United Stales National Enforcement
Environmental Protection Training Institute
Agency Washington, DC 20460
vvEPA
LITIGATING CIVIL PENALTIES
D Strategies
D Techniques
D Tools
Selected Resource Materials
THIRD EDITION
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THIRD EDITION
February, 2000
Regulations, guidance, policy and other important desk
references for all EPA administrative practitioners.
This desk reference is intended to serve EPA administrative practitioners as a
tool in developing, litigating and/or settling cases. This desk reference identifies and
in some instances, provides a full text copy, of regulations, key EPA guidance
documents, EPA policies and other materials that are essential to the administrative
practice of environmental law at EPA. There are numerous policies, guidances, rules
and statutes that have not been included on the list which may be pertinent to an
individual case. These documents can be obtained in regional libraries or via the EPA
or OECA Internet homepage. The purpose of this desk reference is to provide the
general essentials for administrative practice at EPA.
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INDEX OF SELECTED RESOURCE MATERIALS
(1) The Administrative Litigation Practice Network - EPA newsletter which reports
on ALJ and EAB decisions on a monthly basis. A sample copy is included 1
(2) Procedural Rules of Practice
(A) Preamble 14
(B) 40 CFR Part 22 (July 23,1999) 53
(C) Note: Unique Supplemental Rules of Practice - by statute 64
(D) Subpart I - for non-APA matters 67
(3) EPA Enforcement Response Penalty Policies
(A) General - The general penalty policies are not media-specific but provide
agency-wide guidance for media programs to use in developing ERPs. They discuss
the EPA goal in proposing and assessing penalties and provides a framework for the
development of media-specific penalty policies.
(I) Statutory Penalty Section Regarding
Penalty Assessment 69
(II) GM21 "Policy on Civil Penalties" 72
(El) GM 22 "A Framework for Statute-Specific Approaches to Penalty
Assessments 82
(IV) Guidance on the Use of Penalty Policies in Administrative
Litigation. 12/15/95. Gives language to insert into Complaints to
reflect Wausau decision 114
(V) "Impact on Wausau on Use of Penalty Policies" 3/19/97 119
(VI) "Modifications to EPA Penalty Policies to Implement the Civil
Monetary Penalty Inflation Rule(Pursuant to the Debt Collection
Improvement Act of 1996)" 5/9/97 122
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(B) Statute Specific - The statute specific penalty policies (also called
"Enforcement Response Policies" or "ERPs") generally serve two distinct purposes.
The policies explain how to calculate a penalty for the purpose of proposing a penalty
in the complaint. Most of the policies also explain the factors that may be considered
in settling a case and explain how to calculate a settlement figure.
(I) Clean Air Act - Mobile Sources
1. Volatility Civil Penalty Policy. 12/1/89
2. Interim Diesel Civil Penalty Policy. 2/8/94
3. Regulation of Fuels and Fuel Additives. 8/29/75
4. Manufacturers Program Branch Interim Penalty Policy. 3/31/93
5. Tampering and Defeat Device Civil Penalty Policy for Notices of
Violations. 2/28/94
6. Lead Banking Penalty Policy and Revisions of Lead Usage and
Reporting Penalty Policy. 12/18/87
(EQ Clean Air Act - Stationary Sources
1. Clarifications to the 10/25/95 CAA Stationary Source Civil Penalty
Policy. 1/17/92
2. Stationary Source Civil Penalty Policy. 10/25/91
(III) Resource Conservation & Recovery Act
1. Civil Enforcement Response Policy. 3/15/96
2. RCRA Civil Penalty Policy. 10/90
3. Final U.S. EPA Penalty Guidance for Violations of UST Regulations.
11/14/90
(TV) Toxic Substances Control Act - Title I
1. Enforcement Response Policy for TSCA Section 4 Test Rules.
5/28/86
2. TSCA Good Laboratory Practices Regulations. 4/9/85
3. Amended TSCA Section 5 Enforcement Response Policy. 6/8/89
4. Recordkeeping and Reporting Rules TSCA Sections 8,12 and 13.
5/15/87
5. PCB Penalty Policy. 4/9/90
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(V) Toxic Substances Control Act - Title II
1. Interim Final ERP for AHERA. 1/31/89
2. ERP for Asbestos Abatement Projects: Worker Protection Rules.
11/14/89
(VI) Toxic Substances Control Act - Title X
1. Residential Lead-Based Paint Hazard Reduction Act of 1992; Interim
Enforcement Policy. Vi/98
(VII) Federal Insecticide, Fungicide & Rodenticide Act
1. FIFRA Response Policy. 7/2/90
2. FIFRA Section 7(c) ERP. 2/10/86
3. FIFRA ERP Good Laboratory Practices. 9/30/91
4. FIFRA Worker Protection Standards - Interim Final. 12/97
(Vin) Emergency Planning & Community Right-To-Know Act
1. ERP for Section 313 of EPCRA and Section 6607 of the Pollution
Prevention Act. 8/10/92
2. Final Penalty Policy for Sections 302, 303, 304, 311, and 312 of
EPCRA and Section 103 of CERCLA.. 9/30/99
(IX) Comprehensive Environmental Response, Compensation & Liability Act
1. Final Penalty Policy for Sections 302, 303, 304, 311, and 312 of
EPCRA and Section 103 of CERCLA. 6/13/90
(X) Safe Drinking Water Act
1. Interim Final UIC Program Judicial and Administrative Order
Settlement Penalty Policy - Underground Injection Control Guidance
No. 79.9/27/93
2. New Public Water System Supervision Program Settlement Penalty
Policy. 5/25/94
(XI) Clean Water Act
1. Revised Interim Clean Water Act Settlement Penalty Policy. 2/28/95
2. Guidance on the Distinctions Among Pleading, Negotiating, and
Litigating Civil Penalties for Enforcement Cases Under CWA.1/89
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(4) Audit Policy - This series of guidance documents embody EPA's position on the
granting of enforcement discretion to entities that voluntarily discover, disclose and
correct violations of environmental requirements. The Audit Policy is intended for
use solely in cases of settlement and are not intended for cases which are litigated.
(A) "Restatement of Policies Related to Environmental Auditing" Federal
Register 7/28/94. Provided as background 146
(B) "Voluntary Environmental Self-Policing and Self-Disclosure Interim Policy
Statement" Federal Register 4/3/95. Provided as background 153
(C) "Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations" Final Policy Statement, Federal Register
12/22/95. For use by EPA during settlement only. Note that on 5/17/99
EPA published an Evaluation of Proposed Revisions and Request For
Comments 158
(D) "Audit Policy Interpretive Guidance" 1/15/97
*Qs&As 166
(5) Supplemental Environmental Projects (SEP) Policy - In an effort to encourage
pollution prevention and environmental justice, the EPA developed a policy whereby
a respondents willingness to conduct a "supplemental environmental project" would
be considered as a penalty reduction factor in the context of settlement. What
constitutes an acceptable project and how to calculate the penalty reduction is set forth
in the policy.
(A) "EPA SEP Policy" 5/1/98 192
(6) Guidance on Enforcement for Small Businesses - The purpose of this policy is to
promote environmental compliance among small businesses by providing incentives
for participation in compliance assistance programs and encouraging prompt
correction of violations. Specifically, EPA announced that it would exercise its
enforcement discretion, under applicable media-specific policies, to refrain from
initiating an enforcement action or to mitigate penalties whenever a small business
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makes a good faith effort to comply and there is no criminal behavior and no
significant health, safety or environmental threat.
(A) "EPA OECA Policy on Compliance Incentives for Small Businesses"
Issued on 5/20/96 214
(7) Guidance on Analyzing "Ability to Pay" - A common statutory factor that must
be considered before the assessment of a penalty is the Respondents "ability to pay" a
penalty. There are several guidance documents intended to help the administrative
practitioner analyze this statutory factor for use in determining Respondent's ability
to pay a penalty and for use in arguing the EPA's position in litigation. Practitioners
can also access the EPA/OECA website (http://es.epa.gov/oeca/datasys) which has
actual programs that can evaluate ability to pay.
(A) "Guidance on Determining a Violator's Ability to Pay a Civil Penalty"
12/16/86 224
(B) "Change in Methodology for Determining the BEN Model's Discount
Rate" 10/19/92 230
(C) Kimberly Zanier memos, "Financial Analysis/General Synopsis" and
"Financial Analysis Memorandum #2", August 2, 1995 236
(8) Settlement Guidance - In addition to the Audit Policy and the SEP Policy, which
are for use only during settlement, there are several other documents pertaining to
settlement which EPA practitioners should be familiar with as they consider
negotiating settlements.
(A) "Use of Stipulated Penalties in EPA Settlement Agreements"
1/24/90 266
(B) See the Statute Specific ERPs.
(C) "Guidance on Certification of Compliance with Enforcement Agreements"
7/25/88 275
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(9) Guidance on Prosecutorial Discretion - The Audit Policy, the SEP Policy and the
Small Business Policy are all policies which embody an EPA position on prosecutorial
discretion in certain circumstances. However, there are two more guidance documents
which the practitioner should be familiar with that have general applicability in all
media.
(A) "Processing Requests for Use of Enforcement Discretion"
3/3/95 283
(B) "Policy Against 'No Action' Assurances" 11/16/84 287
(10) Guidance on Intra-Agency Process and Procedure - These guidance documents
explain who does what and how within EPA when it comes to administrative practice.
(A) "Procedures to Improve Coordination before the Environmental Appeals
Board" 1/25/93 290
(B) "Redelegation of Authority and Guidance on Headquarters Involvement in
Regulatory Enforcement Cases" 7/11/94 299
(C) "OECA/Regional Procedures for Civil Judicial and Administrative
Enforcement Case Redelegation" 11/8/94 315
(D) "Documenting Penalty Calculations and Justifications in EPA Enforcement
Actions" 8/9/90 331
(E) "Credentials Certification Policy" 335
(11) Delegations of authority. Available at EPA's website, www.epa.gov.
(12) Selected Model Pleadings, complaints, settlements, documents, justification
memos, etc. Models are a handy tool that should be used with caution. Guard against
over-reliance on models. Always double check your models to ensure applicability in
a particular case and that the model is current with respect to EPA policy, procedure,
regulation and, of course, current case law.
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(A) Complainant's Pre-Hearing Exchange in Celltech Media. Inc. aka Health
Care Products. Docket Nos. FIFRA 95-H-04; FIFRA 93-H-02F and I.F.&R.
VHI-90-279C; February 26,1996 340
(B) Complaint in GEC Precision. EPCRA Docket No. 94-T-381-E 367
(C) Memo in Support of Penalty in GEC Precision 376
(D) Transcript of hearing in GEC Precision 382
(E) Transcript of hearing in Wausau 395
(13) Statutes worth studying:
(A) The Revisions to the Equal Access to Justice Act made by the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), P.L.
104-121, 110 Stat. 857-74. This statute authorizes certain Respondents to file
an application seeking reimbursement from the EPA for attorneys fees and
other expenses incurred in defending itself during the litigation. See
"Interim Guidance on Administrative and Civil Judicial Enforcement
Following Recent Amendments to the Equal Access to Justice Act",
5/28/96 .' 416
(B) Paperwork Reduction Act, 44 U.S.C. Sections 3501 et seq., amended in
1995 at Publ.L. No. 104-13, 109 Stat. 163. Implementing regulations are
found at 5 CFR Part 1320. The statute requires the EPA to get OMB
approval for any regulation, permit, etc. which requires the collection of
information. Where EPA has failed to get OMB approval or has failed to
otherwise comply with the PRA requirements, EPA may not collect a
penalty for the violation of an information collection request.
(C) Five-Year Federal Statute of Limitations, 28 U.S.C. 2462. All of our
administrative cases are subject to a five-year statute of limitations. Case
law should be consulted to determine whether a particular violation is
"continuing" in nature.
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(D) Anti-deficiency Act, 31 U.S.C. 665 which prohibits government officials
from spending funds in excess of Congressionally appropriated amounts or
without a Congressional appropriation, unless authorized by law.
(E) Miscellaneous Receipts Act, 31 U.S.C. 3302 mandates that any penalties
collected by an agency to be returned to the treasury as miscellaneous
receipts, rather than be retained by the agency. MRA is not applicable
where there is a specific statutory authority to retain collected funds or to
handle such funds differently.
(14) Access to Information:
(A) Guidance documents, memos and policies can be accessed through the
EPA/OECA website (http://es.epa.gov/oeca) or the Enforcement and Compliance
Docket and Information Center located in Room 4033 of EPA's Ariel Rios Building.
E-mail address is OECA/Docket@EPAMail.Gov. Center contacts are Lee Carothers
(202) 564-2614 and Donna Williams (202) 564-2119.
(B) Penalty Policies can be accessed through OECA's website or through LEXIS
via a special sub-library in the environmental library called "PENLTY".
(C) EPA Shadowlaw has an Administrative Law library containing all ALJ and
EAB decisions as well as a Policy and Guidance library.
Prepared by Helena Ambrosino, Senior Attorney
Office of Enforcement and Compliance Assurance
U.S. EPA - Washington, D.C.
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ADMINISTRATIVE LITIGATION PRACTICE
NETWORK
Helene Ambrosino - 202-564-2627- Michael J. Walker 202-564-2624
Telefax: 202-564-0633
Prepared & distributed for use by EPA administrative law practitioners.
Welcome to the first Administrative Litigation Practice Network for January
2000 our first newsletter of this great new Century. This month we highlight
summaries of several decisions issued by the Administrative Law Judges and one from
the Environmental Appeals Board. Though several FIFRA cases dominate, the
CERCLA/EPCRA Lily accelerated decision of Chief Judge Biro, which builds upon
her earlier PRASA ruling, is significant and expansively first" impression. Look
carefully at the following decisions and orders ... see how you can apply these
holdings and general legal concept's m to your cases and practice:
Q Sealed drums "released" from a facility constitute a "reportable release" under
CERCLA/EPCRA, see Lily Del Caribe.
Q Respondent's request for discovery is denied; lacking "materiality" showing
Davis-Monthan Air Force Base, also a Harmon-res judicata defense soundly
rejected.
Q Multiple penalties for multiple sales rejected, see Microban, now "on appeal"
Q Liability established for landlord in lead-poisoning case; see Billy Yee.
Q Cooperative "sprit & intent" defense fails in NPDES action, Pleasant Hills.
Q Full penalties imposed in CAA asbestos abatement, Choice Insulation.
Of the 12 cases discussed in this NETWORK, only Microban. Choice, Sullen
and Plesant Hills are Initial Decisions. The rest of the orders and decisions are the
direct result of aggressive motion practice by EPA counsel, as well as aggressive
opposition to Respondent's motions. Motion practice is very critical and here we can
clearly see how a such motion practice addresses matters of great impact to our entire
practice. The motions for accelerated decision in Lily Del Caribe and Billy Yee are
textbook perfect examples of how to win cases by narrowing the issues for trial.
In other developments, we were disappointed to see the narrowing of our
authority to seek per sale penalties in Microban (on appeal) and the rejection of the
false claims charges in Bulleji (under consideration for appeal). The Zoo Med denial of
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interlocutory review ruling of the Environmental Appeals Board is also troublesome
in that it fails to recognize the practical impossibility for the trial team to preserve
issues for appeal, when one is precluded from introducing evidence at trial. The
victory in Lily is particularly noteworthy as it expands our view about the
enforceability of situations involving the "release" of toxic or hazardous materials,
which are not reported to the National Response Center as required by CERCLA &
EPCRA. Lily and the Puerto Rico Aquaduct & Sewer Authority (reported in the
November 1999 NETWORK) reject the "lost closed container" defense. An
Interlocutory Appeal of PRASA was denied. It is significant to note that under these
rulings, it is not necessary to prove that the chemicals have actually escaped from the
containers to constitute a "release." Finding full drums of toxic chemical in trees
miles from the storage area appears to be "release" enough in the minds of some judges
for now. This is really first impression litigation and we are watching these
developments very closely.
PRACTICE ADVISORY: Is a penalty witness necessary?
We encourage all practitioners to carefully read the Pleasant Hills decision, as
we did with veteran OECA penalty expert witness Jonathan Libber. This decision
underscores a concern we have been raising that it may not be sufficient to address
economic benefit or ability to pay issues at hearing by merely having a case
development officer present a BEN or ABEL run, unless they have the ability to fully
explain and defend the models. Since the calculation of economic benefit or the
determination of ability to pay requires substantial expertise, litigation teams should
not try to present this evidence through general fact witnesses. (It needs an expert
witness) Even if defense counsel fails to object to EPA's proffer of "expert" testimony
through a fact witness, the ALJ in assessing the totality of the administrative record,
may conclude that the economic benefit portion of the case lacks adequate
development or foundation and may reject the testimony, as happened in Pleasant
Hills where Judge McGuire zeroed out the benefit part of the penalty.
Judge McGuire's rejection of the economic benefit evidence made very little
difference in the final penalty assessment, since the "benefit" component was calculated
to be $2,000. In all fairness, it may not have been cost effective to bring in an expert
for a $2,000 benefit component. By attempting to introduce expert testimony through
a fact witness EPA may risk its credibility before the Judge on the economic benefit
issue as well as overall penalty credibility. Should anyone need expert witness help
regarding a financial issue that impacts an enforcement action, be sure to contact:
Jonathan Libber, BEN/ABEL Coordinator, Office of Enforcement and Compliance
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Assurance, EPA Headquarters. (202) 564-6102. He is available to provide advice, to
serve as an expert witness or help to identify or prepare penalty witnesses.
PRACTICE ADVISORY; Your NETWORK is now 100% electronic.
In an effort to conserve paper and disseminate this information faster, we now
distribute the Administrative Litigation Practice NETWORK electronically. October,
1999 was the last Network that we sent out with full text hard copies of the ALJ and
EAB decisions. All future NETWORKS will be issued via the National email Ian
system and full text decisions will no longer be distributed, since these documents are
now readily available through the OALJ and EAB websites; Shadowlaw, LEXIS and
Westlaw. (Note: we understand that the new national contract with Westlaw has
created some concerns that the full arsenal of ALJ/EAB decisions are not available on
Westlaw at this time. We are taking measures to ensure that Westlaw gets up to speed
with Lexis and ShadowLaw. Remember, ShadowLaw still remains the most
comprehensive data base available to you.
PRACTICE ADVISORY; It's time to inventory your practice "must haves"
The new year, the new century, the new millennium: are you ready to practice?
efficiently and effectively?? Take 30 minutes to run through this checklist to be sure
you have the minimum "practice must haves" at your fingertips. Make this the first
resolution you keep for the new year.
CHECKLIST 2000 FOR EPA ADMINISTRATIVE PRACTITIONERS
D The revised Consolidated Rules of Practice: 40 CFR Part 22. Note also the
new non-APA procedural rule, Subpart I.
D Statute Specific Penalty Policies (ERPs) - As of 5/20/97 all of EPA's penalty
policies were available on SHADOWLAW or LEXIS via a special sub-library in
the environmental library called "PENLTY" WESTLAW is expected to carry
a similar library. Penalty policies are also available on the OECA web page in
hard copy format from ORE practice offices.
D Key General Penalty Policies - GM 21 "Policy on Civil Penalties" and GM-22
"A Framework for Statute-Specific Approaches to Penalty Assessments" 2/16/84.
"Guidance on the Use of Penalty Policies in Administrative Litigation"
12/15/95; ORE Directive/'Impact of Wausau on Use of Penalty Policies" 3/19/97;
ORE Directive. [Cite these policies in briefs, pre-hearing exchanges and related pleadings]
D "Modifications to EPA Penalty Policies to Implement the Civil Monetary
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Penalty Inflation Rule (Pursuant to the Debt Collection Improvement Act of 1996)"
5/9/97. ORE Directive
D Audit and Self Disclosure Policy Guidance and Directives:
"Restatement of Policies Related to Environmental Auditing" Federal Register,
7/28/94.
" Voluntary Environmental Self-Policing and Self-Disclosure Interim Policy
Statement", Federal Register, 4/3/95.
"Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention
of Violations," Final Policy Statement, Federal Register, 12/22/95.
"Audit Policy Interpretive Guidance" 1/15/97.
D Supplemental Environmental Projects (SEP) Policy:
"Issuance of Interim Revised Supplemental Environmental Projects Policy" 5/3/95.
"Drafting Guidance for Revised Interim Supplemental Environmental Projects
Policy" 5/24/95.
D Small Businesses:
"Interim Policy on Compliance Incentives for Small Businesses" Federal
Register, 6/23/95.
"Qs and As on Interim Policy on Compliance Incentives for Small Businesses,"
9/19/95.
D Ability to Pay:
"Guidance for Calculating the Economic Benefit ofNoncompliancefor a Civil
Penalty Assessment" 11/5/84.
"Guidance on Determining a Violator's Ability to Pay a Civil Penalty"
12/16/86.
"Change in Methodology for Determining the BEN Model's Discount Rate"
10/19/92.
"BEN, ABEL and CASHOUT Models on National LAN Platform," 12/13/94.
Kimberly Zanier memos, "Financial Analysis/General Synopsis" and "Financial
Analysis Memorandum #2", August 2,1995.
D Settlements:
"Use of Stipulated Penalties in EPA Settlement Agreements " 1/24/90.
D Prosecutorial Discretion:
"Processing Requests for Use of Enforcement Discretion " 3/3/95.
"Policy Against "No Action Assurances", 11/16/84.
D Intra-Agency Process and Procedure:
"Procedures to Improve Coordination before the Environmental Appeals
Board," 1/25/93.
"Redelegation of Authority and Guidance on Headquarters Involvement in
Regulatory Enforcement Cases" 7/11/94.
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"OECA/Regional Procedures for Civil Judicial and
Administrative Enforcement Case Redelegation" 11/8/94.
D Regional delegations.
D Statutes worth studying:
The revisions to the Equal Access to Justice Act made by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), P.L. 104-121, 110
Stat. 857-74.
Paperwork Reduction Act. 44 U.S.C. Sections 3501 et seq., amended in 1995 at
Publ.L. No. 104-13, 109 Stat. 163. Implementing regulations are found at 5
CFR Part 1320.
General Federal Five-Year Federal Statute of Limitations. 28 U.S.C. 2462.
Don't have it? Can't find it? Computer too Slow? Check LITIGATING
CIVIL PENALTIES: Selected Resource Materials, 1999 Edition. (Note: this is the
text for the NETI course Pleading & Litigating Civil Penalties. Watch for this
course to be offered this year in 5 of the regional offices.
PRACTICE ADVISORY: 10th Advanced Administrative Practice Institute: a must
for every administrative practitioner.
It is not too soon to start planning for the 10th Annual Advanced
Administrative Litigation Practice Institute, to be held in mid-March in Region 8,
Denver, Colorado. Regional attorneys David Janik and Dana Stotsky, who are
helping to host this event, promise good weather. Space will be limited. Do you have
suggestions for the agenda or topics for discussion? Please send suggestions to Mike
Walker or Helene Ambrosino. If you have questions, call Mike Walker or David
Janik at 303-312-6917.
* SIGNIFICANT ORDERS & INITIAL DECISIONS *
* Allegheny Power Service Corporation and Choice Insulation. Inc..
Docket No. CAA-III-0676. Full penalty assessed in asbestos NESHAP case!
On December 14, 1999 Judge Bullock assessed the full penalty in his Initial
Decision in this asbestos NESHAP case. Respondent was found liable for its failure to
adequately wet RACM during a removal operation and for its failure to keep the
RACM until proper disposal in violation of the CAA. The Judge rejected
Respondent's attack on the credibility of the EPA inspector who served as a basis for
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the liability determination. The Judge ruled that Respondent failed to provide any
substantive basis for their assertions that he was negligent or biased. Further, the
inspector's choice not to use the EPA guidance document on how to sample asbestos
does not mean that evidence he gathered should be disregarded. EPA guidance
documents have been held in several prior decisions to be advisory only and not
mandatory. Without a substantive basis for Respondent's attack, the Judge held the
inspector's testimony to be credible. The ALJ also found that it was not necessary for
the inspector to observe the removal activities in order to testify. There was adequate
evidence to support the inspectors conclusions that the RACM was not adequately
wet. For example, the Judge agreed with the inspector that when dry material is found
in bags which are sealed and airtight it is reasonable to conclude that the RACM had
not been adequately wet when bagged. The full proposed $32,000 penalty was assessed
after the ALJ concluded that EPA's penalty proposal was consistent with the
violations, the CAA and the Penalty Policy. Donna Mastro represents EPA Region 3
in this proceeding. Former EPA administrative practitioner, Charlie McPhedran,
also helped to litigate this case.
* Lily Del Caribe. Inc., Docket No. EPCRA-02-99-4001. Drums still must
be reported whether they leak or not.
On December 14, 1999 Chief Judge Biro issued an Order on Cross Motions for
Accelerated Decision in this EPCRA Section 325/CERCLA Section 109 case.
Specifically, Respondent was charged with failing to notify the National Response
Center, Local Emergency Response Center and State Response Center when 18 drums
of propionic anhydride was "released" from its facility during a hurricane. At issue in
the cross motions was whether drums that were swept off Respondent's property
during a hurricane, but recovered sealed and intact, constitute a "release" pursuant to
Section 101(22) of CERCLA and Section 329(8) of EPCRA. The Judge ruled that
when the closed drums were swept away from the facility by the hurricane it
constituted an "escaping" within the definition of "release." "[Escaping . .. into the
environment" may be construed as encompassing unbroken containers coming to rest
in a location on land surface or in water which is unsupervised by or unknown to the
persons in charge of the hazardous substance. The Judge rejected Respondent's
argument that the definition of "release" limits releases of closed containers to those
that have been "abandoned" or "discarded" finding no support of Respondent's
position in the statutory text or its legislative history. Rather, the Judge held that her
position is consistent with the overall purpose of the statute. A closed container
which has escaped by force of nature presents just as much danger as a closed container
which has escaped by act of man. Respondent's Motion for Accelerated Decision was
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denied. EPA's Motion for Accelerated Decision was granted on the issue of "release"
but denied with respect to whether Respondent provided notice of the release to the
proper authorities. Hector Velez Cruz of EPA's Caribbean Field Office is
representing EPA in this highly contested litigation. This case is set to go to hearing in
February.
* Department of Defense, Davis-Monthan Air Force Base, Docket No.
CAA-09-98-17. DOD's "Kitchen Sink" Motion War Defenses Fail; Paving Way
for Trial on the Merits
On November 3, 1999 Judge Moran issued an Order on Respondent's Motion
to Amend Its Answer and Motion to Dismiss Complaint in this CAA asbestos case.
Respondent's Motion to Amend its Answer was granted which sought to retract
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certain admissions it made in the Answer and its Pre-hearing Exchange. Specifically,
in its Answer Respondent admits the facts establishing the asbestos violations.
However, after EPA's pre-hearing exchange was filed, Respondent now believes that
EPA cannot establish the presence of asbestos. The ALJ held that, after trial, if it
appears that Respondent lacked a good faith basis to retract its admissions, the Court
may take that into consideration when recommending a penalty.
On November 17, 199 Judge Moran issued an Order Denying Respondent's
Motion to Compel Discovery. Generally, the Judge ruled that Respondent's Motion
fails to satisfy the "materiality" requirement for ordering additional discovery as
contained in 40 CFR 22.29. Specifically, Respondent sought information to support
its affirmative defenses. Respondent sought to delve into EPA's waiver decision that
was made pursuant to CAA 113(d)(l). In denying the request for discovery, Judge
Moran ruled that the statute unequivocally provides that [the waiver decision] made
by the EPA Administrator and the Attorney General shall not be subject to judicial
review. No inquiry may be made into the decisional process itself. The only
permissible inquiry is whether or not such a waiver was in fact issued. Discovery
based on the statute of limitations issue was denied since the EAB decided in Lyon
County Landfill that "the exceptions clause of section 113(d)(l) does not contain a
durational component" but rather authorizes waivers "where violations of any
duration occurred more than twelve months prior to the initiation of the
administrative action." Respondent sought information which would have gone to a
perceived "durational component" that the Judge rule does not exist in the statute.
Lastly, Respondent would not be allowed discovery that would have gone to its
overfiling argument based on Harmon since it was Respondent who stymied the state
proceeding and cannot now claim EPA is precluded from seeking a penalty.
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On November 19, 1999 Judge Moran issued an Order Denying Respondent's
Motion to Dismiss in this CAA asbestos case. The ALJ rejected Respondent's
argument that EPA failed to comply with the filing limitations contained in CAA
Section 7413(d)(l) and held that the EAB interpretation of this section in Lyon County
Landfill CAA Appeal No. 98-6 (August 26, 1999) is dispositive that EPA had the
requisite jurisdiction to file its complaint. The ALJ rejected Respondent's argument
that EPA improperly "overfiled" when it filed a complaint after the local state agency
closed its case. The Judge held that this case was distinguishable from Harmon
Industries v. Browner. 19 F.Supp. 2d 988 (W.D. Mo. 1998) since the state action in this
case never negotiated a settlement with Respondent. The state case was closed because
Respondent refused to pay a penalty, arguing sovereign immunity. The record
indicated to the ALJ that Respondent was on notice that EPA always thought the state
remedial action to be inadequate and, further Respondent knew the matter was
referred to EPA for enforcement. Finally, the ALJ rejected Respondent's affirmative
defense of laches and held that it generally does not apply to the federal government
when it is acting in its sovereign capacity to protect the public welfare. Further, there
was nothing in the record to establish that Respondent suffered any prejudice from
any delay in bringing the proceeding. Carol Bussey represents EPA Region 9 in this
proceeding.
* Microban Products Company. Docket No. FIFRA 98-H-01. Micro-fine in
Macro FIFRA claims differ case. On appeal to the EAB.
On November 4, 1999 Judge Moran issued an Initial Decision Regarding
Penalty in this FIFRA case. In a previous ruling the ALJ had found Respondent liable
for making claims that were substantially different from claims permitted within the
terms of a registration approval. In this penalty ruling, the ALJ clarified an earlier
holding that the number of violations would not be based upon the number of sales of
the pesticide product, as argued by EPA. Rather, the number of violations would be
based upon the number of documents (five in this case) that contain an unlawful claim.
The complaint had proposed a $160,000 penalty based upon 54 shipments of the
product. The Judge assessed a $5,000 penalty for each violation for a total of $25,000.
In assessing the statutory maximum for each violation, the Judge cited the
egregiousness of Respondent's unlawful claims and the damage Respondent did to the
regulatory program. This case is being handled by ORE-Toxics attorney James
Handley. An appeal was filed with the Environmental Appeals Board .
000008
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* Billy Yee, Docket No. TSCA-7-99-0009. Accelerated Decision Finds
Landlord Liable in Lead Poisoned Kids Case, only the penalty remains to be
decided.
On November 8, 1999 Chief Judge Biro issued an Order Granting EPA's
Motion for Partial Accelerated Decision as to Liability. The complaint charged
Respondent with failing to provide a lessee with lead-based paint disclosures as
required by TSCA Section 409 and 40 CFR Part 745. A penalty of $29,700 was
proposed for six violations. Through its Amended Answer, Respondent had admitted
all material allegations of fact, laying the foundation for the Accelerated Decision
motion. Two affirmative defenses were raised. The first was that the Respondent was
excluded from the rule because its property was found to be lead-based paint free by a
certified inspector. The ALJ rejected the affirmative defense because Respondent failed
to provide supporting documentation for this affirmative defense. The ALJ also
rejected Respondent's second affirmative defense that an "Effective Date Note" left
unintentionally in the CFR rendered the regulation at issue unenforceable.
Specifically, Respondent tried to argue that a note in the CFR which read "will not
become effective until approval has been given [by OMB]" made the rule
unenforceable since it was never deleted after OMB approval and, therefore, made it
confusing to the reader. The ALJ held that the failure of the publishers of the CFR to
delete the Effective Date Notes may cause some confusion but does not render the
Lead-Based Paint Disclosure Rule requirements unenforceable. Mike Gregeric, Region
7 and Claude Walker, ORE-Toxics took this case to trial on December 20 in St.
Louis, MO. Testimony from the physician who treated the children for lead
poisoning was presented, along with testimony by their mother. A decision on
penalty is expected to be issued this spring.
* Pleasant Hills Authority, Docket No. CWA-III-210. Unpleasant result
for Pleasant Hills.
On November 19, 1999 Judge McGuire issued an Initial Decision in this CWA
NPDES permit compliance case. Specifically, Respondent was charged with violating
effluent limitations for free cyanide, phenolics and mercury, with the failure to use
analytical testing methods sufficiently sensitive to demonstrate compliance with the
effluent limitations in the permit and with failure to submit an approvable
pretreatment program as required. The ALJ found Respondent liable for exceeding
the effluent limitations and for failing to have sufficiently sensitive test methods. The
Judge rejected Respondent's argument that they complied with the "spirit and intent"
000009
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of the requirements concerning the development of a pretreatment program and held
that they needed to actually submit such a program for approval within the applicable
time limitations and, having failed to do that, Respondent must be held in violation.
With respect to the penalty, the Judge points out that there is no specific penalty
formula in the CWA, the implementing regulations or in any applicable penalty policy
for calculating penalties under Section 309. Therefore, he looked at prior EAB and
federal court decisions as guidance in recommending a penalty assessment. Noting
that he prefers a "bottom-up" methodology is calculating penalties, he found that this
case did not easily permit such an approach since the economic benefit component was
not well supported by the record. Therefore, in assessing the penalty, the Judge
considered each statutory factor as a percentage reduction from the statutory
maximum of $10,000 per day per violation. EPA had proposed a penalty of $70,000.
The ALJ assessed a $45,600 penalty. The Judge lowered the penalty from that
proposed based, in large part, on EPA's failure to present evidence on the potential for
harm. The Judge felt that some evidence, other than conclusory testimony, was
required to satisfy EPA's burden of persuasion that the penalty is appropriate.
Deanne H. Bartlett and Joyce A. Howell represent EPA Region 3 in this proceeding.
* Ultramar Diamond Shamrock Corp.. Docket No. UST-99-001-AO-1.
Include the Amended Complaint when Filing a Motion to Amend.
On November 23, 1999 Judge Gunning denied EPA's motion to amend the
complaint because there was no amended complaint attached to the motion. A mere
description of what the amended complaint will contain upon amendment is not
sufficient. Also, the ALJ found it problematic that the Motion for Leave to File an
Amended Complaint was sent to Respondent by regular mail. The Judge holds that
had the motion been accompanied (as she rules it should have been) by the Amended
Complaint, it needs to be served as a complaint.
* Burlington Northern and Santa Fc Railway Company. Docket No.
TSCA-10-99-0051. Is Owning Property Enough for Liability in PCB Disposal
Case?
On November 23, 1999 Judge Nissen issued an Order on Motions in this TSCA
PCB case. The complaint alleged that Respondent was the owner of property on
which PCB fluid was spilled by a sub-lessee from a transformer being stored on the site
and, therefore, was liable for improper disposal under the PCB rule. A penalty of
$25,000 was proposed. Respondent filed a Motion to Dismiss arguing, in pertinent
part, that it should not be held liable as a mere owner of the property since they had
10
000010
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no knowledge of the sub-lease, the storage of transformers or the spill until after the
spill occurred, nor did they take an active role in cleaning up. EPA filed a Motion for
Accelerated Decision on Liability. The ALJ denied both motions for lack of
supporting evidence, and ordered a hearing to be held, however, he made some
important rulings. He points out that while an owner of property is a "person" under
the PCB rule however, to impose liability for illegal disposal there must be a nexus
between the owner and the violation. Further, he holds that "disposal" by its
definition requires a showing of some type of action. Therefore, an owner's failure to
act cannot - alone - be evidence of a disposal violation. The disposal rule applies to
those who dispose of PCBs. The Judge ruled that his decision is consistent with the
EAB decision in Employers Insurance of Wausau and Group Eight Technology. Inc..
TSCA Appeal No. 95-6 (February 11, 1997). Respondent's liability will turn on its
duty to prevent the spill and to assume responsibility for the cleanup and these issues
are clearly in dispute necessitating a denial of both motions.
* The Bullen Companies. Inc., IF&R Docket Nos. III-470-C, III-471-C, III-
472-C & III-473-C.
On November 29, 1999 Judge Charneski issued an Initial Decision in this
FIFRA involving the illegal sale or distribution of pesticides. The complaint sought a
penalty of $38,900. Six of the twelve counts in the complaint had been decided earlier
when the ALJ granted an EPA Motion for Accelerated Decision on Liability. At issue
here was liability for the remaining counts and the penalty. The Judge dismissed the
remaining counts which alleged Respondent's failure to register certain pesticides. The
Judge held that EPA failed to sustain its burden of proof that the products were
pesticides and, therefore, required registration. The ALJ faulted EPA with relying on
stipulated exhibits which consisted of product labels and literature, instead of putting
on a witness who could testify that these products were pesticides. The ALJ ruled that
the labels and literature never identify the pesticide product name at issue in the
complaint and, therefore, cannot be said to make pesticidal claims with respect to
those products. EPA's argument that the exhibits pertain to all of Respondent's
products was found to be too strained and was rejected. The Judge assessed a $17,900
penalty which represents the full penalty for the six counts remaining in the
complaint. Benjamin D. Fields and Janet Sharke represent EPA Region 3 in this
proceeding. An appeal is underway.
11
000011
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* EAB DECISIONS *
* Zoo Med Laboratories. FIFRA Appeal No. 99-10. Interlocutory review
denied; can issues be preserved for appeal?
On November 23, 1999 the EAB issued an Order Denying EPA's Motion for
Interlocutory Review in this FIFRA unregistered product case. The ALJ in the case
dismissed certain counts and denied EPA's Motion to Certify the Matter for
Interlocutory Appeal. Using 40 CFR 22.29 (c) EPA filed this motion seeking review of
the decision based upon " exceptional circumstances" and where the EAB determines
"to delay review would be contrary to the public interest." The judge had dismissed
certain counts on the basis of res judicata; that a New York state settlement with the
same Respondent had resolved these issues. The Judge determined that a cooperative
agreement between EPA and the New York Department of Environmental
Conservation gave New York the ability to enforce federal violations as well as state
violations.
In rejecting the motion seeking review, the Board held that "exceptional
circumstances" do not exist and denied EPA's motion. It is important to note that
Respondent has not denied the allegations underlying the dismissed counts and,
therefore, if the EAB later set aside the ALJ's dismissal ruling, no hearing would be
necessary to determine liability. David M. Jones represents EPA Region 9 in this
proceeding.
###
12
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Friday
July 23, 1999
Part V
Environmental
Protection Agency
40 CFR Part 22
Consolidated Rules of Practice Governing
the Administrative Assessment of Civil
Penalties, Issuance of Compliance or
Corrective Action Orders, and the
Revocation, Termination or Suspension of
Permits; Final Rule
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40138
Federal Register/Vol. 64, No. 141/Friday. July 23,
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 22
[FRL-6373-31
RIN2020-AA13
Consolidated Rules of Practice
Governing the Administrative
Assessment of Civil Penalties,
Issuance of Compliance or Corrective
Action Orders, and the Revocation,
Termination or Suspension of Permits
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Final rule.
SUMMARY: This Rule revises the
Consolidated Rules of Practice
("CROP"), including expansion of these
procedural rules to include certain
permit revocation, termination and
suspension actions, and new rules for
administrative proceedings not
governed by section 554 of the
Administrative Procedure Act. The
CROP has not been substantially revised
since 1980. This Rule will remove
inconsistencies, fill in gaps in the CROP
by codifying accepted procedures, and
make the CROP more clear and easily
understood. Most of these changes will
not produce any procedural or
substantive difference in the Agency's
administrative enforcement actions.
Other changes make the CROP more
efficient and more effective, or to
conform to new statutory requirements
and new judicial decisions.
DATES: Effective Date: This rule shall
become effective August 23, 1999.
Applicability Date: This rule shall be
applicable to all proceedings
commenced on or after August 23,1999.
Proceedings commenced before August
23, 1999 shall become subject to this
rule on August 23, 1999, unless to do so
would result in substantial injustice.
FOH FURTHER INFORMATION CONTACT:
Scott Garrison (202-564-4047). Office
Enforcement and Compliance
Assurance, Office of Regulatory
Enforcement (2248A), U.S.
Environmental Protection Agency,
Washington, D.C. 20460.
SUPPLEMENTARY INFORMATION:
The following outline is provided to
assist the reader in locating topics of
interest in the preamble.
I. Background
II. Response to Public Comments
A. Significant Comments Supporting
Proposed Revisions
B. Significant Comments Critical of Proposed
Revisions
1. Scope (40 CFR 22.1)
2. Powers and Duties of the Environmental
Appeals Board. Regional Judicial Officer
and Presiding Officer; disqualification,
withdrawal and reassignment (40 CFR
22.4)
3. Filing, Service, and Form of Documents
(40 CFR 22.5(a)-(c))
4. Confidentiality of Business Information
(40CFR22.5(d))
5. Computation and Extension of Time (40
CFR 22.7)
6. Ex Parte Discussion of Proceeding (40
CFR 22.8)
7. Intervention and Non-Party Briefs (40
CFR22.il)
8. Commencement of a Proceeding (40 CFR
22.13)
9. Complaint (40 CFR 22.14)
10. Answer to the Complaint (40 CFR
22.15)
11. Default (40 CFR 22.17)
12. Quick Resolution (40 CFR 22.18(a))
13. Settlement and Scope of Resolution or
Settlement (40 CFR 22.18(b)&(c))
14. Alternative Dispute Resolution (40 CFR
22.18(d))
15. Prehearing Exchange; Prehearing
Conference (40 CFR 22.19(a)&(b))
16. Other Discovery (40 CFR 22.19(e))
17. Supplementing Prior Exchanges, and
Failure To Exchange Information (40
CFR22.19(f)&(g))
18. Evidence (40 CFR 22.22)
19. Filing the Transcript (40 CFR 22.25)
20. Initial Decision (40 CFR 22.27)
21. Appeal From or Review of Initial
Decision (40 CFR 22.30)
22. Final Order (40 CFR 22.31)
23. Motion To Reconsider a Final Order (40
CFR 22.32)
24. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under the Clean Air Act (40
CFR 22.34)
25. Scope of Subpart I (40 CFR 22.50)
26. Presiding Officer (40 CFR 22.51)
27. Information Exchange and Discovery
(40 CFR 22.52)
28. Interlocutory Orders or Rulings (40 CFR
22.53)
29. Clean Air Act Field Citations
30. Other Comments Not Related to a
Particular Section of the Proposed Rule
III. Miscellaneous Revisions
A. Section Numbering
B. Definitions (40 CFR 22.3)
C. Filing and Service of Rulings, Orders and
Decisions (40 CFR 22.6)
D. Examination of Documents Filed (40 CFR
22.9)
E. Consolidation and Severance (40 CFR
22.12)
F. Motions (40 CFR 22.16)
G. Record of the Prehearing Conference (40
CFR22.19(c))
H. Accelerated Decision; Decision to Dismiss
(40 CFR 22.20)
I. Assignment of Presiding Officer;
Scheduling a Hearing (40 CFR 22.21)
J. Offers of Proof (40 CFR 22.23(b))
K. Proposed Findings, Conclusions, and
Order (40 CFR 22.26)
L. Motion to Reopen a Hearing (40 CFR
22.28)
M. Interlocutory Appeals (40 CFR 22.29)
N. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under the Federal Insecticide,
Fungicide, and Rodenticide Act (40 CFR
22.35)
O. Supplemental Rules of Practice Governing
the Administrative Assessment of Civil
Penalties Under the Clean Water Act (40
CFR 22.38)
P. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under CERCLA Section 109 (40
CFR 22.39)
Q. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties for Violations of Compliance
Orders Issued to Owners or Operators of
Public Water Systems Under Part B of
the Safe Drinking Water Act (40 CFF
22.42)
R. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Against a Federal Agency
Under the Safe Drinking Water Act. (40
CFR 22.43)
S. Supplemental Rules Governing the
Termination of Permits Under Section
402(a) of the Clean Water Act or Under
Section 3005 (d) of the Resource
Conservation and Recovery Act (40 CFR
22.44)
T. Supplemental Rules Governing Public
Notice and Comment in Proceedings
Under Section 309(g) of the Clean Water
Act and Section 300h-2(c) of the Safe
Drinking Water Act (40 CFR 22.45)
U. Appendices
IV. Administrative Requirements
A. The Regulatory Flexibility Act
B. Executive Order 12866
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act
E. Executive Order 12875
F. Executive Order 13045
G. Executive Order 13084
H. National Technology Transfer and
Advancement Act
I. Submission to Congress and the
Comptroller General
I. Background
The Consolidated Rules of Practice
("CROP"), 40 CFR part 22, are
procedural rules for the administrative
assessment of civil penalties, issuance
of compliance or corrective action
orders, and the revocation, termination
or suspension of permits, under most
environmental statutes. The CROP were
first promulgated on April 9,1980 (45
FR 24360). On February 25.1998, (63
FR 9464) EPA issued a notice of
proposed rule making giving public
notice and soliciting comments on
proposed revisions to the CROP.
During the public comment period,
EPA received substantive comments
from Dow Chemical Company ("Dow").
the U.S. Air Force ("USAF"). the Utility
Air Regulatory Group ("UARG"). the
Utility Water Act Group ("UWAG"), the
Corporate Environmental Enforcement
Council ("CEEC"), and joint comments
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Federal Register/Vol. 64, No. 141/Friday, July 23. 1999/Rules and Regulations
40139
from the Chemical Manufacturers
Association and the American
Petroleum Institute ("CMA/AP1"). The
original public comment period closed
on April 27. 1998. On May 6, 1998 (63
FR 25006). EPA published a second
notice reopening the public comment
period for an additional 60 days. During
this reopened public comment period,
EPA received one set of supplementary
comments from CEEC.
All of the public comments submitted
in response may be reviewed at the
Enforcement and Compliance Docket
and Information Center, room 4033 of
the Ariel Rios Federal Building, 1200
Pennsylvania Avenue. N.W.,
Washington. DC. Persons interested in
reviewing the comments must make
advance arrangements to do so by
calling 202-564-2614. A reasonable fee
may be charged by EPA for copying
docket materials. The public comments
may also be viewed on the internet at
http://www.epa.gov/oeca/
forepart22.html.
Today's final rule includes most of
the revisions identified in the proposed
rule, with certain additional changes
(both to the proposed revisions and to
other provisions of the existing rule)
responding to public comments. EPA's
response to the public comments
appears below.
II. Response to Public Comments
A. Significant Comments Supporting
Proposed Revisions
Dow stated that "(m]ost of the CROP
provisions appear to reflect an
appropriate balancing of interests" and
that it has a "favorable impression of
part 22 as a whole." CM A/API support
EPA's efforts to simplify and clarify the
CROP. CEEC states that it supports
"many of the types of changes EPA has
proposed, as they will increase
efficiency and reduce complexity in the
administrative process." The following
are specific comments supporting
particular provisions of the proposed
rule.
Commenters generally support the
consolidation of the various rules into a
single set of CROP procedures for APA
and non-APA proceedings. CMA/API
supports the Agency's decision to use
the CROP instead of the proposed part
28 procedures for Class I proceedings
under the Clean Water Act and the Safe
Drinking Water Act (56 FR 29996 (July
1, 1991)). Dow and UARG support the
use of CROP procedures in lieu of the
procedures originally proposed for use
under the Clean Air Act Field Citation
Program.
Dow states that it supports the
"change" in § 22.4(d)(l)' that would
make appeals from a denial of a motion
to disqualify a Presiding Officer go to
the Environmental Appeals Board
("EAB") "rather than the
Administrator." EPA notes that this
revision of § 22.4(d)(l) is not intended
to change the substance of the existing
rule but merely to eliminate any
implication that the Administrator must
personally rule on appeals from the
denial of disqualification requests made
to Presiding Officers. See In re
Woodcrest Manufacturing, Inc., EPCRA
Appeal No. 97-2. slip op. at 11-12
(EAB, July 23, 1998)(stating that the
term "Administrator" is defined at 40
CFR 22.4(d)(l) to include the
Administrator's delegate, and therefore
"the Administrator is not required to act
personally on disqualification issues,
but may instead delegate this authority
to other individuals within the EPA").
Dow supports the proposed change to
§ 22.5(c)(5). giving the Presiding Officer
and the EAB. rather than the hearing
clerks, authority to rule on the adequacy
of documents filed. Dow strongly
supports the inclusion of language in
§22.5(d) stating that the Agency's rules
governing treatment of Confidential
Business Information (40 CFR part 2)
apply in CROP proceedings.
Dow supports proposed changes to
§§ 22.5 and 22.6 allowing service of
documents by reliable commercial
delivery services other than the U.S.
Mail, and supports the decision to
expand the "mail box rule" of § 22.7(c)
to provide that service is complete when
the document is placed in the custody
of a reliable commercial delivery
service.
CMA/API support the provision in the
proposed § 22.14(a)(6) requiring that the
complaint give notice whether subpart I,
non-APA procedures apply to the
proceeding.
CMA/API and Dow support the
proposed revision to § 22.15(a)
expanding to 30 days the time allowed
to file an answer.
CMA/API and Dow support the
provisions in the proposed rule
extending the time period for filing a
response to a motion from 10 days to 15
days. Additionally. CMA/API supports
not placing page limits on motion
papers.
Dow supports the revisions to
§22.17(a) & (c) that give the Presiding
1 To conform the CROP to the preferred style of
the U.S. Government Priming Office, EPA has
converted § 22.01 to § 22.1. § 22.02 to § 22.2, etc..
In this final rule. For simplicity, this preamble will
use the new numbering system throughout, even
when referring to sections of the proposed rule or
the 1980 CROP.
Officers greater discretion in
determining the appropriate relief in the
default orders, because this "flexibility
will let the Presiding Officer ensure thai
any relief ordered is supported by the
administrative record." CMA/API
"support the provision requiring the
Presiding Officer, when issuing a
default order, to determine that the
relief sought in the complaint is
consistent with the applicable statute,"
CEEC supports the Agency's explicit
recognition of Alternative Dispute
Resolution in the proposed § 22.18(d).
Dow supports the provisions of the
proposed § 22.18(d)(2) that permit the
Presiding Officer to grant extensions of
time for the parties to engage in
alternative dispute resolution
procedures.
CMA/API support the proposed
§ 22.19 allowing amendment of
prehearing exchanges without
restriction, and support the §22.19(f)
requirement that parties promptly
supplement or correct information
known to be incomplete, inaccurate or
outdated, without requiring the parties
to constantly check the accuracy of their
information exchanges. CEEC supports
the proposed revisions to §§ 22.19 and
22.22 that would allow use of
information that has not been timely
provided to the opposing party, upon a
showing of "good cause" for the failure
to timely provide that information.
CEEC also supports the proposed
limitation that "other discovery"
pursuant to § 22.19(e) should be
available only after the prehearing
exchange required under § 22.19(a).
The CMA/API comments support the
proposed change in § 22.27(b)
"requiring the Presiding Officer in all
cases to explain how the civil penalty
imposed corresponds to the statutory
penalty criteria, rather than just the
Agency's penalty policies." Dow notes
its support for the provision in
§ 22.27(b) requiring that the Presiding
Officer articulate how the amount of
penalty conforms to the criteria set forth
in the law under which the proceeding
has been commenced. Dow supports the
proposed revision of § 22.27(c) that
would make an initial decision
inoperative pending review by the EAB,
because it "will avoid premature
recourse to the Federal courts" and
avoid harm to respondents whose
appeals might be successful. Dow also
supports the provision in the proposed
§ 22.28(b) under which a motion to
reopen a hearing would expressly stay
the deadlines for appeal or EAB review
of the initial decision.
Both CMA/API and Dow support the
new provision in §22.30(a) allowing a
party who has initially declined to
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Federal Register/Vol. 64, No. 141/Friday. July 23, 1999/Rules and Regulations
i a cross appeal.
• received no significant public
comment on many of the proposed
revisions to the CROP. Proposed
revisions to §§ 22.2. 22.6 2212 2221
22.23, 22.24, 22.29, 22.33. and 22.35-'
22.45 elicited no specific comments at
all. Today's final rule incorporates all of
the changes identified in the February
25, 1998, Notice of Proposed Rule
Making, except as noted below.
B. Significant Comments Critical of
Proposed Revisions
1. Scope (40 CFR 22.1)
a. Summary of Proposed Rule. Section
22.1 (a) identifies, statute by statute, the
types of proceedings that are subject to
the CROP. The proposed rule would
bring within the scope of the CROP a
number of proceedings that had
previously used other procedures or that
had no formal procedures: field citation
proceedings under the Clean Air Act (42
U.S.C. 7413(d)(3)). proceedings to
suspend or revoke a permit issued
under section 402(a) of the Clean Water
Act (33 U.S.C. 1342(a)) or to suspend or
revoke a permit under sections 3005 (d)
and 3008(h) of the Solid Waste Disposal
Act (42 U.S.C. 6925(d) and 6928(h))
(originally proposed in 60 FR 65280,
December 11, 1996), proceedings for the
assessment of administrative civil
penalties under section 6001 of the
Solid Waste Disposal Act (42 U.S.C.
6961), section 311 (b) (6) of the Clean
Water Act (33 U.S.C. 1321 (b)(6)), and
sections 1423(c) and 1447(b) of the Safe
Drinking Water Act, 42 U.S.C. 300h-2(c)
and 300j-6, including orders requiring
both compliance and the assessment of
a civil penalty under 1423(c), and
proceedings for the assessment of civil
penalties or the issuance of compliance
orders under the Mercury-Containing
and Rechargeable Battery Management
Act (42 U.S.C. 14304). Other
amendments would clarify the
applicability of the CROP to
proceedings already within its scope.
and delete outdated references.
Section 22.1(b) explains the
interrelation between the subpart H, the
new subpart I, and the provisions of
subparts A-G. Section 22.1(c) empowers
the Administrator, the Regional
Administrator, and the Presiding Officer
to resolve procedural matters not
covered in the CROP. The proposed
revision to § 22.1 (c) would make
explicit the authority of the EAB to
resolve such procedural matters.
b. Significant Comments and EPA
Response. CEEC objects to expanding
the scope of the CROP to include non-
APA proceedings, arguing that EPA has
failed to explain why the
CROP is more suitable .tha'n other
procedures. Dow and CMA/API strongly
support revised CROP procedures
replacing the procedures proposed for
the part 59 field citation program. CM A/
API also supports the decision to
include non-APA proceedings within
the CROP, rather than as a distinct set
of procedures under part 28.
The preamble to the proposed rule
explained generally why EPA considers
the proposed CROP suitable for non-
APA enforcement cases, but it did not
expressly contrast the suitability of
alternative sets of procedures. In
drafting the proposed CROP, EPA had
the benefit of the public comments
received in response to the 1991
proposed part 28 procedures and the
1994 proposed field citations
procedures, and the benefit of practical
case experience with both the proposed
part 28 procedures and the existing
CROP procedures. The proposed CROP
revisions drew from the best provisions
of each set of procedures, and is as a
result more clear, more simple and more
efficient than its predecessors.
CEEC questions EPA's decision to use
the CROP procedures for non-APA
cases, asserting that it is inappropriate
for EPA "to assume that one size fits
all." CEEC does not identify any class of
cases for which the proposed CROP
might be unsuitable, nor does it identify
other procedures that might be more
suitable. EPA has taken into account the
limits to a "one size fits all" approach
through the inclusion of statute-specific
supplemental rules (subpart H) and the
special rules for non-APA proceedings
(subpart I).
In apparent contradiction to its
criticism of the "one size fits all"
approach of the CROP, CEEC also faults
EPA for failing to explain why the scope
of the CROP fails to encompass
corrective action orders pursuant to
Solid Waste Disposal Act ("SWDA")
sections 3008(h) and 9003(h)(4), and
pesticide cancellation proceedings
pursuant to section 6 of the Federal
Insecticide, Fungicide, and Rodenticide
Act ("FIFRA"). Although the proposed
rule would expand the scope of the
CROP, EPA did not propose that it
should replace all administrative
adjudicatory procedures.
EPA determined in 1988 that less
formal procedures are appropriate for
corrective action orders because of the
need for quick response to hazardous
waste spills, because such cases present
fewer factual Issues than cases where a
regulatee may be forced to pay a civil
penalty for violating the law, and
because the cost of the formal CROP
procedures is twice as high as the cost
of the informal procedures. 53 FR
12256. 12257 (April 13. 1988). EPA's
procedures for corrective action orders,
codified at 40 CFR part 24, were
challenged upon issuance and upheld
by the Court of Appeals for the District
of Columbia Circuit. The D.C. Circuit
agreed with EPA that "to the modest
extent that EPA's Part 24 regulations do
implicate the private interest in
avoiding the expense of unnecessary
corrective actions, formal procedures
[i.e.. the CROP] do not promise a
sufficient lowering of the risk of error to
justify their significant expense to the
Government." Chemical Waste
Management. Inc. and Waste
Management of North America, Inc., v.
U.S. Environmental Protection Agency,
873 F.2d 1477, 1485 (D.C. Cir. 1989).
EPA continues to believe that the
informal procedures of part 24, rather
than the CROP, are appropriate for
SWDA sections 3008(h) and 9003(h)(4)
corrective action orders.
Pesticide cancellation proceedings are
subject to rules codified at 40 CFR part
164, as are other proceedings related to
the registration status of a pesticide.
Although some sections of part 164 are
very similar, or identical, to provisions
of the CROP, there are also fundamental
differences, that reflect differences
between FIFRA section 6 and the
statutory authorities for various CROP
proceedings. Although it would be
possible to draft a single set of
procedures that could apply to all
corrective action orders and pesticide
cancellation proceedings, as well as the
proceedings within the scope of the
CROP, it would call for extensive
revisions and elaborate supplemental
rules. At this time, it does not appear
that combining either part 24 or part 164
with the CROP would produce
significant efficiencies or
improvements.
c. Final Rule. EPA has adopted § 22.1
as proposed, with minor changes. In the
December 11, 1996, "Round Two"
permit streamlining proposed rule, EPA
proposed to remove the procedures
existing in 40 CFR part 124, subpart E,
for proceedings to revoke or suspend a
permit issued under section 402(a) of
the Clean Water Act (33 U.S.C. 1342(a))
or to revoke or suspend a permit under
sections 3005(d) and 3008(h) of the
Solid Waste Disposal Act (42 U.S.C.
6925(d) and 6928(h)). See 61 FR 65268
(December 11, 1996). EPA proposed that
such proceedings would be conducted
pursuant to the CROP procedures, and
proposed CROP revisions to accomplish
this. These changes were incorporated
into the February 25, 1998. proposed
CROP revisions. As EPA has not yet
finalized the Round Two permit
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40141
streamlining rule and 40 CFR part 124,
subpart E remains in effect. EPA has
removed from § 22.1 (a)(4) and (a)(6) the
proposed references to permit
revocation, suspension and termination.
EPA anticipates that these references
will be restored when the Round Two
permit streamlining rule is finalized.
EPA has deleted the word
"conducted" from paragraphs (a)(l).
(a) (3) and (a) (5). This word is
unnecessary, and the deletions make
these paragraphs more consistent with
therestof§22.1(a).ln§22.1(a)(4)(i),
EPA has replaced the word "and" in the
first parenthetical list of citations to the
U.S. Code, with the word "or" for
consistency.
In the proposed § 22.1 (b). the word
"establish" appeared twice in the first
sentence. EPA has deleted the
redundant word. EPA has also revised
the last sentence of 22.1 (b) for clarity.
2. Powers and Duties of the
Environmental Appeals Board, Regional
Judicial Officer and Presiding Officer;
Disqualification. Withdrawal and
Reassignment. (40 CFR 22.4)
a. Summary of Proposed Rule.
Proposed revisions to § 22.4(a) clarify
the role of the Environmental Appeals
Board, to which the Administrator has
delegated the authority to rule on
appeals. The proposed rule clarifies that
the Environmental Appeals Board rules
on appeals from decisions, rulings and
orders of a Presiding Officer in
proceedings under the CROP, acts as
Presiding Officer until an answer is filed
in cases initiated at EPA Headquarters,
and approves settlement of such cases.
The proposed rule provides that appeals
and motions must be directed to the
Environmental Appeals Board except
those in matters referred by the
Environmental Appeals Board to the
Administrator, and motions for
disqualification under paragraph (d).
Proposed revisions to §22.4(b)
describe the function of the Regional
Judicial Officer, requiring each Regional
Administrator to designate one or more
Regional Judicial Officers to act as
Presiding Officers in proceedings under
subpart I, and to act as Presiding
Officers in APA CROP proceedings until
an answer is filed. The proposed rule
provides that the Regional
Administrator may delegate to a
Regional Judicial Officer the authority to
approve settlement of proceedings,
ratify consent agreements and issue
consent orders.
EPA proposed deleting from § 22.4 (b)
certain limitations on the Regional
Judicial Officers. One proposed deletion
is the current prohibition on
employment of a Regional Judicial
Officer by the Region's Enforcement
Division or the Regional Division
directly associated with the type of
violation at issue in the proceeding. The
other is the prohibition, derived from
section 554 (d) of the Administrative
Procedure Act, against a Regional
Judicial Officer having "performed
prosecutorial or investigative functions
in connection . . . with any factually
related hearing." The proposed rule
would add new language precluding an
individual from serving as Regional
Judicial Officer in any case in which he
or she has any "interest in the
outcome." The proposed rule retains the
provisions that prohibit an individual
from serving as Regional Judicial Officer
in the same case in which he or she
performed prosecutorial or investigative
functions, and that require that Regional
Judicial Officers be attorneys employed
by a Federal agency.
EPA proposed editorial revisions to
§ 22.4 (c), describing the role of the
Presiding Officer, that do not introduce
any substantive change.
The proposed § 22.4(d) establishes
new procedures for seeking
disqualification of the Administrator, a
Regional Administrator, a member of
the EAB, a Regional Judicial Officer
("RJO"), or an Administrative Law
Judge ("ALJ"), from performing
functions they are authorized to perform
under the CROP. Under the existing
rules, any party may seek the
disqualification of a Regional Judicial
Officer by motion to the Regional
Administrator; or may seek the
disqualification of any of the other
individuals by motion to the
Administrator. Under the proposed
rules, any party must first file a motion
with the particular individual
requesting that he or she disqualify
himself or herself from the proceeding.
If the party has moved to disqualify a
Regional Administrator, a Regional
Judicial Officer, an ALJ. or a member of
the EAB, and the motion is denied, the
party may appeal the denial of the
motion administratively. The proposed
rule does not provide for administrative
appeal from the Administrator's denial
of a motion to disqualify herself.
The proposed § 22.4(d) provides that
an interlocutory appeal may be taken
when an ALJ denies a motion that he
disqualify himself or herself from a
proceeding. However. EPA asked for
comments on whether to prohibit such
interlocutory appeals.
b. Significant Comments and EPA
Responses
22.4 (a). Dow suggests clarifying the
rule by adding the word "initial" before
the word "decisions" in the description
of the Environmental Appeals Board's
role in ruling on decisions, rulings and
orders of a Presiding Officer. EPA
accepts the suggested change.
22.4(b). CEEC states that it opposes
expansion of the role of RJOs through
the CROP. The preamble to the
proposed rule stated that EPA had no
current plans to use the subpart 1
procedures for any cases other than
those arising under Clean Water Act
("CWA") sections 309(g)(2)(A) and
311(b)(6)(B)(i) (33U.S.C. 1319(g)(2)(A)
and 1321 (b) (6) (B) (i)), and Safe Drinking
Water Act ("SOWA") sections
1414(g)(3)(B) and 1423(c) (42 U.S.C.
300g-3(g)(3)(B) and 300h-2(c)). See63
FR at 9479. To codify that point, EPA
has revised the proposed § 22.50 so that
it applies only to these cases. With this
revision, today's rule clearly does not
represent any practical expansion of the
RJOs' role. Since the 1980's, RJOs have
presided over cases under CWA sections
309(g)(2)(A) and 311(b)(6)(B)(i)..and
SDWA sections 1414(g)(3)(B) and
1423(c), under the procedures proposed
(but not finalized) as part 28 and under
other Agency guidance (e.g. Guidance
on VIC Administrative Order
Procedures. November 28, 1986). Now
they preside over the same kinds of
cases using the CROP.
Of the six commenters on the
proposed rule, five (UWAG. UARG,
CEEC, CM A/API, and Dow) expressed
concern that the proposed rule fails to
protect constitutional due process rights
and assure the independence and
impartiality of Regional Judicial
Officers. UARG and UWAG oppose use
of any EPA attorneys as Presiding
Officers, arguing that Agency loyalty
will create bias or the appearance of
bias. CEEC. CMA/API. Dow and (by
implication) UARG and UWAG oppose
the use of EPA enforcement attorneys as
Presiding Officers. These commenters
argue that allowing enforcement
personnel to be Presiding Officers
creates actual or apparent bias by
commingling the investigative,
prosecutorial and adjudicative
functions. Particular concerns include
EPA enforcement attorneys presiding
over cases brought by their colleagues,
and over cases with issues or defendants
in common with cases the Presiding
Officer has litigated. Dow, UARG and
UWAG urge the Agency to use
Administrative Law Judges for
adjudication of all administrative
enforcement proceedings, arguing that
ALJs are more qualified and are
insulated against institutional bias.
In response to these concerns, EPA
has made several changes to § 22.4(b).
First, EPA has added a requirement that
a "Regional Judicial Officer shall not
prosecute enforcement cases and shall
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not be supervised by any person who
supervises the prosecution of
enforcement cases, but may be
supervised by the Regional Counsel "
This change will assure that the persons
presiding over subpart 1 proceedings
will be able to freely exercise
independent judgment, without fear of
adverse action by EPA enforcement
managers.
Commenters suggested various
independence criteria: Dow suggested
that the CROP should mandate either
that the employment and advancement
of each EPA attorney serving as RJO
expressly be made independent of his or
her rulings as Presiding Officer, or the
attorney has no direct or indirect
supervision (for a total of at least two
levels of supervision) by persons or
offices responsible for enforcement.
UARG and UWAG believe that hearings
should be run only by ALJs, but if the
Agency refuses to implement that
suggestion, they support the idea
presented in the preamble to the
proposed rule that the Presiding Officer
not be directly supervised by any person
who directly supervises the prosecution
of the case. CMA/API suggested a
requirement that the Regional judicial
Officer "should not be employed by or
supervised by any enforcement
component, whether that component is
in the Office of Regional Counsel or the
Regional Office of Enforcement."
EPA has considered the various
independence criteria suggested by the
commenters, and has concluded that
prohibiting RJOs from prosecuting
enforcement cases, and prohibiting RJOs
from being supervised by persons who
supervise the prosecution of
enforcement cases, will sufficiently
separate RJOs from enforcement.
Although Regional Administrators and
Regional Counsels necessarily have
significant responsibility for their
Regions' enforcement program, they
have other responsibilities which give
them a broader perspective.
Accordingly, there is little risk that they
would exert improper influence over the
decisions of an RJO. In order to avoid
any confusion, the rule explicitly allows
supervision by the Regional Counsel.
The Regional Administrators' authority
to personally supervise the RJOs is
implicit, but may not be delegated to a
person who supervises the prosecution
of enforcement cases (except the
Regional Counsel).
EPA's experience with non-APA
adjudications to date indicates that RJOs
maintain their independence and
impartiality, and their decisions reveal
no bias toward the complainant. Only
four decisions by EPA attorneys serving
as Presiding Officer have been reversed
on appeal out of over 180 decisions
rendered over a period of approximately
10 years. Moreover, there has not been
a single penalty or corrective action case
where a respondent has appealed a
denial of a motion to disqualify a
Regional Judicial Officer, nor where a
respondent has alleged a Regional
Judicial Officer's actual bias among its
grounds for appeal. These results
demonstrate that the RJOs' present
levels of competence and independence
are reasonable. Today's rule assures that
this independence will not be
compromised.
The more restrictive requirements
suggested in some of the comments
would not be feasible to implement.
Prohibiting supervision by Agency
officials who have any enforcement
responsibilities would prohibit virtually
all upper management in the Regional
Offices, including the Regional
Administrators, from such supervision.
The RJOs' record to date indicates that
such restrictive standards are not
necessary. Other suggested standards
would invite time consuming litigation
over side issues, such as whether a
supervisor or office is responsible for
"enforcement" or whether someone is
"indirectly" supervising the RJO, when
the proper questions are whether an RJO
is in fact biased and whether such bias
affected the outcome of a particular
case.
Second, EPA has included in the final
rule a provision precluding a Regional
Judicial Officer from knowingly
presiding over a case involving any
party concerning which the Regional
Judicial Officer performed any functions
of prosecution or investigation within
the 2 years preceding the initiation of
the case. CMA/API recommended that
Regional Judicial Officers should not
currently be involved in any other
proceedings involving the same
defendants and should not have been
involved in the investigation or
prosecution of the defendant within the
previous,5 years. EPA agrees that it
could create at least an appearance of
bias if an EPA attorney were to serve as
prosecutor of one complaint and shortly
thereafter function as adjudicator of
another complaint against the same
party. It is neither necessary nor
practical for EPA to adopt CMA/API's
recommendation that the CROP prohibit
prosecutorial or investigative activity
against the respondent for 5 years. EPA
has included in the final rule a
provision precluding a Regional Judicial
Officer from knowingly presiding over a
case involving any party concerning
which the Regional Judicial Officer
performed any functions of prosecution
or investigation within the 2 years
preceding the initiation of the case. EPA
has made this requirement contingent
upon the RJO's knowledge because
name changes are sufficiently common
in modern industry that a RJO might
preside over a case without being aware
that he or she ha'd previous dealings
with the same company. Upon
becoming aware of such prior
relationship, the RJO must promptly
disqualify himself or herself from the
proceeding. If, in a particular case, a
party were to believe that participation
in a similar case more than 2 years
earlier would bias the RJO, that party
could move for disqualification under
§ 22.4(d). Note also that, owing to the
new prohibition against RJOs
prosecuting enforcement cases, the
potential for these conflicts will
decrease over time.
In the response to the public
comments, EPA has revised the
proposed § 22.4(b) to increase the
independence of RJOs (prohibiting RJOs
from prosecuting enforcement cases,
prohibiting their supervision by persons
who supervises prosecution of
enforcement cases, and prohibiting the
RJO from knowingly presiding over a
case involving any party concerning
which he or she performed any
functions of prosecution or investigation
within the 2 years). Other changes
sought by the commenters are
impractical and unnecessary.
In proceedings subject to section 554
of the APA, Congress has determined
that Presiding Officers may not be
"engaged in the performance of
investigative or prosecuting functions
for (EPA] in * * * a factually related
case * * *", and may not "be
responsible to or subject to the
supervision or direction of [persons]
engaged in the performance or
investigative or prosecuting functions
for 1EPA]." 5 U.S.C. 554(d). However,
subpart I is designed for use in
proceedings that are not subject to
section 554 of the APA. Congress has
expressly authorized EPA to assess civil
penalties through procedures that do
not meet the standards of section 554.
Despite the broad range of options this
allows, EPA has chosen as a matter of
policy to make subpart I procedures
adhere closely to the APA requirements.
The subpart I procedures depart from
the requirements of section 554 only in
regard to the independence of the
Presiding Officer. The commenters who
object to subpart I for failing to provide
this same level of independence are
objecting, in effect, to the statutes that
authorize non-APA proceedings. The
Agency does not agree that such a broad
limitation on its authority is
appropriate.
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40143
Whether adjudication by EPA
attorneys under subpart 1 provides
adequate protection for respondents'
due process rights must be evaluated
according to the three part standard
established in Maihewsv. Eldridge, 424
U.S. 319(1976):
"|O)ur prior decisions indicate that
identification of the specific dictates of due
process generally requires consideration of
three distinct factors: First, the private
interest that will be affected by the official
action: second, the risk of an erroneous
deprivation of such interest through the
procedures used, and the probable value, if
any. of additional or substitute procedural
safeguards: and finally, the Government's
interest, including the function involved and
the fiscal and administrative burdens that the
additional or substitute procedural
requirement would entail." Id. at 334-35.
The private interests in a proceeding
under subpart 1 of the CROP are the
impact on respondent of a civil penalty
and on respondent's reputation from a
finding of liability, and perhaps in the
expense and burden of the hearing
itself. Although these interests are
important, they are less important than
the private interest at stake in Mathews
v. Eldridge, where the governmental
agency summarily discontinued an
individual's social security disability
benefits while the benefit termination
hearing was pending. The private
interests at stake in CROP proceedings
do not rise to this level. Moreover, the
interests at stake certainly are not so
significant as individual interests in
liberty or bodily integrity.
The risk of an erroneous deprivation
of respondents' private interests through
adjudications by EPA attorneys is low,
and certainly lower than in Mathews v.
Eldridge. where the disability benefits
were terminated before any hearing was
afforded. In a CROP subpart I
proceeding, the respondent first has an
opportunity for a hearing before an RJO
(including the opportunity to present
evidence and to cross examine the
Agency's witnesses), and has
opportunities for administrative review
before the penalty is assessed (i.e.,
appeal of the initial decision to the
EAB). The risk of an erroneous
deprivation of a respondent's interests
should correspond closely to the
frequency with which decisions by EPA
attorneys serving as Presiding Officer
are reversed on appeal by either the
EAB or a federal court, and as described
above, this rate has been extremely low.
Balanced against the private interests
at stake and the risk of their impairment
is the government's interest. The
government's primary interest in having
EPA attorneys preside over certain
enforcement cases is in making efficient
use of Agency resources. The costs for
an ALJ to travel from Washington, D.C.,
to the hearing location is greater than
the cost for an EPA attorney to travel
from the Regional office to the hearing
location. In addition, ALJs are paid
more than the EPA attorneys who serve
as Presiding Officers. The other
government interest is in having the
flexibility to increase the number of
Presiding Officers to meet the
administrative case load. In the recent
past, the number of ALJs was clearly
inadequate to handle the number of
cases. Although the number of ALJs is
today more commensurate with the
number of cases, future imbalances
might be alleviated by temporarily
expanding or contracting the number of
EPA attorneys who may serve as
Presiding Officer.
To summarize the results of this
Mathews v. Eldridge three-step
balancing test, there appears to be a
relatively small risk of impairment of
private interests that are of a moderate
level of importance. This small risk of
impairing moderately important
interests must be balanced against the
government's interests in making best
use of its resources. Although it is not
possible to weigh these factors with
mathematical precision, it is clear that
the use of EPA attorneys as Presiding
Officers, subject to the provisions
adopted in this rule and with the right
to appeal to the EAB, is not a violation
of respondents' rights to due process of
law.
CMA/API recommend that, if EPA
allows Agency personnel to serve as
Regional Judicial Officers, they should
be members in good standing with a bar.
EPA notes that under the Federal
personnel rules all attorney positions
require bar membership, so this need
not be addressed in § 22.4(b). CMA/API
also argues that Regional Judicial
Officers should have substantial
litigation experience including
adjudication. The position descriptions
for Regional Judicial Officers require
that they be senior attorneys with
substantial litigation experience, and
EPA believes that its internal
procedures and controls are adequate to
assure that Regional Judicial Officers
have substantial litigation experience.
EPA intends to continue its practice of
sending each of its Regional Judicial
Officers to the National Judicial College
for training in presiding over
administrative hearings. This level of
experience and training is sufficient to
prepare Agency attorneys to preside
over the relatively straight-forward cases
expected under subpart I.
Some commenters (CMA/API, UWAG,
UARG) were concerned that the
physical proximity, friendships or
colleague relationships of the Regional
Judicial Officers with Agency
prosecuting attorneys would create an
appearance of partiality, where they
may share work and social activities,
training and secretarial support, and
where Regional Judicial Officers may
overhear statements made by
prosecutors. EPA and its RJOs make
efforts to avoid such contacts where
feasible, and the contacts that remain
are unlikely to result in an actual bias.
It does not appear that any solution
short of complete physical isolation of
Regional Judicial Officers from the
enforcement offices could completely
eliminate this concern. Such separation
would also pose significant logistical
difficulties for EPA's Regional offices.
Accordingly, this comment is not
adopted in the final rule. EPA Regional
Offices will continue to take prudent
measures to physically separate
Regional Judicial Officers from
personnel responsible for enforcement
case development and prosecution to
the extent feasible.
CMA/API suggested that a Regional
Judicial Officer should not adjudicate
any case involving the same counsel as
another case in which he or she
performed prosecutorial or investigative
functions. EPA disagrees. Counsel serve
merely as representatives of their
clients, and bias cannot be presumed to
attach merely to a representative.
CEEC and Dow suggested that the
final sentence of the proposed § 22.4(b),
which stated that RJOs may not have
"any interest in the outcome of any
case", is unclear and should incorporate
explanatory language from the preamble
to the proposed rule indicating that it
includes "a financial interest, personal
interest, or career interest in the
outcome of the action". 63 FR at 9467.
EPA notes that any interpretation of this
clause would have to conform to the
Standards of Ethical Conduct for
Employees of the Executive Branch, 5
CFR part 2635, which are intended to
supersede all agency ethics standards
(except those approved by the Office of
Governmental Ethics and promulgated
as supplemental ethics regulations
pursuant to 5 CFR 2635.105). In order to
avoid creating a standard which might
be interpreted differently than these
government-wide ethics standards, EPA
has removed this clause from the final
rule.
A general principle of the
government-wide ethics regulations,
particularly 5 CFR 2635.101, is that all
federal employees must perform their
duties impartially. If an RJO held any
interest or bias which would
compromise his or her ability to preside
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impartially in a particular proceeding,
this would be grounds for
disqualification under § 22 4(d)
Dow suggests that the CROP prohibit
enforcement attorneys from serving as
Presiding Officers unless the attorney
has not issued potentially relevant
interpretations of the statute or
regulations allegedly violated. Dow
suggests possible bias where the
Regional Judicial Officer had previously
issued interpretations of the regulations
at issue in a case before him, that may
create a reluctance to overrule his own
prior interpretation. However, all
adjudicators face the possibility of
having to overrule their own prior
interpretation of a rule, as contained in
their own prior decisions. EPA is
unaware of any court where
adjudicators are barred from deciding
cases where their earlier positions are
precedent. In every case, the
adjudicator's decision must be
supported by the evidence and
applicable law, and parties may appeal
any adverse decision to the EAB.
Accordingly, EPA has not made the
suggested change in the final rule.
UARG and UWAG argue that anyone
who has participated in a rule making
proceeding that leads to the
promulgation of a substantive rule
would have an interest and bias in the
interpretation of that rule, and should
not serve as Presiding Officer in a case
where that rule is at issue. Although
Regional Judicial Officers have presided
at public rule making hearings during
the public comment period, their role is
limited to conducting an orderly
hearing—they are not responsible for
weighing the evidence and do not
participate substantively in the
regulatory decision making. EPA
believes that participation in
substantive rule making is unlikely to
result in bias in the interpretation of the
rule. The Presiding Officer's decisions
must include findings of fact and
conclusions of law based upon the
record in the case, and their
interpretations of regulations are subject
to appellate review. EPA declines to add
the suggested prohibition with regard to
rule making.
The proposed rule would delete from
§ 22.4(b) language precluding a
Presiding Officer from hearing a case
that is "factually related" to one in
which he or she performed investigative
or prosecutorial functions. The 1980
CROP was intended to provide
procedures for hearings conforming to
section 554 of the APA, and the
"factually related" clause was derived
from section 554 (d), that provides that
"An employee or agent engaged in the
performance of investigative or
prosecuting functions for an agency in
a case may not, in that or a factually
related case, participate or advise in the
decision [or] recommended decision
* * *." As the revised CROP is
intended for use in proceedings that are
not subject to section 554, as well as
APA proceedings, provisions of the '
1980 CROP such as the "factually
related hearing" clause are no longer
appropriate for RJOs.
It is very probable that any EPA
attorney sufficiently experienced to be
selected as RJO would have prosecuted
a substantial number of the type of
routine cases which are expected to
form the bulk of subpart I practice, and
these cases may contain similar factual
issues. Moreover, the geographical
limits on each Region's enforcement
efforts make it likely that highly
experienced EPA attorneys will have
prosecuted cases that have parties,
locations, or other facts in common with
cases they might hear as an RJO. The
prohibition on hearing "factually
related" cases is too broad for subpart I
proceedings, where the cases will
mainly involve well settled law and
simple factual issues. The mere fact that
two cases have some facts in common
need not present any significant risk of
bias or "will to win," but it may result
in unnecessary litigation over whether
the cases are "factually related."
Although EPA acknowledges that
experience with cases that are factually
related in a substantial way could
potentially be a cause for concern, there
are many more cases where the factual
relation is too trivial to result in bias.
Today's final rule will provide
respondents in subpart I proceedings a
fair and impartial decision maker. Any
party may move to have a decision
maker disqualified, or a decision
overturned, on the basis of partiality
where "a disinterested observer may
conclude that [the agency) has in some
measure adjudged the facts as well as
the law of a particular case in advance
of hearing it." Cinderella Career and
Finishing School v. FTC, 425 F.2d 583,
591 (D.C. Cir. 1970). In the event that an
RJO who performed prosecutorial or
investigative functions in a factually
related case denies a motion for
disqualification, respondent can appeal
that decision, and, if the appellate body
finds that the RJO was not impartial,
then the RJO's decision will
undoubtedly be reversed.
22.4(c), A comment as to paragraph
(c) urges EPA to provide further
sanctions, in addition to the existing
sanction authorizing the Presiding
Officer to draw adverse inferences
against a party. For example, the rule
should authorize, when a party willfully
disregards discovery orders, sanctions
up to the level of dismissal with
prejudice or default, such as striking a
count from a complaint or striking a
specific defense. The commenter
suggests adding to the rule that a
Presiding Officer may impose any other
appropriate sanction that could be
imposed by a Federal court in a civil
proceeding.
EPA believes that it is not necessary
to add any additional language with
regard to sanctions that may be imposed
by a Presiding Officer. The broad
language of §22.4(c)(10) to "(djoall
other acts and take all measures
necessary" authorizes the Presiding
Officer to impose a broad array of
sanctions appropriate for management
of cases, to ensure the "maintenance of
order and for the efficient, fair and
impartial adjudication of issues."
Pursuant to that authority, Presiding
Officers impose sanctions such as
limiting the evidence a party may
present. See, Paul Durham, d/b/a
Windmill Hill Estates Water System,
EPA Docket No. [SDWA]-C930036,
1997 SDWA LEXIS 1, nn. 5, 6 (ALJ,
April 14, 1997). In addition, §22.17(a)
and 22.19(g) specifically provide for
sanctions of default or dismissal with
prejudice, and for exclusion of the
information from evidence for failure to
comply with information exchange
required by § 22.19 or with an order of
the Presiding Officer.
22.4(d). Commenters generally favor
the proposed disqualification
procedures, but have proposed several
revisions to the proposed regulation:
CEEC recommends that EPA add a
provision that "requires the individual
for whom disqualification is sought to
specify reasons for his decision" on the
disqualification motion. EPA does not
agree with the recommendation because
it is unnecessary. When a decision
maker rules on any motion under the
CROP, the decision maker provides
reasons for the ruling unless the reasons
therefor are patently evident. The
precise level of detail provided will
depend upon the decision maker's
informed discretion and the
circumstances of the case. There is no
reason to single out disqualification
rulings for purposes of imposing an
explicit requirement to articulate the
basis for the ruling and no reason for
limiting a decision maker's discretion in
this regard.
Dow proposes that "EPA should
provide a procedure for appeal, in cases
where the Administrator denies a
motion to disqualify himself." EPA
rejects the commenter's suggestion.
Since all Agency officials are supervised
by the Administrator, there is no
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Agency official who could appropriately
resolve such an appeal. Moreover, any
need for such a requirement is remote,
for the occasions when the
Administrator acts or serves as t.he.
deciding official under the CROP are
extremely rare. In practice, the EAB
performs the role of final decision
maker pursuant to its delegation from
the Administrator under the regulations.
For the most part, the Administrator's
role is residual and limited to cases
specifically referred to her by the EAB.
The EAB has not made such a referral
since its creation in 1992. A slightly
different role is reserved for the
Administrator under proposed § 22.31 (f)
(§ 22.31 (e) of this final rule), which
provides that, if the EAB were to issue
a final order to a Federal agency, the
agency may request a conference with
the Administrator. This opportunity is
not available to other recipients of EAB
orders. If a conference occurs as
provided in the provision, a decision by
the Administrator may become the final
decision. Nonetheless. EPA does not
expect that many such requests will be
made pursuant to this provision. If the
Administrator were to deny a motion to
disqualify herself from participating in
a proceeding, the appropriate recourse
would be to federal court, upon
issuance of the final agency action at the
end of the administrative proceeding.
Under both the existing rule and the
proposed rule (except for subpart I
cases), an interlocutory appeal under
§ 22.29 is available where a Presiding
Officer denies a motion for
disqualification. EPA requested
comment on whether to prohibit
interlocutory appeals to the EAB
following the denial of a
disqualification motion, consistent with
federal court practice.
In response to EPA's request for
comment, Dow and CEEC recommend
that interlocutory appeals of motions for
disqualification be allowed because
"there is a far greater likelihood of bias
under CROP proceedings than in
Federal courts," especially where the
presiding officer is not an ALJ. Dow
adds, therefore, that although it might
be acceptable to prohibit an
interlocutory appeal from the denial of
a motion to disqualify an ALJ, because
"ALJs are insulated against actual bias,"
it is not appropriate to prohibit an
interlocutory appeal from the denial of
a motion for disqualification where the
presiding officer is not an ALJ. CEEC
argues that prohibiting interlocutory
appeals would contribute to delay
because the unavailability of an
interlocutory appeals process would
increase the number of proceedings that
would have to be overturned on appeal.
EPA has considered these comments,
but has decided to add a provision to
the rules prohibiting interlocutory
appeals from the denial of
disqualification motions. EPA believes a
prohibition against interlocutory
appeals will not significantly affect the
impartiality of the administrative
adjudicative process and at the same
time will prevent unnecessary delays.
Based on the Agency's experience to
date, motions to disqualify decision
makers have been very infrequent.
Therefore, the Agency expects that the
circumstances will be extremely rare in
which either the Agency or private
litigants will have the burden of a
retrial.
CEEC proposes that the regulatory
bases for disqualifying a decision maker
be expanded to include "the appearance
of impropriety." Courts have held that
appearance of impropriety, without
more, does not warrant disqualification
under due process standards. Del
Vecchio v. Illinois Department of
Corrections, 31 F.3d 1363, 1371-72 (7th
Cir. 1994). Courts have also declined to
extend the judicial system's strict
separation of functions standard to
multi-function agencies. See e.g.,
Simpson v. OTS. 29 F.3d 1418, 1424
(9th Cir. 1994); EOF v. EPA, 510 F.2d at
1305. Likewise, the more stringent
"appearance" standard in 28 U.S.C.
455(a), that requires a Federal judge to
disqualify himself whenever his
impartiality "might reasonably be
questioned", does not apply to agency
adjudicators. See, e.g., Marine Shale
Processors, Inc. v. EPA, 81 F.3d 1371,
1386 (5th Cir. 1996). Although EPA
intends that RJOs should avoid the
appearance of impropriety, EPA does
not believe that the CROP should create
a disqualification standard based on
appearance of impropriety.
The criteria for disqualification in a
CROP proceeding are whether decision
makers have "a financial interest or |a]
relationship with a party or with the
subject matter which would make it
inappropriate for them to act". Whether
a financial interest or a relationship is
inappropriate is determined by
reference to the Standards of Ethical
Conduct for Employees of the Executive
Branch, 5 CFR part 2635. Decision
makers who fail to conform to these
government-wide ethics standards are
subject to disqualification.
c. Final Rule. EPA has reconsidered
the proposed change to the title of
§ 22.4, and has decided to retain the
original title "Powers and duties of the
Environmental Appeals Board * * * "
EPA has adopted the language
proposed under § 22.4(a), with the
addition of the word "initial" before the
word "decisions" in the first sentence,
as recommended by a commenter. This
paragraph appears as § 22.4(a)(l) in
today's final rule. As noted above in the
response to comments on § 22.4(c), a
commenter recommended that Presiding
Officers be given additional authority to
impose sanctions. Although § 22.4(c)
and other sections of the CROP provide
adequate authority to impose procedural
sanctions. EPA notes that § 22.4(c)
applies only to the Presiding Officer,
and not the EAB. In order that the CROP
should expressly authorize the EAB to
employ equivalent procedural
sanctions, EPA has added a new
paragraph to § 22.4(a). This new
paragraph (a) (2) makes explicit the
EAB's authority to impose procedural
sanctions for failures to conform to
CROP requirements and to orders of the
EAB, an authority that the Agency has
always considered implicit:
(2) In exercising its duties and
responsibilities under these Consolidated
Rules of Practice, the Environmental Appeals
Board may do all acts and take all measures
as are necessary for the efficient, fair and
impartial adjudication of issues arising in a
proceeding, including imposing procedural
sanctions against a party who without
adequate justification fails or refuses to
comply with these Consolidated Rules of
Practice or with an order of the
Environmental Appeals Board. Such
sanctions may include drawing adverse
inferences against a party, striking a party's
pleadings or other submissions from the
record, and denying any or all relief sought
by the party in the proceeding.
EPA has also made a minor editorial
revision to the last sentence of what is
now §22.4(a)(l), for reasons of grammar
and clarity. EPA has changed the last
clause from "motions * * * where the
Environmental Appeals Board has
referred a matter to the Administrator"
to "motions filed in matters that the
Environmental Appeals Board has
referred to the Administrator."
As discussed in the response to
comments above, EPA has made several
changes to § 22.4(b) in response to
public comments. EPA has added a new
sentence to §22.4(b): "A Regional
Judicial Officer shall not prosecute
enforcement cases and shall not be
supervised by any person who
supervises the prosecution of
enforcement cases, but may be
supervised by the Regional Counsel."
EPA has also included in the final rule
a provision precluding a Regional
Judicial Officer from knowingly
presiding over a case involving any
party concerning which the Regional
Judicial Officer performed any functions
of prosecution or investigation within
the 2 years preceding the initiation of
the case. EPA has deleted from the final
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sentence of the proposed § 22 4(b)
language prohibiting RJOs having "any
interest in the outcome" of any
proceeding. EPA has also revised
§ 22.50(a) to limit the applicability of
subpart I to cases under CWA sections
309(g) (2) (A) and 311 (b)(6)(B) (i) (33
U.S.C. 1319(g)(2)(A)and
1321 (b) (6) (B) (i)), and SDWA sections
1414(g)(3)(B) and 1423(c) (42 U S C
300g-3(g)(3)(B) and 300h-2(c)).
EPA has also made a minor, editorial
change to § 22.4(b). unrelated to the
public comments. The first sentence of
the proposed § 22.4 (b) stated that the
"Regional Administrator shall designate
one or more Regional Judicial Officers to
act as Presiding Officer...." EPA has
revised this sentence to say that the
Regional Administrator shall "delegate"
that authority.
EPA has adopted the proposed
§ 22.4(c) without change.
As discussed above, EPA has revised
§ 22.4(d) by adding a provision
prohibiting interlocutory appeals from
the denial of disqualification motions.
EPA has made three minor changes to
correct errors in the proposed § 22.4(d).
Contrary to the Agency's express intent
that all motions for disqualification be
made first to the official whose
disqualification is sought (see 63 FR at
9467), the proposed § 22.4(d)
erroneously includes a statement that
motions for disqualification of a
Regional Judicial Officer should be
made to the Regional Administrator.
The final rule requires that all motions
for disqualification must first be made
to the official whose disqualification is
sought.
In the final rule, EPA has corrected
another error in the proposed rule by
substituting "Administrative Law
Judge" for "Presiding Officer" in
§ 22.4(d). In § 22.3 of the 1980 CROP,
"Presiding Officer" was defined as an
Administrative Law Judge who has been
designated by the Chief Administrative
Law Judge to serve as Presiding Officer.
However, under the proposed rules, the
definition of "Presiding Officer" has
been revised to mean either an
Administrative Law Judge or a Regional
Judicial Officer. The proposed § 22.4(d)
failed to reflect this change. Because the
proposed § 22.4(d) used the term
"Presiding Officer" solely to refer to
Administrative Law Judges, EPA has
revised this paragraph to use the term
"Administrative Law Judge" instead.
Finally, the phrase "they deem
themselves" should be singular, rather
than plural. EPA has substituted the
phrase "he deems himself.
3 Filing, Service, and Form of
Documents (40 CFR 22.5(a)-(c))
a. Summary of Proposed Rule. EPA
proposed revisions of § 22.5(a) clarifying
the requirements for filing documents
with the hearing clerk or the clerk of the
EAB. Proposed revisions of §22.5(b)
clarify the requirements for serving
documents on other parties and on the
Presiding Officer. The proposed
paragraph (b)(l) would allow service of
the complaint by any reliable
commercial delivery service that
provides written verification of delivery,
and paragraph (b)(2) would allow
service of all documents other than the
complaint by any reliable commercial
delivery service.
The proposed §22.5 (c) added
provisions which would require more
information on the first page of every
pleading and to require tables of
contents and tables of authorities for all
legal briefs and memoranda greater than
20 pages in length (excluding
attachments) to simplify review. The
provision that allowed Hearing Clerks to
determine the adequacy of documents
was deleted, leaving that authority
solely with Presiding Officers or the
Environmental Appeals Board.
fa. Significant Comments and EPA
Response. Dow says that it is unclear
whether the language in § 22.5(b)(l)
allowing service of the complaint "by
certified mail, return receipt requested"
refers to one method of service or two
alternative methods. EPA has amended
this phrase to read "by certified mail
with return receipt requested",
Dow suggests that § 22.5(b)(l) should
allow respondent to waive the
requirement that EPA send a copy of the
CROP with the complaint. EPA
acknowledges that this is superfluous in
many cases, but nevertheless believes
that this requirement is the most certain
way of assuring that respondents are
aware of their procedural rights.
USAF requests that the phrase
"officer or" be deleted from
§ 22.5(b)(l)(ii)(B), questioning EPA's
authority to file administrative cases
against officers of the United States for
actions within the scope of their
employment. EPA agrees that the words
"officer or" should be deleted from the
proposed section for the reasons stated.
EPA agrees that under normal
circumstances, officers of the United
States acting outside trie scope of their
employment would be treated in the
same manner as other individuals.
Where the real party in interest is a
Federal agency, that agency should be
named as respondent.
USAF also notes that the proposed
§22.5(b)(l)(ii)(B) provides less guidance
as to the manner of service on Federal
agencies than the language presently
codified at § 22.5(b)(l)(iii). USAF urges
the adoption of language clearly
providing for service as provided by
regulation, and absent regulation,
service upon the chief attorney and on
the senior executive officer responsible
for the overall operations of the
geographical unit of the agency being
served. The language describing this
latter official is adapted from 40 CFR
§ 270.11 (a)(3)(ii). that designates who
must sign waste permit applications.
EPA agrees with the Air Force that the
proposed rule does not succeed in
clarifying who must be served. EPA has
revised this paragraph to require service
as provided by the respondent agency's
regulations, or in the absence of
controlling regulation, as otherwise
provided by law. This will clearly allow
Federal agencies to specify how they are
to be served, and where they do not do
so, it will allow EPA to serve the agency
in any manner permitted by the Federal
courts.
EPA recognizes the benefits of
assuring that those directly in charge of
a federal facility get prompt notice of a
complaint, and so, has added to the
final rule a direction that the
complainant should send an additional
copy of the complaint to the senior
executive official having responsibility
for the overall operations of the
geographical unit where the alleged
violations arose. This language.
proposed by USAF, is derived from
EPA's regulation designating who must
sign applications for hazardous waste
permits, 40 CFR 270.11 (a)(3)(ii). EPA
recognizes that the term "geographical
unit" may be subject to varying
interpretations, but has concluded that
the imprecision is both necessary given
the wide variety of federal facilities, and
acceptable given that this copy of the
complaint merely supplements the
official service of the complaint. In
recognition of this imprecision, this new
provision uses the word "should" rather
than "shall." EPA will make a good
faith effort to provide a copy of the
complaint to the base commander, or
equivalent, however, so long as
complainant properly serves the federal
agency according to its regulations or as
otherwise provided by law. the
requirements of § 22.5(b)(l)(iii) are
satisfied.
USAF finds the phrase "all pleadings
and documents other than the
complaint", used in § 22,5(b)(2) and
elsewhere, to be confusing. USAF
recommends using "answer" and/or
"complaint" in place of "pleading" and
"all filed documents" or "all filings" in
place of "pleadings and documents".
EPA agrees with this recommendation.
Dow recommends that § 22.5(c)(2)
should specify how respondent is to
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4014?
determine the docket number. EPA
agrees that the proposed rule leaves this
unclear. EPA has stricken the
parenthetical clause "(after the filing of
the complaint)" in order to assure that
the docket number shall appear on the
complaint.
Dow and CEEC observe that under
§ 22.5(c)(4) a party who fails to furnish
or update its name, address, and
telephone number, and those of its
attorney or representative, if any,
completely waives its right to notice and
service. The commenters argue that this
sanction is too severe for harmless
errors. EPA has amended this provision
so that where a party fails to update
information concerning its
representative and/or service address,
service to the outdated representative or
address shall satisfy the requirements of
§ 22.5(b)(2) and § 22.6. In this manner,
the consequences of any failure to
update this information will be
commensurate with the severity of the
error.
In its comments on §§22.17 (a) and
22.34(c), Dow notes that default is too
harsh a sanction for minor errors in
service or filing. The proposed
§ 22.5(c)(5) would allow the EAB or the
Presiding Officer to exclude from the
record any document that does not
comply with §22.5(c). This would
apparently preclude exclusion for
service errors as significant as those in
§ 22.5(c) (e.g., failure to serve the
opposing party, failure to include a
certificate of service per § 22.5 (a) (3),
failure to file the original document per
§ 22.5(a)(1)). Therefore, the final rule
expands this sanction to include failures
to conform to paragraphs (a), (b) and (d),
as well as (c).
The Agency solicited comments on
whether electronic filing and service
should be allowed, and if so, under
what conditions, but received no
comments. After further consideration.
EPA has decided that the CROP should
permit the Presiding Officer and the
EAB. in consultation with the parties
and the affected hearing clerk, to
authorize facsimile or electronic service
and/or filing on a case-by-case basis.
Accordingly, language is added to
§§ 22.5(a)(l) and 22.5(b)(2) allowing the
Presiding Officer or the EAB to
authorize facsimile or electronic service
and/or filing, subject to any appropriate
conditions and limitations.
c. Final Rule In response to public
comments. EPA has adopted a modified
version of the proposed §22.5(a), (b),
and (c). EPA has revised this and other
sections to use the more general term
"document" in place of "pleadings and
documents", and to use "complaint" or
"answer" where reference to one or the
other is specifically intended. EPA has
edited §22.5(b)(l) to read "by certified
mail with return receipt requested".
EPA deletes the phrase "officer or" from
§ 22.5(b)(l)(ii)(B). and revises the
proposed §22.5(b)(l)(ii)(B) as follows:
"Where respondent is an agency of the
United States, complainant shall serve that
agency as provided by that agency's
regulations, or in the absence of controlling
regulation, as otherwise permitted by law.
Complainant should also provide a copy of
the complaint to the senior executive official
having responsibility for the overall
operations of the geographical unit where the
alleged violations arose."
EPA has stricken from § 22.5(c)(2) the
parenthetical clause "(after the filing of
the complaint)". EPA has revised
§22.5(c)(4) as follows:
"(4) The first document filed by any person
shall contain the name, address, and
telephone number of an individual
authorized to receive service relating to the
proceeding. Parties shall promptly file any
changes in this information with the Regional
Hearing Clerk, and serve copies on the
Presiding Officer and all parties to the
proceeding. If a party fails to furnish such
information or any changes thereto, service to
the party's last known address shall satisfy
the requirements of §22.5(b)(2) and §22.6."
EPA has revised the proposed
§ 22.5(c) (5) to allow the EAB or the
Presiding Officer to exclude from the
record any document that does not
comply with any requirement of § 22.5.
In addition to the changes suggested
by the commenters, EPA has made
several other minor changes to § 22.5.
EPA has amended § 22.5(a)(l) to allow
the Presiding Officer and the EAB the
discretion to allow facsimile or
electronic filing under such
circumstances and limitations as they
deem appropriate. EPA also has added
to § 22.5(b)(2) language allowing the
Presiding Officer or the EAB to
authorize facsimile or electronic service,
subject to such conditions and
limitations as they deem appropriate.
EPA has added a reference to the EAB
to §22.5(b): "A copy of each document
filed in the proceeding shall be served
on the Presiding Officer or the
Environmental Appeals Board, and on
each party."
EPA has determined that additional
clarifications are appropriate for
§ 22.5(b)(2). EPA notes that the U.S.
Postal Service considers overnight
express and priority mail to be forms of
first class mail. EPA has revised
§ 22.5(b)(2) to allow service "by first
class mail (including certified mail,
return receipt requested, Overnight
Express and Priority Mail), or by any
reliable commercial delivery service.
This change necessitates a
corresponding change in § 22.7(c),
because 5 day grace period for
responding to motions sent by first class
mail is unnecessary for documents
served by overnight or same-day
delivery.
Finally, EPA has revised the CROP to
present numbers consistently, adopting
the preferred style of the U.S.
Government Printing Office. Numbers of
10 or more are expressed in figures and
not spelled out. Accordingly, EPA has
revised § 22.5(c) to require a table of
contents and a table of authorities for all
briefs and legal memoranda "greater
than 20 pages in length".
4. Confidentiality of Business
Information (40 CFR 22.5(d))
a. Summary of Proposed Rule. The
proposed §22.5(d) addresses treatment
of information claimed as Confidential
Business Information ("CBI") in
documents filed in CROP proceedings.
The proposed paragraph (d)(l) would
provide that any business
confidentiality claim shall be made in
the manner prescribed by 40 CFR part
2 at the time that the document is filed.
It warns that a document filed without
a claim of business confidentiality will
be available to the public for inspection
and copying pursuant to § 22.9,
Paragraph (d)(2) would require the
submission of a redacted, non-
confidential version in addition to the
full document containing the
information claimed confidential, and
describes the process for preparing these
documents. Paragraph (d){3) describes
the procedures for serving documents
containing claimed-confidential
information and makes clear that only a
redacted version of any document may
be served on a party, amici, or other
representative thereof not authorized to
receive the confidential information.
Paragraph (d)(4) provides that only the
redacted version of a document with
claimed-confidential information will
become part of the public record of the
proceeding, and further provides that an
EPA officer or employee may disclose
information claimed confidential only
as provided by 40 CFR part 2.
b. Significant Comments and EPA
Response. Dow and CEEC express
concern that under the proposed rule a
failure to include a CBI claim at the time
a document is submitted forecloses any
future protection of the document. They
argue that even where a company has
inadvertently placed information in the
public record, there is still value to in
preventing further disclosure. They also
point out that the Agency's CBI
regulations at 40 CFR 2.203{c) provide
that the Agency "will make such efforts
as are administratively practicable to
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r™- lconfiden«ality] claim
« hmi tipH f ' ' ' Pfeviously-
submitted information in EPA files
"amici" with "non-party participant"
for consistency with changes to
§ 22 1 1 (b)
Section 2.203(c) expresses an Agency
intent to give effect to late claims of
business confidentiality, to the extent
administratively practicable. While it is
often administratively practicable to
provide meaningful protection for a
document that has been submitted in a
non-confidential manner to an EPA
office for EPA's own regulatory use, it
is not administratively practicable to
protect information that has become a
matter of public record. There are
significant costs associated with
maintaining the confidentiality of
documents EPA uses, and EPA must
balance them against the potential
benefits of protecting information that is
already likely to be circulating among
the public. The criteria for determining
whether business information is entitled
to confidential treatment, at § 2.208,
include whether the business has taken
reasonable measures to protect the
confidentiality of the information.
Placing a document in the public record
falls short of those reasonable measures.
Some of EPA's enforcement dockets
receive daily visitors, while others are
less frequently examined. Accordingly,
once a person has filed a document with
a hearing clerk, a subsequent effort by
that person to assert a business
confidentiality claim for information
contained in that document will
generally be ineffective. EPA will
consider untimely confidentiality
claims on a case-by-case basis, but
claims asserted more than a few days
after the original filing are unlikely to be
granted.
CEEC also faults EPA for failing to
draw sufficient attention in the notice of
proposed rule making to the provisions
addressing CBI. CEEC asserts that EPA
missed an opportunity to work with the
regulated community to achieve
important regulatory reforms. EPA
disagrees. It is the purpose of a notice
of proposed rule making to elicit
comment from the public to better
inform the Agency's rule making
process. EPA has made many changes in
this final rule in response to the helpful
comments submitted by CEEC and other
commenters. Although EPA has not
agreed with CEEC's one substantive
comment on the CBI provisions, EPA
appreciates the comment and carefully
considered CEEC's point.
c. Final Rule. EPA adopts §22.5(d) as
proposed, except for replacing the
phrase "pleading or document" with
"document" as discussed in the
response to public comments on
§22.5(a), (b) and (c). and replacing
5. Computation and Extension of Time
(40 CFR 22.7)
a. Summary of Proposed Rule. Section
22.7(a) defines time periods for
determining the date upon which a
document is due. The proposed rule
would revisethe term "legal holiday" to
"Federal holiday" for clarity.
Section 22.7(b) sets forth conditions
under which the due date may be
extended. The proposed revision to that
paragraph would require that a motion
for extension of time be filed
sufficiently in advance of the due date
so as to allow other parties an
opportunity to respond and to allow
time for the Presiding Officer or EAB to
issue a ruling upon the motion.
Section 22.7(c) of the proposed rule
would expand the "mailbox rule" to
provide that service of documents other
than the complaint is complete either
upon mailing or when placed in custody
of a reliable commercial delivery
service, and to allow 5 additional days
to respond not only to documents
served by mail but also to documents
served by reliable commercial delivery
service.
b. Significant Comments and EPA
Response. Dow requested an exception
from including Saturdays, Sundays and
holidays where the time period is 10
days or less. The commenter is
concerned that there are not enough
work days and mail delivery days to
respond to a document.
In effect, this would extend the time
period for a party's reply to a response,
which is 10 days, under § 22.16(b). EPA
believes that two different ways of
calculating time periods would cause
confusion and inconsistency. When a
party needs more than 10 days to file a
document, an adequate solution would
be to request an extension of time.
Dow suggested a "good cause"
exception to the time limit for filing a
motion for extension of time. EPA
believes that including such an
exception in the rule is unnecessary and
may encourage untimeliness, and
thereby adversely affect the Agency's
efforts to make administrative
proceedings more efficient. A motion for
leave to file a document beyond the
time limit ("out of time"), stating
reasons for not having filed within the
time limit, may be submitted in
accordance with § 22.16(a). along with
the document sought to be filed. The
time limit provided in the proposed
revision does not require a motion for
extension to be filed so far in advance
of the due date so as to allow other
parties the 15 days provided by
§ 22.16(b) to respond to the motion. A
"reasonable opportunity to respond"
and "reasonable opportunity to issue an
order" will be construed based on the
circumstances of the case.
c. Final Rule. Today's additional
clarifications to § 22.5(b)(2), which
define first class mail as including
Overnight Express and Priority Mail,
expressly allow for service by EPA's
internal mail system, and provide the
Presiding Officer and the EAB
discretion to authorize facsimile or
electronic filing, require a
corresponding change to § 22.7(c). To
assume 5 days for delivery by mail of a
document, and thus to allow 5
additional days for a response, is
appropriate where a document is served
by first class mail and some forms of
commercial delivery. However, it is not
appropriate to make such assumption
and allowance where there is a date of
receipt, logged or stamped by the postal
or commercial delivery service, showing
that the document was sent by same day
or overnight delivery. Accordingly, EPA
is revising the third sentence of § 22.7 (c)
to exempt documents served by
overnight or same-day delivery!
According to the preferred style of the
U.S. Government Printing Office,
measurements of time are to be
expressed in figures and not spelled out.
EPA has revised § 22.7(c) to say that "5
days shall be added".
6. Ex Parte Discussion of Proceeding (40
CFR 22.8)
a. Summary of Proposed Rule. The
existing §22.8 prohibits the decision
making officials in a proceeding from
discussing the merits of the proceeding
with any interested person outside the
Agency, with any Agency staff member
who performs a prosecutorial or
investigative function in the proceeding
or a factually related proceeding. This
prohibition is also imposed on
representatives and to persons likely to
advise the decision making officials on
the proceeding. The proposed rule
would add a sentence that would
exempt officials who have formally
recused themselves from all
adjudicatory functions, including the
approval of consent agreements and
issuance of final orders.
b. Significant Comments and EPA
Response. Dow argues that the CROP
should also restrict ex parte contacts
before a complaint is issued, in order to
avoid the potential for an adjudicator
developing a bias in favor of the
complainant. Dow suggests that the
CROP should prohibit any
communication regarding contemplated
or reasonably foreseeable enforcement
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40149
proceedings between potential
adjudicators and Agency enforcement
personnel. Dow also suggests that where
Agency enforcement attorneys may
potentially serve as Presiding Officers,
any communications regarding
contemplated or reasonably foreseeable
enforcement proceedings should be
recorded, kept on file, and served on
respondent as soon as that attorney is
designated Presiding Officer.
EPA agrees that EPA attorneys who
may serve as Presiding Officers should
avoid communications regarding
contemplated or reasonably foreseeable
enforcement proceedings over which
they might preside. However, a
complete prohibition is neither feasible
nor necessary.
In some instances, it is appropriate for
Agency enforcement personnel to have
prefiling discussions concerning
specific enforcement cases with Agency
attorneys who may be called upon act
as Presiding Officers. When considering
whether to assign a new case to a
particular Agency enforcement attorney,
it may be necessary to inquire of that
attorney whether a prospective case may
present a conflict with any cases in
which the attorney is acting as Presiding
Officer. So long as those discussions are
carefully limited to transmitting the
identity of the prospective respondent
and a bare statement of the statutory or
regulatory provisions allegedly violated,
and to exploring whether there is any.
potential conflict of interest, but do not
address the merits of the potential
action, such discussions could not
influence the decisions of the
prospective adjudicator, and should not
be considered prohibited ex parte
communications.
Sound management of the Agency's
enforcement program also periodically
requires some discussion between
complainants and adjudicators
concerning anticipated work loads. For
example, EPA periodically offers
compliance audit programs (see, e.g.,
Registration and Agreement for TSCA
Section 8(e) Compliance Audit Program,
56 FR 4128 (Feb. 1. 1991)) where large
numbers potential cases are
simultaneously settled on essentially
identical terms, and it is appropriate in
such cases for the complainant to
discuss process issues with the persons
who would be responsible for approving
the consent agreements and issuing final
orders. Discussions of how many
consent agreements might be submitted
for approval, when they might be
submitted, whether or to what extent
the consent agreements vary, are all
permissible procedural matters that are
not prohibited ex parte
communications.
Compliance audit programs encourage
violators to identify their violations and
disclose them to EPA in exchange for a
settlement and release of liability on
favorable terms. Obtaining advance
approval of the generic consent
agreements could reassure those
members of the regulated community
who are wary of disclosing violations
that the Agency will in fact conclude
the cases according to the terms offered.
Although this would result in
substantive discussion of the terms of
settlement between prospective
complainants and adjudicators, this is
permissible under the peculiar
circumstances of a compliance audit
program. It is permissible because
compliance audit programs are entirely
voluntary. Each compliance audit
program is an offer by the Agency to the
regulated community at large, and EPA
typically engages in these efforts
precisely because it does not know who
is in violation and it wants to bring a
large and ill-defined sector of the
industry into compliance. No regulatee
is obligated to identify itself as a
violator or to participate in the program;
each chooses to do so only if it
considers the terms offered by the
Agency to be in its best interest.
Accordingly, where complainants wish
to confer with Agency officials
responsible for approving consent
agreements and issuing final orders
concerning potential compliance audit
programs, they may do so without
violating § 22.8.
Dow's suggested limitations also pose
significant implementation problems.
Parties may disagree about when an
investigation becomes a "contemplated
or reasonably foreseeable enforcement
proceeding" and about what
communications concern such a
proceeding. For the foregoing reasons,
EPA has not added any prohibition
against communications concerning
cases before the filing of the complaint.
Similarly. EPA does not believe that it
is necessary to require by rule that
potential adjudicators retain a written
record of all communications regarding
potential cases. The prohibition in
§ 22.4(d)(l) against individuals serving
as Presiding Officer in regard to "any
matter in which they have any
relationship with a party or with the
subject matter which would make it
inappropriate for them to act" provides
adequate protection against any bias
that might arise through
communications prior to the filing of a
complaint.
Dow also comments that where an
adjudicator obtains advice from other
EPA personnel, any such advice should
be served on the respondent. The focus
of Dow's concern is that EPA personnel
such as technical experts, rule writers,
and attorneys might be advising
adjudicators on the merits of a
proceeding. EPA shares Dow's opinion
that such ex parte advice is generally
unnecessary and inappropriate, and
believes that it is in fact extremely
uncommon. EPA agrees with the
commenter that adjudicators should not
be receiving such advice without all
parties having the opportunity to review
and respond to it. The CROP provides
suitable procedures for adjudicators to
solicit such advice (e.g., by calling for
an expert to testify pursuant to
§22.19(e)(4)) and for EPA personnel to
volunteer such advice (through amicus
briefs subject to § 22.11 (b)) without risk
of ex parte communication.
There are, however, circumstances
where it is appropriate for adjudicators
to obtain from other EPA personnel
advice that is not served on the parties.
Administrative Law Judges periodically
consult with each other, as do the
Agency's RJOs. Adjudicators routinely
receive advice from the attorneys and
law clerks on the staff of the
Environmental Appeals Board and the
Office of Administrative Law Judges,
and on occasion from hearing clerks and
from Agency ethics officials.
Accordingly, EPA declines to require
that all advice to adjudicators from EPA
personnel be served on the parties,
c. Final Rule. EPA is adopting § 22,8
as proposed, with minor changes. EPA
notes that § 22.8 refers in three places to
both Regional Judicial Officers and
Presiding Officers. In order to avoid
redundancy and potential confusion,
EPA has stricken the words "the
Regional Judicial Officer." Other minor
editorial changes in the first sentence
are the substitution of the word
"proceeding" for "case", so as to
consistently use the word "proceeding"
when referring to a particular
administrative adjudication, and
substitution of "any decision" for "the
decision" to clarify ex parte
communication is prohibited in regard
to small matters as well as large ones.
These editorial changes do not alter the
substance of the CROP.
The preamble to the proposed rule
indicated that the prohibitions on ex
parte communications would apply to
persons who approve consent
agreements and issue final orders. 63 FR
at 9468 ("For purposes of this provision
[§22.8], the Agency would consider the
approval of consent agreements and
issuance of consent orders to be
adjudicatory functions."). In some
instances. Regional Administrators have
delegated the authority to review
settlements and issue final orders to
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persons associated with the Regions-
enforcement programs. The Agency has
reconsidered the position expressed in
the preamble to the proposed rule, and
has determined that the person who
ultimately approves settlements on the
Agency's behalf and issues these final
orders need not be as independent as
those who adjudicate contested issues.
To make this change clear, EPA has
amended the last sentence of § 22.8 to
state that the ex parte restrictions shall
not apply to a person who issues final
orders only pursuant to § 22.18(b)(3).
7. Intervention and Non-party Briefs (40
CFR 22.11)
a. Summary of Proposed Rule. Section
22.11 (a) describes the process for
intervening in a CROP proceeding. The
proposed rule provides more specific
procedures and would make the
standard for intervention equivalent to
the standard used in the Federal courts.
Paragraph (b) describes the procedures
for motion for leave to file an amicus
brief; the major change proposed was to
provide a uniform 15 day period for
responses to an amicus brief, rather than
leaving this to the discretion of the
Presiding Officer or the EAB.
b. Significant Comments and EPA
Response. Dow suggests that § 22.11 (b)
should expressly allow 15 days for
parties to respond to a motion for leave
to file an amicus brief, as well as 15
days to respond to the brief itself. This
change is not necessary, because
"motions" are subject to § 22.16, which
provides for responses within 15 days.
Nevertheless, EPA accepts Dow's
suggestion and has revised § 22.11 (a)
and (b) so that all CROP requirements
apply to any motion for leave to file an
amicus brief or motion to intervene in
the same manner as if the movant were
a party.
c. Final Rule. EPA is adopting the
proposed §22.11 with modifications.
EPA has amended the language of
§ 22.11 (a) and (b) so that all
requirements of the CROP shall apply to
any motion for leave to intervene or
motion for leave to file an amicus brief
as if the movant were a party.
EPA has also made two other changes
to § 22.11 (b) on its own initiative. First,
it has replaced the terms "amicus
curiae" and "amicus brief with "non-
party brief." Second, EPA has replaced
the requirement that motions for leave
to file a non-party brief "state the
reasons why the proposed amicus brief
is desirable" with the requirement that
it "explain the relevance of the brief to
the proceeding." Both changes are
intended to improve the clarity and
specificity of the CROP, and neither is
intended to make a substantive change.
To conform to the preferred style of
the U.S. Government Printing Office,
EPA has revised § 22.7(c) to state the
time allowed for responding to a non-
party brief with the numeral "15'.
8. Commencement of a Proceeding (40
CFR 22.13)
a. Summary of Proposed Rule. EPA
proposed amending § 22.13 to define the
commencement of an administrative
enforcement proceeding, and to allow
the simultaneous commencement and
conclusion of a case through the filing
of a consent agreement and a final order
where pre-commencement negotiations
result in settlement,
b. Significant Comments and EPA
Response. CEEC recommends that the
CROP should require discussions with a
prospective respondent before the filing
of a complaint. CEEC argues that pre-
filing discussions would expedite the
proceeding by allowing the parties to
resolve the matter cooperatively, and by
allowing early elimination of
inappropriate allegations or penalties.
CEEC proposes that the CROP should
require that complainant determine
whether a potential respondent had fair
notice of the regulatory requirement(s)
that it is alleged to have violated, and
require EPA to disclose both the
information in EPA's possession
suggesting the violation and the
information EPA will utilize to set the
proposed penalty. CEEC argues that
such a pre-filing process would
maximize the opportunity to resolve
compliance matters cooperatively and
expeditiously.
EPA has often found it advantageous
to engage in pre-filing discussions with
prospective respondents under the
existing CROP, and the proposed
revisions will increase EPA's incentives
to do so. Nothing in the proposed rule
prevents EPA from engaging in the sort
of pre-filing process CEEC proposes.
However, EPA declines to go as far as
CEEC proposes and create a mandatory
pre-filing process. EPA's experience
with pre-filing negotiations has been
mixed: While in many cases pre-filing
negotiations have produced expedited
settlements, in other cases they have
resulted in delay. Sometimes a
respondent is not interested in
settlement, but uses settlement
discussions as a tactic in efforts to
forestall enforcement. In contrast, active
management of the case by a neutral
presiding officer is generally effective in
keeping both parties actively engaged in
settlement efforts, and provides an
alternative process when settlement
efforts fail.
Although EPA does not at this time
believe that a mandatory pre-filing
process should be part of the CROP.
EPA will consider ways to expand use
of pre-filing negotiations. Although
statutory public commenter provisions
somewhat limit the Agency's authority
to pursue pre-filing negotiations, the
final rule does not add any further
limits to EPA's discretion in this regard.
c. Final Rule. EPA is adopting § 22.13
of the CROP as proposed, with two
minor changes. The first resolves
conflicting language in the proposed
rule concerning whether a case subject
to public comment requirements of
§ 22.45 could be commenced through
the filing of a consent agreement and
final order pursuant to §22.13(b).
Although the proposed §22.13(b) states
that it is limited to cases not subject to
§22.45, the proposed §22.45(b)(l) and
(2) describe a process for public notice
in cases commenced pursuant to
§ 22.13(b). EPA has revised the public
comment procedures of § 22.45 to better
accommodate cases commenced
pursuant to § 22.13(b). Accordingly,
EPA has deleted from § 22.13(b) the
clause which would have made it
inapplicable in cases subject to the
public comment provisions of § 22,45.
Second, as noted in the discussion of
public comments on § 22.18(b) and (c),
EPA has eliminated the term "consent
order," and is using the term "final
order" instead.
9. Complaint (40 CFR 22.14)
a. Summary of Proposed Rule. The
primary substantive change proposed in
§22.14 was the addition of explicit
authority for complainants to use, at
their discretion, a notice pleading
approach comparable to that used in
administrative enforcement proceedings
under the proposed part 28 procedures
and in the Federal courts. The proposed
§ 22,14(a)(4) would expressly permit
EPA to file a complaint without
specifying the precise penalty sought, as
an alternative to pleading a specific
penalty. Where complainant elects not
to demand a specific penalty in the
complaint, complainant is nonetheless
obligated to provide a brief explanation
of the severity of each violation alleged
and a citation to the statutory penalty
authority applicable for each violation
alleged in the complaint. The text
originally in paragraph (c) would be
deleted to avoid the possibility of
conflict with the notice pleading option
proposed under § 22.14 (a) (4) (il).
The proposed §22.14(a)(6) would
require the complainant to specify in
the complaint whether the non-APA
procedures in subpart I shall apply to
the proceeding. If a complaint does not
contain an explicit statement that
subpart I applies, the ensuing
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40151
proceeding shall be conducted in
conformance with section 554 of the
APA.
EPA also proposed editorial revisions,
primarily to consolidate the provisions
applicable to complaints for assessment
of civil penalties with the essentially
parallel provisions for revocation,
termination or suspension of permits,
and to explicitly provide for the
issuance of compliance and corrective
action orders.
b. Significant Comments and EPA
Response
Four of the commenters, CMA/API,
CEEC, UWAG and USAF, opposed the
proposed notice pleading option.
Implicit in these comments is a
concern that respondents will not be
able to fairly gauge the amount of their
potential penalty liability based on the
information in the complaint. EPA
agrees that complaints should provide
more information than is required under
the proposed rule. The proposed
§ 22.14(a)(4)(ii) arguably would allow
issuance of complaints which do not
clearly identify the number of violations
charged, for example, where a statute
authorizes EPA to assess a separate
penalty for each day a violation
continues. In order to ensure that
respondents understand from the
complaint how many violations are
charged, EPA has revised
§ 22.14(a)(4)(ii) to require that the
complaint specify "the number of
violations (where applicable, days of
violation) for which a penalty is
sought".
CMA/API objected to the notice
pleading option and recommended that
it be rejected, noting that allowing
• miplaints to issue without stating a
sum certain would make it "too easy"
for EPA to proceed with an
administrative penalty action without
gathering sufficient information to make
an informed decision, and that the
Agency might file meritless complaints
that would nonetheless have a
"stigmatizing impact" on respondents.
EPA notes that the proposed § 22.14
would still require complainant to state
the factual basis for alleging the
violation, and to specify each provision
of a statute, regulation, permit or order
that respondent is alleged to have
violated. The proposed change would
only allow EPA, at its discretion, to
postpone stating the extent of the relief
sought. Owing to the retention of
provisions that require complainant to
specifically allege respondent's
violation, the risk that EPA might file
meritless complaints is not increased by
the proposed change.
CMA/API objects that notice pleading
will allow EPA to use the administrative
complaint as a form of discovery to
obtain information from the respondent,
and argues that EPA's existing
information gathering tools are adequate
for that purpose. EPA does not view the
administrative complaint as an
investigation or discovery tool, but
rather, the product of an investigation
through which EPA has collected
evidence reasonably supporting the
conclusion that the respondent has
violated the law. However, in some
cases the litigation process is the only
mechanism by which EPA can obtain
the financial information necessary to
determine what penalty is appropriate
for those violations (see, e.g., FlFRA
section 8(b), 7 U.S.C. 136f(b), and Toxic
Substances Control Act ("TSCA")
section ll(b), 15U.S.C. 2610(b). which
expressly prohibit inspections seeking
financial information).
The USAF argues that the proposed
change potentially shifts to respondents
the burden of demonstrating that
something less than the maximum
penalty is appropriate. EPA disagrees, as
the proposed §22.24(a) states that
complainant bears both "the burdens of
presentation and persuasion * * * that
the relief sought is appropriate", while
respondents only bear "the burden of
presenting'
any response or
evidence with respect to the appropriate
relief." Notice pleading is common
practice in the state and federal courts,
and in those courts notice pleading does
not put the burden of persuasion on the
respondent, is not inherently unfair, and
does not violate a defendant's due
process rights.
USAF objects that notice pleading is
unnecessary to achieve the Agency's
stated goal of "provid(ing) the Agency
with added flexibility in issuing a
complaint under circumstances where
only the violator possesses information
crucial to the proper determination of
the penalty* * *." USAF suggests that
a better approach would be to require a
specific penalty proposal in the
complaint, but allow the complainant to
amend the proposed penalty based on
information it timely obtains after the
commencement of a suit.
EPA agrees that the approach USAF
identified is appropriate in many cases.
However, where EPA does not have
adequate information to confidently
recommend a specific penalty. EPA
would be misleading the respondent
were it to propose an arbitrary penalty
which does not reflect significant facts
of the case. An unreasonable penalty
demand may also make EPA liable for
respondent's attorneys' fees under the
Equal Access to Justice Act ("EAJA"). 5
U.S.C. 504. The Small Business
Regulatory Enforcement Fairness Act of
1996 ("SBREFA"), Pub.L. 104-121.
expanded the EAJA to allow recovery of
attorney's fees where an initial penalty
demand is later shown to be
unreasonable, Notice pleading is an
appropriate and responsible choice in
circumstances where liability is clear,
but where EPA is not able to determine
with confidence the reasonableness of a
specific penalty amount before filing the
case.
If EPA were not to provide the option
of notice pleading, the SBREFA
amendments would make it possible for
polluters to escape high penalties if they
can effectively hide from EPA their
financial status or the economic benefits
derived from their noncompliance with
environmental regulation. Some statutes
require EPA to consider a respondent's
ability to pay the proposed penalty or its
economic benefit of noncompliance in
assessing a penalty (e.g., FIFRA section
14(a)(4), TSCA section 16(a)(2)(B), CWA
section 309 (g) (3), Clean Air Act
("CAA") section H3(e)(l)), and EPA
generally considers these factors
relevant in penalty assessment under
other statutes as well. However,
authority for EPA to gather such
information is not always clear, and
under some statutes it has been
expressly withheld (see, e.g.. FIFRA
section 8(b). 7 U.S.C. I36f(b). TSCA
section 11 (b). 15 U.S.C. 2610(b)).The
SBREFA amendments to the EAJA make
the Agency wary of seeking large
penalties against individuals or
privately held corporations (who do not
generally make public disclosures of
their financial condition) absent reliable
financial information. Because EPA
does not have the resources to inspect
any but the largest facilities more than
once every few years, inspections
typically reveal violations that are
several years old. The 5-year federal
statute of limitations may limit the
Agency's ability to sanction violators for
older violations, so a respondent need
only hide its financial status for a short
time in order to forestall EPA from
seeking penalties commensurate with a
serious violation. Notice pleading
increases the deterrent effect of EPA's
enforcement program, and levels the
regulatory playing field for publicly
held and privately held corporations.
CEEC noted in its comments that the
February 25. 1998, FR Notice of
Proposed Rule Making did not analyze
the proposed notice pleading option in
light of the SBREFA amendments to the
EAJA. The proposed rule, as well as
today's final rule, is fully consistent
with the EAJA as amended by SBREFA.
The EAJA does not prohibit notice
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pleading, and nothing in the SBREFA
legislative history suggests any intent by
Congress to limit its use in judicial or
administrative enforcement. The EAJA
does not require the agencies to include
specific penalty demands in their
complaints.
When a complainant makes an
express demand, the remedies of the
EAJA may be invoked. However, the
EAJA explicitly excludes from the
definition of "demand" any "recitation
of the maximum statutory penalty" in
the administrative or civil complaint.
Consistent with this provision, EPA may
postpone making a "demand" by
exercising the notice pleading option of
§22.14(a)(4)(ii), and providing "a brief
explanation of the severity of each
violation alleged and a citation to the
statutory penalty authority applicable
for each violation alleged in the
complaint" instead of a specific penalty
demand.
Civil administrative penalty
complaints should communicate the
significance that the Agency places on
the alleged violations. The CROP
accomplishes this in both the traditional
method embodied in §22.14(a)(4)(i),
and the notice pleading option in
§22.14(a)(4)(ii). Section 22.14(a)(4)(i)
requires that the complaint state "It]he
amount of the civil penalty which is
proposed to be assessed, and a brief
explanation of the proposed penalty,"
while §22.14(a)(4)(ii) requires "a brief
explanation of the severity of each
violation alleged and a citation to the
statutory penalty authority applicable
for each violation alleged in the
complaint". Moreover, EPA intends to
maintain the practice developed in the
notice pleading cases under the
proposed part 28 administrative
enforcement rules of concurrently
supplementing complaints with early,
informal settlement overtures to
respondents. EPA has found this
process expedites settlement while also
providing respondents with more
specific guidance on the penalty value
the Agency places on its enforcement
case.
EPA notes that notice pleading is not
mandatory, but is instead an option.
EPA expects that administrative
complaints containing specific penalty
proposals will continue to be a central
part of the Agency's administrative
enforcement program. However, one
clear mandate of SBREFA is that the
Agency should not make a penalty
demand unless it has evidence to fully
support that demand. Notice pleading
balances the goals of SBREFA with
those of the statutes EPA is charged
with enforcing, as it allows the Agency
to pursue enforcement in cases where
adequate financial information is either
unavailable or withheld by the
respondent during the case
development process.
Today's final rule is fully consistent
with the spirit and intent of the Equal
Access to Justice Act, in that the CROP
produces complaints that are
substantially justified by the facts.
circumstances and relevant statutory
and regulatory requirements alleged to
be violated. The limitations on
discovery in CROP proceedings
practically force complainants to have
in hand at the time an administrative
complaint is filed virtually all the
evidence necessary to prove the alleged
violations and the appropriateness of
the penalty. This is in marked contrast
to the rules governing civil judicial
enforcement, that allow complaints to
be filed so long as the allegations and
factual contentions "are likely to have
evidentiary support after a reasonable
opportunity for further investigation or
discovery * * *." See Rule 1 l(b)(3) of
the Federal Rules of Civil Procedure,
The notice pleading option does not
ease the Agency's pre-filing burdens
associated with documenting that a
regulatee has violated the law, but
merely allows the filing of a complaint
with somewhat less information about
what penalty might be appropriate for
those violations.
UWAG also questioned the efficacy of
the notice pleading option, asserting
that the Agency will be no better
informed at the time of prehearing
exchange or default than it is at the time
the complaint is issued. EPA has shared
this concern, and requested comments
on whether complainant might
postpone stating a specific proposed
penalty for an additional 30 days, or
longer, after prehearing exchange. 63 FR
at 9472. Dow objected to postponement
beyond prehearing exchange (although
it did not state any objection to allowing
complainant to state a specific proposed
penalty for the first time in prehearing
exchange). As discussed in the response
to comments on § 22.19(a) below, it is
appropriate to allow complainant to
review respondent's prehearing
exchange for 15 days before specifying
a proposed penalty. EPA believes that
this process properly balances the
parties' competing interests.
Most regulatees will engage in
settlement discussions with the Agency
once a complaint has been filed. Such
settlement discussions, often
accompanied by voluntary exchanges of
certain documents, almost always give
EPA additional information about the
merits of the Agency's allegations and
the appropriateness of a penalty. In
addition. §22.15(b) requires respondent
to state in its answer the "circumstances
or arguments which are alleged to
constitute the grounds of any defense;
the facts which respondent disputes;
[and] the basis for opposing any
proposed relief * * *." As a result of
the information received through the
answer and settlement discussions,
complainant generally has a better
understanding of whether respondent
has financial limitations significant
enough to warrant assessing a lower
penalty. EPA recognizes that in some
cases, a respondent may still resist
providing necessary information. In
such cases, the Agency's recourse would
be to postpone proposing a specific
penalty until 15 days after respondent
has filed its prehearing exchange, in
accordance with §22.19(a)(4). If
respondent's prehearing exchange fails
to contain necessary information,
complainant could then move for a
discovery order, and subsequently
amend the penalty demand as
necessary.
Several commenters noted that notice
pleading might impede quick resolution
and settlement. CEEC notes that failure
to provide a specific penalty amount
early in the process can frustrate quick
resolution of the proceedings. UWAG
states that the failure to specify a sum-
certain penalty in the complaint will
undercut the Agency's goal of resolution
of administrative complaints with a
minimum of cost and delay, since a
party will "have no choice" but to
engage in settlement discussions in
order to ascertain "exactly what
penalty" the Agency is seeking. CMA/
API notes that requiring a specific
penalty demand amount encourages
settlement because it makes clear to the
respondent the extent of the penalty
relief that EPA is seeking. CMA/API
states that without a specific penalty
amount stated in the complaint, a
respondent can neither judge whether
settlement is a realistic possibility nor
gauge EPA's view of the significance of
the matter. USAF states that the
proposed change reduces the
respondent's ability to negotiate and
removes any incentive to negotiate.
The Agency acknowledges that notice
pleading may impede use of the quick
resolution process, and that it has the
potential to delay settlement relative to
cases where a sum certain penalty
amount is stated in the complaint.
However, notice pleading also provides
an additional incentive to settle by
preserving EPA's full penalty claim in
the event settlement is not achieved. In
those cases where the Agency perceives
critical information gaps relevant to the
amount of the penalty, these potential
inefficiencies are an acceptable price to
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40153
pay in order to avoid making an
unreasonable penalty demand.
EPA's introduction of the notice
pleading option into CROP proceedings
does not signal any intention to alter the
Agency's longstanding policies and
practices favoring expeditious
settlements. Over the past 20 years,
more than 98 per cent of all
administrative cases have been settled
without trials. Today's final rule
evidences EPA's continuing
commitment to non-adversarial
resolution with new provisions such as
commencement of pre-negotiated cases
with a final order pursuant to § 22.13(b),
the quick resolution of §22.18(a), and
procedures supporting alternative
dispute resolution at §22.18(d).
Although notice pleading could
possibly delay settlement, it is expected
that the need to make efficient use of
enforcement resources will restrain
EPA's use of notice pleading if, in actual
practice, it significantly reduces the
frequency of settlements or the pace at
which settlements are reached.
c. Final Rule. EPA has adopted
§ 22.14 as proposed, with several
changes. As noted above, EPA has
revised §22.14(a)(4)(ii) to require that
where complainant chooses not to
specify a proposed penalty in the
complaint, the complaint must state
"the number of violations (where
applicable, days of violation) for which
a penalty is sought".
EPA also has made several minor
changes at its own initiative. The
proposed §22.14(a)(6) required
complainant to specify in the complaint
whether subpart I "applies to such
hearing." EPA has revised this
paragraph to clarify that where subpart
1 applies, it applies to the entire
proceeding, and not just the evidentiary
hearing phase.
EPA has added two new requirements
as to content of the complaint. Section
22.14(a) now requires in paragraph (7)
that the complaint include the address
of the Regional Hearing Clerk, and in
paragraph (8) requires instructions for
paying penalties, if applicable. EPA has
observed that the names and addresses
of the lock box banks change often, and
that it would be difficult to keep the
proposed Appendix B up to date. EPA
also notes that Appendix A is redundant
with 40 CFR 1.7, and moreover, notes
that these addresses are of less value to
respondent than the specific address of
the Regional Hearing Clerk. EPA has
decided to expand § 22.14(a) to require
that the relevant information appear in
the complaint, and to delete both
appendices.
In recognition of the fact that most
complaints allege more than one
violation, EPA has amended
§ 22.14(a) (3) to require that the
complaint state the factual basis "for
each violation alleged."
For the convenience of respondents
receiving complaints which do not
specify a proposed penalty, EPA has
amended § 22.14(a)(4)(ti) to clarify that,
the complaint shall include "a recitation
_i**' __*.L-._._ *l*nM *s w\nr-f± "/••ifrafrlrtfl tf\ trlP
of, rather than a mere "citation to", the
applicable statutory penalty authority.
EPA has revised § 22.14(a)(4)(iii) and
(a) (5), as well as other sections of the
CROP, to replace the unwieldy phrase
"revocation, termination or suspension
of all or part of a permit" with a new
term "Permit Action." EPA has moved
the "revocation, termination or
suspension" language into the
definition of "Permit Action" at
§ 22.3(a), which makes the remainder of
the CROP easier to read, and will
facilitate any future efforts to bring other
permit actions within the scope of the
CROP.
EPA has changed the title of this
section from "Content and amendment
of the complaint" to the more general
"Complaint". Finally, to conform to the
preferred style of the U.S. Government
Printing Office. EPA has revised
§ 22.14(c) to state the time allowed for
responding to an amended complaint
with the numeral "20"
10. Answer to the Complaint (40 CFR
22.15)
a. Summary of Proposed Rule. EPA
proposed to amend § 22.15(a) to clarify
requirements for filing and serving the
answer to a complaint, and to extend
the time allowed for the filing of an
answer from 20 days to 30 days. EPA
proposed to add to paragraph (b) a new
requirement that the answer state the
basis for opposing any proposed
penalty, compliance or corrective action
order, or permit revocation, termination
or suspension. EPA proposed editorial
changes to paragraph (c). and proposed
no changes to paragraphs (d) or (e).
b. Significant Comments and EPA
Response. USAF notes that where
complainant has elected not to specify
a penalty in the complaint, respondent
cannot comply with the proposed
requirement in §22.15(b) that the
answer state respondent's basis for
opposing the proposed relief. In
response, the final rule now requires
that the answer shall state "the basis for
opposing any proposed relief * * *"
CEEC urges that EPA amend § 22.15(e)
to allow respondent to amend its answer
as a matter of right, arguing that
respondent is unlikely to have all the
necessary information at the time the
answer is due. Allowing amendment of
the answer as a matter of right would
not encourage diligence in answering
the complaint, and could disrupt the
orderly progress of proceedings.
Accordingly, EPA declines to adopt
CEEC's suggestion.
The existing CROP allows
amendments of the answer at the
presiding officer's discretion, and
motions to amend pleadings are
generally granted. See, e.g.. In re Port of
Oakland and Great Lakes Dredge and
Dock Co., 4 E.A.D. 170, 205 (EAB 1992)
("the Board adheres to the generally
accepted legal principle that
administrative pleadings are liberally
construed and easily amended")
(citations omitted). Moreover, in
paragraph (a) EPA already has expanded
by 50% the time allowed for assembling
information and preparing an answer.
Although leave to amend pleadings is
liberally granted, allowing amendments
to the answer as a matter of right would
make the CROP significantly less
efficient. The purpose of the answer is
to clarify what is contested and what is
not contested at an early stage of the
proceeding. Allowing amendment of the
answer as a matter of right would not
encourage due diligence in framing the
issues, and could unfairly prejudice
complainant if, for example, respondent
were to substantially alter its defenses
shortly before, or even after, the
evidentiary hearing. Accordingly,
CEEC's recommendation is rejected,
except in circumstances where the
complaint has been amended.
c. Final Rule. For the foregoing
reasons, EPA has adopted §22.15 of the
CROP as proposed, with the exception
of certain changes. As discussed above,
the language of § 22.15(b) is amended to
require that the answer state "the basis
for opposing any proposed relief
* * *", and the proposed §22.15(e) is
amended to allow amendment as of
right whenever the complaint is
amended.
Section 22.15(c) of both the proposed
rule and the 1980 CROP states that "[a]
hearing ... shall be held if requested by
respondent in its answer." As used in
this context, the word "hearing" refers
to an adjudicatory proceeding, and
encompasses a determination on motion
papers alone. See In re Green Thumb
Nursery, Inc., 6 E.A.D. 782, 790 & n.14
(EAB 1997) (holding that there is no
right to an oral evidentiary hearing).
Elsewhere in both the proposed rule and
the 1980 CROP, "hearing" refers
specifically to the oral evidentiary
hearing phase of a proceeding. In
today's final rule, EPA has endeavored
to use the term "hearing" to refer
specifically to the oral evidentiary
hearing. In order to avoid the
implication that a request for a hearing
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necessarily results in an oral evidentiary
hearing. EPA has replaced the word
shall with "may."
Consistent with the changes noted in
§ 22.14(a)(4)(Hi) and (a)(5) above EPA
has revised §22.15(a) by replacing the
phrase "permit revocation, termination
or suspension" with a new term "Permit
Action." To conform to the preferred
style of the U.S. Government Printing
Office, EPA has revised § 22.15(a) to
state the time allowed for filing an
answer with the numeral "30".
11. Default (40 CFR 22.17)
a. Summary of Proposed Rule. The
proposed § 22.17 would reorganize the
entire section to indicate the role of
each of the parties and the Presiding
Officer in a sequential manner.
Paragraph (a) would describe the
actions of each party that may result in
a finding of default and the
consequences of such a finding for each
of the parties. Provisions describing the
end of the process (i.e., when penalty
monies come due, when a permit
revocation, termination or suspension
becomes effective) would be moved to
paragraph (d).
Paragraph (b) would describe content
requirements for motions for default and
would include a requirement that when
the motion requests the assessment of a
penalty or the imposition of other relief
against a defaulting party, the movant
must specify the penalty or other relief
sought and must put into the record the
legal and factual grounds for the relief
requested. This amendment
accommodates the change in § 22.14
that allows notice pleading in which the
complainant elects not to demand a
specific penalty in the complaint.
Paragraph (c) would describe the
default order itself, would provide that
a default order shall be an initial
decision, and would clarify the
standards for granting the default order,
for granting the relief proposed, and for
setting the order aside. In addition,
proposed paragraph (c) would remove
the apparent restriction on the Presiding
Officers' discretion in existing
§ 22.17(a), in which a default order
automatically assesses the penalty
proposed in the complaint, or
automatically revokes or terminates the
permit according to the conditions
proposed in the complaint. Although
the proposed paragraph (c) would
acknowledge that the Presiding Officer
has some discretion regarding default
orders, it would require that the
proposed relief must be granted unless
the record clearly demonstrates that the
requested relief is inconsistent with the
Act.
Paragraph (d) would specify when
penalties assessed by default are due,
and the effective dates for the default
revocation, termination or suspension of
permits, and for the default issuance of
compliance or corrective action orders.
b. Significant Comments and EPA
Response. Dow suggests revising
§22.17(a) to allow other less serious
sanctions. Dow argues that minor or
technical defaults, such as not including
a proof of service in a responsive
document when proper service is
perfected or failing to appear at a
conference due to weather conditions,
do not deserve the severe sanctions
delineated in the section. Dow's
objection seems to be two-fold: that
issuance of an order of default is
mandated upon the violative conduct
and that an issued order of default
might be too severe under certain
circumstances.
Dow's objection concerns, language
that has been in § 22.17 (a) since 1980.
The CROP has not mandated and does
not now mandate automatic
determination of default liability. The
proposed rule retained the language in
§ 22.17(a) which states that a "party may
be found to be in default", and in
§ 22.17 (c) included the old §22.17 (d)
language "[f)or good cause shown, the
Presiding Officer may set aside a default
order" [emphasis added]. Moreover, the
proposed rule adds a new provision at
§ 22.17(c), which states that "[w]hen the
Presiding Officer finds that default has
occurred, he shall issue a default order
against the defaulting party unless the
record shows good cause why a default
order should not be issued". Therefore,
the new provisions at § 22.17 would
allow Presiding Officers to exercise
discretion in issuing a default order for
"minor or technical default."
Furthermore, Presiding Officers do
have authority to impose sanctions less
than a complete finding of default when
appropriate. Section 22.16(b) provides
that any party who fails to respond to
a motion within the designated period
waives any objection to the granting of
the motion. Section 22.19(g) provides
that a when a party fails to respond to
a discovery or prehearing exchange
order as required, the Presiding Officer
may draw adverse inferences and
exclude information from evidence. As
noted above in the response to
comments on §22.5(c), EPA has
amended § 22.5(c)(5) so that the
Presiding Officer may exclude from the
record documents that are improperly
served or untimely filed.
EPA has made no change to § 22.17(a)
in response to Dow's comment because
the CROP does not mandate default for
minor errors and because other
provisions of the CROP authorize less
severe sanctions that are appropriate for
types of nonperformance that fall short
of default. Nevertheless, EPA has
revised § 22.17(c) to emphasize the
Presiding Officer's discretion, as
discussed below.
The proposed § 22.17(b) would
require complainant to specify the
penalty sought and the legal and factual
grounds therefor in any motion that
"requests the assessment of a penalty or
the imposition of other relief against a
defaulting party * * *" This provision
was added in order to complement the
notice pleading option in
§22.14(a)(4)(ii), giving respondents
notice of complainant's specific penalty
demand assuring that record will
support the penalty assessed. CEEC
argues that delaying disclosure of the
penalty demand until this stage "delays
resolution, fails to give respondents
sufficient notice; frustrates small
entities' or small business' rights under
SBREFA; and thwarts EPA's goal to
increase administrative efficiency." For
the reasons stated above in the response
to comments on § 22.14 (a) (4), EPA
disagrees. Because EPA has retained the
notice pleading option in §22.14(a)(4),
EPA also retains in § 22.17(b) the
requirement that complainant specify a
penalty and state the legal and factual
grounds therefor.
In its objection to the notice pleading
option, CEEC states that the new
provision requires disclosure of the
penalty demand in "any motion for
default" when such demand has not
been disclosed in the complaint. This
statement does not correspond exactly
to the text of the § 22.17(b), which only
requires that motions for default specify
a penalty sought "|w]here the motion
requests the assessment of a penalty
* * * " Section 22.17 (b), consistent with
accepted practice under the existing
CROP, allows parties to make motions
that merely ask the Presiding Officer to
determine whether a default has
occurred, without arguing at that time
what penalty should be assessed.
As noted in the response to comments
on § 22.17(a), not all failures to conform
to the CROP will warrant a default
judgment. Until such time as a
respondent is found to be liable for a
default judgment, it is not necessary for
the parties to commit their resources to
arguing what relief is appropriate.
Motions for default may be likened to
motions for accelerated decision: It is
appropriate in many instances to file a
motion for partial accelerated decision,
that merely attempts to resolve whether
as a matter of law respondent is or is not
liable for a violation, leaving the
determination of the proper penalty for
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40155
a subsequent motion if liability is
established. This approach spares the
parties from burdensome litigation over
an issue that may be moot.
CEEC's statement mirrors a statement
in the preamble to the proposed rule (63
FR at 9469). EPA acknowledges that this
statement, while generally accurate, is
overly broad in that it incorrectly
implies that every motion for default
must specify a penalty. In order to avoid
unnecessary burdens on the litigants,
EPA intends that the CROP should
continue to allow parties to make
motions that merely ask the Presiding
Officer to determine whether a default
has occurred, without specifying a
penalty in that particular motion.
Pursuant to the second sentence of
paragraph (b), complainant will still be
obliged to specify a penalty if it moves
for the assessment of a penalty against
a defaulting party. However, this may be
n second motion that follows a finding
(hat default judgment against
respondent is warranted.
In order to eliminate any confusion
resulting from the overly broad
M a cement in the preamble or ambiguity
in the regulation itself, EPA has added
an additional clarifying sentence to
§22.17(b): "The motion may seek
resolution of all or part of the
proceeding."
Dow supports the revision of
§ 22.17(c) that gives the Presiding
Officers greater discretion in
determining the appropriate relief in the
default orders because this "flexibility
will let the Presiding Officer ensure that
any relief ordered is supported by the
administrative record." Dow's comment
is essentially reiterated by CMA and
API: both organizations "support the
provision requiring the Presiding
Officer, when issuing a default order, to
determine that the relief sought in the
complaint is consistent with the
applicable statute."
Even though there were no adverse
comments regarding this provision, the
preceding discussion of paragraphs (a)
and (b) suggests some useful revisions of
paragraph (c). First, corresponding to
§ 22.17 (b) 's statement that a default
"motion may seek resolution of any or
all parts of the proceeding". § 22.17(c) is
revised to no longer require that a
default order must be an initial
decision, unless it resolves "all issues
and claims in the proceeding." This will
allow Presiding Officers to find a party
liable in default, without necessarily
determining the appropriate relief in the
same order.
Second, EPA has also relaxed the
proposed requirement that "the relief
proposed in the complaint or the motion
for default shall be ordered unless the
record clearly demonstrates that the
requested relief is inconsistent with the
Act." Under this proposed language, if
a proposed penalty were inconsistent
with the record (e.g., owing to a
mathematical error), though not to such
a degree as to be clearly inconsistent
with the statutory penalty authority, the
Presiding Officer would apparently be
required to assess the proposed penalty.
In order to prevent injustice, EPA has
amended this language to allow the
Presiding Officer to impose other relief
where "the requested relief is clearly
inconsistent with the record or the Act".
c. Final Rule. EPA is adopting §22.17
as proposed, but with several
modifications. As discussed above, EPA
has added one sentence to § 22.17(b).
EPA has also noted that the rest of the
proposed §22.17(b) repeats parts of
§22.16(a). Section 22.16 applies to all
motions, except as otherwise provided,
so restatement is not necessary in
§ 22.17(b). Moreover, the failure to
include all of §22,16(a) in §22.17(b)
introduces potential confusion.
Accordingly, EPA has deleted from the
final rule those parts of the proposed
§ 22.17(b) that are redundant with the
general requirements for motions at
§22.16.
The proposed §22.17(a) provided that
a default by respondent would
constitute a waiver of respondent's
"right to a hearing" on the factual
allegations in the complaint.
Throughout today's final rule, for clarity
and consistency. EPA has endeavored to
use the term "hearing" only to refer to
oral evidentiary hearings. As there is no
right to an oral evidentiary hearing (see,
e.g., In re Green Thumb Nursery, Inc., 6
E.A.D. 782 (1997)), EPA has revised
§ 22.17(a) to state that default by -
respondent constitutes a waiver of
respondent's "right to contest" the
factual allegations in the complaint.
EPA has replaced the undefined word
"action" in § 22.17(a) with the word
"proceeding," which is defined in
today's final rule as discussed below.
EPA has revised § 22.17(c) as follows:
(1) EPA has added the clause "as to all
or part of the proceeding," to the first
sentence, before "unless the record
shows"; (2) EPA has revised the second
sentence to say "If the order resolves all
outstanding issues and claims in the
proceeding, it shall constitute the initial
decision under these Consolidated
Rules of Practice.'1; (3) EPA has
expanded the next to last sentence in
order to allow the Presiding Officer to
impose relief other than that requested
by complainant if it is clearly
inconsistent with the record of the
proceeding. In addition, EPA has split
the second sentence of the proposed
§ 22.17(c) into two sentences. This
editorial revision is not intended to
effect a substantive change.
For consistency with changes
elsewhere in the CROP, EPA has revised
§ 22.17(d) to refer to the effective date of
a "Permit Action" rather than the
effective date of a permit revocation or
suspension. To conform to the preferred
style of the U.S. Government Printing
Office, EPA has also revised § 22.17(d)
to state the time allowed for paying
default penalties with the numeral "30"
12. Quick Resolution (40 CFR 22.18(a))
a. Summary of Proposed Rule, In
cases where the complaint proposes a
specific penalty amount (and seeks no
other relief), the proposed §22.18(a)(l)
would provide that the respondent can
resolve the case at any time by simply
paying the proposed penalty in full. The
only restriction on when the respondent
can take advantage of the quick
resolution provision is in cases
involving the public comment
provisions of § 22.45. In these cases, the
respondent must wait until 10 days after
the period for public comment has
closed before submitting the penalty
payment.
Where the complaint includes a
specific proposed penalty, the proposed
§ 22.18(a)(2) would allow respondent to
resolve an action without filing an
answer by paying the penalty within 30
days of receipt of the complaint. By
paying the proposed penalty within that
30 day time frame, the action is resolved
before the answer is due and hence
there is no need for respondent to file
an answer.
If the respondent wishes to resolve
the matter by paying the proposed
penalty in full but needs additional time
in which to do so, §22.18(a)(2) would
allow the respondent to file a written
statement with the Regional Hearing
Clerk within 30 days of receiving the
complaint in which it agrees to pay the
penalty within 60 days of receipt of the
complaint.
b. Significant Comments and EPA
Response. Dow noted that in actions
subject to the public comment
provisions, the 30 day public comment
period may require respondent to file an
answer even though it wants to resolve
the action, because the last sentence of
§ 22.18(a)(l) provides that a respondent
cannot utilize the quick resolution
provision until 10 days after the close of
the public comment period. This
commenter suggested amending the last
sentence of §22.18(a)(l) to explicitly
provide that the respondent does not
have to file an answer if it wishes to
settle the action by paying the full
penalty. Instead, EPA believes that the
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better approach is for respondent to file
a statement agreeing to pay the full
penalty, in accordance with
§ 22.18(a)(2), and delay payment until
the eleventh day after the close of the
public comment period. Section
22.18(b)(2) provides ample time for
paying the proposed penalty after the
close of the public comment period, so
long as the public notice is issued
contemporaneously with the complaint.
If the public notice is delayed, a motion
for extension of time may be necessary.
CEEC supports the proposed
inclusion of the "quick resolution"
process, but noted that the quick
resolution option is not available to
respondents if the complaint does not
propose a specific penalty. The
proposed language would have
prevented respondents who receive
complaints that did not contain specific
penalty demands from exercising the
quick resolution option even after EPA
has made a specific penalty demand.
This was unintended, and EPA has
revised §22.18(a)(l) so that once
complainant has made a specific
penalty demand, respondent may
resolve the proceeding by paying the
proposed penalty in full. The option of
notice'pleading in lieu of pleading a
specific penalty amount is intended to
provide EPA with flexibility in those
situations where only the violator
possesses information crucial to the
proper determination of the penalty,
such as the economic benefit the
violator derived from its
noncompliance, or its ability to pay the
penalty. Under such circumstances,
EPA needs to obtain and review the
necessary information before proposing
a penalty. Section 22.19 of the rule
provides that EPA must at the
prehearing exchange stage propose a
specific penalty. Once EPA proposes a
specific penalty, the respondent may, if
it wishes, utilize the quick resolution
provision and pay the proposed penalty
in full at that time. As a result of this
revision, notice pleading does not
prevent the use of the quick resolution
provision by the respondent, it only
delays it. While the respondent, under
such circumstances, would not be able
to take advantage of the quick
settlement until after the prehearing ----- , , , ,- fnnn^mt it* ri£
exchange, respondents always have the deprives the federal respon dentitenj
option of earl? resolution of the £elevate the matter to the President.
proceeding pursuant to § 22.18(b). by The Agency maintains that
informally negotiating settlement with
the Agency.
The same commenter noted that the -0 ,
Quick resolution option was available to appeal processes provided. If, on tne
?espondents only if they are willing to other hand, the federal agency wishes to
pay the full amount of the proposed conclude the f «°n-il m^t filling
penalty This commenter also noted that to agree to waive its rights to further
the quick resolution provision should appeals.
include safeguards to prevent or redress
those situations where EPA may have
pled an excessive penalty amount.
These comments appear to envision a
quick resolution that is entirely unlike
that proposed in § 22.18(a), but which
does not appear to differ significantly
from the settlement process in § 22.18(b)
and (c). As presently codified, the CROP
does not explicitly provide for a "no
contest" plea. EPA intended to remedy
this by explicitly providing in the
proposed §22.18(a) a formal process for
a respondent who—upon receipt of the
complaint or at any later time—wishes
to simply pay the proposed penalty and
disengage from the proceeding. In
contrast, the settlement provisions of
§ 22.18(b) and (c) provide opportunity to
negotiate a settlement that could
terminate the proceeding upon payment
of a lesser penalty. If the respondent
believes that EPA has pled an excessive
amount, the respondent has the option
of informally discussing the matter with
EPA during settlement negotiations, or
formally contesting the proposed
penalty through the hearing process.
Consequently, there is no need to
amend the proposed § 22.18(a) to
safeguard respondents' interests.
The USAF noted that, because of
fiscal law requirements, it would be
difficult for a federal agency to make a
penalty payment within 60 days of
complaint issuance, thereby effectively
foreclosing federal agencies from taking
advantage of the quick resolution
provision. The USAF suggests that 18
months would be appropriate. EPA
acknowledges that it may be difficult for
a federal agency, or a state or local
agency, to pay a penalty within 60 days
of receipt of the complaint. However,
EPA does not believe that the intended
purpose of the quick resolution
provision would be served by such an
extension of the payment period. Where
respondent is unable to pay the penalty
within 60 days, EPA believes that the
§ 22.18(b) settlement process would be
the appropriate process for terminating
the proceeding.
The USAF also noted that this section
obligates respondent to admit the
jurisdictional allegations of the
complaint and waive its right to appeal
a final order, and argues that this
c. Final Rule. As noted above, EPA
has amended the proposed § 22.18(a)(l)
to allow quick resolution at any point in
a proceeding once complainant has
proposed a specific penalty, including
penalties specified in complainant's
prehearing exchange, and by moving
from the first to the second sentence the
language that limited quick resolution to
cases where the complaint contained a
specific proposed penalty.
As discussed in connection with the
revisions to § 22.14, EPA has deleted
Appendix B. Accordingly, EPA has
revised the first sentence of §22.18(a)(l)
to require that payment be made as
specified by complainant, and deleted
reference to Appendix B. In order to
address interbank funds transfers, EPA
has expanded § 22.18(a)(l) to include
other instruments of payment. With
these changes, the first two sentences of
§ 22.18(a)(l) now read as follows:
A respondent may resolve the action at any
time by paying the specific penalty proposed
in the complaint or in complainant's
prehearing exchange in full as specified by
complainant and by filing with the Regional
Hearing Clerk a copy of the check or other
instrument of payment. If the complaint
contains a specific proposed penalty and
respondent pays that proposed penalty In full
within 30 days after receiving the complaint,
then no answer need be filed.
The proposed § 22.18(a)(3) provided
that quick resolution would constitute a
waiver of respondent's "rights to a
hearing". Throughout today's final rule,
for clarity and consistency, EPA has
endeavored to use the term "hearing"
only to refer to oral evidentiary
hearings. As there is no right to an oral
evidentiary hearing (see, e.g., In re
Green Thumb Nursery, Inc., 6 E.A.D.
782 (EAB 1997)). EPA has revised
§ 22.18(a)(3) to state that quick
resolution constitutes a waiver of
respondent's "rights to contest the
factual allegations in the complaint"
EPA has also corrected a
typographical error in the word
"section" that appeared in the third
sentence of the proposed § 22.18(a)(l).
In the third sentence of § 22.18(a)(l),
EPA has replaced the phrase "to revoke,
terminate or suspend a permit" with the
term "Permit Action", as discussed in
connection with revisions to § 22.3 (a)
and§22.14(a)(4)(iii).
EPA has replaced the undefined word
"action" in §22.18(a)(l) and (2) with the
word "proceeding," which is defined in
today's final rule as discussed below.
Finally, to conform to the preferred style
of the U.S. Government Printing Office,
. EPA has revised § 22.18(a)(l) and (2) to
state all time periods with numerals.
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40157
13. Settlement and Scope of Resolution
or Settlement (40 CFR 22.18(b)&(c))
a. Summary of Proposed Rule. The
proposed §22.18(b) would clarify the
existing settlement process. Paragraph
(b)(2) would specify that consent
agreements contain an express waiver of
the respondent's right to a hearing and
appeal of the final order, and establishes
additional content requirements for
consent agreements in cases where the
complainant proposes to simultaneously
commence and conclude a case
pursuant to § 22.13(b) through filing of
a consent agreement and final order
negotiated before a complaint is issued.
Paragraph (b)(3) would be revised to
expressly provide that an administrative
action is settled only when the Regional
Judicial Officer or Regional
Administrator, or, in cases commenced
at EPA Headquarters, the Environmental
Appeals Board, approves a consent
agreement and issues a final order.
Paragraph (c) would provide that the
effect of settlements and full payment of
proposed penalties is limited to those
facts and violations specifically alleged
in the complaint, and reserves the
Agency's right to pursue injunctive
relief or criminal sanctions.
b. Significant Comments and EPA
Response. Dow urges that § 22.18(b)(2)
should expressly provide for partial or
contingent settlements. Dow's particular
concern is that paragraph (b)(2) should
not require respondent to waive its right
to hearing or to appeal matters that are
raised in the complaint but not included
in the consent agreement or the final
order. Dow's comments do not take
issue with the waiver of rights to
hearing or appeal in settlements of the
entire proceeding.
Paragraphs (a), (b) and (c) of §22.18
define the process by which the parties
may resolve an entire proceeding, and
so, consent agreements pursuant to
§ 22.18(b)(2) and final orders under
§ 22.18(b)(3) can be neither partial nor
contingent. Nevertheless, EPA disagrees
with Dow's conclusion that the
proposed rule precludes partial or
contingent settlements. Where the
parties wish to settle some of the counts
in a complaint, they may file
stipulations as to a respondent's
liability, and/or to the appropriate relief,
for those counts. Where the parties seek
a more final resolution, they may move
pursuant to § 22.12(b) to sever the case
"with respect to any or all parties or
issues." Upon severance, the parties
may settle the uncontested portions and
litigate the contested portions.
Contingent settlements (e.g., where the
parties agree that if a contested issue is
resolved in a certain manner, then the
parties agree to settle on predetermined
terms) are possible under the proposed
rule, however, the documents
committing the parties to the
contingency agreement would not
themselves constitute "consent
agreements" pursuant to §22.18(b)(2).
Such contingent settlements could be
accomplished, for example, through
formal stipulations as to the
appropriateness of certain relief in the
event that liability is established, or
agreements to sign a specific "consent
agreement" when the agreed conditions
are met. As the problems Dow describes
can easily be avoided. EPA believes that
the language in the proposed rule is
desirable in that it gives respondents
unambiguous notice that consent
agreements waive respondents' rights to
a hearing and all rights of appeal,
including appeal to the federal courts as
well as appeal to the EAB under
§§22.30 and 22.32.
CMA/API object to language proposed
for § 22.18(c) that would limit the scope
of relief available in settlements to those
"violations and facts" alleged in the
complaint. CMA/API feel this provision
prevents the parties from taking
advantage of the economies that result
from resolving in a single settlement
additional violations that may come to
light during the proceeding. EPA agrees
that it is, in many cases, desirable to
resolve in a single proceeding additional
violations that become apparent as a
case progresses. However, such
expansions of a proceeding should be
accomplished through motions to
amend the complaint, pursuant to
§ 22.14(c). Although even a joint or
uncontested motion to amend the
complaint is somewhat more
burdensome that expanding the case
through a consent agreement alone, this
burden is outweighed by the interest of
assuring a clear public record of the
Agency's administrative enforcement
proceedings.
This is particularly important where
statutes require public notice of a
proposal to assess penalties for specific
violations. Such statutes envision that
interested members of the public will
have had notice of all violations cited in
the complaint and all violations
resolved by consent agreement, in order
to properly avail themselves of their
statutory rights as to those actions.
CEEC also objects to the proposed
language limiting settlements to "the
facts and violations alleged in the
complaint", on the grounds that it is
improper for the Agency to assess in a
subsequent proceeding additional
penalties for other violations arising out
of the same circumstances identified in
the initial proceeding. As noted above,
EPA is well aware that resolving as
many violations as possible within a
single proceeding generally demands
less resources than pursuing multiple
cases involving similar facts or issues,
and EPA generally can be counted on to
take advantage of such cost-saving
opportunities. There are, however,
circumstances where this may be
inadvisable or impossible. For example,
where one violation is straightforward
and undisputed, neither party would
gain from delaying resolution of that
case in order to address within the same
proceeding another violation sharing
certain facts with the first, but
concerning a different statute, an
unsettled area of the law. and presenting
substantial evidentiary disputes. In
other circumstances, where new facts
establishing other violations come to
light after the close of a case, it would
be impossible to resolve these newly
discovered violations through the closed
case. EPA therefore disagrees with
CEEC's contention that it is necessarily
improper for EPA to seek penalties in a
subsequent proceeding for violations
related to the initial proceeding.
Section 22.14 (a) requires that a
complaint specify each statutory
provision, regulation, permit or order
that respondent is alleged to have
violated, and a concise statement of the
factual basis for alleging the violation.
The complaint thereby describes the
violations at issue in the case, in terms
of the specific legal requirements and
their specific factual circumstances;
anything else is outside the scope of the
proceeding. This description of the
violations that comprise the case must
also describe the scope of any
settlement. Any violations that are
outside the scope of the complaint must
necessarily be outside the scope of any
possible settlement.
The language of § 22.18(c) to which
CEEC objects merely states that payment
of a penalty "shall only resolve
respondent's liability * * * for the
violations and facts alleged in the
complaint." This provision defines the
scope of settlement in its most obvious
and straightforward sense.
c. Final Rule. EPA is adopting
§ 22.18(b) and (c) as proposed, with
minor editorial changes. The proposed
§ 22.18(b)(2) provided that in a consent
agreement, respondent must waive "any
right to a hearing". For the reasons
noted in the discussion of § 22.18(a)(3)
above, EPA has revised this to require
that respondent waive "any right to
contest the factual allegations in the
complaint". EPA has also replaced the
term "consent order" with the term
"final order" or "proposed final order"
in paragraph (b) and elsewhere (§§22.3
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Federal Register/Vol. 64. No. 141/Friday. July 23, 1999/Rules and Regulations
(definition of final order), 22.13(b), and
22.45(b)(4)). A consent order is in fact
a final order, and CROP's suggestion
that there is a distinction only adds
potential for confusion. EPA has
replaced the phrase "permit revocation,
termination or suspension" with
"Permit Action", as discussed in
connection with revisions to § 22.3(a)
each case individually depending on the
circumstances, and a stay may be
inappropriate in cases of excessive
delay,
EPA agrees that a broad array of ADR
options should be made available to
parties, but believes that it is not
necessary to list in the rule, and thereby
possibly limit, the range of ADR
and §22.14(a)(4)(iii). Finally, reflecting options. Section 22.18(d)(l) provides for
jM|'*<»itnactrt&99 1 ^ t rt\ nn+A*J nU..~.. ._ T?n A ** — __ ,.*. . . « .
changes to § 22.14(a) noted above, EPA
has added the requirement that in
proceedings commenced pursuant to
§ 22.13(b), the consent agreement shall
also contain the information required in
§22.14(a)(8).
14. Alternative Dispute Resolution (40
CFR22.18(d))
a. Summary of Proposed Rule. The
proposed § 22.18(d) would add a new
provision that recognizes the use of
alternative dispute resolution ("ADR")
within the scope of the Alternative
Dispute Resolution Act, 5 U.S.C. 581 et
seq. The proposed rule would provide
that, while the parties engage in ADR,
the enforcement proceeding is not
automatically stayed, jurisdiction
remains with the Presiding Officer, and
all provisions of the CROP remain in
effect. The parties may select any person
to act as a neutral, or may file a motion
with the Presiding Officer to request a
neutral. If the Presiding Officer concurs
with the motion, the Presiding Officer
forwards the motion to the Chief
Administrative Law Judge who
designates a qualified neutral.
b. Significant Comments and EPA
Response. Those who commented on
the proposed § 22.18(d) support the
Agency's use of ADR and inclusion in
the CROP of a provision that recognizes
ADR. CEEC believes that the proposed
rule does not go far enough to encourage
ADR, that it seems to employ ADR only
after a complaint is filed, and that it
limits the use of ADR by not staying the
enforcement proceeding when the ADR
process is commenced. CEEC urges the
Agency to make available and encourage
the use of a broad array of ADR options,
by formalizing the availability of the
complete range of ADR. Dow Chemical
supports the allowance upon request of
temporary stays and extensions for
motions, discovery and hearings during
ADR proceedings, to encourage
voluntary settlement and to avoid
imposing undue burdens on the parties
and the Presiding Officer.
EPA believes that the absence of an
automatic stay provision in the rule
does not unreasonably limit the use of
ADR. The Presiding Officer always has
the discretion to grant a stay in
connection with the parties' use of ADR,
but such a decision should be made for
any process within the scope of the
Alternative Dispute Resolution Act."
The neutral serving in the particular
case may discuss ADR options with the
parties.
CEEC objected that the CROP does not
require the Agency to attempt to resolve
a case before filing the complaint. The
CROP does not limit ADR to the time
after a complaint is filed. The parties
may agree to use ADR prior to the filing
of a complaint.
c. Final Rule. EPA has adopted
§ 22.18(d) as. proposed, with minor
technical revisions to paragraph (d)(3)
intended to address two concerns. First,
in subpart 1 cases, it is appropriate for
a neutral to be appointed by the
Regional Administrator rather than by
the Chief Administrative Law Judge.
Second, it is more accurate to say the
Presiding Officer "grants" a motion,
rather than "concurs with" a motion.
15. Prehearing Exchange; Prehearing
Conference (40 CFR 22.19(a)&(b))
a. Summary of Proposed Rule. EPA
proposed to amend § 22.19(a) and (b) by
reversing paragraphs (a) and (b) in order
from the existing CROP, reflecting the
fact that the information exchange is
more common than, and usually
precedes, a prehearing conference. The
requirements for the prehearing
exchange would now appear in
paragraph (a). In addition to the
information required to be exchanged
under § 22.19(b) of the existing CROP,
EPA proposed that the complainant
would specify a proposed penalty if it
has not done so in the complaint and
state the basis for that penalty. The
respondent would be required to
provide all factual information it
considers relevant to the assessment of
a penalty, even if the complainant did
not identify a specific penalty in the
complaint. EPA also proposed under
§ 22.22 to tighten the standards for
admitting into evidence information
that was not timely exchanged.
In addition, EPA requested comments
on whether it is necessary for the
complainant to specify a proposed
penalty in the prehearing exchange
when it has not specified a specific
penalty in the complaint (notice
pleading). Comments were also
requested on the merits of allowing the
complainant to postpone for an
additional 30 days, or indefinitely, the
making of a specific penalty demand
where EPA has not specified a specific
penalty in the complaint. EPA also
requested comments on the merits of
requiring by rule that the parties
simultaneously perform their prehearing
information exchange 90 or 120 days
after the filing of the answer, rather than
requiring a prehearing exchange order
from the Presiding Officer. 63 FR at
9472.
EPA proposed to revise paragraph (b)
to no longer compel the Presiding
Officer to require the parties to "appear
at a conference before him", but instead
would make the nature of the
conference more flexible.
b. Significant Comments and EPA
Response. CEEC opposes allowing EPA
to postpone making a specific proposed
penalty until the prehearing information
exchange, insisting that the proposed
penalty appear in the complaint. Dow
does not object to postponing the
specific penalty until prehearing
exchange, but objects to any further
postponement. Dow notes that if
information obtained during or after the
prehearing exchange warrants a change
in the proposed penalty, the CROP
already allows for amendment of the
pleadings. Dow maintains that requiring
a specific proposed penalty is not a
hardship for the complainant, however,
postponing it beyond prehearing
exchange would impose a hardship on
the respondent. Respondents need to
know the proposed penalty amounts to
make informed decisions about settling
or contesting violations. Therefore, Dow
argues that no further delays or
extensions should be allowed, except
with the consent of the respondent.
UWAG suggested that the proposal
would be ineffective because
complainant would be no better
informed at the time of prehearing
exchange than it is at the time the
complaint is issued.
As set forth in the discussion
concerning § 22.14. EPA has retained
§ 22.14(a)(4)(ii). which allows EPA to
elect not to specify a specific penalty in
the complaint. When complainant has
incomplete or unreliable information on
subjects such as the economic benefit
respondent received from its unlawful
conduct and its ability to pay a penalty,
it would be of little benefit to
respondent for complainant to make an
uninforme—and possibly unrealistic—
penalty demand, which would need to
be amended when better information
becomes available. Complainant would
risk specifying either a too-high figure
that could result In EAJA claims, or a
too-low figure that falls to achieve
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401S9
deterrence, and then be forced to defend
its guesswork in the penalty litigation.
EPA has concluded that complainants
should not have to specify a penalty
demand until after preheating exchange.
EPA continues to believe that there is
merit to giving respondents a specific
penalty demand at the earliest practical
stage of a proceeding, and has therefore
not adopted the approach used in the
federal courts, where specific penalty
demands generally are not made until
the end of the proceeding. Today's final
rule requires complainant to specify a
proposed penalty no later than 15 days
after respondent has filed its prehearing
exchange. The final rule requires each
party to include in its prehearing
information exchange all factual
information it considers relevant to the
assessment of a penalty, as well as
exhibits and documents it intends to use
at the hearing, names of witnesses and
summaries of their anticipated
testimony. Owing to the general nature
of these prehearing exchange
requirements, further discovery may
still be appropriate, and complainants
may need to amend their proposed
penalties, but the prehearing
information exchange nonetheless will
provide complainants with a substantial
basis for formulating a specific penalty
demand.
CEEC and Dow oppose automatic
prehearing exchange, stating that during
productive settlement discussions such
attention could be better spent on
settlement. Dow proposes one of the
following options: (1) making the
prehearing exchange totally dependent
on an order from the Presiding Officer,
or (2) making the prehearing exchange
automatic, but expressly allowing the
Presiding Officer to issue a temporary
stay or to extend the deadline. CMA/AP1
recommend a default time period of 90
days prehearing exchanges as a starting
point, which the parties would be
allowed to modify by mutual agreement.
Today's final rule does not require the
automatic filing of prehearing
exchanges. Although such a
requirement may expedite resolution of
many cases, EPA believes that it would
be a distraction and an unnecessary
burden in that greater number of cases
that progress readily toward settlement.
Furthermore, the Presiding Officer may
require additional information from the
parties as part of his or her prehearing
scheduling order than is provided in
§ 22.19(a). Therefore, the prehearing
exchanges will not be required until
ordered by the Presiding Officer.
Regarding the proposed § 22.19(b),
Dow notes that EPA failed to delete the
phrase "before him", as discussed in the
preamble to the proposed rules. EPA
agrees that this editorial change would
help clarify that § 22.19(b) no longer
requires that the parties personally
appear before the Presiding Officer, but
allows the Presiding Officer to conduct
telephonic prehearing conferences.
CEEC proposes that EPA should be
required, as part of its prehearing
exchange, to provide a respondent with
all information relevant to whether the
respondent had fair notice of the
regulatory requirement (s). Many
different offices in EPA conduct
compliance assistance, provide
speakers, and otherwise publicize
regulatory requirements, and
documenting all such efforts in every
case would present an unreasonable and
unnecessary burden on complainant,
particularly because fair notice of the
law is rarely an issue. Moreover, it is
unlikely that EPA would have evidence
showing that respondent does not know
something. Accordingly, EPA rejects
this proposal.
CEEC also proposes that EPA should
also be required to disclose all
information it uses, or chooses to ignore,
in determining the penalty it seeks for
each alleged violation. The proposed
§ 22.19(a) would require complainant to
state the basis for the penalty in its
prehearing exchange, as well as to
provide narrative summaries of
witnesses' expected testimony, and
copies of all documents and exhibits
that it intends to introduce into
evidence at the hearing. These
requirements would assure that
complainant discloses all information it
uses in determining the appropriate
penalty. It would not, however, require
disclosure of all information that EPA
"chooses to ignore." EPA believes that
little or no reliable, relevant information
is ever knowingly ignored in
determining proposed penalties.
Moreover, such exculpatory evidence
and evidence of concerning a
respondent's inability to pay the
proposed penalty is almost always in
respondent's hands, and not in
complainant's. Accordingly, it would be
exceedingly rare for the requirement
proposed by CEEC to provide a
respondent with new information. This
potential benefit is greatly outweighed
by the burden on the complainant to
identify, document, and exchange all
the information that it has not
considered in determining the proposed
penalty.
EPA agrees with CEEC's
recommendation that § 22.19(a) should
be amended to make the complainant's
and respondent's burdens more equal.
In the proposed § 22.19(a), complainant
would be required to state the basis for
the proposed penalty, while respondent
would have to provide "all factual
information it considers relevant to the
assessment of a penalty". For cases
where complainant has specified a
proposed penalty before prehearing
exchange. § 22.19(a) (3) of today's final
rule now requires that "complainant
shall explain in its prehearing
information exchange how the proposed
penalty was calculated in accordance
with any criteria set forth in the Act,
and the respondent shall explain in its
prehearing information exchange why
the proposed penalty should be reduced
or eliminated." For those cases where
EPA has not specified a proposed
penalty, §22.19(a)(4) imposes on each
party the identical burden of providing
"all factual information it considers
relevant to the assessment of a penalty."
c. Final Rule. For the foregoing
reasons. EPA is adopting § 22.19(a) with
the two substantive changes noted
above. In response to CEEC's comment,
EPA has amended the proposed
§ 22.19(a) to provide a more equitable
burden concerning providing
information concerning the proposed
penalty. EPA has also revised §22.19(a)
to allow complainant to specify a
proposed penalty 15 days after
prehearing exchange, rather than in its
prehearing exchange as proposed.
The parties information exchange
burdens necessarily differ depending on
whether complainant has specified a
proposed penalty before the prehearing
exchange, but the proposed rule did not
fully address these differences. In order
to make the prehearing information
exchange process address these
differences, EPA has significantly
reorganized and revised § 22.19(a).
Paragraph (a)(l) contains the provisions
describing the nature and effect of the
prehearing information exchange. The
only significant differences between the
provisions of paragraph (a)(l) and their
counterparts in the proposed rule are
that paragraph (a)(l) expressly requires
that prehearing exchange be "filed"
(§ 22.5(b) provides for service on the
Presiding Officer and opposing parties),
and clarifies that an order of the
Presiding Officer initiates prehearing
exchange.
Paragraph (a) (2) describes the
contents of prehearing information
exchange, other than those that depend
upon whether complainant has
specified a proposed penalty. These
requirements are unchanged.
As discussed in the response to
comments above, paragraph (a) (3)
provides that where complainant has
already specified a proposed penalty,
complainant shall include in its
prehearing information exchange an
explanation of how the proposed
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penalty was calculated in accordance
with any criteria set forth in the Act,
and the respondent shall include an
explanation why the proposed penalty
should be reduced or eliminated.
Paragraph (a) (4) applies where
complainant has not specified a
proposed penalty, and requires each
party to include in its prehearing
information exchange all factual
information it considers relevant to the
assessment of a penalty. It also requires
that complainant file a document
specifying a proposed penalty and
explaining how the proposed penalty
was calculated in accordance with any
criteria set forth in the Act 15 days after
respondent has filed its prehearing
information exchange.
EPA has adopted § 22.19(b) as
proposed, except that in response to
comment, EPA has deleted the words
"before him".
16. Other Discovery (40 CFR 22.19(e))
a. Summary of Proposed Rule. The
proposed § 22.19(e) would provide a
mechanism for discovery should any be
necessary after the parties have
completed their prehearing exchange.
Under the CROP, other discovery has
always been limited in comparison to
the extensive and time-consuming
discovery typical in the Federal courts,
and designed to discourage dilatory
tactics and unnecessary and time-
consuming motion practice.
The proposed revisions to
§ 22.19(e)(l) would require additional
detail in motions for discovery, and
refine the substantive standards for
issuance of a discovery order. The
proposed rule would add a prohibition
against discovery that would
unreasonably burden the other party.
The proposal would also elaborate the
existing requirement that discovery
seeks "information [that] has significant
probative value", by the addition of the
clause "on a disputed issue of material
fact relevant to liability or the relief
sought." The proposed rule would
clarify the existing prohibition on
discovery where "[t]he information to
be obtained is not otherwise
obtainable", by substituting a
requirement that discovery is
permissible so long as it "[s]eeks
information that is most reasonably
obtained from the non-moving party,
and which the non-moving party has
refused to provide voluntarily".
Paragraph (e)(2) of the proposed rule
would expressly prohibit discovery of a
party's settlement positions and
information regarding their
development, specifically including
penalty calculations that are based on
Agency settlement policies. Paragraph
(e)(3) would clarify that the Presiding
Officer may order depositions upon oral
questions only where additional
conditions, over and above those in
paragraph (e)(l), are satisfied. Paragraph
(e)(4) would consolidate in the main
body of the CROP the subpoena
standards presently scattered through
the supplemental rules. This
consolidation does not signify any
general subpoena authority: Subpoenas
are available in CROP proceedings only
where authorized by the Act giving rise
to the cause of action.
Paragraph (e)(5) states that none of the
§ 22.19(e) limitations on discovery limit
a party's right to request admissions or
stipulations, a respondent's right to
request Agency records under the
Federal Freedom of Information Act
("FOIA"), 5 U.S.C. 552, or EPA's
authority under the Act to conduct
inspections, issue information request
letters or administrative subpoenas, or
otherwise obtain information.
b. Significant Comments and EPA
Response. Several of the commenters
object to proposed changes to
§ 22.19(e)(l) that would allow discovery
only where it "[w]ill neither
unreasonably delay the proceeding nor
unreasonably burden the non-moving
party", and where it "(sjeeks
information that has significant
probative value on a disputed issue of
material fact relevant to liability or the
relief sought." UWAG and UARG are
concerned that these criteria are vague
and might prevent respondents from
discovering documents relating to the
basis for the Agency's determination
that a violation has occurred and
concerning how the Agency determined
the proposed penalty. UWAG and
UARG believe that respondents cannot
meaningfully respond to a complaint
without access to such documents.
CEEC states that while efforts to lessen
the burden of discovery are admirable,
the proposed limitations on discovery
are one-sided and disadvantage
respondents. CMA/API believe that the
proposed criteria of § 22.19(e)(l) are
"unfair and fundamentally tip the
balance in favor of EPA." CMA/API say
the "unreasonably burdensome"
standard is vague, subjective, and too
easily abused.
EPA believes that the changes to
§ 22.19(e)(l) will not significantly alter
the amount of discovery permitted,
although it is hoped that they will
reduce the amount of litigation over
whether discovery is to be allowed. EPA
notes that the provisions to which the
commenters object are less vague than
the comparable provisions of the
existing rule, which have been
reasonably effective for 18 years.
Although the standard "neither
unreasonably delay nor unreasonably
burden" does not achieve mathematical
exactness, it is the sort of standard that
judges are accustomed to apply. EPA is
confident that the impartial presiding
officers can implement these standards
in a fair and efficient manner.
Although commenters express
concern that the proposed discovery
criteria may prevent respondents from
discovering information important to
their defense, no commenter has
identified any specific information or
category of information that could not
be discovered under the proposed
discovery standards. None of the
commenters have articulated any reason
why discovery should extend to
information that does not have
significant probative value on a
disputed issue of material fact relevant
to liability or the relief sought, or why
a presiding officer should allow
unreasonable delay or unreasonable
burdens. EPA perceives no basis for the
contention that these proposed
discovery criteria unfairly limit
discovery. The proposed changes to the
standards for granting a discovery
motion are incremental, and are
unlikely to produce different results in
the majority of cases. The proposed
changes are beneficial in that they
clarify the types of discovery that are
appropriate and help prevent
inappropriate discovery.
There is no inherent unfairness in
rules that permit less extensive
discovery than those of the Federal
courts. Restrictions on discovery work
as both an burden and an advantage,
and as some of the commenters
acknowledge, respondents share in the
advantages as well as the burdens. For
example, the extensive discovery
allowed in the Federal courts allows
EPA to expand a judicial case through
discovery of all manner of violations.
The CROP limits the Agency's discovery
to "information that has significant
probative value on a disputed issue of
material fact relevant to liability or the
relief sought." As a result, EPA foregoes
in its administrative proceedings the
opportunities afforded by extensive
discovery in exchange for the benefits of
more expeditious case resolution.
EPA finds no merit to the contention
that respondents cannot meaningfully
respond to a complaint without broader
discovery of documents relating to the
basis for the Agency's determination
that a violation has occurred and
concerning how the Agency determined
the proposed penalty. EPA is unlikely to
have unique information relevant to the
case. Respondents are generally in a
better position than is EPA to obtain
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first hand information about whether or
not they have conducted their activities
in violation of the law. and about the
circumstances surrounding any
violations. The evidence upon which
EPA bases its enforcement action is
generally acquired from the respondent
through an inspection or information
collection request that is well known to
respondent, or through respondent's
own reporting. The proposed § 22.14(a)
requires EPA to articulate the regulatory
and factual basis of its case in the
complaint. The proposed §22.19(a)
requires EPA in prehearing exchange to
identify all witnesses it intends to call
at hearing, provide summaries of their
expected testimony, provide copies of
all exhibits and documents to be
introduced as evidence, and specify the
basis of the proposed penalty. In this
context, it cannot reasonably be argued
that the limitations on other discovery
imposed through §22.19(e) would
prevent respondents' full and
meaningful participation in the hearing.
Dow asserts that it is not appropriate
for § 22.19(e) (2) to preclude discovery of
•nalty calculations based on
ulement policies," because this
uuuld leave respondent without
information necessary to respond to the
proposed penalty. Dow observes that
EPA does not have separate written
policies for settlement and for pleading
penalties, and Dow asserts that EPA
uses its "settlement" policies for both
purposes. Dow argues that § 22.19(e)(2)
should allow discovery of any
calculations used to derive a proposed
penalty for pleading purposes or
otherwise pursued in the proceeding.
EPA had intended that the proposed
§ 22.19(e)(2) should make clear that a
party's settlement positions and
information regarding their
development are not discoverable.
There is merit to Dow's contention that
EPA should not be able to shield from
discovery the basis for a proposed
penalty simply by basing it on a
document formally titled a "settlement
policy." The preamble to the proposed
rule describes this paragraph in a
manner that appears to avoid this
problem, "the proposed revision would
prohibit discovery of a party's
settlement positions and information
regarding their development specifically
including penalty calculations for
purposes of settlement based on Agency
settlement policies." 63 Fed. Reg. at
9473. Accordingly, EPA has replaced
the parenthetical clause from the
proposed paragraph (e)(2). "(such as
penalty calculations based upon Agency
settlement policies)", with more
restrictive language taken the preamble,
"(such as penalty calculations for
purposes of settlement based on Agency
settlement policies)".
CMA/AP1 express their understanding
and support of limitations on discovery
and use of settlement positions, but
indicate concern that §22.19(e)(2) might
signal an EPA intention to abandon its
practice of sharing penalty and
economic benefit calculations in
settlement negotiations. This revision of
CROP draws on two very different
antecedents, as it merges the different
approaches of the part 22 and the
proposed part 28 procedures. In those
programs that have historically relied on
the 1980 version of the CROP, the
Agency has specified a penalty demand
in the complaint and has provided a
copy of the applicable penalty policy
and penalty calculation worksheets
typically at initial settlement
conferences, but never later than
prehearing exchange. In contrast, in its
CWA and SDWA class I administrative
enforcement programs under the
proposed part 28 rules, EPA did not
generally argue the basis of a penalty or
specify a penalty demand until post
hearing briefs, in the manner of
enforcement proceedings in the Federal
courts. For those programs where the
practice has been to specify a penalty in
the complaint, EPA does not intend any
dramatic change from current practice
regarding disclosure of penalty and
economic benefit calculations in
settlement negotiations. For those
programs that evolved in the Federal
courts and under the proposed part 28
procedures, specifying a penalty and the
basis for that penalty at prehearing
exchange will be a major change, but it
is certainly a change that will be to
respondents' advantage.
Dow argues that the word
"reasonably" should be inserted into
§ 22.29(e)(3)(i) so as to allow
depositions on oral questions in
circumstances where the information
"cannot reasonably be obtained by
alternative methods of discovery." EPA
agrees that the suggested change should
result in more efficient proceedings, and
has therefore adopted this
recommendation.
The proposed § 22.19(e)(5) also
elicited several comments. Some
commenters seem to misinterpret the
Agency's proposal as if it were offering
FOIA and EPA's other information
collection authorities as substitutes for
discovery opportunities taken away in
§22.19(e)(l). As noted above, the
changes to §22.19(e)(l) will only
produce an incremental restriction of
discovery, and would preclude only
inappropriate discovery. Accordingly,
substitutes for discovery are neither
needed nor appropriate, and suggestions
that FOIA rights be expanded are
rejected. EPA proposed § 22.19(e)(5)
simply to make clear that FOIA
requests, inspections, statutorily
provided information collection
requests, and administrative subpoenas
issued by an authorized Agency official
other than the Presiding Officer do not
constitute discovery and are not
restricted by the CROP. The proposed
revision does not change the CROP,
because these activities have never been
subject to a Presiding Officer's control,*
EPA acknowledges that the statutory
information collection tools available to
the Agency are substantial, however,
EPA does not believe that this
undermines the fairness of the CROP
proceedings. The central factual issue of
a CROP proceeding is whether
respondent's conduct has been
consistent with the law, and
respondent's ability to gather
information about its own conduct is
always greater than EPA's, statutory
information collection authorities
notwithstanding. In any event, it is
uncommon for EPA to initiate
inspections, information collection
requests, or administrative subpoenas
(other than those issued by the
Presiding Officer) to gather information
to support cases that have already
commenced.
EPA notes that the clause "EPA's
authority under the Act" may have
contributed to some commenters' view
of paragraph (e) (5) as endorsing the use
of information collection authorities
outside of those in § 22.19 to "otherwise
obtain information" support ongoing
cases. EPA's primary motivation in
proposing § 22.19(e)(5) is that its
authority to conduct investigations
2 See. e.g., In Re: Dominick's Finer Foods, Inc..
Docket No. CERCLA/EPCRA-007-95 (February 15.
1996) (holding (hat a pending action In which the
parties are subject to the discovery rules of
S22.19(f) "Is by no means a basis for restricting
EPA's information gathering rights" under CERCLA
§ 104(e)). Cases holding that EPA may not be
enjoined from exercising its investigative authority
under the Solid Waste Disposal Act solely because
of the pendency of a related administrative action:
Del Val Ink and Color, Inc.. RCRA11-91-0104
(January 12, 1993), at 6-7: Florida Dept. Of
Transportation, RCRA 92-16-R (October 29,1993),
at 3-6; and Coors Brewing Co., RCRA-VII1-90-09
(January 4, 1991). at 11-15. Comparable federal
court decisions: Llnde Thomson Langworthy Win
& Van Dykev. RTC, 5 F.3d 1508 1518 (D.C. Clr.
1993) (Statute authorizing RTC Investigations does
not contemplate the termination of investigative
authority upon commencement of civil
proceedings.): National-Standard Company v.
Adamkus. 881 F.2d 352.363 (7th Cir. 1989)("The
mere pendency of a related civil action does not
automatically preclude EPA's use of other
authorized law enforcement techniques. *'*)'>
and In Re Stanley Plating Co.. 637 F.Supp. 71,72-
73 (D.Conn. 1986) (Nothing In RCRA suggesting tW
civil action restricts EPA to investigative technique
in accordance with discovery rules).
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unrelated to the particular proceeding,
perhaps under other statutes or at other
facilities, should not be restricted by an
unrelated enforcement proceeding. EPA
has replaced the phrase "authority
under the Act" with the more general
phrase "under any applicable law" in
order to better convey EPA's intention
that activities unrelated to an ongoing
CROP proceeding are not to be subject
to the §22.19(e) limitations.
EPA cannot agree with commenters'
suggestions that EPA's information
collection authorities be restricted
during the pendency of a case. EPA
administers fourteen different regulatory
statutes, several of which impose a wide
variety of requirements on EPA and on
regulatees. Many corporations have
dozens, or even hundreds, of facilities
that are regulated by EPA. EPA needs to
continually conduct inspections and
exercise other information collection
authorities both to identify
noncompliance with existing
regulations and to determine the need
for new or revised regulations, whether
or not a company is presently subject to
a CROP proceeding. In effect, the
commenters ask EPA to blind itself to
anything a respondent might do at any
facility during the course of a CROP
proceeding. EPA would be derelict in its
regulatory and enforcement
responsibilities if it were to forego its
statutorily authorized information
collection tools, even for a relatively
short time.
Dow stated that although it agrees
generally with the proposed
§ 22.19(e) (5), it believes that the CROP
should allow for protective orders and/
or sanctions to prevent a party from
abusing or harassing another party. The
Presiding Officer has the authority,
under §§22.4(c)(6), 22.4(c)(10). 22.17.
and 22.22, to impose certain sanctions
against a party, such as exclusion of
evidence, that are not provided in the
statute under which a case is
commenced. The Presiding Officer in a
CROP proceeding does not have the
broad powers of a Federal court judge,
and can order only such relief (e.g.
penalty, compliance order) as is
authorized by the statute(s) under which
the case is commenced. None of the
statutes EPA administers authorize
protective orders or contempt sanctions
for misuse of the information collection
authorities noted in § 22.19(e)(5).
The USAF urges that § 22.19(e)(5)
state that where EPA seeks to obtain
information from a respondent
represented by an attorney in a
proceeding under the CROP, it shall
seek such information through the
respondent's attorney. The USAF
observes that § 22.10 requires
representatives of parties to conform to
the standards of conduct and ethics
applicable in the Federal courts, and
that one such rule would require that
information collection efforts
concerning the subject of the litigation
are to be made through counsel for the
party. EPA notes that these ethical rules
are already applicable to attorneys and
representatives for all parties through
§ 22.10, and need not be restated in
§22.19(e)(5).
More importantly, EPA's ability to
enforce an information collection
request will depend on whether the
request has been made of the proper
individual. Some statutory information
collection authorities are only
applicable to specified persons (e.g.,
Section 308 (a) of the Clean Water Act,
authorizes EPA to require the owner or
operator of a point source to submit
reports and provide information).
Although an attorney may represent
respondent in a particular proceeding, it
is not clear that the scope of that
representation will always make the
attorney the surrogate of the proper
recipient of.an information collection
request. In addition, EPA is a large and
decentralized agency, and regulates
many large and decentralized
corporations. As a result, it is possible
that the individuals responsible for a
particular enforcement proceeding and
those responsible for a particular
information request may have no
knowledge of each other's activities. For
these reasons, it is not appropriate for
EPA to commit itself by rule to send all
information collection requests to
respondent's attorney.
c. Final Rule. As stated above, EPA is
adopting the § 22.19(e) as proposed with
three modifications: Paragraph (e) (2)
shall contain the language "(such as
penalty calculations for purposes of
settlement based on Agency settlement
policies)". Paragraph (e)(3)(i) will allow
depositions on oral questions in
circumstances where the information
"cannot reasonably be obtained by
alternative methods of discovery."
Paragraph (e)(5) shall state that "...
Nothing in paragraph (e) of this section
shall limit * * * EPA's authority, under
any applicable law, to conduct
inspections, issue information request
letters or administrative subpoenas, or
otherwise obtain information".
EPA has also noted an unintended
side effect of moving the subpoena
provisions from the supplemental rules
into the discovery section of the
proposed rule. In many cases,
subpoenas are not used as discovery
tools, but merely to ensure the
attendance of a witness at hearing. The
witness may also be totally independent
from the parties. In these circumstances,
the standards set forth in §22.19(e)(l)
are inappropriate. Therefore, EPA has
revised §22.19(e)(4) so that it applies
only to subpoenas issued for discovery
purposes. Other subpoenas would be at
the Presiding Officer's discretion,
pursuant to §22.4(c)(9). Corresponding
language is also added to § 22.21 to
provide for subpoenas not used as
discovery tools.
17. Supplementing Prior Exchanges, and
Failure To Exchange Information (40
CFR22.19(f)&(g))
a. Summary of Proposed Rule. Section
22.19(f) would clarify that parties may
freely supplement their information
exchanges, and additionally impose on
each party a duty to supplement or
correct prior exchanges of information
when the party learns that a prior
exchange is deficient. Section 22.19(g)
clarifies that a failure of a party to
provide information within its control
pursuant to an order of the Presiding
Officer may lead to an inference that the
information sought would be adverse to
the non-exchanging party, to exclusion
of the information from evidence, or to
issuance of a default order.
b. Significant Comments and EPA
Response. CMA/API support the
proposed changes to § 22.19(f). Dow
suggests that §22.19(g) should state that
"the Presiding Officer may, in his
discretion." impose the specified
sanctions, in order to clarify that the
"abuse of discretion" standard applies
on appeal. EPA accepts this suggestion.
c. Final Rule. EPA is adopting the
proposed §22.19(f) and (g) with minor
modifications. In the first sentence of
paragraph (f), EPA has replaced the
word "responded" with the more
expressive phrase "exchanged
information in response." In response to
Dow's comment noted above, EPA has
added the phrase "in his discretion" to
the language of § 22.19(g). EPA also
corrected an erroneous citation in
paragraph (g) (3): it should refer to
§ 22.17(c) rather than § 22.17(a). For
consistency with the other paragraphs
in § 22.19, EPA has added a heading to
paragraph (g), "Failure to exchange
information".
18. Evidence (40 CFR 22.22)
a. Summary of Proposed Rule. Section
22.22(a) proposes both structural and
substantive changes. Structurally, EPA
proposes splitting subsection (a) into
two paragraphs, (a)(l) and (a) (2).
Paragraph (a)(l) proposes to add an
exclusionary provision for information
not provided to the opposing party at
least 15 days before the hearing date
unless there was good cause and the
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40163
information was provided as soon as it
had control of it or there was good cause
for not providing the information.
Paragraph (a) (2) proposes to clarify how
and when confidential business
information ("CB1") may be used as
evidence in accordance with, and
specifically referencing EPA's general
confidentiality requirements in 40 CFR
Part 2. In conforming with Part 2
requirements, a proposed significant
change would authorize the Presiding
Officer and EAB to consider CBI
information outside the presence of the
public or a party as necessary to
preserve the confidentiality of business
information.
b. Significant Comments and EPA
Response. Dow opposes the automatic
exclusion of information that is not
exchanged in a timely manner unless
good cause is shown, as proposed in
§ 22.22(a)(l). Dow presents hypothetical
situations where it believes a
respondent would be unable to get
exculpatory or mitigating information
that comes to its attention admitted into
evidence, if EPA "deliberately chooses
to withhold" such information "instead
of exchanging it in a timely manner." In
such situations, Dow reasons that there
would be no "good cause" for EPA's
failure to exchange the information. As
a result. Dow advocates the proposed
exclusionary provision be revised to
state that the "information will be
excluded from evidence only upon
objection by the innocent party (i.e.. the
party who did not fail to exchange the
information in a timely manner)."
Dow's fears are unfounded. If party A
withholds information until just before
the hearing, and party B seeks to have
that information admitted into evidence.
then party A's failure to disclose would
constitute "good cause" for the innocent
party B's inability to produce the
information 15 days prior to the hearing.
If the party was required to disclose the
information in prehearing exchange or
other discovery, § 22.19(g) gives the
Presiding Officer some authority to
sanction the party who withheld the
information. Section 22.19(f) prohibits
knowing concealment of deficiencies in
information that has previously been
exchanged. It imposes an affirmative
duty to promptly supplement or correct
information provided previously in a
prehearing exchange, a response to a
request for information, or a response to
a discovery order when a party learns
that the information is "incomplete,
inaccurate or outdated, and the
additional or corrective information has
not otherwise been disclosed to the
other party. * * *" Id. An opposing
party's failure to supplement as required
under § 22.19(f) would provide "good
cause" for admission of evidence. In
addition, §22.4(c)(10) empowers the
Presiding Officer do all acts and
measures needed for a fair adjudication
of the proceedings.
The preamble to the proposed rule
noted that the CROP is aimed at the
practice of full and complete exchange
of information in order to expedite
hearings and avoid unnecessary and
costly motion practice. E.g.. 63 FR at
9472, 9473. The Agency believes that
the exclusionary provision facilitates
this end and provides a mechanism to
enforce the failure of a party to engage
in such full disclosure. For parties that
act in bad-faith, the CROP, as discussed
above, provides adequate safeguards to
address these situations and ensure a
fair adjudication.
Regarding § 22.22(a)(2), CEEC
supports the Agency's proposal to allow
the Presiding Officer to review CBI
evidence outside the presence of a party
if it is necessary to preserve the
confidentiality of the business
information. In contrast, Dow believes
that viewing CBI evidence outside the
presence of a party can impede the non-
attending party's ability to effectively
participate in the hearing and the
fairness of the hearing. Dow requests
that the Agency include a provision for
disclosure of CBI to all parties and to
neutral experts, as needed, with
safeguards to prevent against using the
information outside the scope of the
hearing.
The Agency acknowledges the
legitimacy of Dow's concerns, however,
today's rule and 40 CFR part 2 provide
adequate mechanisms to accomplish
most of Dow's suggestions.
Notwithstanding today's revision of
§ 22.22(a)(2), EPA retains the authority
to disclose CBI in a CROP proceeding
where appropriate, pursuant to several
statute-specific provisions of part 2 (see,
e.g.. 40 CFR 2.301 (g), 2.302(g), 2.304(g).
2.305(g), 2.306(i). 2.310(g)). Disclosure
to a neutral expert could be
accomplished through these authorities,
or through the statute-specific
provisions of part 2 that authorize
disclosure to persons performing work
under contract to EPA (see, e.g., 40 CFR
2.301 (h). 2.302(h), 2.304(h). 2.305(h),
2.306(j). 2.307(h). 2.310(h)). The Agency
does not, however, have the authority to
enforce secrecy agreements between
respondent and an intervener. nor does
it have the authority to impose
sanctions (other than procedural
sanctions such as default) for violations
of protective orders that might be issued
under the authority of §22.4(a)(2) or (c).
Therefore, it may be advisable for
owners of CBI to make such agreements
enforceable as contracts.
As expressed in the preamble to the
proposed rule, the Agency believes that
allowing the independent Presiding
Officers the "discretion to review
confidential evidence outside the
presence of a party * * * strike [s] an
appropriate balance between the right of
confrontation and the statutory
mandates to protect confidential
business information." 63 FRat 9474.
Contrary to the Dow's suggestion, the
Presiding Officer is competent to handle
these infrequent situations, including
the concern about CBI evidence being
unduly relied upon to the detriment of
the non-present party. The Presiding
Officers handle cases daily involving
the Agency's technical regulations and
corresponding business information. As
an impartial trier of fact, trained to
assure that all cases are fairly
adjudicated, the Presiding Officer can
take into account the failure of a party
to be present and to rebut any CBI
evidence. Additionally, the Presiding
Officer can pose questions to the absent
party about any non-CBI issues that
exist once the hearing resumes in full.
Moreover, as this commenter
acknowledges, the CROP provides that a
party will have access to a redacted
version of the CBI documents. Thus, a
right to confrontation and to present its
defense will not be unfairly impeded,
c. Final Rule. EPA is adopting § 22.22
as proposed, with four minor changes.
In addition to excluding information
required to be exchanged under
§ 22.19(a) or (f) that has not been
provided to the opposing party at least
15 days before the hearing date,
§ 22.22(a)(l) should also exclude
information that has not been timely
provided pursuant to a § 22,19(e)
discovery order. This is a technical
change, in as much as § 22.19(g)(2)
already permits the exclusion of
information not provided pursuant to a
discovery order, and that it is clearly the
intent of the proposed rule to exclude
information that has not been provided
to opposing parties in a timely manner.
EPA has therefore added to § 22.22(a)(l)
a reference to § 22.19(e) discovery
orders.
To conform to the preferred style of
the U.S. Government Printing Office,
EPA has revised § 22.22(a) to state the
duration of this exclusion period with
the numeral "15".
EPA has made an editorial change to
§ 22.22(b), which requires witnesses to
testify "orally, under oath or
affirmation, except as otherwise
provided in these Consolidated Rules of
Practice or by the Presiding Officer."
EPA has replaced the phrase "in these
Consolidated Rules of Practice" with the
more specific language "in paragraphs
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(c) and (d) of this section". No
provisions of the CROP other than
§22.22{b), (c) and (d) address whether
witnesses must testify orally, under oath
or affirmation.
EPA notes that although the existing
§ 22,22(c) places the burden of
delivering copies of a witnesses' written
testimony on the witness, this burden
should fall on the party who would call
that witness to testify. EPA has revised
this paragraph to require that "the party
who has called the witness shall deliver
a copy of the testimony to the Presiding
Officer, the reporter, and opposing
counsel."
19. Filing the Transcript (40 CFR 22.25)
a. Summary of Proposed Rule. Section
22.25 provides that the hearing shall be
transcribed, and that the reporter shall
transmit copies to the Presiding Officer,
and to the Regional Hearing Clerk who
shall make copies available to the
parties. EPA proposed a new provision
specifically allowing motions to
conform the transcript to the actual
testimony, provided that such motions
are filed within 20 days after notice of
the availability of the transcript.
b. Significant Comments and EPA
Response. Dow asserts that 20 days is
insufficient time for attorneys and
employee witnesses to review, correct,
and move to amend a hearing transcript,
even if the 20 days commenced upon
receipt of the transcript. Dow
recommends that § 22.25 be revised to
allow motions to conform the transcript
to the actual testimony either 30 days
from the date the transcript is received,
or 45 days from service of the notice of
availability. EPA agrees with Dow's
recommendation that additional time be
allowed.
EPA originally proposed that the time
allowed should be measured time from
date the parties are notified that the
transcript is available, as this appeared
to be a single, well-defined reference
point. In practice, this has not been the
case, because complainants on occasion
receive the transcript itself before
receiving a formal notice of its
availability. Moreover, the proposed
standard would generally give
complainant more time than
respondent, because complainant
typically receives the transcript as soon
as it becomes available. The
commenter's suggestion of 30 days from
the date the transcript is received is
good benchmark, as it allows each party
the same amount of time to review the
transcript, however, it is open-ended for
so long as a respondent declines to
request or pay for its copy of the
transcript. In order to balance fairness to
each party with the need for finality,
EPA has adopt a standard building on
both of the commenter's suggestions:
"Any party may file a motion to
conform the transcript to the actual
testimony within 30 days after receipt of
the transcript, or 45 days after the
parties are notified of the availability of
the transcript, whichever is sooner."
c. Final Rule. EPA is adopting the rule
as proposed with the exception of
modifying the language of § 22.25 to
read "Any party may file a motion to
conform the transcript to the actual
testimony within 30 days after receipt of
the transcript, or 45 days after the
parties are notified of the availability of
the transcript, whichever is sooner."
20. Initial Decision (40 CFR 22.27)
a. Summary of Proposed Rule. Section
22.27 is concerned with initial decision,
and it consists (in both the existing and
proposed versions) of three paragraphs.
Paragraph (a) is concerned with the
issuance of an initial decision, what it
shall contain, and to whom copies shall
be sent. Paragraph (b) outlines the
factors a Presiding Officer must take
into consideration in determining the
amount of a civil penalty and the
procedures for determining a civil
penalty upon a default. Paragraph (c)
sets forth when an initial decision
becomes a final order and when it does
not; this provision also states that the
effect of an initial decision appealed to
the EAB is stayed pending a decision on
an appeal by the EAB.
Many of the changes in § 22.27(a) are
intended to clarify the language. Other
changes include requiring that an initial
decision, where appropriate, include a
compliance order, corrective action
order or permit revocation, termination
or suspension. This provision also
designates to whom, in addition to the
parties, copies of the initial decision are
to be sent.
The revised § 22.27 (b) would require
that the Presiding Officer explain in the
initial decision how the penalty
recommended to be assessed therein
corresponds to the evidence in the
record and any penalty criteria set forth
in the statute under which the action
has been commenced. It also establishes
that in case of default, the penalty
recommended to be assessed shall not
exceed the lesser of amount sought in
either the complaint or motion for
default.
In § 22.27(c), the ways in which a
party can prevent an initial decision
from becoming a final order are set
forth. The proposed rule states that
pending the issuance of decisions on
appeals of them to the EAB, initial
decisions are neither final nor operative.
This amendment is to prevent a party
from seeking judicial review prior to
seeking review from EPA's
administrative appellate body, the
Environmental Appeals Board.
b. Significant Comments and EPA
Response. Dow notes that the second
sentence of § 22.27(a) arguably requires
that every initial decision must include
a civil penalty assessment. To remedy
this, Dow recommends that the words
"if appropriate" be moved so that they
follows the phrase "as well as reasons
therefor, and". EPA agrees, and adopts
Dow's proposed revision.
Dow supports the inclusion in
§ 22.27(c) of the provision that states,
"An initial decision that is appealed to
the Environmental Appeals Board shall
not be final or operative pending the
Environmental Appeals Board's
issuance of a final order" as properly
balancing the needs of EPA and
respondents. While Dow is pleased that
this "will avoid premature recourse to
Federal courts", Dow argues that EPA
should not require appeal to the EAB for
those issues that cannot be adjudicated
administratively. As examples of
matters that an agency cannot address,
Dow cites challenges involving
constitutional questions, challenges to
an agency's interpretation of a statute
and challenges to an agency's authority.
EPA does not agree with the •
recommendation that the CROP should
not require an appeal to the EAB of
"issues that cannot be adjudicated
administratively." It cannot be left to a
party to determine the scope of the
EAB's jurisdiction, and respondents
should not bear the burden of
attempting to predict whether a
particular issue must be appealed to the
EAB as a prerequisite to judicial review.
Also, issues that may not be adjudicated
administratively are often mixed with
issues that may be adjudicated by the
Board. It is appropriate, and in the
interest of both the Agency and the
parties, for the EAB to decide which
issues may be adjudicated
administratively. This will ensure that
the EAB has the opportunity to exercise
its full review authority and protect
respondents from losing their right to
appeal based on a failure to exhaust
administrative remedies.
CEEC also objects to the proposed.
changes to § 22.27(c), arguing that it is
inappropriate to require respondents to
appeal any initial decisions to the EAB
before appealing to the federal courts.
CEEC's initial comments (April 27.
1998) gave no reasons why this is
inappropriate. CEEC reiterated this
objection in its supplemental comments
(June 4,1998), again without significant
explanation. CEEC's supplemental
comments elaborated on this point only
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40165
lo the extent of echoing Dow's
comment, stating that it is especially
inappropriate "where the issue to be
addressed is a constitutional challenge,
a challenge to an Agency interpretation,
or a challenge to the Agency's
authority."
As EPA has already discussed issues
specific to requiring appeal to the EAB
as a prerequisite to judicial review
"where the issue to be addressed is a
constitutional challenge, a challenge to
an Agency interpretation, or a challenge
to the Agency's authority", this
response will address the larger issue
raised by CEEC, whether respondents
should be required to appeal any
decisions of a Presiding Officer to the
EAB as a prerequisite to judicial review.
The EAB is responsible for assuring
consistency in Agency adjudications by
all of the ALJs and RJOs. The appeal
process of the CROP gives the Agency
an opportunity to correct erroneous
decisions before they are appealed to
the federal courts. The EAB assures that
final decisions represent with the
position of the Agency as a whole,
rather than just the position of one
Region, one enforcement office, or one
Presiding Officer. EPA considers this a
necessary and important function, and
rejects CEEC's suggestion that this
internal appeal and review process be
abandoned. In addition to meeting
EPA's institutional needs, this process
also offers enormous advantages to
respondents who are dissatisfied with
an initial decision, in that appeals to the
EAB are much quicker and much less
expensive than appeals to a federal
court.
CEEC's comment may be based on a
misreading of the proposed rule as
requiring respondent to make an
interlocutory appeal to the EAB every '
time there is an adverse decision: "In its
Preliminary Comments, CEEC noted its
concerns with the proposal requiring
appeal to the EAB after every "initial"
decision or order of the Presiding
Officer before seeking judicial review."
To the extent that this comment is
intended to apply to any ruling or order
other than an initial decision (as the
latter term is defined in § 22.3), it is
based on a misreading of the proposed
rule. The proposed rule would only
require that initial decisions (as
specifically defined in § 22.3) be
appealed to the EAB as a prerequisite to
judicial review. EPA did not propose to
require interlocutory appeal of rulings
and orders other than initial decisions
as a prerequisite to judicial review.
CEEC also objects to the process by
which EPA has proposed the revisions
relating to exhaustion of remedies.
Terming the inclusion of the exhaustion
requirement a "major revision" to the
CROP, CEEC says that "Given the
magnitude of this proposed change, EPA
should have brought this proposal to the
attention of the regulated community in
the summary of its proposed rule-
change, and explained it thoroughly."'
First, the February 25, 1998, Federal
Register notice of proposed rule making
provided adequate notice of EPA's
intention to address the exhaustion
doctrine in its rules of administrative
procedure. The one-sentence summary
that begins the notice of proposed rule
making accurately describes the subject
of the notice, though it does not attempt
to summarize all of the issues raised in
the proposal. The body of the notice and
the proposed regulations clearly
identified and discussed this issue in
detail. See 63 FR 9474-75, 9489. The
proposed rule allowed 60 days for the
public to comment on the entire
proposal. In addition, in response to
CEEC's concern, EPA published a
second notice on May 6, 1998,
reopening the public comment period
for an additional 60 days.
CEEC's contention that the initial
proposal did not give adequate notice of
the magnitude of the proposed changes
is not persuasive. The original notice of
proposed rule making attracted the
attention of a broad spectrum of the
regulated community, and elicited
comments from major trade associations
representing the chemical
manufacturing industry, the
petrochemical industry and the utility
industry, and individual comments
from the U.S. Air Force and one major
chemical company, in addition to the
companies represented by CEEC. These
comments were generally detailed and
well considered. Only two of the
comments addressed § 22.27(c), and
only CEEC considered this an
extraordinary revision. CEEC's
contention that the initial proposal did
not allow enough time to consider and
comment on the proposed changes is
also undermined by the fact that CEEC's
supplemental comments were the only
comments received during reopened
comment period, as well as by the fact
that those supplemental comments did
not raise any significant issues that were
not raised during the original public
comment period.
Second. EPA disagrees with CEEC's
characterization of the magnitude of the
proposed changes. EPA considers
appeals of an initial decision to the EAB
as a prerequisite to judicial review
under the CROP as previously codified,
and that, during such appeal, the initial
decision is inoperative. The regulated
community also appears to share this
understanding, as respondents
consistently seek EAB review before
appealing to the federal courts. The
proposed explicit inclusion of the
exhaustion doctrine simply clarifies the
status quo, and thus does not represent
something that would significantly alter
or impact a respondent's rights or
position under the CROP.
Although the proposed revision of
§ 22.27(c) was designed to make it
explicit that an initial decision must be
appealed to the EAB as a prerequisite
for judicial review, Dow points out that
§ 22.27(c) does not actually say anything
about the need for administrative appeal
before judicial review. An explicit
statement appears in § 22.31 (e)(l) of the
proposed rule, however, EPA
acknowledges that it would be more
helpful if the provision advising a
respondent of the consequences of
failing to appeal an initial decision to
the EAB were included in the section
discussing initial decisions, rather than
the section concerned with final orders,
Accordingly, language from §22.31(e)(l)
of the proposed rule now appears in a
new§22.27(d).
c. Final Rule. In response to comment,
EPA has moved the words "if
appropriate" from the end of the second
sentence in §22.27(a) to follow the
phrase "as well as reasons therefor,
and", in order to clarify that not all
initial decisions will assess a penalty.
Language from § 22.27(c) and
§ 22.31 (e)(l) relating to exhaustion of
administrative remedies has been
combined in a new § 22.27(d). The
remainder of § 22.27'(c) has also been
subdivided into four paragraphs for
easier reading.
EPA has made an additional
substantive change to § 22.27(a) on its
own initiative. The existing and
proposed rules specify that the Regional
Hearing Clerk shall forward the entire
record of the proceeding to EPA
Headquarters as soon as an initial
decision is issued, regardless of whether
the case is appealed to the EAB. For
administrative efficiency, this
requirement has been deleted. Regional
Hearing Clerks will retain the record of
the proceeding unless the EAB requests
it. This change should have no effect on
respondents' interests.
EPA has made minor editorial
changes to § 22.27(a) as well: EPA has
deleted the word "reply" from the first
sentence to make it more general, and
has replaced the phrase "permit
revocation and suspension" with
"Permit Action", as discussed in
connection with revisions to § 22.3(a)
and §22.14(a)(4)(Hi)..
In the fourth and fifth sentences of
paragraph (b), the proposed rule uses
the phrase "penalty recommended to be
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assessed in the complaint". The
convention elsewhere in the CROP is to
describe the penalty proposed by
complainant as the "proposed penalty",
and the penalty determined by the
Presiding Officer as the "recommended
penalty". In order to eliminate the
"recommended to be assessed" language
and to provide for cases where
complainant makes its specific penalty
proposal in its prehearing exchange,
EPA has replaced "penalty
recommended to be assessed in the
complaint" in the fourth sentence with
the phrase "penalty proposed by
complainant". In the fifth sentence, EPA
has substituted the phrase "proposed by
complainant in the complaint, the
prehearing information exchange or the
motion for default".
EPA has also changed the order of the
sentences in paragraph (b). The sentence
stating that "It]he Presiding Officer shall
explain in detail in the initial decision
how the penalty to be assessed
corresponds to the any penalty criteria
set forth in the Act" has been moved up
to follow the sentence stating that "the
Presiding Officer shall consider any
penalty guidelines issued under the
Act." This will make it clearer that the
obligation to explain in detail how the
penalty corresponds to the penalty
criteria of the Act is not limited to
circumstances where the Presiding
Officer assesses a penalty different from
that proposed in the complaint.
As discussed above in connection
with public comments on § 22.17, EPA
has revised the CROP to clarify that a
motion for default or a default order
may apply to all or part of a proceeding.
EPA has made a correspond ing change
to § 22.27(c)(3), to clarify that it applies
only to those default orders that
constitute initial decisions.
To conform to the preferred style of
the U.S. Government Printing Office,
EPA has revised § 22.27(c) to state the
time after which an initial decision
becomes a final order with the numeral
"45".
21. Appeal From or Review of Initial
Decision (40 CFR 22.30)
a. Summary of Proposed Rule. The
proposed revisions to §22.30 (a) would
extend the time to file an appeal from
20 to 30 days, clarify the procedure for
filing appeals, including, but not limited
to. provisions addressing service and
filing, and describing the contents of
any appeal brief. The proposed rule also
contained a new provision whereby a
party who initially declined to appeal.
but who receives a notice of appeal from
another party, is granted an additional
20 days to raise other issues on appeal.
This change would eliminate the need
for protective filings by parties who
otherwise would have elected not to file
an appeal.
Proposed revisions to paragraph (b)
would clarify the respective roles of the
Regional Hearing Clerk and the Clerk of
the Board. Paragraph (c) of the proposed
rule added a provision expressly
limiting the scope of appeals to issues
raised during the course of the
proceeding or by the initial decision.
Minor editorial changes were made to
the proposed paragraph (d), as well as
to the other paragraphs.
EPA proposed a new paragraph (e)
that would specify that the general
requirements for motions at § 22.16
apply to motions made in appeals to the
EAB. EPA proposed a new paragraph (f),
consisting largely of the language
formerly contained in § 22.31 (a).
Paragraph (f) describes the scope of
review by the EAB and its authority to
increase or decrease a penalty, or to
modify any compliance order, corrective
action order, or any permit revocation,
termination and suspension. The
proposed §22.30(f) would allow the
EAB to increase the amount of a penalty
assessed in a default order, but would
not allow the EAB to increase the
default penalty to an amount greater
than that proposed in the complaint or
in a motion for default, whichever is
less.
b. Significant Comments and EPA
Responses. CMA/API support the
provision extending the time for filing
appeals from 20 to 30 days, while Dow
objects that 30 days is not sufficient
time to review the initial decision and
file an appeal brief. CROP proceedings
have worked effectively since 1980 with
a 20 day appeal period, and with
extensions in appropriate cases.
Expanding the appeal period by fifty
percent should substantially reduce the
burdens felt by counsel, as well as allow
improvement in the quality of the briefs
filed. While today's final rule expands
several time periods, EPA still intends
that CROP proceedings should progress
quickly from the filing of the complaint
to the issuance of a final order. EPA
believes that further expansion of the
appeals period is not necessary at this
time.
Dow also commented that the
deadline for response briefs would be
ambiguous under the proposed
§ 22.30(a)(2) in cases where two or more
notices of appeal are filed in serial
fashion. EPA concedes that in such
cases there would not be a single date
upon which all reply briefs are due,
however, the proposed CROP is clear as
to when the response briefs are due: A
brief responding to an appeal is due
within 20 days of service of the appeal
brief to which it responds. Requiring all
reply briefs to be filed on the same day
would give the person filing the last
appeal the most time to respond to the
opposing party's appeal, while EPA's
proposed approach gives each party the
same amount of time to respond.
CEEC recommends that the CROP
include procedures to ensure that
members of the regulated community
have access to ail administrative
complaints, decisions, orders,
settlements, etc. EPA notes that all such
documents appear in the public docket
for each case. The formal opinions of
the EAB are published in a series of
bound volumes titled Environmental
Administrative Decisions (E.A.D.),
which may be purchased from the U.S.
Superintendent of Documents. The full
text of all formal EAB opinions may also
be accessed electronically at the EAB's
World Wide Web Site (http://
www.epa.gov.eab). Decisions and
"substantive" orders (i.e., having some
discussion of legal argument) of the
Agency's ALJs are on http://
www.epa.gov/oalj going back to
November 1996. A web site for RJO
decisions is under construction. Hard
copies of ALJ decisions (and substantive
orders since 1997) may be obtained from
the Headquarters Hearing Clerk, and
RJO decisions may be obtained from the
Regional Hearing Clerks. Several
commercial sources also make available
the EAB formal opinions, most ALJ
decisions and orders, and some RJO
decisions and orders.
The Agency's practice has been for
the Regional Hearing Clerk to maintain
a complete docket up through the initial
decision, and for the Clerk of the Board
to maintain the docket of subsequent
proceedings. EPA acknowledges that
this system has made it difficult for
persons reviewing a case docket in an
EPA Regional office to review the entire
case record. In order that the Regional
Hearing Clerk's docket should indicate
that a case had been appealed, EPA
proposed in §22.30(a)(l) that each
appellant shall serve copies of its notice
of appeal and brief with the Regional
Hearing Clerk. In response to CEEC's
comment, EPA has revised § 22.30(a)
and (b) to require that copies of all
documents filed with,-or by, the EAB
shall also be served on the Regional
Hearing Clerk.
Finally, Dow notes that despite EPA's
stated intention of removing the words
"sua sponte" from the CROP. EPA
neglected to replace this expression in
the title of § 22.30(b). EPA has finished
this task by revising this title to read
"Review initiated by the Environmental
Appeals Board."
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c. Final Rule. EPA has adopted
§ 22.30 as proposed, with several
modifications. As discussed above, EPA
has revised the title of § 22.30(b) to read
"Review initiated by the Environmental
Appeals Board", and has revised
§ 22.30(a) to require that copies of all
documents filed with, or by, the EAB
shall also be served on the Regional
Hearing Clerk. EPA has made several
other minor revisions on its own
initiative:
As discussed above in connection
with the revisions to § 22.11. EPA has
replaced the term "amicus curie" in
§ 22.30(a)(l) and (a)(2) with the term
"non-party participant."
In order that the Presiding Officer
may be aware of the status of his or her
decision, EPA has also revised
paragraph (a)(l) to require that a copy of
the notice of appeal be served on the
Presiding Officer, and revised paragraph
(b) to require that the EAB serve on the
Presiding Officer a copy of its notice of
intent to review a decision.
EPA has also replaced the expression
"Clerk of the Environmental Appeals
Board" with "Clerk of the Board." using
the term defined at § 22.3(a) for
consistency.
Because response briefs are to be filed
with the Clerk of the Board, the words
"and serve" are unnecessary and
potentially confusing as they appear in
the proposed § 22.30(a)(2), and have
therefore been deleted from today's final
rule.
The proposed § 22.30(c) included a
new provision: "The parties' rights of
appeal shall be limited to those issues
raised during the course of the
proceeding and by the initial decision."
In order to reflect the well established
principle that the question of subject
matter jurisdiction cannot be waived
and may be raised at any stage of a
proceeding. EPA has revised this
provision by adding the clause "and to
issues concerning subject matter
jurisdiction."
The proposed § 22.30(f) may
incorrectly suggest that a final order is
the only possible outcome from an EAB
decision on appeal of an initial
decision. However, it is not uncommon
for the EAB to remand a case. EPA has
revised paragraph (f) by adding the
following sentence: "The Environmental
Appeals Board may remand the case to
the Presiding Officer for further action."
EPA has replaced the phrase "any
permit revocation, termination or
suspension" in § 22.30(f) with "Permit
Action", as discussed in connection
with revisions to § 22.3(a) and
§ 22.14 (a) (4) (ill). To conform to the
preferred style of the U.S. Government
Printing Office, EPA has revised § 22,30
to state all time periods with numerals
only.
22. Final Order (40 CFR 22.31)
a. Summary of Proposed Rule. Section
22.31 is concerned with final orders,
and the proposed section consists of six
sub-paragraphs. Paragraph (a) would
specify the effect of the final order. It
states that a final order constitutes final
Agency action and specifies that a final
order neither affects the right of the
United States to seek criminal or civil
relief for any violation of law nor waives
a respondent's obligations to comply
with applicable law. Paragraph (b)
would establish the effective date of a
final order. Paragraph (c) would set
forth procedures for paying any civil
penalties assessed in a final order.
Paragraph (d) would establish that any
corrective action or compliance order.
or any permit revocation, termination or
suspension becomes effective and
enforceable as of the effective date of a
final order unless otherwise specified in
the final order. The proposed paragraph
(e) is concerned with exhaustion of
administrative remedies, and would
specify that where a respondent fails to
appeal an initial decision or enters into
a consent agreement, the right of
subsequent judicial review is waived.
The proposed paragraph (f) discusses
final orders issued to Federal agencies.
This provision would specify that where
the head of an affected agency seeks the
intervention of the EPA Administrator,
the decision by the Administrator will
be the final order; this provision would
also specify that a motion for
reconsideration does not affect the 30-
day time period for the effective date of
final orders against Federal agencies.
b. Significant Comments and EPA
Responses. The proposed inclusion in
§22.31(e) of a provision explicitly
addressing exhaustion of administrative
remedies as a prerequisite to judicial
review is viewed by CEEC as a "major"
revision of the CROP. CEEC argues that:
"Given the magnitude of this proposed
change, EPA should have brought this
proposal to the attention of the regulated
community in the summary of its proposed
rule-change, and explained it thoroughly."
As discussed in EPA's response to
comments on § 22.27(c), above, EPA
disagrees with CEEC's characterization
of the magnitude of this change, and
maintains that the proposed rule gave
adequate notice of the proposed change.
As discussed in EPA's response to
comments on § 22.27(c), above, EPA
agrees with Dow's comment that the
requirement that an administrative
appeal is a predicate for subsequent
judicial review should appear in
§ 22.27. Therefore, the language that
appeared in the proposed § 22.31 (e)(l)
has been deleted and moved to
§22.27(c).The proposed §22.31 (e)(2),
which would specify that "[a]
respondent which elects to resolve a
proceeding pursuant to §22.18 waives
its rights to judicial review", is
redundant with §22.18(a)(3) and (b)(2)
and can be deleted without substantive
change. The proposed § 22.31 (f) has
been redestgnated as § 22.31 (e) in
today's final rule,
The proposed § 22.31 (f) describes the
manner in which the head of another
Federal agency may bring disputes over
a final order directly to the EPA
Administrator, and provides that the
EAB's decision shall not be effective
pending the Administrator's review.
Essentially the same provision already
appears in the supplemental rule
governing Solid Waste Disposal Act
cases, § 22.37(g). The proposed rule
would move this provision from that
supplemental rule into the main body of
the CROP, in order that this process
should be available in any CROP case
brought against a Federal agency.
The USAF opposes moving this
provision from the supplemental rule
governing Solid Waste Disposal Act
cases into the main text of the CROP.
USAF argues that instead of a generally
applicable provision, such procedures
should be confined to the statute-
specific supplemental rules. USAF
argues that EPA should be required to
amend the CROP each time
Congressional action expands EPA's
authority to enforce against another
Federal agency, in order to provide a
forum for resolving constitutional and
jurisdictional issues.
The proposed change does not expand
EPA's jurisdiction to assess civil
penalties against a Federal facility, nor
does it expand the scope of the CROP
as it pertains to Federal facilities. EPA
can assess penalties against Federal
facilities for violations of the Safe
Drinking Water Act (42 U.S.C. 300J-6),
the Resource Conservation and
Recovery Act ("RCRA") (42 U.S.C.
6961), and the Clean Air Act (42 U.S.C.
7413(d), 7524(c) and 7545(d)(l)) through
a CROP proceeding regardless of
whether the proposed language is
adopted. Should other authorities for
assessing penalties against Federal
facilities become available in the future,
this will be true for those authorities as
well. The only effect of the change
proposed in § 22.31 (f) is to provide a
mutually understood process for staying
a final order while the head of the
respondent Federal Agency confers with
the EPA Administrator.
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The proposed § 22.31 (f) is a
procedural provision, not a
jurisdictional provision. It does not, on
its own, establish authority to assess
administrative penalties. It merely
provides the process to follow where
Congress has provided such authority to
EPA. Although EPA has not made the
change USAF seeks, EPA has made a
minor change to the proposed
§ 22.31 (f)(D (promulgated today as
§22.31 (e)(l)) that should help reduce
the chance that this might be
misperceived as a jurisdictional
provision, by moving the words
"pursuant to § 22.30". to follow the
word "issued."
c. Final Rule. EPA has made no
substantive change in response to the
comments on the proposed § 22.31. As
described above, EPA has deleted the
proposed § 22.31 (e) because equivalent
provisions now appear in §§22.18 and
22.27(c). Also as noted above, EPA has
changed the proposed paragraph (f) to
"(e)". and has moved the words
"pursuant to § 22.30", to follow the
word "issued" in §22.31 (e)(l).
On its own initiative, EPA has made
several other editorial changes to
§ 22.31. First, the third sentence of the
proposed § 22.31 (a) is inartfully drafted
and subject to misinterpretation. The
relevance of the terms "liability" and
"violation" is not clear in relation to
proceedings for permit actions. For
example, permit actions may often
involve facts which could establish
violations of the permit or of
environmental regulations, however,
permit action proceedings do not
adjudicate respondents' liability for
such violations. In order to avoid the
implication that a final order in permit
action proceeding might "resolve
Respondent's liability for a civil
penalty", or conversely, that a final
order in a penalty proceeding might
resolve "the status of a permit or
authority to operate", this sentence
must be revised. In addition, this
sentence does not address proceedings
commenced with a consent agreement
and final order pursuant to § 22.13(b).
Accordingly, EPA has revised the third
sentence of the proposed § 22.31 (a) to
state that: "The final order shall resolve
only those causes of action alleged In
the complaint, or for proceedings
commenced pursuant to § 22.13(b),
alleged in the consent agreement."
Second, EPA has significantly
simplified the second sentence of
§ 22.31 (c), by removing the
requirements concerning who shall be
the payee on the check and where the
check should be sent, and by amending
§ 22.14 (a) to require that these be
specified in the complaint. EPA notes
that the proposed § 22.31 (c) was
deficient in that it did not provide a
mechanism to accommodate changes in
the lock box banks or bank addresses
other than by amending the CROP, and
that it did not provide for cases under
Section 311 (b)(6) of the Clean Water
Act, where penalties must be paid to the
"Oil Spill Liability Trust Fund."
Moreover, the focus on the "check" left
it unclear whether interbank funds
transfers were permitted. Requiring that
the complaint address these issues
allows EPA to replace the second and
third sentences of § 22.31 (c) with a
much simpler statement:
"Payment shall be made by sending a
cashier's check or certified check to the
payee specified in the complaint, unless
otherwise instructed by the complainant. The
check shall note the case title and docket
number. Respondent shall serve copies of the
check or other instrument of payment on the
Regional Hearing Clerk and on complainant."
Third, EPA has replaced the phrase
"permit revocation, termination or
suspension" in §22.31(d) with "Permit
Action", as discussed in connection
with revisions to § 22.3(a) and
S 22.14 (a) (4) (ill).
Fourth, EPA has clarified an
imprecise sentence in the proposed
§22.31(f)(D (now §22.31(e)(l). The last
sentence of the proposed § 22.31 (0(1)
stated that "In that event, a decision by
the Administrator shall become the final
order." EPA has replaced "In that
event" with the more explicit statement,
"If a timely request is made".
Finally, to conform to the preferred
style of the U.S. Government Printing
Office. EPA has revised § 22.31 to state
all time periods with numerals only.
23. Motion to Reconsider a Final Order
(40 CFR 22.32)
a. Summary of Proposed Rule. Section
22.32 of the 1980 CROP provides that
parties may move for reconsideration of
a final order within 10 days of service
of the final order, and describes the
procedure. The proposed rule made
only trivial editorial changes.
b. Significant Comments and EPA
Response. Dow objects that 10 days is
insufficient time to perform the
extensive reviews and legal research on
specific issues raised by the final order.
Dow concedes that 10 days is sufficient
to file a motion for reconsideration,
provided that additional time is allowed
for the filing of briefs in support of the
motion.
The purpose of § 22.32 is to provide
a mechanism to bring to the EAB's
attention a manifest error, such as a
simple oversight, or a mistake of law or
fact, or a change in the applicable law.
See In the Matter of Cypress Aviation,
Inc., 4 E.A.D. 390, 392 (EAB 1992). The
motion for reconsideration is not
intended as a forum for rearguing
positions already considered or raising
new arguments that could have been
made before. This narrow scope of
§ 22.32 is reflected in the fact that the
CROP does not require a respondent to
seek reconsideration in order to exhaust
its administrative remedies as a
prerequisite for judicial review.
Accordingly, EPA has not expanded the
time allotted to file a motion for
reconsideration or to file briefs in
support of a motion for reconsideration.
c. Final Rule. EPA is adopting § 22.32
as proposed, with two modifications. As
noted in the discussion of public
comments on § 22.18(b)&(c), EPA has
eliminated the term "consent order."
and is using the term "final order"
instead. In the interests of exhaustion of
remedies and finality, motions for
reconsideration are not appropriate
where the final order results from
settlement or quick resolution, nor
where the parties have declined to
appeal an initial decision and it has
become final by operation of § 22.27(c).
Accordingly. EPA has amended § 22.32
to clarify that it is limited to motions for
reconsideration of a final order issued
pursuant to § 22.30. In addition, to
conform to the preferred style of the
U.S. Government Printing Office, EPA
has revised § 22.32 to state the time
period allowed for motions for
reconsideration with the numeral "10"
24. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under the Clean Air Act (40
CFR 22.34)
a. Summary of Proposed Rule. Section
22.34 presents supplemental rules
applicable to Clean Air Act penalty
cases. Paragraph (b) reiterates the
requirement of 42 U.S.C. 7413(d)(2)(A)
that before issuing an order assessing a
civil penalty (i.e., a final order), EPA
shall give written notice to the person
against whom penalty is to be assessed
the order is to be issued, and give that
person the opportunity to request a
hearing. It clarifies the relationship
between this statutory requirement and
the CROP by stating that the such notice
shall be provided by issuance of a
complaint. EPA proposed only minor
editorial changes to §22.34(b).
EPA proposed a new paragraph (c),
which would apply to default orders for
failure to answer a field citation. Section
59.5(d) of the proposed rule governing
CAA field citations (59 FR 22776, May
3, 1994) would provide that when a
respondent fails to file a timely answer
to a field citation (and fails to offer to
pay the penalty under the quick
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40169
resolution procedure at § 22.l8(a)(2)),
the Presiding Officer shall issue a
default order assessing the penalty
proposed in the complaint.
b. Significant Comments and EPA
Response. Dow commented that
respondents should be able to waive the
written notice required pursuant to
§ 22.34(b), because this is a procedural
protection provided merely for
respondents' benefit. EPA agrees that
the second sentence of § 22.34(b)
appears to require issuance of a
complaint in every case. In order to
allow the parties to take full advantage
of the efficiencies of § 22.13(b) where
prefiling negotiations produce a
settlement, EPA has amended this
provision to specify that a complaint is
sufficient to satisfy this notice
requirement, but without requiring that
a complaint necessarily must be served.
The second sentence of § 22.34(b) now
reads: "Service of a complaint or a
consent agreement and final order
pursuant to § 22.13 satisfies this notice
requirement."
c. Final Rule. EPA is adopting
§ 22.34(a) as proposed, and has adopted
the proposed § 22.34(b) with the
exception of modifying the second
sentence to read "Service of a complaint
or a consent agreement and final order
pursuant to § 22.13 satisfies this notice
requirement." EPA has deleted the
proposed § 22.34(c), pending adoption
of a final rule governing CAA field
citations. Any changes necessary to
accommodate field citations will be
made when the proposed Field Citation
rule is finalized.
25. Scope of Subpart I (40 CFR 22.50)
a. Summary of Proposed Rule. Section
22.50 defines the scope of subpart I and
its relationship to other provisions of
Part 22. The proposed paragraph (a)
would restrict the scope of subpart I to
adjudicatory proceedings that are
initiated by a complaint stating that
subpart I shall apply. The proposed
paragraph (a) would clarify that subpart
1 does not apply to any proceeding
where the statute requires a hearing
subject to section 554 of the
Administrative Procedure Act (APA).
Paragraph (b) lists the provisions of
subparts A through G which do not
apply to subpart I proceedings. Almost
all provisions of subparts A through G
apply to a subpart I proceeding.
Paragraph (b) also addresses the
potential for conflicting provisions in
the preceding sections of the CROP,
providing that where any provisions of
subparts A though G conflict with any
provision of subpart I, the latter
supersedes the former.
The preamble to the proposed rule
stated that EPA does not intend to alter
its present practice of providing the full
APA process in cases pursuant to
section I09(a) of the Comprehensive
Environmental Response, Compensation
and Liability Act ("CERCLA") (42
U.S.C. 9609(a)) or section 325(b)(l), (c),
and (d) of the Emergency Planning and
Community Right-To-Know Act
("EPCRA") (42 U.S.C. 11045(b)(l), (c),
and (d)), but invited comment as to the
types of CERCLA and EPCRA penalty
cases for which non-APA procedures
would be appropriate, if the Agency
decides in the future to assess EPCRA
and CERCLA penalties through non-
APA proceedings.
b. Significant comments and EPA
response. Most commenters (Dow,
CEEC, UWAG, UARG) oppose any
proposed expansion of the role of RJOs
under subpart I. The preamble to the
proposed rule stated that EPA did not
expect to use non-APA procedures
except in the kinds of cases where they
have historically been used for the
foreseeable future. As discussed in the
response to comments on § 22.4(b), EPA
has revised §22.50(a) to expressly limit
the applicability of subpart I to cases
under CWA sections 309 (g) (2) (A) and
311(b)(6)(B)(i) (33 U.S.C. 1319(g)(2)(A)
and 1321(b)(6)(B)(i)), and SDWA
sections 1414(g)(3)(B) and 1423(c)(42
U.S.C. 300g-3(g)(3)(B) and 300h-2(c)).
This change makes clear that the scope
of the RJOs' activities will remain much
the same as it has been in recent years.
All who commented on the proposed
subpart I (CMA/API, Dow, CEEC,
UWAG, UARG) expressed concern that
it would not protect constitutional due
process rights. In particular, CEEC
considers such a proposal a "major
concern" and submits that subpart I
procedures do not meet the due process
standard set forth in Mathews v.
Eldridge, 424 U.S. 319 (1976). Dow,
UWAG and UARG believe that there is
too great a chance that RJOs would have
a pro-Agency bias, and suggest that EPA
should eliminate subpart I and apply
APA procedures universally. Dow
suggests in the alternative that either
party should be allowed to opt out of
subpart I and have APA procedures
applied upon request.
EPA has addressed this due process
question in the discussion of public
comments on § 22.4(b). Also as noted
above in the discussion of § 22.4(b), the
Agency has implemented adequate
measures to ensure the impartiality of
the Regional Judicial Officers. If a
litigant has reason to believe that a
Regional Judicial Officer is biased, then
a motion for disqualification pursuant to
§ 22.4(d) may be submitted.
As to Dow's suggestion of providing
parties the option of having APA
procedures apply upon request,
Congress has provided for this option
only in section 1414 (g) (3) (B) of the Safe
Drinking Water Act. If APA procedures
were provided upon respondent's
request in all proceedings brought under
subpart I, the regulated community,
rather than EPA. would be determining
the course of the Agency's enforcement
program, and imbalances of Agency
resources might result. Nevertheless, the
Agency acknowledges that, on occasion,
a complainant may not recognize until
after a case has been commenced that
the subpart I procedures would not be
adequate, for example, where
intervention, amici, subpoena, or
additional discovery appear crucial to
the case, or where the issues are such
that the proceeding would greatly
benefit from the unquestioned
independence of an ALJ. In those
instances, a complainant may move to
withdraw the complaint without
prejudice in order that the proceeding
be recommenced as an APA proceeding,
or either party might move that subpart
I should not be applied to the
proceeding.
As to paragraph (b), Dow and CEEC
suggest deleting the reference to § 22.11
and allowing intervention and amici
curiae. This would be inconsistent with
the purpose of subpart I, that is to have
simpler and more efficient proceedings.
To add to subpart I more of the
provisions of subparts A through G
would frustrate this purpose. If a party
believes that intervention or amici
curiae would be of crucial importance to
a particular case, then as discussed
above, it may file a motion requesting
withdrawal or dismissal without
prejudice to allow refiling under the
APA procedures.
c. Final Rule. EPA has revised
§22.50(a) to limit the applicability of
subpart I to cases under CWA sections
309 (g) (2) (A) and 31 l(b)(6)(B)(i) (33
U.S.C. 1319(g)(2)(A)and
1321 (b)(6)(B)(i)), and SDWA sections
1414(g)(3)(B) and 1423(c) (42 U.S.C.
300g-3(g)(3)(B) and 300h-2(c)). EPA
adopts § 22.50(b) as proposed, with one
correction. The February 25, 1998, FR
notice included a typographical error in
§ 22.50(b). The section number that
appeared as "22011" has been corrected
to read "22.1."
26. Presiding Officer (40 CFR 22.51)
a. Summary of Proposed Rule. The
proposed § 22.51 presents the key
modification to the CROP facilitating
use of the CROP in administrative
adjudications not subject to section 554
of the APA. that the Presiding Officer
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need not be an Administrative Law
Judge ("ALJ"). Instead, the Presiding
Officer in a "non-APA", subpart 1
proceeding would be a Regional Judicial
Officer ("RJO"). Unlike an APA
proceeding, where an RJO presides until
an answer is filed and the RJO is
replaced by an AL], in a subpart I
proceeding the RJO serves as Presiding
Officer until the initial decision has
become final or has been appealed.
b. Significant Comments and EPA
Responses. Several commenters
objected to EPA attorneys, rather than
ALJs, serving as Presiding Officers in
subpart I proceedings. Their objections
have been fully addressed in the
discussion of public comments on the
proposed § 22.4, and are not repeated
here.
c. Final Rule. EPA has adopted
§ 22.51 as proposed, but with a minor
addition. EPA has observed that while
§ 22.51 provides that the Presiding
Officer "shall rule on all motions until
an initial decision has become final or
has been appealed", it does not
explicitly state that the Presiding Officer
will conduct the hearing. As is clear
from the preamble to the proposed rule,
and from the responses of the
commenters, conduct of the hearing is
the key element in the Presiding
Officer's role in such cases, as it is for
ALJ Presiding Officers in APA cases. In
order to avoid any future confusion, the
final rule includes an explicit statement
that: "The Presiding Officer shall
conduct the hearing, and rule on all
motions * * *"
27, Information Exchange and Discovery
(40 CFR 22.52)
a. Summary of Proposed Rule. The
proposed § 22.52 would define the
parameters of an information exchange
in non-APA proceedings. Parties would
be subject to the prehearing exchange
authorized in § 22.19(a), but most
additional discovery would be
prohibited under Subpart 1. The
proposed § 22.52 would require the
respondent to provide in its prehearing
exchange information concerning any
economic benefit it may have enjoyed as
a result of the alleged non-compliance
or a failure to act.
Although proposed § 22.52 would
prohibit most additional discovery that
would otherwise be allowed under
§ 22.19(e), the complainant would be
entitled to discovery of information
concerning respondent's economic
benefit of non-compliance and of
financial records probative of
respondent's ability to pay a penalty.
b. Significant Comments and EPA
Response. CMA/API and CEEC believe
that it is unfair to prohibit discovery by
private parties but authorize discovery
by EPA for penalty information. CMA/
API and Dow oppose requiring
respondents to provide information on
economic benefit in the prehearing
exchange because this requirement
imposes a burden only upon the
respondent. CMA/API argues that the
prehearing exchange burdens for each
party should be made equivalent,
particularly given EPA's far greater
information collection powers.
Dow asserts that § 22.52 is
unnecessary because § 22.19(d) already
provides ways to avoid excessive
discovery. Dow argues that §22.19 (d)
provides ample authority for the
Presiding Officer to protect against
excessive or abusive discovery
practices. Dow expresses concern that
the comparatively less formal
procedures of subpart I might be used in
very complex cases involving a
multitude of separate alleged violations.
In such cases, it is likely that additional
discovery would be needed and
appropriate. Dow urges that EPA
abandon the subpart I modifications and
apply the standard CROP procedures
universally, as this would allow
Presiding Officers to tailor the scope of
discovery to the needs of each
individual case.
While EPA acknowledges that the
prehearing exchange requirements and
discovery limits of the proposed § 22.52
are asymmetric, EPA disagrees with the
contention that they are unfair. The
comments suggest that the commenters
perceive "fairness" to require that the
parties be exact equals subject to the
exact same rules. However, the parties
are never equals in a CROP proceeding:
The complainant alone carries the
burden of persuasion, and carries most
of the burden of presentation. Yet the
statutes generally require penalty
assessment to be based in large part on
information held by the respondent, not
the complainant. The proposed
discovery regime redresses this
imbalance in knowledge and burden by
requiring a respondent to provide such
information to the party required to put
it forward to the neutral. There is
nothing "unfair" about this
arrangement. Indeed, it is a logistical
necessity.
Being subject to such discovery does
not invest in the respondent a reciprocal
right to make discovery of the
complainant on "fairness" grounds.
EPA is not obligated to provide
additional discovery in order to satisfy
the requirements of the due process
clause. Matthews v. Eldridge, 424 U.S.
319,344-45 (1976); also see Chemical
Waste Management, Inc. v. U.S.E.P.A.,
873 F.2d 1477 (D.C. Cir. 1989).
Non-APA proceedings are typically
for enforcement cases that do not raise
significant factual or legal issues. See.
e.g., Sen. Rep. 99-50 (99th Cong., 1st.
Sess.), reprinted in "A Legislative
History of the Water Quality Act of
1987, Congressional Research Service of
the Library of Congress (November
1988) at 1448, which states:
"To serve its intended function, this
administrative enforcement tool-should be
tailored to the less complex cases for which
it Is intended. Administrative enforcement
should be as flexible and unencumbered by
procedural complexities as possible,
consistent with due process considerations
while providing for effective input by
citizens who may be affected by the
violations. Administrative cases should be
resolved promptly * * *. Because
administrative penalty assessments will be
used in smaller cases and often will be based
on discharge monitoring reports routinely
submitted by permittees, formal
administrative procedures strictly in
accordance with the formal adjudicatory
procedures of the Administrative Procedures
|sic] Act are not required. EPA therefore has
the flexibility to streamline its
decisionmaking process and procedural rules
through promulgation of procedural
regulations that provide appropriate due
process protection."
Requiring that subpart I provide
discovery equal to § 22.19(e) would
undermine the objective of subpart I:
non-APA proceedings that are more
efficient than APA proceedings. See,
Superfund Reauthorization: judicial and
Legal Issues, Oversight Hearings before
the Subcommittee on Administrative
Law and Governmental Relations of the
House Judiciary Committee, 99 Cong.
1st Sess. 64 (1985)(statement of F. Henry
Habicht II, Assistant Attorney General,
Land and Resources Division) (EPA
objected to requiring APA procedures
for imposition of administrative
penalties under CERCLA, stating that
such procedures were too lengthy and
laborious). Section 22.52 accounts for
most of the streamlining in these non-
APA procedures relative to the APA
procedures. If the same procedures
apply to subpart I proceedings as apply
to APA proceedings, the only
differences remaining are the
qualifications and independence of the
adjudicator and the absence of the right
to interlocutory appeal. Congress
intended that the non-APA process
provide faster, simpler, less costly and
more efficient administrative
proceedings, not just an additional
corps of adjudicators.
The types of cases that are to be
brought under the non-APA provisions
are typically factually simple.
Expanding discovery in subpart I would
raise costs to the litigants and invite
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40171
delaying motions and fishing
expeditions. The inquiry should be
centered on the conduct of the
respondent and any penalty assessment
factors. Allowing additional discovery
of EPA beyond the prehearing exchange
would not serve those goals, but would
raise the complexity and cost of
proceedings that Congress intended to
be as unencumbered as possible.
c. Final Rule. EPA adopts § 22.52 as
proposed. EPA notes that this section
does not affect the authority of the
Presiding Order to require the
attendance of witnesses by subpoena, if
authorized by the Act, in accordance
with§22.4(c).
28. Interlocutory Orders or Rulings (40
CFR 22.53)
a. Summary of Proposed Rule. The
proposed § 22.53 stated that, for
proceedings subject to subpart I,
"[i]nterlocutory review as set forth in
§ 22.29 is prohibited."
b. Significant Comments and EPA
Response. Dow argues that the
prohibition on interlocutory appeals in
subpart I proceedings is unnecessary,
because §22.29 already imposes
substantial limits on interlocutory
appeals. Dow believes that interlocutory
appeal is warranted in any case where
the criteria of § 22.29(b) are met (i.e..
"(1) The order or ruling involves an
important question of law or policy
concerning which there is substantial
grounds for difference of opinion; and
(2) either an immediate appeal from the
order or ruling will materially advance
the ultimate termination of the
proceeding, or review after the final
order is issued will be inadequate or
ineffective.")
EPA intends to use subpart I primarily
for cases where EPA has substantial
prior enforcement experience, which do
not appear to present significant new
issues of law, and where the sanctions
sought are relatively modest. In these
circumstances, meritless appeals are
likely to greatly exceed meritorious
appeals. Because the likely advantages
of interlocutory appeal are outweighed
by the anticipated delays that would
result from meritless appeals, the final
rule retains the prohibition on
interlocutory appeal in subpart I cases.
c. Final Rule. In today's final rule,
EPA adopts the proposed prohibition on
interlocutory appeals in subpart I cases.
However, EPA has concluded that the
proposed § 22.53 is redundant, because
§ 22.50(b) states that § 22.29, which
provides for interlocutory appeals, does
not apply to subpart I proceedings.
Although the proposed § 22.53
highlighted this provision for purposes
of soliciting public comment, EPA has
concluded that this redundancy is
inappropriate in the final rule.
Accordingly, EPA has deleted the
proposed §22.53. The prohibition
against interlocutory appeals in subpart
1 cases is accomplished through
§ 22.50(b)'s exclusion of § 22.29.
29. Clean Air Act Field Citations
a. Summary of Proposed Rule. EPA
proposed that revisions to the CROP
would supersede and replace the rules
governing non-APA hearings on field
citations under section 113(d)(3) of the
Clean Air Act ("CAA"). The Field
Citation rules were proposed (59 FR
22776, May 3, 1994) but not yet final at
the time EPA proposed the CROP
revisions, and EPA expected that the
Field Citation rules would be published
as a final rule before the CROP
revisions. The preamble to the proposed
CROP stated that EPA intended to use
the procedures that would appear as
subpart B of the Field Citation rules
until the CROP revisions were made
final.
b. Significant Comments and EPA
Response. CMA/API, Dow and CEEC
opposed the interim use of the
procedures in subpart B of the Field
Citation rules pending publication of
the final CROP. These commenters
urged EPA to postpone publication of
the Field Citation rules until after
publication of the final CROP
procedures
EPA agrees that commencing a field
citation program using one set of
procedures for a short time before
switching to the CROP procedures could
result in unnecessary burdens and
confusion. EPA has postponed issuing a
final rule governing hearing procedures
for CAA field citations.
c. Final Rule. Today's final rule does
not contain the provisions in the
proposed rule relating to the removal
from the CFR of procedures for CAA
field citations. A decision on
appropriate hearing procedures for field
citations, inclusion in subpart I of the
CROP, will be made when the Field
Citation rules are finalized.
30. Other Comments Not Related to a
Particular Section of the Proposed Rule
a. Significant Comments and EPA
Response. CEEC suggests that the CROP
should provide respondents an
opportunity to review enforcement
related press releases and raise
objections to the Presiding Officer.
CEEC notes that unfair and misleading
press releases reduce incentives to reach
settlement. EPA makes every effort to
assure that press releases are accurate,
based on the information available to
the Agency at the time. A complainant
may, at its discretion, allow a
respondent to review a press release
before issuance, but EPA does not
negotiate the terms of enforcement
related press releases. To include in the
CROP a provision providing
respondents the right to review EPA's
press releases and raise objections to the
Presiding Officer would create the
appearance that the government's ability
to communicate with the public is
subject to a private party's control. EPA
therefore rejects this suggestion.
b. Final Rule. EPA has made no
changes to the proposed rule in
response to CEEC's suggestion that the
CROP should provide respondents an
opportunity to review enforcement
related press releases and raise
objections to the Presiding Officer.
HI. Miscellaneous Revisions
Through the process of analyzing the
public comments, and pursuant to
EPA's own internal review of the
proposed rule, EPA has identified a
number of typographical and drafting
errors. In addition. EPA has identified
parts of the proposed rule that could be
stated more clearly, as mandated by
Executive Order 12866 (September 30,
1993) and the President's memorandum
of June 1, 1998, which require each
agency to write all rules in plain
language. In this final rule EPA adopts
a number of changes on its own
initiative, and not in response to any
particular public comment. Where such
revisions pertain to a section of the
proposed rule that received significant
public comment, the changes have
already been discussed above. This
section identifies the remaining
revisions, which pertain to sections of
the proposed rule that received no
significant public comment, Public
notice of proposed rule making is not
required "when the agency for good
cause finds * * * that notice and public
procedure thereon are impractical,
unnecessary, or contrary to the public
interest." 5 U.S.C. 553(b)(3)(B). EPA has
determined that the following revisions
do not significantly affect respondents'
substantive or procedural rights.
Accordingly, EPA has determined that
providing an additional round of public
notice before making these minor
changes to this procedural rule would
be unnecessary and contrary to the
public interest.
A. Section Numbering
EPA has converted those section
numbers that had contained a preceding
zero (§§22.01, 22.02, etc.) to conform
the CROP to the standard numbering of
the Code of Federal Regulations set out
in the regulations of the Administrative
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Committee of the Federal Register at
CFR21.11 (§§22.1,22.2, etc.) in this
final rule. For simplicity, this preamble
uses the new numbering system
throughout, even when referring to
sections of the proposed rule or the
1980 CROP.
B. Definitions (40 CFR 22.3)
EPA has deleted from the definition of
"Administrative Law Judge" the
superfluous Public Law citation.
EPA has revised the definition of
"Clerk of the Board" to clarify that it
means the Clerk of the Environmental
Appeals Board.
In the definition of "Complainant",
EPA has replaced the ambiguous word
"decision" with "adjudication".
Under the proposed § 22.3, "Hearing
means a hearing on the record open to
the public and conducted under these
Consolidated Rules of Practice." It is not
clear from this definition whether the
hearing is the proceeding as a whole, or
just the oral evidentiary hearing.
"Hearing" is used throughout the CROP,
most often in reference to the oral
evidentiary hearing (e.g., prehearing
exchange, motion to reopen a hearing),
and sometimes in the more general
sense (e.g., in the definition of "party"
and "Hearing Clerk"). Moreover, the
definition of hearing does not
acknowledge the fact that protection of
confidential business information may
require that all or part of a hearing be
closed to the public. EPA has clarified
the definition of "hearing" as follows:
Hearing means an evidentiary hearing on
the record, open to the public (to the extent
consistent with § 22.22(a)(2)), conducted as
part of a proceeding under these
Consolidated Rules of Practice.
Although the terms "proceeding" and
"action" are used throughout the CROP,
they have not previously been defined.
In the final rule, EPA avoids the term
"action" in reference to a particular
proceeding, and has added to the CROP
the following definition:
Proceeding means the entirety of a single
administrative adjudication, from the filing
of the complaint through the issuance of a
final order, including any action on a motion
to reconsider under § 22.32.
For consistency with these new
definitions of "hearing" and
"proceeding", EPA has substituted
"proceeding" for "hearing" in the
definition of "party."
EPA has simplified the definition of
"Initial Decision" by deleting the
superfluous phrase "based on the record
of the proceedings out of which it
arises."
EPA has converted the definition of
"permit" into a definition of a new term
"Permit Action." By its nature, the
CROP provides a set of common
procedures applicable to various
administrative proceedings under a
large number of regulatory statutes, each
of which have their own specific
terminology. In order to avoid conflict
between terms used differently in
different regulatory programs, EPA has
adopted the new term "Permit Action"
as a generic term applicable solely
within the CROP. This change allows
EPA to replace the unwieldy "permit
revocation, termination or suspension"
language elsewhere in the CROP with
"Permit Action," improving the clarity
of the CROP and facilitating any future
efforts to bring other permit actions
within the scope of the CROP.
EPA has deleted from this definition
the references to permits issued under
section 402 (a) of the Clean Water Act
(33 U.S.C. 1342(a)) and permits issued
under sections 3005 (d) and 3008 (h) of
the Solid Waste Disposal Act (42 U.S.C.
6925(d) and 6928(h)). EPA anticipates
that these references will be restored
when the Round Two permit
streamlining rule (61 FR 65,268) is
finalized, involving revocation of 40
CFR part 124, subpart E. In addition,
EPA has added a parallel citation to the
U.S. Code.
EPA has made two revisions to the
definition of "Regional Hearing Clerk."
First, EPA has added a clause to the first
sentence, specifying that the Regional
Hearing Clerk "shall be neutral in every
proceeding." Second, EPA has revised
the second sentence, which in the
proposed rule states that
"Correspondence may be addressed to
the Regional Hearing Clerk, U.S.
Environmental Protection Agency
(address of Regional Office—see
Appendix A)." EPA has created a new
§ 22.14(a)(7) which requires that the
complaint contain the address of the
Regional Hearing Clerk, which should
provide more effective and more
specific notice than the reference to
Appendix A contained in the definition
of Regional Hearing Clerk. EPA has
. therefore revised this sentence as
follows: "Correspondence with the
Regional Hearing Clerk shall be
addressed to the Regional Hearing Clerk
at the address specified in the
complaint."
EPA has revised the definition of
"Respondent" for clarity, replacing "any
person proceeded against in the
complaint" with "any person against
whom the complaint states a claim for
relief."
C. Filing and Service of Rulings, Orders
and Decisions (40 CFR 22.6)
The proposed revisions to § 22.6 were
intended to delete certain references as
surplusage and to allow documents
issued by adjudicators to be served by
any reliable commercial delivery
service. The proposed deletions,
however, are inconsistent with the
current practice that copies of all
rulings, orders and decisions (except
initial decisions) issued by an
Administrative Law Judge are served on
all parties by the Administrative Law
judge's legal staff assistant. Copies of all
initial decisions are served on the
parties by the Regional Hearing Clerk.
Section 22.6 is amended to be consistent
with this practice.
As noted in the response to comments
on § 22.5(b)(2), the U.S. Postal Service
considers overnight express and priority
mail to be forms of first class mail. In
addition, the proposed rule makes no
mention of EPA's internal mail system.
EPA's internal mail delivery system has
proven to be generally effective, and it
is in fact ultimately responsible for
delivering first class mail (including
certified mail) to individual EPA
personnel. To address these points. EPA
has revised § 22.6 to allow service "by
first class mail (including certified mail,
return receipt requested, Overnight
Express and Priority Mail), by EPA's
internal mail, or by any reliable
commercial delivery service."
EPA has also replaced the expression
"Clerk of the Environmental Appeals
Board" with "Clerk of the Board," using
the term defined at § 22.3(a) for
consistency.
D. Examination of Documents Filed (40
CFR 22.9)
EPA has replaced the term
"Environmental Appeals Board" with
"Clerk of the Board," to specify the
official document custodian.
E. Consolidation and Severance (40 CFR
22.12)
EPA has added "or the Environmental
Appeals Board" to § 22.12(a) and (b), in
order to clarify that the EAB has
authority to consolidate or sever cases.
This authority applies to cases pending
before the EAB and to cases before a
Presiding Officer through interlocutory
appeal of a denial of a motion to
consolidate or sever. In order to keep
subpart I proceedings expeditious, EPA
has also added a new requirement that
subpart I proceedings may be
consolidated only where all parties
agree. This should eliminate the risk of
litigation delays over whether one
proceeding might be consolidated with
another.
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F Motions (40 CFR 22.16)
EPA is adopting § 22.16 as proposed,
except that a reference to § 22.51 has
been added to §22.16(c) in order to
avoid any apparent conflict between
§ 22.16(c) and §22.51. and the
implication that an ALJ must rule on
motions in proceedings under subpart 1.
EPA has also rearranged the sentences
of § 22.16(a) to improve clarity. To
conform to the preferred style of the
U.S. Government Printing Office, EPA
has revised §22.16(b) to state the time
allowed for responses and replies with
the numerals "15" and "10",
respectively.
C. Record of the Preheating Conference
(40 CFR 22.19(c))
The scope of the requirement that the
Presiding Officer prepare and file "for
the record a written summary of the
action taken" at a prehearing conference
is not clear. Just as a transcript of a
prehearing conference may discourage
frank and open discussion, the
implication that the Presiding Officer
may produce a formal summary of the
conference may also reduce the
effectiveness of such conferences.
Moreover, the CROP is not clear
whether the Presiding Officer's
summary is supposed to constitute a
finding of law or fact, nor is it clear
whether the parties have the right to
object and change the summary. EPA
has revised the last two sentences in
order to clarify that the Presiding Officer
is only responsible for ensuring that the
record of the proceeding includes any
stipulations and agreements reached,
and rulings and orders issued, during
the conference.
H. Accelerated Decision; Decision to
Dismiss (40 CFR 22.20)
Section 22.20(b)(2) provides for
accelerated decisions and decisions to
dismiss some but not all issues or
claims in a proceeding. The last
sentence requires that the Presiding
Officer "shall issue an interlocutory
order specifying the facts which appear
substantially uncontroverted, and the
issues and claims upon which the
hearing will proceed." This sentence Is
somewhat ambiguous, in that it might
be construed as requiring an
interlocutory order separate from, and
in addition to, any partial accelerated
decision or decision to dismiss certain
counts. Such an interpretation would be
unwarranted, would unnecessarily
complicate the CROP, and would be
contrary to the customary practice of the
Agency's ALJs. Rule 56(d) of the Federal
Rules of Civil Procedure, from which
this language is derived, does not
require a separate interlocutory order
specifying the facts which appear
substantially uncontroverted, and the
issues and claims upon which the
hearing will proceed. To clarify that a
single decision or order can accomplish
all the requirements of §22.20(b)(2).
EPA has amended the last sentence of
that paragraph to state that: "The partial
accelerated decision or the order
dismissing certain counts shall specify
the facts which appear substantially
uncontroverted, and the issues and
claims upon which the hearing will
proceed."
7. Assignment of Presiding Officer;
Scheduling a Hearing (40 CFR 22.21)
EPA has amended § 22.21 (a) to clarify
that the Regional Hearing Clerk
forwards copies, not originals, of the
complaint, answer, and other
documents in the record to the Chief
Administrative Law Judge upon receipt
of the answer.
According to § 22.20(a), an
accelerated decision is appropriate "if
no genuine issue of material fact exists
and a party is entitled to judgment as a
matter of law." Where this standard is
not met. a hearing is appropriate. EPA
has revised § 22.21 (b) to use the same
criterion as § 22.20(a): The first sentence
of § 22.21 (b) now states that. "The
Presiding Officer shall hold a hearing if
the proceeding presents genuine issues
of material fact." In addition to making
§22.20 and §22.21 more clearly
complementary, this change clarifies
that the mere request for a hearing does
not require that a hearing be held.
Neither §22.2 l(b) nor§22.15(c) of the
1980 CROP required an oral evidentiary
hearing merely upon respondent's
request for a hearing. See, e.g.. In re
Green Thumb Nursery, Inc., 6 E.A.D.
782 (EAB 1997) (holding that there is no
right to an oral evidentiary hearing).
EPA has also expanded the notice
period before a hearing from 20 to 30
days. This will allow the parties, their
attorneys, and witnesses additional time
to make travel arrangements and to
prepare for the hearing.
As noted in the discussion of
§ 22.19(e), EPA has added to § 22.21 (b)
an explicit statement of the Presiding
Officer's authority (where provided by
the Act) to require the attendance of
witnesses or the production of
documentary evidence by subpoena.
This statement includes criteria for
issuing subpoenas that appeared in the
1980 CROP (see. e.g., §22.37(f)(l).
J. Offers of Proof (40 CFR 22.23(b))
The proposed § 22.23(b) provides for
offers of proof regarding "evidence
"excluded from the record."
* *
Although the Presiding Officer may
decline to admit certain documents.
exhibits or testimony into evidence, and
may refuse to consider them in his or
her decision, it is incorrect to describe
the status of such documents as
"excluded from the record." This
information is indisputably part of "the
record" of the proceeding for purposes
of appellate review. Accordingly, EPA
has revised this paragraph to state that
"Whenever the Presiding Officer denies
a motion for admission into evidence,
the party offering the information may
make an offer of proof * * *." For
purposes of clarity, EPA has revised this
paragraph (b) using the word
"information" in place of "evidence"
where the subject is information which
has not been admitted into evidence.
K. Proposed Findings, Conclusions, and
Order (40 CFR 22.26)
Section 22.26 provides that the
Presiding Officer must allow 20 days
after receipt of notice of the availability
of the transcript before requiring the
parties to file proposed findings of fact,
conclusions of law, and a proposed
order. In the response to public
comments on § 22.25 above, EPA
announced that it would amend that
section to allow motions to conform the
transcript to the actual testimony to be
filed "within 30 days after receipt of the
transcript, or 45 days after the parties
are notified of the availability of the
transcript, whichever is less." EPA has
amended § 22.26 in order to assure that
parties need not file proposed findings
of fact, conclusions of law, and the
proposed order before the last date for
filing motions to conform the transcript
to the actual testimony pursuant to
§ 22.26. For additional clarity, EPA has
reorganized this section and has also
substituted the word "filed" for the
undefined term "submitted."
After the hearing, any party may file
proposed findings of fact, conclusions of
law, and a proposed order, together with
briefs in support thereof. The Presiding
Officer shall set a schedule for filing
these documents and any reply briefs,
but shall not require them before the last
date for filing motions under § 22.25 to
conform the transcript to the actual
testimony. All submissions shall be in
writing, shall be served upon all parties,
and shall contain adequate references to
the record and authorities relied on.
L. Motion to Reopen a Hearing (40 CFR
22.28)
The CROP does not specify when a
motion is "made", so in the interest of
clarity, EPA has substituted the word
"filed" for "made" in the first sentence
of § 22.28(a). To conform to the ^
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preferred style of the U.S. Government
Printing Office, EPA has revised
§ 22.28(a) and (b) to state the time
periods associated with a motion to
reopen a hearing with numerals only.
M. Interlocutory Appeals (40 CFR 22.29)
EPA has corrected a typographical
error in the last sentence of the
proposed §22.29(a) "forward the order
or ruling to the Environmental Appeals
Board * * *." EPA has corrected a
typographical error in the proposed
§22.29(b) by replacing the semicolon
that follows "proceeding" with a
comma. EPA has also changed the title
of paragraph (c) from "Decision" to
"Interlocutory review." The CROP does
not specify when a motion is "made",
so in the interest of clarity, EPA has
substituted the word "filed" for "made"
in the last sentence of § 22.29(c). To
conform to the preferred style of the
U.S. Government Printing Office, EPA
has revised § 22.29 to state all time
periods with numerals only.
N. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under the Federal Insecticide,
Fungicide, and Rodenticide Act (40 CFR
22.35)
As discussed below, EPA has deleted
Appendix A. In § 22.35(b), EPA has
replaced the reference to Appendix A
with a reference to 40 CFR 1.7, which
contains the same EPA offices.
O. Supplemental Rules of Practice
Governing the Administrative
Assessment of Civil Penalties Under the
Clean Water Act (40 CFR 22.38)
EPA has revised § 22.38(b) to provide
notice to State agencies in proceedings
commenced without a complaint,
pursuant to § 22.13(b). For ease of
administration, EPA has made the
timing of such notice consistent with
the public notice requirements of
§ 22.45(b)(l). Where § 22.38(c) refers to
section 509(b)(l) of the CWA, EPA has
added a parallel citation to 33 U.S.C.
1369(b)(l). As discussed above, EPA
deleted from the proposed § 22.31 (c) the
requirement specifying to whom
payment of penalties must be made, in
favor of the more flexible requirement
that complainant direct respondent as to
how payment should be made. In view
of this change to § 22.31 (c), the
proposed §22.38(d) is unnecessary and
has been deleted.
P. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Under CERCLA Section 109
(40 CFR 22.39)
The proposed §22.39(b) says petitions
for judicial review must be filed "within
30 days of the date the order making the
assessment was issued." As the CROP
does not specify when an order is
"issued," EPA has amended this
provision to state that petitions for
judicial review must be filed within 30
days after the order has been served on
the parties. Where § 22.39(b) refers to
CERCLA section 109, EPA has specified
the relevant paragraphs and has added
parallel citations to the U.S. Code.
EPA has deleted from § 22.39 a
superfluous quotation mark that
appeared in the proposed rule.
Q. Supplemental Rules Governing The
Administrative Assessment of Civil
Penalties for Violations of Compliance
Orders Issued to Owners or Operators of
Public Water Systems Under Part B of
the Safe Drinking Water Act (40 CFR
22.42)
EPA has revised the title of this
section to explicitly state that it applies
to cases against owners or operators of
public water systems.
Where § 22.42(a) refers to section
1414 (g) (3) (B) of the SDWA, EPA has
added a parallel citation to 42 U.S.C.
§300g-3(g)(3)(B).
EPA has also revised § 22.42(b) to
provide more certain notice to
respondents in subpart I proceedings of
their right to choose that hearings be
conducted in accordance with section
554 of the APA. Paragraph (b) now
requires that the complaint must
include notice of such right to choose,
and notice that the right is waived if
respondent does not indicate such
choice in its answer. EPA has also
revised the final sentence to require that
the hearing clerk notify the parties of
any changes if the pleadings have been
recaptioned.
R. Supplemental Rules Governing the
Administrative Assessment of Civil
Penalties Against a Federal Agency
Under the Safe Drinking Water Act (40
CFR 22.43)
Where § 22.43(a) refers to section
1447(b) of the SDWA, EPA has added a
parallel citation to 42 U.S.C. § 300j-6(b).
To conform to the preferred style of the
U.S. Government Printing Office, EPA
has revised § 22.43(b) and (c)(6) to state
time periods with the numeral "30".
In paragraph (c)(6), EPA has added a
missing comma after the word "may",
and has clarified the reference to 40 CFR
part 135. The proposed rule required
that the public notice include reference
to the requirements of 40 CFR 135. EPA
has expanded this clause to state that
the public notice shall instruct
prospective appellants to provide copies
of any appeal to the persons described
in 40 CFR 135.11 (a).
S. Supplemental Rules Governing the
Termination of Permits Under Section
402(a) of the Clean Water Act or Under
Section 3005(d) of the Resource
Conservation and Recovery Act (40 CFR
22.44)
In the December 11, 1996, "Round
Two" permit streamlining proposed
rule, EPA proposed to remove the
procedures existing in 40 CFR part 124,
subpart E, for proceedings to revoke or
suspend a permit issued under section
402(a) of the Clean Water Act (33 U.S.C.
1342(a)) or to revoke or suspend a
permit under sections 3005 (d) and
3008 (h) of the Solid Waste Disposal Act
(42 U.S.C. 6925(d) and 6928(h)). See 61
FR 65,268 (December 11, 1996). EPA
proposed that such proceedings would
be conducted pursuant to the CROP
procedures, and proposed CROP
revisions to accomplish this. These
changes were incorporated into the
February 25, 1998, proposed CROP
revisions. As EPA has not yet finalized
the Round Two permit streamlining rule
and 40 CFR part 124, subpart E remains
in effect, EPA has removed and reserved
§ 22.44. EPA anticipates that this section
will be restored when the Round Two
permit streamlining rule is finalized.
T. Supplemental Rules Governing Public
Notice and Comment in Proceedings
Under Section 309(g) of the Clean Water
Act and Section 300h-2(c) of the Safe
Drinking Water Act (40 CFR 22.45)
The proposed §22.45 contains several
minor errors. The paragraph number
"(1)" was omitted from §22.45(b), and
the reference to "paragraph (d)(l) of this
section" in §22.45(c)(3) should instead
refer to section (c)(l). EPA has corrected
these typographical errors in today's
final rule. EPA has revised the heading
of this section to refer to "section
1423(c)" of the SDWA, rather than
"section 300h-2(c)," which is the U.S.
Code section number.
In addition to correcting the above-
mentioned errors, EPA has expanded
the scope of § 22.45 so that these public
comment procedures shall apply to
class II civil penalty cases under the oil
pollution provisions of Section
311 (b) (6) (B) (ii) of the Clean Water Act
(33 U.S.C. 1321(b)(6)(B)(ii)). Section
31 l(b)(6)(C)(i) (33 U.S.C.
1321 (b) (6) (C) (i)) requires that EPA
provide public notice of and reasonable
opportunity to comment on the
proposed issuance of a class II civil
penalty order.
EPA has also revised paragraphs
(b)(l). (b)(2)(i), (c)(l) and (c)(3) to better
accommodate cases commenced
through the filing of a consent
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agreement and final order pursuant to
§22.13(b).
EPA has revised paragraphs (b)(l) and
(c)(l) to clarify when the public
comment period begins and ends.
EPA has revised § 22.45(b)(2)(ii) and
(v) to clarify that comments must be
submitted to the Regional Hearing Clerk.
EPA has replaced the undefined word
"action" in paragraphs (b)(2)(ii).
(c)(4)(viii). with the word "proceeding,
which today's rule defines as discussed
above.
In §22.45(b)(2)(iv), EPA has added the
word "and" after the semi-colon.
EPA has edited §22.45(c)(l)(iii) and
(iv) to refer to commenters in the
singular, for consistency with the other
provisions of § 22.45.
EPA has also revised § 22.45(c)(4)(ii)
to more clearly and succinctly state that
a commenter may petition to set aside
a consent agreement and proposed final
order only on the basis that material
evidence was not considered.
EPA has edited the proposed
§ 22.45(c)(4)(vii) to correct deficiencies
in grammar.
U. Appendices
The information in Appendix A of the
proposed CROP ("Appendix" in the
1980 CROP) is redundant with 40 CFR
1.7. For that reason, EPA has deleted
Appendix A. This deletion should have
no substantive effect. Section 22.5(c)(4)
requires that the complaint include
complainant's address, and the revised
122.14(a)(7) requires that the complaint
contain the address of the Regional
Hearing Clerk, so respondents will have
ample notice of the addresses relevant
to their cases.
EPA has observed that the names and
addresses of the lock box banks change
often, and that it would be difficult to
keep the proposed Appendix B up to
date. EPA has decided to delete the
proposed Appendix B. and instead to
require under § 22.14(a)(8) that the
complaint provide information on how
to pay penalties.
IV. Administrative Requirements
A. The Regulatory Flexibility Act
Under the Regulatory Flexibility Act.
5 U.S.C. 601-612, whenever an agency
is required to publish a general notice
of rule making for any proposed or final
rule, it must prepare and make available
for public comment a regulatory
flexibility analysis that describes the
impact of the rule on small entities, i.e.,
small business, small organizations, and
small governmental jurisdictions. The
analysis is not required, however, where
the Administrator certifies that the rule
will not have a significant economic
impact on a substantial number of small
entities.
This regulation will impose no
significant costs on any small entities,
because it creates no new regulatory
requirements, but instead simplifies
existing procedural rules. The overall
economic impact on small entities is
therefore believed to be nominal, if any
at all. Accordingly, 1 hereby certify that
this final regulation will not have a
significant impact on a substantial
number of small entities.
B. Executive Order 12866
Under Executive Order 12866, (58 FR
51735 (October 4, 1993)) the Agency
must determine whether the regulatory
action is "significant" and therefore
subject to OMB review and the
requirements of the Executive Order.
The Order defines "significant
regulatory action" as one that is likely
to result in a rule that may:
(1) Have an annual effect on the
economy of $100 million or more or
adversely affect in a material way the
economy, a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities;
(2) Create a serious inconsistency or
otherwise interfere with an action taken
or planned by another agency;
(3) Materially alter the budgetary
impact of entitlements, grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or
(4) Raise novel legal or policy issues
arising out of legal mandates, the
President's priorities, or the principles
set forth in the Executive Order.
It has been determined that this rule
is not a "significant regulatory action"
under the terms of Executive Order
12866 and is therefore not subject to
OMB review.
C. Paperwork Reduction Act
This rule contains no information
collection activities and, therefore, no
information collection request ("ICR")
will be submitted to the Office of
Management and Budget for review in
compliance with the Paperwork
Reduction Act. 44 U.S.C. 3501 etseq.
D. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 ("UMRA"), Public
Law 104-4, establishes requirements for
Federal agencies to assess the effects of
their regulatory actions on State, local,
and tribal governments and the private
sector. Under section 202 of the UMRA,
EPA generally must prepare a written
statement, including a cost-benefit
analysis, for proposed and final rules
with "Federal mandates" that may
result in expenditures to State, local,
and tribal governments, in the aggregate,
or to the private sector, of $100 million
or more in any one year. When a written
statement is needed for an EPA rule,
section 205 of the UMRA generally
requires EPA to identify and consider a
reasonable number of regulatory
alternatives and adopt the least costly,
most cost-effective or least burdensome
alternative that achieves the objectives
of the rule. The provisions of section
205 do not apply when they are
inconsistent with applicable law.
Moreover, section 205 allows EPA to
adopt an alternative other than the least
costly, most cost-effective or least
burdensome alternative if the
Administrator publishes with the final
rule an explanation why that alternative
was not adopted. Before EPA establishes
any regulatory requirements that may
significantly or uniquely affect small
governments, including tribal
governments, it must have developed
under section 203 of the UMRA a small
government agency plan. The plan must
provide for notifying potentially
affected small governments, giving them
meaningful and timely input in the
development of EPA regulatory
proposals with significant Federal
intergovernmental mandates, and
informing, educating, and advising them
on compliance with the regulatory
requirements.
Today's rule contains no Federal
mandates (under the regulatory
provisions of Title II of the UMRA) for
State, local, or tribal governments or the
private sector. The rule imposes no
enforceable duties on any of these
governmental entities or the private
sector.
E. Executive Order 12875
Under Executive Order 12875, EPA
may not issue a regulation that is not
required by statute and that creates a
mandate upon a State, local or tribal
government, unless the Federal
government provides the funds
necessary to pay the direct compliance
costs incurred by those governments, or
EPA consults with those governments. If
EPA complies by consulting, Executive
Order 12875 requires EPA to provide to
the Office of Management and Budget a
description of the extent of EPA's prior
consultation with representatives of
affected State, local and tribal
governments, the nature of their
concerns, copies of any written
communications from the governments,
and a statement supporting the need to
issue the regulation. In addition,
Executive Order 12875 requires EPA to
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develop an effective process permitting
elected officials and other
representatives of State, local and tribal
governments "to provide meaningful
and timely input to the development of
regulatory proposals containing
significant unfunded mandates."
Today's rule does not create a
mandate on State, local or tribal
governments. This rule does not impose
any enforceable duties on these entities.
Instead, it merely revises the procedural
rules governing EPA's administrative
enforcement proceedings.
F. Executive Order 13045
Executive Order 13045: "Protection of
Children from Environmental Health
Risks and Safety Risks" (62 FR 19885,
April 23, 1997) applies to any rule that:
(1) is determined to be "economically
significant" as defined under E.O.
12866, and (2) concerns an
environmental health or safety risk that
EPA has reason to believe may have a
disproportionate effect on children. If
the regulatory action meets both criteria,
the Agency must evaluate the
environmental health or safety effects of
the planned rule on children, and
explain why the planned regulation is
preferable to other potentially effective
and reasonably feasible alternatives
considered by the Agency.
This final rule is not subject to the
E.O. 13045 because it is not
"economically significant" as defined in
E.O. 12866, and because it does not
involve decisions based on
environmental health or safety risks.
G. Executive Order 13084
Under Executive Order 13084, EPA
may not issue a regulation that is not
required by statute, that significantly or
uniquely affects the communities of
Indian tribal governments, and that
imposes substantial direct compliance
costs on those communities, unless the
Federal government provides the funds
necessary to pay the direct compliance
costs incurred by the tribal
governments, or EPA consults with
those governments. If EPA complies by
consulting, Executive Order 13084
requires EPA to provide to the Office of
Management and Budget, in a separately
identified section of the preamble to the
rule, a description of the extent of EPA's
prior consultation with representatives
of affected tribal governments, a
summary of the nature of their concerns,
and a statement supporting the need to
issue the regulation. In addition.
Executive Order 13084 requires EPA to
develop an effective process permitting
elected and other representatives of
development of regulatory policies on
matters that significantly or uniquely
affect their communities."
Today's rule does not significantly or
uniquely affect the communities of
Indian tribal governments. Accordingly,
the requirements of section 3(b) of
Executive Order 13084 do not apply to
this rule.
H. National Technology Transfer and
Advancement Act
Section 12(d) of the National
Technology Transfer and Advancement
Act of 1995 ("NTTAA"), Public Law
104-113. section 12(d) (15U.S.C. 272
note), directs EPA to use voluntary
consensus standards in its regulatory
activities unless to do so would be
inconsistent with applicable law or
otherwise impractical. Voluntary
consensus standards are technical
standards (e.g., materials specifications,
test methods, sampling procedures,
business practices) that are developed or
adopted by voluntary consensus
standards bodies. The NTTAA requires
EPA to provide Congress, through OMB,
explanations when the Agency decides
not to use available and applicable
voluntary consensus standards.
This action does not involve technical
standards. Therefore, EPA did not
consider the use of any voluntary
consensus standards.
/. Submission to Congress and the
Comptroller General
The Congressional Review Act, 5
U.S.C. 801 et seq., as added by the Small
Business Regulatory Enforcement
Fairness Act of 1996, generally provides
that before a rule may take effect, the
agency promulgating the rule must
submit a rule report, which includes a
copy of the rule, to each House of the
Congress and to the Comptroller General
of the United States. The EPA will
submit a report containing this rule and
other required information to the U.S.
Senate, the U.S. House of
Representatives, and the Comptroller
General of the United States prior to
publication of the rule in the Federal
Register. This rule is not a "major rule"
as defined by 5 U.S.C. 804(2).
List of Subjects in 40 CFR Part 22
Environment protection,
Administrative practice and procedure,
Air pollution control, Hazardous
substances, Hazardous waste, Penalties.
Pesticides and pests, Poison prevention.
Superfund, Waste treatment and
Dated: June 30. 1999.
Carol M. Browner,
Administrator.
Therefore, 40 CFR part 22 is revised
to read as follows:
PART 22—COSOLIDATED RULES OF
PRACTICE GOVERNING THE
ADMINISTRATIVE ASSESSMENT OF
CIVIL PENALTIES, ISSUANCE OF
COMPLIANCE OR CORRECTIVE
ACTION ORDERS, AND THE
REVOCATION, TERMINATION OR
SUSPENSION OF PERMITS
Subpart A—General
Sec.
22.1 Scope of this part.
22.2 Use of number and gender.
22.3 Definitions.
22.4 Powers and duties of the
Environmental Appeals Board, Regional
Judicial Officer and Presiding Officer;
disqualification, withdrawal, and
reassignment.
22.5 Filing, service, and form of all filed
documents; business confidentiality
claims.
22.6 Filing and service of rulings, orders
and decisions.
22.7 Computation and extension of time.
22.8 Ex pane discussion of proceeding.
22.9 Examination of documents filed.
ejecieaana uuici icpicacui€."»v.-v« --, • __„*„>! Water
Indian tribal governments "to provide disposal. Water pollution control. Water
meaningful and timely input in the supply.
Subpart B—Parties and Appearances
22.10 Appearances.
22.11 Intervention and non-party briefs.
22.12 Consolidation and severance.
Subpart C—Preheating Procedures
22.13 Commencement of a proceeding.
22.14 Complaint.
22.15 Answer to the complaint.
22.16 Motions.
22.17 Default.
22.18 Quick resolution; settlement;
alternative dispute resolution.
22.19 Prehearing information exchange;
prehearing conference; other discovery.
22.20 Accelerated decision; decision to
dismiss,
Subpart D—Hearing Procedures
22.21 Assignment of Presiding Officer;
scheduling the hearing.
22.22 Evidence.
22.23 Objections and offers of proof.
22.24 Burden of presentation; burden of
persuasion; preponderance of the
evidence standard.
22.25 Filing the transcript.
22.26 Proposed findings, conclusions, and
order.
Subpart E—Initial Decision and Motion to
Reopen a Hearing
22.27 Initial decision.
22.28 Motion to reopen a hearing.
Subpart F—Appeals and Administrative
Review
22.29 Appeal from or review of
interlocutory orders or rulings.
22.30 Appeal from or review of initial
decision.
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40177
Subpart G—Final Order
22.31 Final order.
22.32 Motion to reconsider a final order.
Subpart H—Supplemental Rules
22.33 (Reserved)
22.34 Supplemental rules governing the
administrative assessment of civil
penalties under the Clean Air Act.
22.35 Supplemental rules governing the
administrative assessment of civil
penalties under the Federal Insecticide,
Fungicide, and Rodenticide Act.
22.36 [Reserved]
22.37 Supplemental rules governing
administrative proceedings under the
Solid Waste Disposal Act.
22.38 Supplemental rules of practice
governing the administrative assessment
of civil penalties under the Clean Water
Act.
22.39 Supplemental rules governing the
administrative assessment of civil
penalties under section 109 of the
Comprehensive Environmental
Response. Compensation, and Liability
Act of 1980, as amended.
22.40 [Reserved]
22.41 Supplemental rules governing the
administrative assessment of civil
penalties under Title II of the Toxic
Substance Control Act. enacted as
section 2 of the Asbestos Hazard
Emergency Response Act (AHERA).
22.42 Supplemental rules governing the
administrative assessment of civil
penalties for violations of compliance
orders issued to owners or operators of
public water systems under part B of the
Safe Drinking Water Act.
22.43 Supplemental rules governing the
administrative assessment of civil
penalties against a federal agency under
the Safe Drinking Water Act.
22.44 [Reserved]
22.45 Supplemental rules governing public
notice and comment in proceedings
under sections 309(g) and 311 (b)(6)(B)fii)
of the Clean Water Act and section
1423(c) of the Safe Drinking Water Act.
22.46-22.49 [Reserved]
Subpart I—Administrative Proceedings Not
Governed by Section 554 of the
Administrative Procedure Act
22.50 Scope of this subpart.
22.51 Presiding Officer.
22.52 Information exchange and discovery.
Authority: 7 U.S.C. 1361; 15 U.S.C. 2610(c),
2615(a) and 2647; 33 U.S.C. 1319(g),
1321(b)(6), 1342(a), 1415(a) and (f) and 1418;
42 U.S.C. 300g-3(g)(3)(B). 300h-2(c), 300j-
6(a). 6912. 6925, 6928. 6945(c)(2). 6961,
6991b, 6991e, 7413(d), 7524(c). 7545(d).
7547{d). 7601, 7607(a). 9609. 11045. and
14304.
Subpart A—General
§22.1 Scope of this part.
(a) These Consolidated Rules of
Practice govern all administrative
adjudicatory proceedings for:
(1) The assessment of any
administrative civil penalty under
section 14 (a) of the Federal Insecticide,
Fungicide, and Rodenticide Act as
amended (7 U.S.C. 1367(a));
(2) The assessment of any
administrative civil penalty under
sections 113(d), 205(c), 21 l(d) and
213 (d) of the Clean Air Act, as amended
(42 U.S.C. 7413(d), 7524(c). 7545(d) and
7547 (d));
(3) The assessment of any
administrative civil penalty or for the
revocation or suspension of any permit
under section 105 (a) and (f) of the
Marine Protection. Research, and
Sanctuaries Act as amended (33 U.S.C.
1415(a)and(0);
(4)(i) The issuance of a compliance
order pursuant to section 3008(a),
section 4005 (c) (2), section 6001 (b), or
section 9006(a) of the Solid Waste
Disposal Act ("SWDA") (42 U.S.C.
6925(d) & (e). 6928(a). 6945(c)(2).
696l(b), or 699le(a)); or the assessment
of any administrative civil penalty
under sections 3008, 4005(c)(2). 6001 (b),
and 9006 of the SWDA (42 U.S.C. 6928,
6945(c)(2), 6961(b), and 6991e), except
as provided in 40 CFR parts 24 and 124.
(ii) The issuance of corrective action
orders under section 3008 (h) of the
SWDA only when such orders are
contained within an administrative
order which:
(A) Includes claims under section
3008(a) of the SWDA; or
(B) Includes a suspension or
revocation of authorization to operate
under section 3005 (e) of the SWDA; or
(C) Seeks penalties under section
3008(h)(2) of the SWDA for non-
compliance with a order issued
pursuant to section 3008(h).
(iii) The issuance of corrective action
orders under section 9003 (h) (4) of the
SWDA only when such orders are
contained within administrative orders
which include claims under section
9006 of the SWDA;
(5) The assessment of any
administrative civil penalty under
sections 16(a) and 207 of the Toxic
Substances Control Act (15 U.S.C.
2615 (a) and 2647);
(6) The assessment of any
administrative civil penalty under
sections 309(g) and 311 (b) (6) of the
Clean Water Act (33 U.S.C. 1319(g) and
132 l(b) (6));
(7) The assessment of any
administrative civil penalty under
section 109 of the Comprehensive
Environmental Response,
Compensation, and Liability Act of
1980. as amended (42 U.S.C. 9609);
(8) The assessment of any
administrative civil penalty under
section 325 of the Emergency Planning
and Community Right-To-Know Act of
1986 ("EPCRA") (42 U.S.C. 11045);
(9) The assessment of any
administrative civil penalty under
sections 1414(g)(3)(B), 1423(c).and
1447(b) of the Safe Drinking Water Act
as amended (42 U.S.C. 300g-3(g)(3)(B),
300h-2(c), and 300j-6(b)), or the
issuance of any order requiring both
compliance and the assessment of an
administrative civil penalty under
section 1423(c);
(10) The assessment of any
administrative civil penalty or the
issuance of any order requiring
compliance under Section 5 of the
Mercury-Containing and Rechargeable
Battery Management Act (42 U.S.C.
14304).
(b) The supplemental rules set forth in
subparts H and 1 of this part establish
special procedures for proceedings
identified in paragraph (a) of this
section where the Act allows or requires
procedures different from the
procedures in subparts A through G of
this part. Where inconsistencies exist
between subparts A through G of this
part and subpart H or I of this part,
subparts H or I of this part shall apply.
(c) Questions arising at any stage of
the proceeding which are not addressed
in these Consolidated Rules of Practice
shall be resolved at the discretion of the
Administrator, Environmental Appeals
Board, Regional Administrator, or
Presiding Officer, as provided for in
these Consolidated Rules of Practice.
§ 22.2 Use of number and gender.
As used in these Consolidated Rules
of Practice, words in the singular also
include the plural and words in the
masculine gender also include the
feminine, and vice versa, as the case
may require.
§22.3 Definitions.
(a) The following definitions apply to
these Consolidated Rules of Practice:
Act means the particular statute
authorizing the proceeding at issue.
Administrative Law Judge means an
Administrative Law Judge appointed
under 5 U.S.C. 3105.
Administrator means the
Administrator of the U.S.
Environmental Protection Agency or his
delegate.
Agency means the United States
Environmental Protection Agency.
Business confidentiality claim means
a confidentiality claim as defined in 40
CFR 2.20 l(h).
Clerk of the Board means the Clerk of
the Environmental Appeals Board. Mail
Code 1103B, U.S. Environmental
Protection Agency, 401 M St. S.W.,
Washington, DC 20460.
Commenter means any person (other
than a party) or representative of such
person who timelyr} n f) A c: /
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(1) Submits in writing to the Regional
Hearing Clerk that he is providing or
intends to provide comments on the
proposed assessment of a penalty
pursuant to sections 309(g)(4) and
311 (b)(6)(C) of the Clean Water Act or
section 1423(c) of the Safe Drinking
Water Act, whichever applies, and
intends to participate in the proceeding;
and
(2) Provides the Regional Hearing
Clerk with a return address.
Complainant means any person
authorized to issue a complaint in
accordance with §§22.13 and 22.14 on
behalf of the Agency to persons alleged
to be in violation of the Act. The
complainant shall not be a member of
the Environmental Appeals Board, the
Regional judicial Officer or any other
person who will participate or advise in
the adjudication.
Consolidated Rules of Practice means
the regulations in this part.
Environmental Appeals Board means
the Board within the Agency described
in40CFR 1.25.
Final order means:
(1) An order issued by the
Environmental Appeals Board or the
Administrator after an appeal of an
initial decision, accelerated decision,
decision to dismiss, or default order,
disposing of the matter in controversy
between the parties;
(2) An initial decision which becomes
a final order under § 22.27(c); or
(3) A final order issued in accordance
with §22.18.
Hearing means an evidentiary hearing
on the record, open to the public (to the
extent consistent with § 22.22(a)(2)),
conducted as part of a proceeding under
these Consolidated Rules of Practice.
Hearing Clerk means the Hearing
Clerk, Mail Code 1900, U.S.
Environmental Protection Agency, 401
M St. SW., Washington, DC 20460.
Initial decision means the decision
issued by the Presiding Officer pursuant
to §§ 22.17(c), 22.20(b) or 22.27
resolving all outstanding issues in the
proceeding.
Party means any person that
participates in a proceeding as
complainant, respondent, or intervenor.
Permit Action means the revocation,
suspension or termination of all or part
of a permit issued under section 102 of
the Marine Protection, Research and
Sanctuaries Act (33U.S.C. 1412).
Person includes any individual,
partnership, association, corporation,
and any trustee, assignee, receiver or
legal successor thereof; any organized
group of persons whether incorporated
or not; and any officer, employee, agent.
department, agency or instrumentality
of the Federal Government, of any State
or local unit of government, or of any
foreign government.
Presiding Officer means an individual
who presides in an administrative
adjudication until an initial decision
becomes final or is appealed. The
Presiding Officer shall be an
Administrative Law Judge, except where
§§22.4(b).22.16(c) or 22.51 allow a
Regional Judicial Officer to serve as
Presiding Officer.
Proceeding means the entirety of a
single administrative adjudication, from
the filing of the complaint through the
issuance of a final order, including any
action on a motion to reconsider under
§22.32.
Regional Administrator means, for a
case initiated in an EPA Regional Office,
the Regional Administrator for that
Region or any officer or employee
thereof to whom his authority is duly
delegated.
Regional Hearing Clerk means an
individual duly authorized to serve as
hearing clerk for a given region, who
shall be neutral in every proceeding.
Correspondence with the Regional
Hearing Clerk shall be addressed to the
Regional Hearing Clerk at the address
specified in the complaint. For a case
initiated at EPA Headquarters, the term
Regional Hearing Clerk means the
Hearing Clerk.
Regional Judicial Officer means a
person designated by the Regional
Administrator under § 22.4(b).
Respondent means any person against
whom the complaint states a claim for
relief.
(b) Terms defined in the Act and not
defined in. these Consolidated Rules of
Practice are used consistent with the
meanings given in the Act.
§ 22.4 Powers and duties of the
Environmental Appeals Board, Regional
Judicial Officer and Presiding Officer;
disqualification, withdrawal, and
reassignment.
(a) Environmental Appeals Board. (1)
The Environmental Appeals Board rules
on appeals from the initial decisions.
rulings and orders of a Presiding Officer
in proceedings under these
Consolidated Rules of Practice; acts as
Presiding Officer until the respondent
files an answer in proceedings under
these Consolidated Rules of Practice
commenced at EPA Headquarters; and
approves settlement of proceedings
under these Consolidated Rules of
Practice commenced at EPA
Headquarters. The Environmental
Appeals Board may refer any case or
motion to the Administrator when the
Environmental Appeals Board, in its
discretion, deems it appropriate to do
so. When an appeal or motion is
referred to the Administrator by the
Environmental Appeals Board, all
parties shall be so notified and
references to the Environmental
Appeals Board in these Consolidated
Rules of Practice shall be interpreted as
referring to the Administrator. If a case
or motion is referred to the
Administrator by the Environmental
Appeals Board, the Administrator may
consult with any EPA employee
concerning the matter, provided such
consultation does not violate § 22.8.
Motions directed to the Administrator
shall not be considered except for
motions for disqualification pursuant to
paragraph (d) of this section, or motions
filed in matters that the Environmental
Appeals Board has referred to the
Administrator.
(2) In exercising its duties and
responsibilities under these
Consolidated Rules of Practice, the
Environmental Appeals Board may do
all acts and take all measures as are
necessary for the efficient, fair and
impartial adjudication of issues arising
in a proceeding, including imposing
procedural sanctions against a party
who without adequate justification fails
or refuses to comply with these
Consolidated Rules of Practice or with
an order of the Environmental Appeals
Board. Such sanctions may include
drawing adverse inferences against a
party, striking a party's pleadings or
other submissions from the record, and
denying any or all relief sought by the
party in the proceeding.
(b) Regional Judicial Officer. Each
Regional Administrator shall delegate to
one or more Regional Judicial Officers
authority to act as Presiding Officer in
proceedings under subpart I of this part.
and to act as Presiding Officer until the
respondent files an answer in
proceedings under these Consolidated
Rules of Practice to which subpart 1 of
this part does not apply. The Regional
Administrator may also delegate to one
or more Regional Judicial Officers the
authority to approve settlement of
proceedings pursuant to §22.18(b)(3).
These delegations will not prevent a
Regional Judicial Officer from referring
any motion or case to the Regional
Administrator. A Regional Judicial
Officer shall be an attorney who is a
permanent or temporary employee of
the Agency or another Federal agency
and who may perform other duties
within the Agency. A Regional Judicial
Officer shall not have performed
prosecutorial or investigative functions
in connection with any case in which he
serves as a Regional Judicial Officer. A
Regional Judicial Officer shall not
knowingly preside over a case involving
any party concerning whom the
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Regional Judicial Officer performed any
functions of prosecution or investigation
within the 2 years preceding the
commencement of the case. A Regional
judicial Officer shall not prosecute
enforcement cases and shall not be
supervised by any person who
supervises the prosecution of
enforcement cases, but may be
supervised by the Regional Counsel.
(c) Presiding Officer. The Presiding
Officer shall conduct a fair and
impartial proceeding, assure that the
facts are fully elicited, adjudicate all
issues, and avoid delay. The Presiding
Officer may:
(1) Conduct administrative hearings
under these Consolidated Rules of
Practice;
(2) Rule upon motions, requests, and
offers of proof, and issue all necessary
orders;
(3) Administer oaths and affirmations
and take affidavits:
(4) Examine witnesses and receive
documentary or other evidence;
(5) Order a party, or an officer or agent
thereof, to produce testimony,
documents, or other non-privileged
evidence, and failing the production
thereof without good cause being
shown, draw adverse inferences against
that party;
(6) Admit or exclude evidence;
(7) Hear and decide questions of facts.
law, or discretion;
(8) Require parties to attend
conferences for the settlement or
simplification of the issues, or the
expedition of the proceedings;
(9) Issue subpoenas authorized by the
Act; and
(10) Do all other acts and take all
measures necessary for the maintenance
of order and for the efficient, fair and
impartial adjudication of issues arising
in proceedings governed by these
Consolidated Rules of Practice.
(d) Disqualification, withdrawal and
reassignment. (1) The Administrator,
the Regional Administrator, the
members of the Environmental Appeals
Board, the Regional Judicial Officer, or
the Administrative Law Judge may not
perform functions provided for in these
Consolidated Rules of Practice regarding
any matter in which they have a
financial interest or have any
relationship with a party or with the
subject matter which would make it
inappropriate for them to act. Any party
may at any time by motion to the
Administrator. Regional Administrator,
a member of the Environmental Appeals
Board, the Regional Judicial Officer or
the Administrative Law Judge request
that he or she disqualify himself or
herself from the proceeding. If such a
motion to disqualify the Regional
Administrator, Regional Judicial Officer,
or Administrative Law Judge is denied.
a party may appeal that ruling to the
Environmental Appeals Board. If a
motion to disqualify a member of the
Environmental Appeals Board is denied,
a party may appeal that ruling to the
Administrator. There shall be no
interlocutory appeal of the ruling on a
motion for disqualification. The
Administrator, the Regional
Administrator, a member of the
Environmental Appeals Board, the
Regional Judicial Officer, or the
Administrative Law Judge may at any
time withdraw from any proceeding in
which he deems himself disqualified or
unable to act for any reason.
(2) If the Administrator, the Regional
Administrator, the Regional Judicial
Officer, or the Administrative Law judge
is disqualified or withdraws from the
proceeding, a qualified individual who
has none of the infirmities listed in
paragraph (d)(l) of this section shall be
assigned as a replacement. The
Administrator shall assign a
replacement for a Regional
Administrator who withdraws or is
disqualified. Should the Administrator
withdraw or be disqualified, the
Regional Administrator from the Region
where the case originated shall replace
the Administrator. If that Regional
Administrator would be disqualified,
the Administrator shall assign a
Regional Administrator from another
Region to replace the Administrator.
The Regional Administrator shall assign
a new Regional Judicial Officer if the
original Regional Judicial Officer
withdraws or is disqualified. The Chief
Administrative Law Judge shall assign a
new Administrative Law Judge if the
original Administrative Law Judge
withdraws or is disqualified.
(3) The Chief Administrative Law
Judge, at any stage in the proceeding,
may reassign the case to an
Administrative Law Judge other than
the one originally assigned in the event
of the unavailability of the
Administrative Law Judge or where
reassignment will result in efficiency in
the scheduling of hearings and would
not prejudice the parties.
§ 22.5 Filing, service, and form of all filed
documents; business confidentiality claims.
(a) Filing of documents. (1) The
original and one copy of each document
intended to be part of the record shall
be filed with the Regional Hearing Clerk
when the proceeding is before the
Presiding Officer, or filed with the Clerk
of the Board when the proceeding is
before the Environmental Appeals
Board. A document is filed when it is
received by the appropriate Clerk. The
Presiding Officer or the Environmental
Appeals Board may by order authorize
facsimile or electronic filing, subject to
any appropriate conditions and
limitations.
(2) When the Presiding Officer
corresponds directly with the parties,
the original of the correspondence shall
be filed with the Regional Hearing
Clerk. Parties who correspond directly
with the Presiding Officer shall file a
copy of the correspondence with the
Regional Hearing Clerk.
(3) A certificate of service shall
accompany each document filed or
served in the proceeding.
(b) Service of documents. A copy of
each document filed in the proceeding
shall be served on the Presiding Officer
or the Environmental Appeals Board,
and on each party.
(1) Service of complaint, (i)
Complainant shall serve on respondent,
or a representative authorized to receive
service on respondent's behalf, a copy of
the signed original of the complaint,
together with a copy of these
Consolidated Rules of Practice. Service
shall be made personally, by certified
mail with return receipt requested, or by
any reliable commercial delivery service
that provides written verification of
delivery.
(ii)(A) Where respondent is a
domestic or foreign corporation, a
partnership, or an unincorporated
association which is subject to suit
under a common name, complainant
shall serve an officer, partner, a
managing or general agent, or any other
person authorized by appointment or by
Federal or State law to receive service
of process,
(B) Where respondent is an agency of
the United States complainant shall
serve that agency as provided by that
agency's regulations, or in the absence
of controlling regulation, as otherwise
permitted by law. Complainant should
also provide a copy of the complaint to
the senior executive official having
responsibility for the overall operations
of the geographical unit where the
alleged violations arose. If the agency is
a corporation, the complaint shall be
served as prescribed in paragraph
(b)(l)(ii)(A) of this section.
(C) Where respondent is a State or
local unit of government, agency,
department, corporation or other
instrumentality, complainant shall serve
the chief executive officer thereof, or as
otherwise permitted by law. Where
respondent is a State or local officer,
complainant shall serve such officer.
(iii) Proof of service of the complaint
shall be made by affidavit of the person
making personal service, or by properly
executed receipt. Such proof of service
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shall be filed with the Regional Hearing
Clerk immediately upon completion of
service.
(2) Service of filed documents other
than the complaint, rulings, orders, and
decisions. All filed documents other
than the complaint, rulings, orders, and
decisions shall be served personally, by
first class mail (including certified mail,
return receipt requested. Overnight
Express and Priority Mail), or by any
reliable commercial delivery service.
The Presiding Officer or the
Environmental Appeals Board may by
order authorize facsimile or electronic
service, subject to any appropriate
conditions and limitations.
(c) Form of documents. (1) Except as
provided in this section, or by order of
the Presiding Officer or of the
Environmental Appeals Board there are
no specific requirements as to the form
of documents.
(2) The first page of every filed
document shall contain a caption
identifying the respondent and the
docket number. All legal briefs and legal
memoranda greater than 20 pages in
length (excluding attachments) shall
contain a table of contents and a table
of authorities with page references.
(3) The original of any filed document
(other than exhibits) shall be signed by
the party filing or by its attorney or
other representative. The signature
constitutes a representation by the
signer that he has read the document,
that to the best of his knowledge,
information and belief, the statements
made therein are true, and that it is not
interposed for delay.
(4) The first document filed by any
person shall contain the name, address,
and telephone number of an individual
authorized to receive service relating to
the proceeding. Parties shall promptly
file any changes in this information
with the Regional Hearing Clerk, and
serve copies on the Presiding Officer
and all parties to the proceeding. If a
party fails to furnish such information
and any changes thereto, service to the
party's last known address shall satisfy
the requirements of paragraph (b) (2) of
this section and § 22.6.
(5) The Environmental Appeals Board
or the Presiding Officer may exclude
from the record any document which
does not comply with this section.
Written notice of such exclusion, stating
the reasons therefor, shall be promptly
given to the person submitting the
document. Such person may amend and
resubmit any excluded document upon
motion granted by the Environmental
Appeals Board or the Presiding Officer,
as appropriate.
(d) Confidentiality of business
information. (1) A person who wishes to
assert a business confidentiality claim
with regard to any information
contained in any document to be .filed
in a proceeding under these
Consolidated Rules of Practice shall
assert such a claim in accordance with
40 CFR part 2 at the time that the
document is filed. A document filed
without a claim of business
confidentiality shall be available to the
public for inspection and copying.
(2) Two versions of any document
which contains information claimed
confidential shall be filed with the
Regional Hearing Clerk:
(i) One version of the document shall
contain the information claimed
confidential. The cover page shall
include the information required under
paragraph (c)(2) of this section and the
words "Business Confidentiality
Asserted". The specific portion(s)
alleged to be confidential shall be
clearly identified within the document.
(ii) A second version of the document
shall contain all information except the
specific information claimed
confidential, which shall be redacted
and replaced with notes indicating the
nature of the information redacted. The
cover page shall state that information
claimed confidential has been deleted
and that a complete copy of the
document containing the information
claimed confidential has been filed with
the Regional Hearing Clerk.
(3) Both versions of the document
shall be served on the Presiding Officer
and the complainant. Both versions of
the document shall be served on any
party, non-party participant, or
representative thereof, authorized to
receive the information claimed
confidential by the person making the
claim of confidentiality. Only the
redacted version shall be served on
persons not authorized to receive the
confidential information.
(4) Only the second, redacted version
shall be treated as public information.
An EPA officer or employee may
disclose information claimed
confidential in accordance with
paragraph (d)(l) of this section only as
authorized under 40 CFR part 2.
§ 22.6 Filing and service of rulings, orders
and decisions.
All rulings, orders, decisions, and
other documents issued by the Regional
Administrator or Presiding Officer shall
be filed with the Regional Hearing
Clerk. All such documents issued by the
Environmental Appeals Board shall be
filed with the Clerk of the Board. Copies
of such rulings, orders, decisions or
other documents shall be served
personally, by first class mail (including
by certified mail or return receipt
requested. Overnight Express and
Priority Mail), by EPA's internal mail, or
any reliable commercial delivery
service, upon all parties by the Clerk of
the Environmental Appeals Board, the
Office of Administrative Law Judges or
the Regional Hearing Clerk, as
appropriate.
§ 22.7 Computation and extension of time.
(a) Computation. In computing any
period of time prescribed or allowed in
these Consolidated Rules of Practice,
except as otherwise provided, the day of
the event from which the designated
period begins to run shall not be
included. Saturdays, Sundays, and
Federal holidays shall be included.
When a stated time expires on a
Saturday, Sunday or Federal holiday,
the stated time period shall be extended
to include the next business day.
(b) Extensions of time. The
Environmental Appeals Board or the
Presiding Officer may grant an
extension of time for filing any
document: upon timely motion of a
party to the proceeding, for good cause
shown, and after consideration of
prejudice to other parties; or upon its
own initiative. Any motion for an
extension of time shall be filed.
sufficiently in advance of the due date
so as to allow other parties reasonable
opportunity to respond and to allow the
Presiding Officer or Environmental
Appeals Board reasonable opportunity
to issue an order.
(c) Service by mail or commercial
delivery service. Service of the
complaint is complete when the return
receipt is signed. Service of all other
documents is complete upon mailing or
when placed in the custody of a reliable
commercial delivery service. Where a
document is served by first class mail or
commercial delivery service, but not by
overnight or same-day delivery, 5 days
shall be added to the time allowed by
these Consolidated Rules of Practice for
the filing of a responsive document.
§ 22.8 Ex parte discussion of proceeding.
At no time after the issuance of the
complaint shall the Administrator, the
members of the Environmental Appeals
Board, the Regional Administrator, the
Presiding Officer or any other person
who is likely to advise these officials on
any decision in the proceeding, discuss
ex parte the merits of the proceeding
with any interested person outside the
Agency, with any Agency staff member
who performs a prosecutorial or
investigative function in such
proceeding or a factually related
proceeding, or with any representative
of such person. Any ex parte
memorandum or other communication
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addressed to the Administrator, the
Regional Administrator, the
Environmental Appeals Board, or the
Presiding Officer during the pendency
of the proceeding and relating to the
merits thereof, by or on behalf of any
party shall be regarded as argument
made in the proceeding and shall be
served upon all other parties. The other
parties shall be given an opportunity to
reply to such memorandum or
communication. The requirements of
this section shall not apply to any
person who has formally recused
himself from all adjudicatory functions
in a proceeding, or who issues final
orders only pursuant to § 22.18(b)(3).
§ 22.9 Examination of documents filed.
(a) Subject to the provisions of law
restricting the public disclosure of
confidential information, any person
may, during Agency business hours
inspect and copy any document filed in
any proceeding. Such documents shall
be made available by the Regional
Hearing Clerk, the Hearing Clerk, or the
Clerk of the Board, as appropriate.
(b) The cost of duplicating documents
shall be borne by the person seeking
copies of such documents. The Agency
may waive this cost in its discretion.
Subpart B—Parties and Appearances
§22.10 Appearances.
Any party may appear in person or by
counsel or other representative. A
partner may appear on behalf of a
partnership and an officer may appear
on behalf of a corporation. Persons who
appear as counsel or other
representative must conform to the
standards of conduct and ethics
required of practitioners before the
courts of the United States.
§ 22.11 Intervention and non-party briefs.
(a) Intervention. Any person desiring
to become a party to a proceeding may
move for leave to intervene. A motion
for leave to intervene that is filed after
the exchange of information pursuant to
§ 22.19(a) shall not be granted unless the
movant shows good cause for its failure
to file before such exchange of
information. All requirements of these
Consolidated Rules of Practice shall
apply to a motion for leave to intervene
as if the movant were a party. The
Presiding Officer shall grant leave to
intervene in all or part of the proceeding
if: the movant claims an interest relating
to the cause of action; a final order may
as a practical matter impair the
movant s ability to protect that interest;
and the movant's interest is not
adequately represented by existing
parties. The intervenor shall be bound
by any agreements, arrangements and
other matters previously made in the
proceeding unless otherwise ordered by
the Presiding Officer or the
Environmental Appeals Board for good
cause.
(b) Non-party briefs. Any person who
is not a party to a proceeding may move
for leave to file a non-party brief. The
motion shall identify the interest of the
applicant and shall explain the
relevance of the brief to the proceeding.
All requirements of these Consolidated
Rules of Practice shall apply to the
motion as if the movant were a party. If
the motion is granted, the Presiding
Officer or Environmental Appeals Board
shall issue an order setting the time for
filing such brief. Any party to the
proceeding may file a response to a non-
party brief within 15 days after service
of the non-party brief.
§ 22.12 Consolidation and severance.
(a) Consolidation. The Presiding
Officer or the Environmental Appeals
Board may consolidate any or all
matters at issue in two or more
proceedings subject to these
Consolidated Rules of Practice where:
there exist common parties or common
questions of fact or law; consolidation
would expedite and simplify
consideration of the issues; and
consolidation would not adversely
affect the rights of parties engaged in
otherwise separate proceedings.
Proceedings subject to subpart I of this
part may be consolidated only upon the
approval of all parties. Where a
proceeding subject to the provisions of
subpart I of this part is consolidated
with a proceeding to which subpart I of
this part does not apply, the procedures
of subpart I of this part shall not apply
to the consolidated proceeding.
(b) Severance. The Presiding Officer
or the Environmental Appeals Board
may. for good cause, order any
proceedings severed with respect to any
or all parties or issues.
Subpart C—Prehearing Procedures
§ 22.13 Commencement of a proceeding.
(a) Any proceeding subject to these
Consolidated Rules of Practice is
commenced by filing with the Regional
Hearing Clerk a complaint conforming
to.§ 22.14.
j (b) Notwithstanding paragraph (a) of
this section, where the parties agree to
settlement of one or more causes of
action before the filing of a complaint,
a proceeding may be simultaneously
commenced and concluded by the
issuance of a consent agreement and
final order pursuant to §22.18(b)(2) and
(3).
§22.14 Complaint.
(a) Content of complaint. Each
complaint shall include:
(1) A statement reciting the section(s)
of the Act authorizing the issuance of
the complaint;
(2) Specific reference to each
provision of the Act, implementing
regulations, permit or order which
respondent is alleged to have violated;
(3) A concise statement of the factual
basis for each violation alleged;
(4) A description of all relief sought,
including one or more of the following:
(i) The amount of the civil penalty
which is proposed to be assessed, and
a brief explanation of the proposed
penalty;
(ii) Where a specific penalty demand
is not made, the number of violations
(where applicable, days of violation) for
which a penalty is sought, a brief
explanation of the severity of each
violation alleged and a recitation of the
statutory penalty authority applicable
for each violation alleged in the
complaint;
(iii) A request for a Permit Action and
a statement of its proposed terms and
conditions; or
(iv) A request for a compliance or
corrective action order and a statement
of the terms and conditions thereof;
(5) Notice of respondent's right to
request a hearing on any material fact
alleged in the complaint, or on the
appropriateness of any proposed
penalty, compliance or corrective action
order, or Permit Action;
(6) Notice if subpart I of this part
applies to the proceeding;
(7) The address of the Regional
Hearing Clerk; and
(8) Instructions for paying penalties, if
applicable.
(b) Rules of practice. A copy of these
Consolidated Rules of Practice shall
accompany each complaint served.'
(c) Amendment of the complaint. The
complainant may amend the complaint
once as a matter of right at any time
before the answer is filed. Otherwise the
complainant may amend the complaint
only upon motion granted by the
Presiding Officer. Respondent shall
have 20 additional days from the date of
service of the amended complaint to file
its answer.
(d) Withdrawal of the complaint. The
complainant may withdraw the
complaint, or any part thereof, without
prejudice one time before the answer
has been filed. After one withdrawal
before the filing of an answer, or after
the filing of an answer, the complainant
may withdraw the complaint, or any
part thereof, without prejudice only
upon motion granted by the Presiding
Officer.
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§ 22.15 Answer to the complaint.
(a) General. Where respondent:
Contests any material fact upon which
the complaint is based; contends that
the proposed penalty, compliance or
corrective action order, or Permit
Action, as the case may be, is
inappropriate; or contends that it is
entitled to judgment as a matter of law,
it shall file an original and one copy of
a written answer to the complaint with
the Regional Hearing Clerk and shall
serve copies of the answer on all other
parties. Any such answer to the
complaint must be filed with the
Regional Hearing Clerk within 30 days
after service of the complaint.
(b) Contents of the answer. The
answer shall clearly and directly admit,
deny or explain each of the factual
allegations contained in the complaint
with regard to which respondent has
any knowledge. Where respondent has
no knowledge of a particular factual
allegation and so states, the allegation is
deemed denied. The answer shall also
state: The circumstances or arguments
which are alleged to constitute the
grounds of any defense; the facts which
respondent disputes; the basis for
opposing any proposed relief; and
whether a hearing is requested.
(c) Request for a hearing. A hearing
upon the issues raised by the complaint
and answer may be held if requested by
respondent in its answer. If the
respondent does not request a hearing,
the Presiding Officer may hold a hearing
if issues appropriate for adjudication are
raised in the answer.
(d) Failure to admit, deny, or explain.
Failure of respondent to admit, deny, or
explain any material factual allegation
contained in the complaint constitutes
an admission of the allegation.
(e) Amendment of the answer. The
respondent may amend the answer to
the complaint upon motion granted by
the Presiding Officer.
§22.16 Motions.
(a) General. Motions shall be served as
provided by § 22.5(b)(2). Upon the filing
of a motion, other parties may file
responses to the motion and the movant
may file a reply to the response. Any
additional responsive documents shall
be permitted only by order of the
Presiding Officer or Environmental
Appeals Board, as appropriate. All
motions, except those made orally on
the record during a hearing, shall:
(1) Be in writing;
(2) State the grounds therefor, with
particularity;
(3) Set forth the relief sought; and
(4) Be accompanied by any affidavit,
certificate, other evidence or legal
memorandum relied upon.
(b) Response to motions. A party's
response to any written motion must be
filed within 15 days after service of such
motion. The movant's reply to any
written response must be filed within 10
days after service of such response and
shall be limited to issues raised in the
response. The Presiding Officer or the
Environmental Appeals Board may set a
shorter or longer time for response or
reply, or make other orders concerning
the disposition of motions. The
response or reply shall be accompanied
by any affidavit, certificate, other
evidence, or legal memorandum relied
upon. Any party who fails to respond
within the designated period waives any
objection to the granting of the motion.
(c) Decision. The Regional Judicial
Officer (or in a proceeding commenced
at EPA Headquarters, the Environmental
Appeals Board) shall rule on all motions
filed or made before an answer to the
complaint is filed. Except as provided in
§§ 22.29(c) and 22.51, an Administrative
Law Judge shall rule on all motions filed
or made after an answer is filed and
before an initial decision has become
final or has been appealed. The
Environmental Appeals Board shall rule
as provided in § 22.29(c) and on all
motions filed or made after an appeal of
the initial decision is filed, except as
provided pursuant to §22.28.
(d) Oral argument. The Presiding
Officer or the Environmental Appeals
Board may permit oral argument on
motions in its discretion.
§22.17 Default.
(a) Default. A party may be found to
be in default: after motion, upon failure
to file a timely answer to the complaint;
upon failure to comply with the
information exchange requirements of
§22.19(a) or an order of the Presiding
Officer; or upon failure to appear at a
conference or hearing. Default by
respondent constitutes, for purposes of
the pending proceeding only, an
admission of all facts alleged in the
complaint and a waiver of respondent's
right to contest such factual allegations.
Default by complainant constitutes a
waiver of complainant's right to proceed
on the merits of the action, and shall
result in the dismissal of the complaint
with prejudice.
(b) Motion for default. A motion for
default may seek resolution of all or part
of the proceeding. Where the motion
requests the assessment of a penalty or
the imposition of other relief against a
defaulting party, the movant must
specify the penalty or other relief sought
and state the legal and factual grounds
for the relief requested.
(c) Default order. When the Presiding
Officer finds that default has occurred.
he shall issue a default order against the
defaulting party as to any or all parts of
the proceeding unless the record shows
good cause why a default order should
not be issued. If the order resolves all
outstanding issues and claims in the
proceeding, it shall constitute the initial
decision under these Consolidated
Rules of Practice. The relief proposed in
the complaint or the motion for default
shall be ordered unless the requested
relief is clearly inconsistent with the
record of the proceeding or the Act. For
good cause shown, the Presiding Officer
may set aside a default order.
(d) Payment of penalty; effective date
of compliance or corrective action
orders, and Permit Actions. Any penalty
assessed in the default order shall
become due and payable by respondent
without further proceedings 30 days
after the default order becomes final
under §22.27(c). Any default order
requiring compliance or corrective
action shall be effective and enforceable
without further proceedings on the date
the default order becomes final under
§ 22.27(c). Any Permit Action ordered in
the default order shall become effective
without further proceedings on the date
that the default order becomes final
under § 22.27(c).
§ 22.18 Quick resolution; settlement;
alternative dispute resolution.
(a) Quick resolution. (1) A respondent
may resolve the proceeding at any time
by paying the specific penalty proposed
in the complaint or in complainant's
prehearing exchange in full as specified
by complainant and by filing with the
Regional Hearing Clerk a copy of the
check or other instrument of payment.
If the complaint contains a specific
proposed penalty and respondent pays
that proposed penalty in full within 30
days after receiving the complaint, then
no answer need be filed. This paragraph
(a) shall not apply to any complaint
which seeks a compliance or corrective
action order or Permit Action. In a
proceeding subject to the public
comment provisions of § 22.45, this
quick resolution is not available until 10
days after the close of the comment
period.
(2) Any respondent who wishes to
resolve a proceeding by paying the
proposed penalty instead of filing an
answer, but who needs additional time
to pay the penalty, may file a written
statement with the Regional Hearing
Clerk within 30 days after receiving the
complaint stating that the respondent
agrees to pay the proposed penalty in
accordance with paragraph (a)(l) of this
section. The written statement need not
contain any response to, or admission
of, the allegations in the complaint.
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Within 60 days after receiving the
complaint, the respondent shall pay the
full amount of the proposed penalty.
Failure to make such payment within 60
days of receipt of the complaint may
subject the respondent to default
pursuant to §22.17.
(3) Upon receipt of payment in full,
the Regional Judicial Officer or Regional
Administrator, or, in a proceeding
commenced at EPA Headquarters, the
Environmental Appeals Board, shall
issue a final order. Payment by
respondent shall constitute a waiver of
respondent's rights to contest the
allegations and to appeal the final order.
(b) Settlement. (1) The Agency
encourages settlement of a proceeding at
any time if the settlement is consistent
with the provisions and objectives of the
Act and applicable regulations. The
parties may engage in settlement
discussions whether or not the
respondent requests a hearing.
Settlement discussions shall not affect
the respondent's obligation to file a
timely answer under §22.15.
(2) Consent agreement. Any and all
terms and conditions of a settlement
shall be recorded in a written consent
agreement signed by all parties or their
representatives. The consent agreement
shall state that, for the purpose of the
proceeding, respondent: Admits the
jurisdictional allegations of the
complaint; admits the facts stipulated in
the consent agreement or neither admits
nor denies specific factual allegations
contained in the complaint; consents to
the assessment of any stated civil
•nalty. to the issuance of any specified
npliance or corrective action order, to
conditions specified in the consent
agreement, and to any stated Permit
Action; and waives any right to contest
the allegations and its right to appeal
the proposed final order accompanying
the consent agreement. Where
complainant elects to commence a
proceeding pursuant to §22.13(b). the
consent agreement shall also contain the
elements described at § 22.14(a)(l)-(3)
and (8). The parties shall forward the
executed consent agreement and a
proposed final order to the Regional
Judicial Officer or Regional
Administrator, or, in a proceeding
commenced at EPA Headquarters, the
Environmental Appeals Board.
(3) Conclusion of proceeding. No
settlement or consent agreement shall
dispose of any proceeding under these
Consolidated Rules of Practice without
a final order from the Regional Judicial
Officer or Regional Administrator, or, in
a proceeding commenced at EPA
Headquarters, the Environmental
Appeals Board, ratifying the parties'
consent agreement.
(c) Scope of resolution or settlement.
Full payment of the penalty proposed in
a complaint pursuant to paragraph (a) of
this section or settlement pursuant to
paragraph (b) of this section shall not in
any case affect the right of the Agency
or the United States to pursue
appropriate injunctive or other equitable
relief or criminal sanctions for any
violations of law. Full payment of the
penalty proposed in a complaint
pursuant to paragraph (a) of this section
or settlement pursuant to paragraph (b)
of this section shall only resolve
respondent's liability for Federal civil
penalties for the violations and facts
alleged in the complaint.
(d) Alternative means of dispute
resolution. (1) The parties may engage in
any process within the scope of the
Alternative Dispute Resolution Act
("ADRA"), 5 U.S.C. 581 et seq.. which
may facilitate voluntary settlement
efforts. Such process shall be subject to
the confidentiality provisions of the
ADRA.
(2) Dispute resolution under this
paragraph (d) does not divest the
Presiding Officer of jurisdiction and
does not automatically stay the
proceeding. All provisions of these
Consolidated Rules of Practice remain
in effect notwithstanding any dispute
resolution proceeding.
(3) The parties may choose any person
to act as a neutral, or may move for the
appointment of a neutral. If the
Presiding Officer grants a motion for the
appointment of a neutral, the Presiding
Officer shall forward the motion to the
Chief Administrative Law Judge, except
in proceedings under subpart 1 of this
part, in which the Presiding Officer
shall forward the motion to the Regional
Administrator. The Chief
Administrative Law Judge or Regional
Administrator, as appropriate, shall
designate a qualified neutral.
§ 22.19 Preheating information exchange;
preheating conference; other discovery.
(a) Preheating information exchange.
(1) In accordance with an order issued
by the Presiding Officer, each party
shall file a prehearing information
exchange. Except as provided in
§ 22.22(a). a document or exhibit that
has not been included in prehearing
information exchange shall not be
admitted into evidence, and any witness
whose name and testimony summary
has not been included in prehearing
information exchange shall not be
allowed to testify. Parties are not
required to exchange information
relating to settlement which would be
excluded in the federal courts under
Rule 408 of the Federal Rules of
Evidence. Documents and exhibits shall
be marked for identification as ordered
by the Presiding Officer.
(2) Each party's prehearing
information exchange shall contain:
(i) The names of any expert or other
witnesses it intends to call at the
hearing, together with a brief narrative
summary of their expected testimony, or
a statement that no witnesses will be
called; and (ii) Copies of all documents
and exhibits which it intends to
introduce into evidence at the hearing.
(3) If the proceeding is for the
assessment of a penalty and
complainant has already specified a
proposed penalty, complainant shall
explain in its prehearing information
exchange how the proposed penalty was
calculated in accordance with any
criteria set forth in the Act, and the
respondent shall explain in its
prehearing information exchange why
the proposed penalty should be reduced
or eliminated.
(4) If the proceeding is for the
assessment of a penalty and
complainant has not specified a
proposed penalty, each party shall
include in its prehearing information
exchange all factual information it
considers relevant to the assessment of
a penalty. Within 15 days after
respondent files its prehearing
information exchange, complainant
shall file a document specifying a
proposed penalty and explaining how
the proposed penalty was calculated in
accordance with any criteria set forth in
the Act.
(b) Prehearing conference. The
Presiding Officer, at any time before the
hearing begins, may direct the parties
and their counsel or other
representatives to participate in a
conference to consider:
(1) Settlement of the case;
(2) Simplification of issues and
stipulation of facts not in dispute;
(3) The necessity or desirability of
amendments to pleadings;
(4) The exchange of exhibits,
documents, prepared testimony, and
admissions or stipulations of fact which
will avoid unnecessary proof;
(5) The limitation of the number of
expert or other witnesses;
(6) The time and place for the hearing;
and
(7) Any other matters which may
expedite the disposition of the
proceeding.
(c) Record of the prehearing
conference. No transcript of a
prehearing conference relating to
settlement shall be made. With respect
to other prehearing conferences, no
transcript of any prehearing conferences
shall be made unless ordered by the
Presiding Officer. The Presiding Officer
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shall ensure that the record of the
proceeding includes any stipulations,
agreements, rulings or orders made
during the conference.
(d) Location of preheating conference.
The prehearing conference shall be held
in the county where the respondent
resides or conducts the business which
the hearing concerns, in the city in
which the relevant Environmental
Protection Agency Regional Office is
located, or in Washington, DC, unless
the Presiding Officer determines that
there is good cause to hold it at another
location or by telephone.
(e) Other discovery. (I) After the
information exchange provided for in
paragraph (a) of this section, a party
may move for additional discovery. The
motion shall specify the method of
discovery sought, provide the proposed
discovery instruments, and describe in
detail the nature of the information and/
or documents sought (and, where
relevant, the proposed time and place
where discovery would be conducted).
The Presiding Officer may order such
other discovery only if it:
(i) Will neither unreasonably delay
the proceeding nor unreasonably burden
the non-moving party:
(ii) Seeks information that is most
reasonably obtained from the non-
moving party, and which the non-
moving party has refused to provide
voluntarily: and
(iii) Seeks information that has
significant probative value on a
disputed issue of material fact relevant
to liability or the relief sought.
(2) Settlement positions and
information regarding their
development (such as penalty
calculations for purposes of settlement
based upon Agency settlement policies)
shall not be discoverable.
(3) The Presiding Officer may order
depositions upon oral questions only in
accordance with paragraph (e)(l) of this
section and upon an additional finding
that:
(i) The information sought cannot
reasonably be obtained by alternative
methods of discovery; or
(ii) There is a substantial reason to
believe that relevant and probative
evidence may otherwise not be
preserved for presentation by a witness
at the hearing.
(4) The Presiding Officer may require
the attendance of witnesses or the
production of documentary evidence by
subpoena, if authorized under the Act.
The Presiding Officer may issue a
subpoena for discovery purposes only in
accordance with paragraph (e)(l) of this
section and upon an additional showing
of the grounds and necessity therefor.
Subpoenas shall be served in
accordance with §22.5(b)(l). Witnesses
summoned before the Presiding Officer
shall be paid the same fees and mileage
that are paid witnesses in the courts of
the United States. Any fees shall be paid
by the party at whose request the
witness appears. Where a witness
appears pursuant to a request initiated
by the Presiding Officer, fees shall be
paid by the Agency.
(5) Nothing in this paragraph (e) shall
limit a party's right to request
admissions or stipulations, a
respondent's right to request Agency
records under the Federal Freedom of
Information Act, 5 U.S.C. 552, or EPA's
authority under any applicable law to
conduct inspections, issue information
request letters or administrative
subpoenas, or otherwise obtain
information.
(f) Supplementing prior exchanges. A
party who has made an information
exchange under paragraph (a) of this
section, or who has exchanged
information in response to a request for
information or a discovery order
pursuant to paragraph (e) of this section,
shall promptly supplement or correct
the exchange when the party learns that
the information exchanged or response
provided is incomplete, inaccurate or
outdated, and the additional or
corrective information has not otherwise
been disclosed to the other party
pursuant to this section.
(g) Failure to exchange information.
Where a party fails to provide
information within its control as
required pursuant to this section, the
Presiding Officer may, in his discretion:
(1) Infer that the information would
be adverse to the party failing to provide
it:
(2) Exclude the information from
evidence; or
(3) Issue a default order under
§22.17(c).
§ 22.20 Accelerated decision; decision to
dismiss.
(a) General. The Presiding Officer may
at any time render an accelerated
decision in favor of a party as to any or
all parts of the proceeding, without
further hearing or upon such limited
additional evidence, such as affidavits,
as he may require, if no genuine issue
of material fact exists and a party is
entitled to judgment as a matter of law.
The Presiding Officer, upon motion of
the respondent, may at any time dismiss
a proceeding without further hearing or
upon such limited additional evidence
as he requires, on the basis of failure to
establish a prima facie case or other
grounds which show no right to relief
on the part of the complainant.
(b) Effect. (I) If an accelerated
decision or a decision to dismiss is
issued as to all issues and claims in the
proceeding, the decision constitutes an
initial decision of the Presiding Officer,
and shall be filed with the Regional
Hearing Clerk.
(2) If an accelerated decision or a
decision to dismiss is rendered on less
than all issues or claims in the
proceeding, the Presiding Officer shall
determine what material facts exist
without substantial controversy and
what material facts remain controverted.
The partial accelerated decision or the
order dismissing certain counts shall
specify the facts which appear
substantially uncontroverted, and the
issues and claims upon which the
hearing will proceed.
Subpart D—Hearing Procedures
§22.21 Assignment of Presiding Officer;
scheduling the hearing.
(a) Assignment of Presiding Officer.
When an answer is filed, the Regional
Hearing Clerk shall forward a copy of
the complaint, the answer, and any
other documents filed in the proceeding
to the Chief Administrative Law Judge
who shall serve as Presiding Officer or
assign another Administrative. Law
Judge as Presiding Officer. The
Presiding Officer shall then obtain the
case file from the Chief Administrative
Law Judge and notify the parties of his
assignment.
(b) Notice of hearing. The Presiding
Officer shall hold a hearing if the
proceeding presents genuine issues of
material fact. The Presiding Officer shall
serve upon the parties a notice of
hearing setting forth a time and place for
the hearing not later than 30 days prior
to the date set for the hearing. The
Presiding Officer may require the
attendance of witnesses or the
production of documentary evidence by
subpoena, if authorized under the Act,
upon a showing of the grounds and
necessity therefor, and the materiality
and relevancy of the evidence to be
adduced.
(c) Postponement of hearing. No
request for postponement of a hearing
shall be granted except upon motion
and for good cause shown.
(d) Location of the hearing. The
location of the hearing shall be
determined in accordance with the
method for determining the location of
a prehearing conference under
§22.19(d).
§22.22 Evidence.
(a) General. (I) The Presiding Officer
shall admit all evidence which is not
irrelevant, immaterial, unduly
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repetitious, unreliable, or of little
probative value, except that evidence
relating to settlement which would be
excluded in the federal courts under
Rule 408 of the Federal Rules of
Evidence (28 U.S.C.) is not admissible.
If, however, a party fails to provide any
document, exhibit, witness name or
summary of expected testimony
required to be exchanged under § 22.19
(a), (e) or (f) to all parties at least 15 days
before the hearing date, the Presiding
Officer shall not admit the document,
exhibit or testimony into evidence,
unless the non-exchanging party had
good cause for failing to exchange the
required information and provided the
required information to all other parties
as soon as it had control of the
information, or had good cause for not
doing so.
(2) In the presentation, admission,
disposition, and use of oral and written
evidence, EPA officers, employees and
authorized representatives shall
preserve the confidentiality of
information claimed confidential,
whether or not the claim is made by a
party to the proceeding, unless
disclosure is authorized pursuant to 40
CFR part 2. A business confidentiality
claim shall not prevent information
from being introduced into evidence,
but shall instead require that the
information be treated in accordance
with 40 CFR part 2. subpart B. The
Presiding Officer or the Environmental
Appeals Board may consider such
evidence in a proceeding closed to the
public, and which may be before some,
but not all, parties, as necessary. Such
proceeding shall be closed only to the
extent necessary to comply with 40 CFR
part 2, subpart B, for information
claimed confidential. Any affected
person may move for an order
protecting the information claimed
confidential.
(b) Examination of witnesses.
Witnesses shall be examined orally,
under oath or affirmation, except as
otherwise provided in paragraphs (c)
and (d) of this section or by the
Presiding Officer. Parties shall have the
right to cross-examine a witness who
appears at the hearing provided that
such cross-examination is not unduly
repetitious.
(c) Written testimony. The Presiding
Officer may admit and insert into the
record as evidence, in lieu of oral
testimony, written testimony prepared
by a witness. The admissibility of any
part of the testimony shall be subject to
the same rules as if the testimony were
produced under oral examination.
Before any such testimony is read or
admitted into evidence, the party who
has called the witness shall deliver a
copy of the testimony to the Presiding
Officer, the reporter, and opposing
counsel. The witness presenting the
testimony shall swear to or affirm the
testimony and shall be subject to
appropriate oral cross-examination.
(d) Admission of affidavits where the
witness is unavailable. The Presiding .
Officer may admit into evidence
affidavits of witnesses who are
unavailable. The term "unavailable"
shall have the meaning accorded to it by
Rule 804 (a) of the Federal Rules of
Evidence.
(e) Exhibits. Where practicable, an
original and one copy of each exhibit
shall be filed with the Presiding Officer
for the record and a copy shall be
furnished to each party. A true copy of
any exhibit may be substituted for the
original.
(f) Official notice. Official notice may
be taken of any matter which can be
judicially noticed in the Federal courts
and of other facts within the specialized
knowledge and experience of the
Agency. Opposing parties shall be given
adequate opportunity to show that such
facts are erroneously noticed.
§ 22.23 Objections and offers of proof.
(a) Objection. Any objection
concerning the conduct of the hearing
may be stated orally or in writing during
the hearing. The party raising the
objection must supply a short statement
of its grounds. The ruling by the
Presiding Officer on any objection and
the reasons given for it shall be part of
the record. An exception to each
objection overruled shall be automatic
and is not waived by further
participation in the hearing.
(b) Offers of proof. Whenever the
Presiding Officer denies a motion for
admission into evidence, the party
offering the information may make an
offer of proof, which shall be included
in the record. The offer of proof for
excluded oral testimony shall consist of
a brief statement describing the nature
of the information excluded. The offer
of proof for excluded documents or
exhibits shall consist of the documents
or exhibits excluded. Where the
Environmental Appeals Board decides
that the ruling of the Presiding Officer
in excluding the information from
evidence was both erroneous and
prejudicial, the hearing may be
reopened to permit the taking of such
evidence.
§ 22.24 Burden of presentation; burden of
persuasion; preponderance of the evidence
standard.
(a) The complainant has the burdens
of presentation and persuasion that the
violation occurred as set forth in the
complaint and that the relief sought is
appropriate. Following complainant's
establishment of a prima facie case,
respondent shall have the burden of
presenting any defense to the allegations
set forth in the complaint and any
response or evidence with respect to the
appropriate relief. The respondent has
the burdens of presentation and
persuasion for any affirmative defenses.
(b) Each matter of controversy shall be
decided by the Presiding Officer upon a
preponderance of the evidence.
§ 22.25 Filing the transcript.
The hearing shall be transcribed
verbatim. Promptly following the taking
of the last evidence, the reporter shall
transmit to the Regional Hearing Clerk
the original and as many copies of the
transcript of testimony as are called for
in the reporter's contract with the
Agency, and also shall transmit to the
Presiding Officer a copy of the
transcript. A certificate of service shall
accompany each copy of the transcript.
The Regional Hearing Clerk shall notify
all parties of the availability of the
transcript and shall furnish the parties
with a copy of the transcript upon
payment of the cost of reproduction,
unless a party can show that the cost is
unduly burdensome. Any person not a
party to the proceeding may receive a
copy of the transcript upon payment of
the reproduction fee. except for those
parts of the transcript ordered to be kept
confidential by the Presiding Officer.
Any party may file a motion to conform
the transcript to the actual testimony
within 30 days after receipt of the
transcript, or 45 days after the parties
are notified of the availability of the
transcript, whichever is sooner.
§ 22.26 Proposed findings, conclusions,
and order.
After the hearing, any party may file
proposed findings of fact, conclusions of
law, and a proposed order, together with
briefs in support thereof. The Presiding
Officer shall set a schedule for filing
these documents and any reply briefs,
but shall not require them before the last
date for filing motions under § 22.25 to
conform the transcript to the actual
testimony. All submissions shall be in
writing, shall be served upon all parties,
and shall contain adequate references to
the record and authorities relied on.
Subpart E—Initial Decision and Motion
To Reopen a Hearing
§22.27 Initial Decision.
(a) Filing and contents. After the
period for filing briefs under § 22.26 has
expired, the Presiding Officer shall issue
an initial decision. The initial decision
shall contain findings of fact,
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conclusions regarding all material issues
of law or discretion, as well as reasons
therefor, and, if appropriate, a
recommended civil penalty assessment,
compliance order, corrective action
order, or Permit Action. Upon receipt of
an initial decision, the Regional Hearing
Clerk shall forward copies of the initial
decision to the Environmental Appeals
Board and the Assistant Administrator
for the Office of Enforcement and
Compliance Assurance.
(b) Amount of civil penalty. If the
Presiding Officer determines that a
violation has occurred and the
complaint seeks a civil penalty, the
Presiding Officer shall determine the
amount of the recommended civil
penalty based on the evidence in the
record and in accordance with any
penalty criteria set forth in the Act. The
Presiding Officer shall consider any
civil penalty guidelines issued under
the Act, The Presiding Officer shall
explain in detail in the initial decision
how the penalty to be assessed
corresponds to any penalty criteria set
forth in the Act. If the Presiding Officer
decides to assess a penalty different in
amount from the penalty proposed by
complainant, the Presiding Officer shall
set forth in the initial decision the
specific reasons for the increase or
decrease. If the respondent has
defaulted, the Presiding Officer shall not
assess a penalty greater than that
proposed by complainant in the
complaint, the prehearing information
exchange or the motion for default.
whichever is less.
(c) Effect of initial decision. The
initial decision of the Presiding Officer
shall become a final order 45 days after
its service upon the parties and without
further proceedings unless:
(1) A party moves to reopen the
hearing;
(2) A party appeals the initial decision
to the Environmental Appeals Board;
(3) A party moves to set aside a
default order that constitutes an initial
decision; or
(4) The Environmental Appeals Board
elects to review the initial decision on
its own initiative.
(d) Exhaustion of administrative
remedies. Where a respondent fails to
appeal an initial decision to the
Environmental Appeals Board pursuant
to § 22.30 and that initial decision
becomes a final order pursuant to
paragraph (c) of this section, respondent
waives its rights to judicial review. An
initial decision that is appealed to the
Environmental Appeals Board shall not
be final or operative pending the
Environmental Appeals Board's
issuance of a final order.
§ 22.28 Motion to reopen a hearing.
(a) Filing and content. A motion to
reopen a hearing to take further
evidence must be filed no later than 20
days after service of the initial decision
and shall state the specific grounds
upon which relief is sought. Where the
movant seeks to introduce new
evidence, the motion shall: state briefly
the nature and purpose of the evidence
to be adduced; show that such evidence
is not cumulative; and show good cause
why such evidence was not adduced at
the hearing. The motion shall be made
to the Presiding Officer and filed with
the Regional Hearing Clerk.
(b) Disposition of motion to reopen a
hearing. Within 15 days following the
service of a motion to reopen a hearing,
any other party to the proceeding may
file with the Regional Hearing Clerk and
serve on all other parties a response. A
reopened hearing shall be governed by
the applicable sections of these
Consolidated Rules of Practice. The
filing of a motion to reopen a hearing
shall automatically stay the running of
the time periods for an initial decision
becoming final under § 22.27(c) and for
appeal under § 22.30. These time
periods shall begin again in full when
the motion is denied or an amended
initial decision is served.
Subpart F—Appeals and
Administrative Review
§ 22.29 Appeal from or review of
interlocutory orders or rulings.
(a) Request for interlocutory appeal.
Appeals from orders or rulings other
than an initial decision shall be allowed
only at the discretion of the
Environmental Appeals Board. A party
seeking interlocutory appeal of such
orders or rulings to the Environmental
Appeals Board shall file a motion
within 10 days of service of the order or
ruling, requesting that the Presiding
Officer forward the order or ruling to the
Environmental Appeals Board for
review, and stating briefly the grounds
for the appeal.
(b) Availability of interlocutory
appeal. The Presiding Officer may
recommend any order or ruling for
review by the Environmental Appeals
Board when:
(1) The order or ruling involves an
important question of law or policy
concerning which there is substantial
grounds for difference of opinion; and
(2) Either an immediate appeal from
the order or ruling will materially
advance the ultimate termination of the
proceeding, or review after the final
order is issued will be inadequate or
ineffective.
(c) Interlocutory review. If the
Presiding Officer has recommended
review and the Environmental Appeals
Board determines that interlocutory
review is inappropriate, or takes no
action within 30 days of the Presiding
Officer's recommendation, the appeal is
dismissed. When the Presiding Officer
declines to recommend review of an
order or ruling, it may be reviewed by
the Environmental Appeals Board only
upon appeal from the initial decision,
except when the Environmental
Appeals Board determines, upon motion
of a party and in exceptional
circumstances, that to delay review
would be contrary to the public interest.
Such motion shall be filed within 10
days of service of an order of the
Presiding Officer refusing to recommend
such order or ruling for interlocutory
review.
§ 22.30 Appeal from or review of initial
decision.
(a) Notice of appeal. (I) Within 30
days after the initial decision is served,
any party may appeal any adverse order
or ruling of the Presiding Officer by
filing an original and one copy of a
notice of appeal and an accompanying
appellate brief with the Environmental
Appeals Board (Clerk of the Board (Mail
Code 1103B), United States
Environmental Protection Agency. 401
M Street, SW. Washington, DC, 20460.
Hand deliveries may be made at Suite
500, 607 14th Street, NW.). One copy of
any document filed with the Clerk of the
Board shall also be served on the
Regional Hearing Clerk. Appellant also
shall serve a copy of the notice of appeal
upon the Presiding Officer. Appellant
shall simultaneously serve one copy of
the notice and brief upon all other
parties and non-party participants. The
notice of appeal shall summarize the
order or ruling, or part thereof, appealed
from. The appellant's brief shall contain
tables of contents and authorities (with
page references), a statement of the
issues presented for review, a statement
of the nature of the case and the facts
relevant to the issues presented for
review (with appropriate references to
the record), argument on the issues
presented, a short conclusion stating the
precise relief sought, alternative
findings of fact, and alternative
conclusions regarding issues of law or
discretion. If a timely notice of appeal
is filed by a party, any other party may
file a notice of appeal on any issue
within 20 days after the date on which
the first notice of appeal was served.
(2) Within 20 days of service of
notices of appeal and briefs under
paragraph (a)(l) of this section, any
other party or non-party participant may
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40187
file with the Environmental Appeals
Board an original and one copy of a
response brief responding to argument
raised by the appellant, together with
reference to the relevant portions of the
record, initial decision, or opposing
brief. Appellee shall simultaneously
serve one copy of the response brief
upon each party , non-party participant,
and the Regional Hearing Clerk.
Response briefs shall be limited to the
scope of the appeal brief. Further briefs
may be filed only with the permission
of the Environmental Appeals Board.
(b) Review initiated by the
Environmental Appeals Board.
Whenever the Environmental Appeals
Board determines to review an initial
decision on its own initiative, it shall
file notice of its intent to review that
decision with the Clerk of the Board,
and serve it upon the Regional Hearing
Clerk, the Presiding Officer and the
parties within 45 days after the initial
decision was served upon the parties.
The notice shall include a statement of
issues to be briefed by the parties and
a time schedule for the filing and
service of briefs.
(c) Scope of appeal or review. The
parties' rights of appeal shall be limited
to those issues raised during the course
of the proceeding and by the initial
decision, and to issues concerning
subject matter jurisdiction. If the
Environmental Appeals Board
determines that issues raised, but not
appealed by the parties, should be
argued, it shall give the parties
reasonable written notice of such
determination to permit preparation of
adequate argument. The Environmental
Appeals Board may remand the case to
the Presiding Officer for further
proceedings.
(d) Argument before the
Environmental Appeals Board. The
Environmental Appeals Board may, at
its discretion, order oral argument on
any or all issues in a proceeding.
(e) Motions on appeal. All motions
made during the course of an appeal
shall conform to § 22.16 unless
otherwise provided.
(f) Decision. The Environmental
Appeals Board shall adopt, modify, or
set aside the findings of fact and
conclusions of law or discretion
contained in the decision or order being
reviewed, and shall set forth in the final
order the reasons for its actions. The
Environmental Appeals Board may
assess a penalty that is higher or lower
than the amount recommended to be
assessed in the decision or order being
reviewed or from the amount sought in
the complaint, except that If the order
being reviewed is a default order, the
Environmental Appeals Board may not
increase the amount of the penalty
above that proposed in the complaint or
in the motion for default, whichever is
less. The Environmental Appeals Board
may adopt, modify or set aside any
recommended compliance or corrective
action order or Permit Action. The
Environmental Appeals Board may
remand the case to the Presiding Officer
for further action.
Subpart G—Final Order
§22.31 Final order.
(a) Effect of final order. A final order
constitutes the final Agency action in a
proceeding. The final order shall not in
any case affect the right of the Agency
or the United States to pursue
appropriate injunctive or other equitable
relief or criminal sanctions for any
violations of law. The final order shall
resolve only those causes of action
alleged in the complaint, or for
proceedings commenced pursuant to
§ 22.13(b), alleged in the consent
agreement. The final order does not
waive, extinguish or otherwise affect
respondent's obligation to comply with
all applicable provisions of the Act and
regulations promulgated thereunder.
(b) Effective date. A final order is
effective upon filing. Where an initial
decision becomes a final order pursuant
to § 22.27(c), the final order is effective
45 days after the initial decision is
served on the parties.
(c) Payment of a civil penalty. The
respondent shall pay the full amount of
any civil penalty assessed in the final
order within 30 days after the effective
date of the final order unless otherwise
ordered. Payment shall be made by
sending a cashier's check or certified
check to the payee specified in the
complaint, unless otherwise instructed
by the complainant. The check shall
note the case title and docket number.
Respondent shall serve copies of the
check or other instrument of payment
on the Regional Hearing Clerk and on
complainant. Collection of interest on
overdue payments shall be in
accordance with the Debt Collection
Act. 31 U.S.C. 3717.
(d) Other relief. Any final order
requiring compliance or corrective
action, or a Permit Action, shall become
effective and enforceable without
further proceedings on the effective date
of the final order unless otherwise
ordered.
(e) Final orders to Federal agencies on
appeal. (I) A final order of the
Environmental Appeals Board issued
pursuant to § 22.30 to a department,
agency, or instrumentality of the United
States shall become effective 30 days
after its service upon the parties unless
the head of the affected department,
agency, or instrumentality requests a
conference with the Administrator in
writing and serves a copy of the request
on the parties of record within 30 days
of service of the final order. If a timely
request is made, a decision by the
Administrator shall become the final
order.
(2) A motion for reconsideration
pursuant to § 22.32 shall not toll the 30-
day period described in paragraph (e)(l)
of this section unless specifically so
ordered by the Environmental Appeals
Board.
§ 22.32 Motion to reconsider a final order.
Motions to reconsider a final order
issued pursuant to § 22.30 shall be filed
within 10 days after service of the final
order. Motions must set forth the
matters claimed to have been
erroneously decided and the nature of
the alleged errors. Motions for
reconsideration under this provision
shall be directed to, and decided by, the
Environmental Appeals Board. Motions
for reconsideration directed to the
Administrator, rather than to the
Environmental Appeals Board, will not
be considered, except in cases that the
Environmental Appeals Board has
referred to the Administrator pursuant
to § 22.4(a) and in which the
Administrator has issued the final order.
A motion for reconsideration shall not
stay the effective date of the final order
unless so ordered by the Environmental
Appeals Board.
Subpart H—Supplemental Rules
§ 22.33 [Reserved]
§ 22.34 Supplemental rules governing the
administrative assessment of civil penalties
under the Clean Air Act.
(a) Scope. This section shall apply, in
conjunction with §§22.1 through 22.32,
in administrative proceedings to assess
a civil penalty conducted under sections
113(d), 205(c). 211(d), and 213(d) of the
Clean Air Act, as amended (42 U.S.C.
74l3(d), 7524(c), 7545(d), and 7547(d)).
Where inconsistencies exist between
this section and §§ 22.1 through 22.32.
this section shall apply.
(b) Issuance of notice. Prior to the
issuance of a final order assessing a civil
penalty, the person to whom the order
is to be issued shall be given written
notice of the proposed issuance of the
order. Service of a complaint or a
consent agreement and final order
pursuant to § 22.13 satisfies this notice
requirement.
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§ 22.35 Supplemental rules governing the
administrative assessment of civil penalties
under the Federal Insecticide, Fungicide,
and Rodenticide Act.
(a) Scope. This section shall apply, in
conjunction with §§22.1 through 22.32,
in administrative proceedings to assess
a civil penalty conducted under section
14(a) of the Federal Insecticide,
Fungicide, and Rodenticide Act as
amended (7 U.S.C. 1361(a)). Where
inconsistencies exist between this
section and §§22.1 through 22.32, this
section shall apply.
(b) Venue. The prehearing conference
and the hearing shall be held in the
county, parish, or incorporated city of
the residence of the person charged,
unless otherwise agreed in writing by all
parties. For a person whose residence is
outside the United States and outside
any territory or possession of the United
States, the prehearing conference and
the hearing shall be held at the EPA
office listed at 40 CFR 1.7 that is closest
to either the person's primary place of
business within the United States, or the
primary place of business of the
person's U.S. agent, unless otherwise
agreed by all parties.
§22.36 [Reserved].
§22.37 Supplemental rules governing
administrative proceedings under the Solid
Waste Disposal Act.
(a) Scope. This section shall apply, in
conjunction with §§22.1 through 22.32,
in administrative proceedings under
sections 3005 (d) and (e), 3008, 9003 and
9006 of the Solid Waste Disposal Act
(42 U.S.C. 6925(d) and (e). 6928, 6991b
and 699le) ("SWDA"). Where
inconsistencies exist between this
section and §§22.1 through 22.32, this
section shall apply.
(b) Corrective action and compliance
orders. A complaint may contain a
compliance order issued under section
3008(a) or section 9006(a), or a
corrective action order issued under
section 3008(h) or section 9003(h)(4) of
the SWDA. Any such order shall
automatically become a final order
unless, no later than 30 days after the
order is served, the respondent requests
a hearing pursuant to § 22.15.
§ 22.38 Supplemental rules of practice
governing the administrative assessment of
civil penalties under the Clean Water Act.
(a) Scope. This section shall apply, in
conjunction with §§ 22.1 through 22.32
and § 22.45, in administrative
proceedings for the assessment of any
civil penalty under section 309 (g) or
section 31 l(b)(6) of the Clean Water Act
("CWA")(33 U.S.C. 1319(g) and
1321 (b) (6)). Where inconsistencies exist
between this section and §§ 22.1
through 22.32, this section shall apply.
(b) Consultation with States. For
proceedings pursuant to section 309(g),
the complainant shall provide the State
agency with the most direct authority
over the matters at issue in the case an
opportunity to consult with the
complainant. Complainant shall notify
the State agency within 30 days
following proof of service of the
complaint on the respondent or, in the
case of a proceeding proposed to be
commenced pursuant to § 22.13(b), no
less than 40 days before the issuance of
an order assessing a civil penalty.
(c) Administrative procedure and
judicial review. Action of the
Administrator for which review could
have been obtained under section
509(b)(l) of the CWA, 33 U.S.C.
1369{b)(l), shall not be subject to review
in an administrative proceeding for the
assessment of a civil penalty under
section 309(g) or section 31 l(b)(6).
§ 22.39 Supplemental rules governing the
administrative assessment of civil penalties
under section 109 of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 19BO, as amended.
(a) Scope. This section shall apply, in
conjunction with §§ 22.10 through
22.32, in administrative proceedings for
the assessment of any civil penalty
under section 109 of the Comprehensive
Environmental Response,
Compensation, and Liability Act of
1980, as amended (42 U.S.C. 9609).
Where inconsistencies exist between
this section and §§ 22.1 through 22.32,
this section shall apply.
(b) Judicial review. Any person who
requested a hearing with respect to a
Class II civil penalty under section
109(b) of CERCLA, 42 U.S.C. 9609(b),
and who is the recipient of a final order
assessing a civil penalty may file a
petition for judicial review of such order
with the United States Court of Appeals
for the District of Columbia or for any
other circuit in which such person
resides or transacts business. Any
person who requested a hearing with
respect to a Class I civil penalty under
section 109(a)(4) of CERCLA. 42 U.S.C.
9609(a)(4), and who is the recipient of
a final order assessing the civil penalty
may file a petition for judicial review of
such order with the appropriate district
court of the United States. All petitions
must be filed within 30 days of the date
the order making the assessment was
served on the parties.
(c) Payment of civil penalty assessed.
Payment of civil penalties assessed in
the final order shall be made by
forwarding a cashier's check, payable to
the "EPA, Hazardous Substances
Superfund," in the amount assessed,
and noting the case title and docket
number, to the appropriate regional
Superfund Lockbox Depository.
§22.40 [Reserved].
§ 22.41 Supplemental rules governing the
administrative assessment of civil penalties
under Title II of the Toxic Substance Control
Act, enacted as section 2 of the Asbestos
Hazard Emergency Response Act (AHERA).
(a) Scope. This section shall apply, in
conjunction with §§ 22.1 through 22.32,
in administrative proceedings to assess
a civil penalty conducted under section
207 of the Toxic Substances Control Act
("TSCA") (15 U.S.C. 2647). Where
inconsistencies exist between this
section and §§22.1 through 22.32, this
section shall apply.
(b) Collection of civil penalty. Any
civil penalty collected under TSCA
section 207 shall be used by the local
educational agency for purposes of
complying with Title II of TSCA. Any
portion of a civil penalty remaining
unspent after a local educational agency
achieves compliance shall be deposited
into the Asbestos Trust Fund
established under section 5 of AHERA.
§ 22.42 Supplemental rules governing the
administrative assessment of civil penalties
for violations of compliance orders issued
to owners or operators of public water
systems under part B of the Safe Drinking
Water Act.
(a) Scope. This section shall apply, in
conjunction with §§22.1 through 22.32,
in administrative proceedings to assess
a civil penalty under section
1414 (g) (3) (B) of the Safe Drinking Water
Act, 42 U.S.C. 300g-3(g)(3)(B). Where
inconsistencies exist between this
section and §§22.1 through 22.32, this
section shall apply.
(b) Choice of forum. A complaint
which specifies that subpart I of this
part applies shall also state that
respondent has a right to elect a hearing
on the record in accordance with 5
U.S.C. 554, and that respondent waives
this right unless it requests in its answer
a hearing on the record in accordance
with 5 U.S.C. 554. Upon such request,
the Regional Hearing Clerk shall
recaption the documents in the record
as necessary, and notify the parties of
the changes.
§ 22.43 Supplemental rules governing the
administrative assessment of civil penalties
against a federal agency under the Safe
Drinking Water Act
(a) Scope. This section shall apply, in
conjunction with §§ 22.1 through 22.32,
in administrative proceedings to assess
a civil penalty against a federal agency
under section 1447(b) of the Safe
Drinking Water Act. 42 U.S.C. 300j-6(b).
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Where inconsistencies exist between
this section and §§ 22.1 through 22.32,
this section shall apply.
(b) Effective date of final penalty
order. Any penalty order issued
pursuant to this section and section
1447(b) of the Safe Drinking Water Act
shall become effective 30 days after it
has been served on the parties.
(c) Public notice of final penalty
order. Upon the issuance of a final
penalty order under this section, the
Administrator shall provide public
notice of the order by publication, and
by providing notice to any person who
requests such notice. The notice shall
include:
(1) The docket number of the order;
(2) The address and phone number of
the Regional Hearing Clerk from whom
a copy of the order may be obtained;
(3) The location of the facility where
violations were found;
(4) A description of the violations;
(5) The penalty that was assessed; and
(6) A notice that any interested person
may, within 30 days of the date the
order becomes final, obtain judicial
review of the penalty order pursuant to
section 1447(b) of the Safe Drinking
Water Act, and instruction that persons
seeking judicial review shall provide
copies of any appeal to the persons
described in 40 CFR 135.11 (a).
§22.44 [Reserved]
§ 22.45 Supplemental rules governing
public notice and comment In proceedings
under sections 309(g) and 311(b)(6)(B)(il) of
the Clean Water Act and section 1423(c) of
the Safe Drinking Water Act.
(a) Scope. This section shall apply, in
conjunction with §§ 22.1 through 22.32,
in administrative proceedings for the
assessment of any civil penalty under
sections 309(g) and 311(b)(6)(B)(ii) of
the Clean Water Act (33 U.S.C. 1319(g)
and 1321 (b) (6) (B) (ii)), and under section
1423(c) of the Safe Drinking Water Act
(42 U.S.C. 300h-2(c)). Where
inconsistencies exist between this
section and §§22.1 through 22.32, this
section shall apply.
(b) Public notice.—(I) General.
Complainant shall notify the public
before assessing a civil penalty. Such
notice shall be provided within 30 days
following proof of service of the
complaint on the respondent or, in the
case of a proceeding proposed to be
commenced pursuant to § 22.13(b), no
less than 40 days before the issuance of
an order assessing a civil penalty. The
notice period begins upon first
publication of notice.
(2) Type and content of public notice.
The complainant shall provide public
notice of the complaint (or the proposed
consent agreement if § 22.13(b) is
applicable) by a method reasonably
calculated to provide notice, and shall
also provide notice directly to any
person who requests such notice. The
notice shall include:
(i) The docket number of the
proceeding;
(ii) The name and address of the
complainant and respondent, and the
person from whom information on the
proceeding may be obtained, and the
address of the Regional Hearing Clerk to
whom appropriate comments shall be
directed;
(Hi) The location of the site or facility
from which the violations are alleged,
and any applicable permit number;
(iv) A description of the violation
alleged and the relief sought; and
(v) A notice that persons shall submit
comments to the Regional Hearing
Clerk, and the deadline for such
submissions.
(c) Comment by a person who is not
a party. The following provisions apply
in regard to comment by a person not
a party to a proceeding:
(1) Participation in proceeding, (i)
Any person wishing to participate in the
proceedings must notify the Regional
Hearing Clerk in writing within the
public notice period under paragraph
(b)(l) of this section. The person must
provide his name, complete mailing
address, and state that he wishes to
participate in the proceeding.
(ii) The Presiding Officer shall
provide notice of any hearing on the
merits to any person who has met the
requirements of paragraph (c)(l)(i) of
this section at least 20 days prior to the
scheduled hearing.
(iii) A commenter may present written
comments for the record at any time
prior to the close of the record.
(iv) A commenter wishing to present
evidence at a hearing on the merits shall
notify, in writing, the Presiding Officer
and the parties of its intent at least 10
days prior to the scheduled hearing.
This notice must include a copy of any
document to be introduced, a
description of the evidence to be
presented, and the identity of any
witness (and qualifications if an expert),
and the subject matter of the testimony.
(v) In any hearing on the merits, a
commenter may present evidence,
including direct testimony subject to
cross examination by the parties.
(vi) The Presiding Officer shall have
the discretion to establish the extent of
commenter participation in any other
scheduled activity.
(2) Limitations. A commenter may not
cross-examine any witness in any
hearing and shall not be subject to or
participate in any discovery or
prehearing exchange.
(3) Quick resolution and settlement.
No proceeding subject to the public
notice and comment provisions of
paragraphs (b) and (c) of this section
may be resolved or settled under
§22.18, or commenced under §22.13(b),
until 10 days after the close of the
comment period provided in paragraph
(c)(l) of this section.
(4) Petition to set aside a consent
agreement and proposed final order, (i)
Complainant shall provide to each
commenter, by certified mail, return
receipt requested, but not to the
Regional Hearing Clerk or Presiding
Officer, a copy of any consent agreement
between the parties and the proposed
final order.
(ii) Within 30 days of receipt of the
consent agreement and proposed final
order a commenter may petition the
Regional Administrator (or, for cases
commenced at EPA Headquarters, the
Environmental Appeals Board), to set
aside the consent agreement and
proposed final order on the basis that
material evidence was not considered.
Copies of the petition shall be served on
the parties, but shall not be sent to the
Regional Hearing Clerk or the Presiding
Officer.
(iii) Within 15 days of receipt of a
petition, the complainant may, with
notice to the Regional Administrator or
Environmental Appeals Board and to
the commenter, withdraw the consent
agreement and proposed final order to
consider the matters raised in the
petition. If the complainant does not
give notice of withdrawal within 15
days of receipt of the petition, the
Regional Administrator or
Environmental Appeals Board shall
assign a Petition Officer to consider and
rule on the petition. The Petition Officer
shall be another Presiding Officer, not
otherwise involved in the case. Notice
of this assignment shall be sent to the
parties, and to the Presiding Officer.
(iv) Within 30 days of assignment of
the Petition Officer, the complainant
shall present to the Petition Officer a
copy of the complaint and a written
response to the petition. A copy of the
response shall be provided to the parties
and to the commenter, but not to the
Regional Hearing Clerk or Presiding
Officer.
(v) The Petition Officer shall review
the petition, and complainant's
response, and shall file with the
Regional Hearing Clerk, with copies to
the parties, the commenter, and the
Presiding Officer, written findings as to:
(A) The extent to which the petition
states an issue relevant and material to
the issuance of the proposed final order;
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Federal Register/Vol. 64, No. 141/Friday. July 23. 1999/Rules and Regulations
(B) Whether complainant adequately
considered and responded to the
petition; and
(C) Whether a resolution of the
proceeding by the parties is appropriate
without a hearing.
(vi) Upon a finding by the Petition
Officer that a hearing is appropriate, the
Presiding Officer shall order that the
consent agreement and proposed final
order be set aside and shall establish a
schedule for a hearing.
(vii) Upon a finding by the Petition
Officer that a resolution of the
proceeding without a hearing is
appropriate, the Petition Officer shall
issue an order denying the petition and
stating reasons for the denial. The
Petition Officer shall:
(A) File the order with the Regional
Hearing Clerk;
(B) Serve copies of the order on the
parties and the commenter; and
(C) Provide public notice of the order.
(viii) Upon a finding by the Petition
Officer that a resolution of the
proceeding without a hearing is
appropriate, the Regional Administrator
may issue the proposed final order,
which shall become final 30 days after
both the order denying the petition and
a properly signed consent agreement are
filed with the Regional Hearing Clerk,
unless further petition for review is filed
by a notice of appeal in the appropriate
nited States District Court, with
coincident notice by certified mail to
the Administrator and the Attorney
General. Written notice of appeal also
shall be filed with the Regional Hearing
Clerk, and sent to the Presiding Officer
and the parties.
(ix) If judicial review of the final order
is denied, the final order shall become
effective 30 days after such denial has
been filed with the Regional Hearing
Clerk.
§§22.46-22.49 [Reserved].
Subpart I—Administrative Proceedings
Not Governed by Section 554 of the
Administrative Procedure Act
§ 22.50 Scope of this subpart.
(a) Scope. This subpart applies to all
adjudicatory proceedings for:
(1) The assessment of a penalty under
sections 309(g)(2)(A) and 31 l(b)(6)(B)(i)
of the Clean Water Act (33 U.S.C.
1319(g)(2)(A) and 1321{b)(6)(B)(i)).
(2) The assessment of a penalty under
sections 1414(g)(3)(B) and 1423(c)ofthe
Safe Drinking Water Act (42 U.S.C.
300g-3(g)(3)(B) and 300h-2(c)), except
where a respondent in a proceeding
under section 1414 (g) (3) (B) requests in
its answer a hearing on the record in
accordance with section 554 of the
Administrative Procedure Act, 5 U.S.C.
554.
(b) Relationship to other provisions.
Sections 22.1 through 22.45 apply to
proceedings under this subpart, except
for the following provisions which do
notapply:§§22.11,22.16(c),22.21(a),
and 22.29. Where inconsistencies exist
between this subpart and subparts A
through G of this part, this subpart shall
apply. Where inconsistencies exist
between this subpart and subpart H of
this part, subpart H shall apply.
§22.51 Presiding Officer.
The Presiding Officer shall be a
Regional Judicial Officer. The Presiding
Officer shall conduct the hearing, and
rule on all motions until an initial
decision has become final or has been
appealed.
§ 22.52 Information exchange and
discovery.
Respondent's information exchange
pursuant to § 22.19(a) shall include
information on any economic benefit
resulting from any activity or failure to
act which is alleged in the
administrative complaint to be a
violation of applicable law, including its
gross revenues, delayed or avoided
costs. Discovery under § 22.19(e) shall
not be authorized, except for discovery
of information concerning respondent's
economic benefit from alleged
violations and information concerning
respondent's ability to pay a penalty.
|FR Doc. 99-17337 Filed 7-22-99; 8:45 am]
BILLING CODE 656O-5O-P
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Statutory Penalties Sections Requiring Consideration of Enumerated Factors
Commentary - The following statutory sections require consideration of enumerated factors in
determining the amount of a civil penalty assessed. The statutes provide the authority for
assessing penalties, and establish a maximum penalty that may be assessed. However,
only in rare instances will the maximum be assessed. The factors that must be considered
tend to lower assessed penalties.
EPA penalty policies provide detailed guidance as to how to determine penalty
amounts and take the statutory factors into account. Each penalty policy is specific to
a statute, and may even be specific to a section within a statute. The penalty policy for
each statute should be checked to determine which sections of the statute the policy
applies to.
I. TSCA - section 2615(a)
(l)Any person who violates a provision of section 2614 or 2689 of this title shall be liable to the United States for a civil penalty
in an amount not to exceed $25,000 for each such violation. Each day such a violation continues shall, for purposes of
this subsection, constitute a separate violation of section 2614 or 2689 of this title.
(2) (B)In determining the amount of a civil penalty, the Administrator shall take into account the nature, circumstances, extent,
and gravity of the violation or violations and, with respect to the violator, ability to pay, effect on ability to continue
business, any history of prior such violations, the degree of culpability, and such other matters as justice may require.
(2)(C)The Administrator may compromise, modify, or remit, with or without conditions, any civil penalty which may be
imposed under this subsection. The amount of such penalty, when finally determined, or the amount agreed upon in
compromise, may be deducted from any sums owing by the United States to the person charged.
II. RCRA - section 6928faU31
Any order issued pursuant to this subsection may include a suspension or revocation of any permit issued by the
Administrator or a State under this subchapter and shall state with reasonable specificity the nature of the violation.
Any penalty assessed in the order shall not exceed $25,000 per day of noncompliance for each violation of a
requirement of this subchapter. In assessing such a penalty, the Administrator shall take into account the seriousness
of the violation and any good faith efforts to comply with applicable requirements.
section 699 le (underground storage tank regulation1)
(a)(3)If a violator fails to comply with an order under this subsection within the time specified in the order, he shall be liable for
a civil penalty of not more than $25,000 for each day of continued noncompliance.
(c)Any order issued under this section shall state with reasonable specificity the nature of the violation, specify a reasonable time
for compliance, and assess a penalty, if any, which the Administrator determines is reasonable taking into account the
seriousness of the violation and any good faith efforts to comply with the applicable requirements.
section 6992d (medical waste tracking program)
(d)Any person who violates any requirement of or regulation under this subchapter shall be liable to the United States for a civil
penalty in an amount not to exceed $25,000 for each such violation. Each day of such violation shall, for purposes of
this section, constitute a separate violation.
(E)Civil penalties assessed by the United States or by the States under this subchapier shall be assessed in accordance with the
Administrator's "RCRA Civil Penalty Policy", as such policy may be amended from time to time.
III. CERCLA - section 9609faU3)
In determining the amount of any penalty assessed pursuant to this subsection, the President shall take into account the
nature, circumstances, extent and gravity of the violation or violations and, with respect to the violator, ability to pay,
any prior history of such violations, the degree of culpability, economic benefit or savings (if any) resulting from the
violation, and such other matters as justice may require.
IV. EPCRTKA - section 11045
(I>)(1)(C) [penalty for emergency notification] In determining the amount of any penalty assessed pursuant to this subsection, the
Administrator shall take into account the nature, circumstances, extent and gravity of the violation or violations and.
with respect to the violator, ability to pay, any prior history of such violations, the degree of culpability, economic
benefit or savings (if any) resulting from the violation, and such other matters as justice may require.
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V. FIFRA - section 136/(aH41
In determining the amount of the penalty, the Administrator shall consider the appropriateness of such penalty to tlie
size of the business of the person charged, the effect on the person's ability to continue in the business, and the gravity
of the violation. Whenever the Administrator finds that the violation occurred despite the exercise of due care or did
not cause significant harm to health or environment, the Administrator may issue a warning in lieu of assessing a
penalty.
VI. CAA - section 7413frt(»
In determining the amount of any penalty to be assessed under this section or section 7604(a) of this title, the
Administrator or the court, as appropriate, shall take into consideration (in addition to such other factors as justice
may require) the size of the business, the economic impact of the penalty on the business, the violator's full compliance
history and good faith efforts to comply, the duration of the violation as established by any credible evidence
(including evidence other than the applicable test method), payment by the violator of penalties previously assessed for
the same violation, the economic benefit of noncompliance, and the seriousness of the violation. The court shall not
assess penalties for noncompliance with administrative subpoenas under section 7607(a) of this title, or actions under
section 7414 of this title, where the violator had sufficient cause to violate or fail or refuse to comply with such
subpoena or action.
section 7524(c)(2) [motor vehicle emissions!
In determining the amount of any civil penalty assessed under this subsection, the Administrator shall lake into
account the gravity of the violation, the economic benefit or savings (if any) resulting from the violation, the size of
the violator's business, the violator's history of compliance with this subchapter, action taken to remedy the violation,
the effect of the penalty on the violator's ability to continue in business, and such other matters as justice may require.
VII. CWA [FWPCA] - section 1319
(d) [ civil penalties] Any person who violates section 1311, 1312, 1316, 1317, 1318, 1328, or 1345 of this title, or any permit
condition or limitation implementing any of such sections in a permit issued under section 1342 of this title by the
Administrator, or by a State, or in a permit issued under section 1344 of this title by a State, or any requirement
imposed in a pretreatment program approved under section 1342(a)(3) or 1342(b)(8) of this title, and any person who
violates any order issued by the Administrator under subsection (a) of this section, shall be subject to a civil penalty
not to exceed $25,000 per day for each violation. In determining the amount of a civil penalty, the court shall
consider the seriousness of the violation or violations, the economic benefit (if any) resulting from the violation, any
history of such violations, any good-faith efforts to comply with the applicable requirements, the economic impact of
the penalty on the violator, and such other matters as justice may require. For purposes of this subsection, a single
operational upset which leads to simultaneous violations of more than one pollutant parameter shall be treated as a
single violation.
VIII. ESA - section 1540(a)
Any person who knowingly violates, and any person engaged in business as an importer or exporter offish, wildlife, or
plants who violates, any provision of this chapter, or any provision of any permit or certificate issued he, eunder, or of
any regulation issued in order to implement subsection (a)(l)(A), (B), (C), (D), (E), or (F), (a)(2)(A), (B), (C), or (D),
(c), (d) (other than regulation relating to recordkeeping or filing of reports), (f) or (g) of section 1538 of this title, may
be assessed a civil penalty by the Secretary of not more than $25,000 for each violation. Any person who knowingly
violates, and any person engaged in business as an importer or exporter of fish, wildlife, or plants who violates, any
provision under this chapter may be assessed a civil penalty by the Secretary of not more than $12,QOO for each such
violation. Any person who otherwise violates any provision of this chapter, or any regulation, permit, or certificate
issued hereunder, may be assessed a civil penalty by the Secretary of not more than $500 for each such violation. No
penalty may be assessed under this subsection unless such person is given notice and opportunity for a hearing with
respect to such violation. Each violation shall be a separate offense. Any such civil penalty may be remitted or
mitigated by the Secretary. Upon any failure to pay a penalty assessed under this subsection, the Secretary may
request the Attorney General to institute a civil action in a district court of the United States for any district in which
such person is found, resides, or transacts business to collect the penalty and such court shall have jurisdiction to hear
and decide any such action. The court shall hear such action on the record made before the Secretary and shall sustain
his action if it is supported by substantial evidence on the record considered as a whole.
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POLICY ON CIVIL PENALTIES
EPA GENERAL ENFORCEMENT POLICY IGM - 21
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY
EFFECTIVE DATE: FEB I ft
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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 OE
different programs. Accordingly, it cannot be used, by itself,
as a basis for determining an appropriate penalty in a specific
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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.
Ujitil 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:
• CERCLA SI07. This is an area in which
Congress has directed a particular kind
of response explicitly oriented toward
recovering the cost of Government cleanup
activity and natural resource damage.
° Clean Water Act S311(f) and (q). This also
is cost recovery in nature. As in CERCLA
S107 actions, the penalty assessment
approach is inappropriate.
0 Clean Air Act S120. 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-tcase 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.
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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
additio'n, 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. Ih such cases, the case development
team should consider increasing the gravity component sufficient to*
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achieve general deterrence. These extra assessments should
balance the other goals of this policy, particularly equitable
treatme'nt 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
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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.
* Ability to pay.
• 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.
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. 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:
i
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.
T7For 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.
000078
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. -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
000079
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-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.)
• ,
IT. Apply Adjustment Factors ,
A* Degree of cooperation/noncboperation (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.)
000080
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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! FEB -t 6 1984
000082
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Contents
Page
Introduction
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
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 1C
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
' 21
C. History 'of noncompliance
D. Ability to pay
E. Other. unique factors
000083
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ii
Appendix (Con'tT
II. Alternative Payments 24
III. Promoting Consistency 27
Use of Penalty Figure in Settlement Negotiations 28
000084
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-1-
Introduction
This document, A Framework for Statute-Specific Approaches
to Penalty Assessment, provides guidance to the user of t-h^
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 Penaltiest 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 ori implementing each section of the instruc-
tions and explains how the instructions are intended to further
the goals of the policy.
000085
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-2-
Writinq 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:
• Benefit Component. This section should
explain:
a. the relevant 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.
000086
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-3-
* 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:
amount of pollutant,
toxicity of pollutant,
sensitivity of the environment,
length of time of a violation and
size of the violator.
The policy then should assign appropriate dollar amounts
or ranges of amounts to the different ranked violations to
constitute the "gravity component". This amount, added to the
amount reflecting economic benefit, constitutes the preliminary
deterrence figure.
III. Adjusting the Preliminary Deterrence Amount to Derive the
Initial Penalty 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.
000087
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-4-
0 Ability to pay.
• 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
000088
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-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.
1-n 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 t.o 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
000089
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-6-
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
noncorapliance. 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 te-
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 OL 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
000090
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-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.
8 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.
• 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
000091
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-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 unusu-ally 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
^ 000092
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-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..
e 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.
* 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
" — -the method
Again, until the Metholology. is issued,
ontined in the July 8, 1980, Civi ^Penalty Policy should be
used as modified to reflect recent changes in the tax law.
000093
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-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 td provide' goods or services which
are hot available elsewhere or are more attractive to the
consumer. Examples of such violations include:
A
• 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.
* The benefit derived should be adjusted to
reflect the present value of net profits
derived in the past.
.000094
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-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 ay other pT-f>gi-am5"—fhe
programs should also ensure that sufficient contract funds are
available to obtain expert advice in this area as needed to
support4penalty development, negotiation and trial of these kinds
of cases.
D. Settling cases fo.r 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:
o impact on violator; The likelihood that
assessing the benefit component as part
of the penalty will have a noticeable
effect on the violator's competitive
position or overall profits. If no such
effect appears likely, the benefit com-
ponent should, probably not be pursued.
The size of the gravity component; If the
qravity component is relatively small, it
may not provide a sufficient deterrent, by
000095
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-12-
itself, to achieve the goals of this policy.
0 The certainty of the size of the benefit
component: If the economic benefit is qui.te
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.
* 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^.
000096
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-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
ku =.«» re?lizes 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.
000097
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-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
000098
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-15-
raatter. 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.)
* 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.
• Toxicity of the pollutant; Violations
involving highly toxic pollutants are more
serious and should result in relatively
larger penalties.
• Sensitivity of the environment; This
factor focuses on the location where the
violation was committed. For example,
improper discharge into waters near a
drinking water intake or a recreational
beach is usually more serious than dis-
charge into waters not near any such use.
• The length of time a violation continues;
In most circumstances, the longer a
violation continues uncorrected, the
greater is the risk of harm.
000099
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-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
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.
oootoo
-------
-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
cooperatibn/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. £/ 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
I/ Absolute discretion means that the case development team
may makfe penalty development decisions ^eP8™^t°£_??A
Headquarters. Nevertheless it is understood that in all.
judicial matters, the Department of Justice can still review
these determinations if they so desire. Of^oursethe authority
to exercise the Agency's'concur. e in final settlements is
covered by the applicable deleg is. uuu i u .
-------
-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.
* The forseeability of the events consti- .
tuting the violation.
0 Whether the violator took reasonable
precautions against the events con-
stituting the violation.
•
• Whether the violator knew or should have
known of the hazards associated with the
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
perialty up or down by 20% of the gravity component. Adjustments
in the + 21-30% range should only be made in unusual circumstances.
000102
-------
-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
1 f
. 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..2/ But since these incentives must be consistent
with deterrence, they must be used judiciously.
For the purposes of this document, litigatipn is deemed to
begin: ».u
• for administrative actions - when the
respondent files a response to an adminis-f
trative complaint or when the time to
file expires or
• for judicial actions - when an Assistant
United States Attorney files a com-
plaint in court.
. - . 000103
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-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 th* 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.
000104
-------
-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 vthe trier of fact to
impose'jsuch 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.
'.. • 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.
/
000105
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-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.
000106
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-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
J^f1 P*™1**3!8^58"1611*-, At the same time' lt " 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.
i
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
000107
-------
-24-
• *
on their vehicles agreed to display anti-
tampering ads on their vehicles. Similar
solutions may be possible in other industries.
Consider straight penalty reductions as a last
recourse: If this approach is necessary, the
reasons for the case development team's
conclusion as to the size of the necessary.
reduction should be made a part of the formal
enforcement file and the memorandum accompany-
ing the settlement.
° Consider joinder of the violator's individual
owners ; .This is appropriate if joinder is
legally possible and justified under the
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-
trative or judicial final order, then the Agency must follow
the Federal Claims Collection Act procedures for obtaining the
penalty amount.
000108
-------
-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 thi« 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).
* 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 prioc 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.
000109
-------
-26-
9 EPA must not lower the amount it decides
to accept in penalties by more than the
• after-tax amount the violator spends on
the project.*/
In all cases where alternative payments are allowed, the
case file should contain documentation showing that each of
the conditions listed above have been met in tha 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.
000110
-------
. • -27-
Each alternative payment plan must entail an identified
project to be :ompletely 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 coyer
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.
Or*, n • « 1
W 0 i II
-------
-28-
Use of Penalty Figure in Settlement Discussions
Tne 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.
000112
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
. , WASHINGTON, D.C. 20460 •
vN.
December 15, 1995
MEMORANDUM
SUBJECT: Gu
FROMj .
OFFCECf
ENFORCEMENT AND
COMPLIANCE ASSURANCE
TO:
Penalty Policies in Administrative Litigation
irector
Office of Regulatory Enforcement
Regional Counsels, Regions I - X
Director, Office of Environmental Stewardship, Region I
Director, Compliance Assurance & Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice,
Region VIII . :
Regional Enforcement Coordinators, Regions I-X
At Introduction
This document provides guidance on how penalty amounts should be pled and argued
in administrative litigation and how penalty policies should be used in this process.
B* Background . _
. —f ' '
On September 29, 1995, Chief Administrative Law Judge Lotis issued ita Initial.
Decision in In Re: Employers Insurance of Waus.iu. ruling that EPA must present evidence
other than the PCB Penalty Policy in order to support its proposed penalty. We think the
• decision in the Wausau case is inconsistent with decisions on the use of penalty polities by
the Environmental Appeals Board, in particular PIC Americas. Inc.. TSCA Appeal No. 94-2.
(September 27, 1995). the Agency, is appealing the Wausau decision to the Environmental
Appeals Board. Accordingly, this document is being issued in response to the Wausau
decision to provide guidance on our administrative penalty pleading practices and use of
penalty policies. After we receive a decision from the Environmental Appeals Board on our •
appeal we may revise this guidance as appropriate.
YE5 25 1993
000114
Primed wtin $0y/C»flat« im w* ?*n*i y-jg
-------
page 21
Qt, Use of Penalty Policies in Administrative Litigation
I. Federal environmental statutes set fordi.various factors which EPA or a court
must consider in establishing .penalties. EPA's penalty policies are based on the statutory
penalty factors. The policies provide EPA enforcement staff with a logical calculation.
memodolpgy^fprdetermining appropriate penalties. The policies help EPA apply the.
^atutbrypenalry factors m a consistent and'equitable manner so that members of the"
regulated community are treated.similarly for similar violations'across the country. .As ,
policies, they are not substantive rules under the Administrative Procedure Act.1 I' -
2, The penalty amount sought in me aclministratiye complaint is based on the ;
relevant statutory, factors, .The penalry amount pled'should be calculated pursuant to any
applicable penalty policy and the specific facts of the case/- If there is no applicable policy,
t^5^-*.»':J>f;K~£^S&.fy•&**»•••:.->-y.»•».•'••• r,.v. .-•• -. •. ...«&*;*»*»»•»•!•- •w*-S*?*='W:iv.-> -w X'v-.:"'.!^*'-.-:.; -• •• -I.?-,1 •
me penalty amount to be pled in the complaint should be based on the statutory factors
?•••••• .•-..'••••-• ff ' •*•*.*•'"' •• -;*•• --• i ' . ••• :-«v»''"l/SV!V«K'*«:>'.*1-' •*•** >•'*• " -*r i '•••'•'»•••'•'• • f . '•• '
governing penalty assessment, case law interpreting such factors, and the facts .of the /
Darticular case.?.
3. The administrative complaint should explain that the penalry requested is based
on the statutory provisions governing penalty assessment and it was calculated using a policy
that applies the statutory factors. Accordingly,' the administrative complaint should contain
a paragraph similar to this'model:
The proposed civil penalty tias been determined in accordance with [cite to
relevant statutory penalty provision]. For purposes of determining the amount
of any penalty, to be assessed, [section of the Act] requires EPA to take into
1 Thei policies are a mix of legal interpretations, general policy, and procedural guidance in hpw-
EPA should allocate its enforcement resources and exercise its enforcement discretion. As such, they
are exempt from the notice and comment rulemakbg'ixequirements of the Administrative Procedures
Act. 5 U.S.C. § 5531
3 Not all EPA programs nave penalty policies that establish calculation methodologies fgr use io
determining the^enalty arnouht .to plead in an administrative complaint. 'For example; the May 1995
Interim Revised dean Water Act Settlement Policy and the May, 1994 Public Water System Supervision
Settlement Penalty Policy only establish, how the Agency expects to calculate the minimum penalty for
which it would be willing to s'ettl^ a case; these policies are not to be used in pleading penalties, or in
a hearing or at trial.
* The Region should not use'the policy in a particular case if the penalry amount produced by the
'calculation methodology produces an amount that appears inconsistent with the statutory penalty
factors or otherwise unreasonable. In such a case, the Region mtist consult with OECA prior to
deviating from the policy. See Redelegation of Authority and Guidance on Headquarters Involvement
in Regulatory Enforcement Cases, memo issued by die Assistant Administrator, on July 11, 1994.
especially page 3. and page 2 of the redelegation issued the same date, and subsequent program.
specific implementing'guidances. .
000115
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page3 . ' ;•- . •
. • ' • ', — * - ' • .. . - *
,-. ' ' account [enumerate statutory penalty factors]. To develop me proposed '; • •
• - • penalty in mis complaint, complainant bar taken into account the particular
facts..and circumstances of this case with specific'reference to EPA's [name of
..':; : relevant penalty policy,'if applicabte], a copy.of which is enclosed with this " ..
'';'"•' Complaint This policy provides a rational, consistent and equiiable
; calculation memc^otogY for applying me statutory penalty, factors enumerated
... above tt> particular cases. - - ••'.... •'".': -:
."••. '.- •••.-. • '•. . •• •". '-1;-' *-. .- . "•'•'*• " •''.'• ' '-' • • '
: :'-'•'••]4.. •:.'.' As further support of me .penalty proposed in the complaint, a case "record"
file should document or reference all factual information on which EPA relied to develop the
penalty amount pled in' the complaint. If the Agency has an applicable penalty policy (other
than an exclusive settlement-policy), the file should contain a computation worksheet setting '
forth how the penalty was calculated in the specific case, along with a narrative description
of the specific calculation. This narrative description need hot.be lengthy, but it should .
explain how any applicable penalty, policy methodology was applied to the specific facts in
: the case.4 If there was no applicable penalty policy, the record file should contain a
narrative description of how the statutory penalty-factors were applied to develop the amount
pled in the complaint. In short, the record file should document the facts and rationale ' .
which formed the basis for the penalty amount pled in the administrative complaint. In the
prehearing exchange, EPA counsel may provide the respondent with* copies of relevant
documents from the case record file.3 . :
5. • ' Pursuant to 'the Consolidated Rules of Practice Governing the Administrative
Assessment of Civil Penalties, 40 CFR §22.24, the complainant (usually the Region), has the
burden of presenting why the proposed penalty is appropriate. This burden of persuasion
may be subdivided into three tasks or parts: . ..
..,." a) why any applicable penalty policy is a reasonable approach to use in the instant .
'•'/-••-case; .--r'• ' . ... •... • -.. ' " '..."'•.•
v" b) proving the facts relevant to penalty assessment; and-. . . .."
c) why the particular facts merit the penalty proposed in the complaint, .'. > _
\ * * *.'.' "' ;
Each of these three tasks is discussed below. •••..'•
* See. e.g.. the RCRA Civil Penalty Policy, October 1990, pages 6 to 8, 41 to 47. .
s The case record file only should contain final documents, and not preliminary, draft, or
confidential documents. For example, documents evaluating the appropriate enforcement action.
planning legal strategy, or establishing a settlement penalty amount are not part of the record file and
-00.0 IV 6
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page 4
a. Presenting anv applicable penalty policy as a reasonable approach. In the prehearing
exchange or at the hearing, EPA counsel should briefly explain why the applicable penalty
policy is a reasonable way to apply the statutory factors. This explanation is a legal and
policy analysis, which can be presented primarily, if not entirely, in briefs based on the
written policy. Administrative law judges, however, may prefer some parts of this analysis
to be presented through testimony or affidavits.. If the Presiding Officer or respondent
challenges the rationale OF the basis for the penalty policy, complainant should provide a
detailed explanation of why the penalty policy is a fair and logical way to apply the statutory
factors.6 Since penalty policies are not binding rules, such challenges must be responded to
on the merits. Counsel should explain how the penalty policy provides a consistent, fair and
logical framework for quantifying the statutory penalty factors to the particular circumstances
of the instant case. Of course, the Presiding Officer is free to adopt a different framework
other than the penalty policy for applying the statutory factors and ultimately arriving at a
penalty amount.. ' , .
b. Proving the facts relevant to penalty assessment. In the prehearing exchange or hearing,
the facts relevant to determining an appropriate penalty under the particular statute should be
presented as evidence. The relevant facts will depend on the circumstances of the specific
case and the statutory penalty factors. Such facts usually include the number, duration, and
types of violations, any economic benefit resulting from the violations, the pollutants '
involved, and the environmental impact of the violations. Some of these facts may have
been established in proving .the violations. ' . '
•
c. Whv the particular facts merit the penalty proposed in the complaint. This task requires
the complainant to persuade the Presiding Officer why the penalty requested in the complaint
is appropriate based on the statutory penalty factors and the facts in the case. If a penalty
policy was used to calculate the penalty, an explanation of the calculation methodology
should be presented* This task is primarily, if not exclusively, a legal and policy analysis
and should be-done through briefs or argument. If the Presiding Officer requires testimony .
regarding such analysis, the Region may identify'^'Regional enforcement person-experienced
in using and understanding'the applicable penalty policy, and capable of discussing the nature
and seriousness of the violations in the instant case. This expert should not be the counsel in
the case. ' . .-•'.'.'
• If you have any questions regarding this guidance, you may call David Hindin at 202
564-6004, or Scott Garrison at 202 564-4047.
cc: Sylvia K. Lowrance; ORE Division Directors
ORE Branch Chiefs; Workgroup members
6 Regions should consult with ORE on how to respond to such challenges.
000117
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[signed March 19, 1997]
MEMORANDUM •
SUBJECT: Impact ofWausau on Use of Penalty Policies
FROM: . Robert I. Van Heuvelen, Director • . .
Office of Regulatory .Enforcement
TO: Regional Counsels, Regions I - X
Director, Office of Environmental Stewardship, Region I
Director, Division of Enforcement and Compliance Assurance, Region n
Director, Compliance Assurance,& Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice,
Region Vin
Regional Enforcement Coordinators, Regions I-X
On February 11,. 1997, the Environmental Appeals Board ("EAB") ruled on the Agency's
appeal of In the Matter of Employers Insurance of Wausau and Group Eight Technology. Inc..
. TSCA Appeal No. 95-6, of the September 29, 1995, Initial Decision of the former Chief.
Administrative Law Judge Jon Lotis. The EAB reversed those portions of the Initial Decision
concerning the validity and use of penalty policies,'endorsed the penalty policy concept, and
validated the Agency's method of applying its penalty policies.
The EAB affirmed that the Agency's penalty policies are not rules, and that the Agency
can use penalty policies without going through, notice and comment rulemaking so long as
Agency decisionmakers (i.e., the Presiding Officer and EAB) are under no obligation to adhere to
a penalty policy in a particular instance. Slip op. at 36-38. The Board held that proof of
adherence to the penalty policy can legitimately form a part of complainant's prima facie penalty
case.as evidence that the statutory penalty factors were taken into account, provided that the
penalty policy addresses all applicable statutory penalty factors. Moreover, where a penalty
policy is designed to enhance fairness and consistency of penalty assessments, proof of adherence
to the penalty policy provides some evidence that the proposed penalty is appropriate. Id. at 35.
In order to establish the "appropriateness" qf a recommended penalty, complainant must
000119
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demonstrate how the statutory penalty factors relate to the particular facts of the violation. Id. at
30. The Consolidated Rules of Practice, 40 C.F.R. § 22.24, requires complainant to come
forward-with evidence to show (1) that it considered each statutory factor, and (2) that its
recommended penalty is supported by its analysis of those factors. However, nothing in TSCA,
the -Consolidated Rules of Practice, or the Administrative Procedure Act requires that
complainant provide evidence supporting the findings, assumptions and determinations underlying
the penalty policy in order to make a prima facie case for the appropriateness of a proposed
penalty. Id. at 34-35. Complainant need not offer such evidentiary support in the absence of a
specific challenge by respondent or a specific request by the Presiding Officer.
After the Agency has made its prima facie case, the Presiding Officer must be prepared to
re-examine the basic propositions upon which a penalty policy is based in any case where they are
genuinely placed in issue. Ig. at 36. Indeed, even where respondent does not contest the penalty,
the Presiding Officer need not assess the proposed penalty and is not constrained by the
complainant's penalty proposal. Id. at 31. The Presiding-Officer must either (1) ensure that
complainant properly took into account the statutory penalty factors and assess the proposed
penalty, or (2) specify reasons for disagreeing with complainant's analysis and assess a different
penalty that reasonably applies the statutory penalty factors to the facts of the violation. • Id. at 32.
The EAB noted that there is no evidence that EPA's Presiding Officers Apply penalty policies so
inflexibly.as to belie the EAB's repeated assurances that the penalty policies do not bind the
Presiding Officers in the manner of rules. Id. at 36-37.
>
The EAB ruled that where complainant gives clear notice in its preheating exchange that it
would rely on a penalty policy to support its penalty proposals, and where respondent does not
challenge any of the factual propositions underlying the penalty policy, it is error for a Presiding
Officer to reject a penalty proposal for complainant's failure to offer evidence beyond that
sufficient to make its prima facie penalty case where the Presiding Officer did not demand such
evidence during the hearing. Id,, at 34-35. The Presiding Officer may demand additional
argument or evidence to support its analysis of the statutory penalty factors, but it is error to
articulate such a demand only after the hearing,- when the demand could no longer be satisfied. Id
at 38-39. - .'
The EAB's decision removes the cloud cast over our administrative enforcement practice
by the initial decision in Wausau. In the wake of that initial decision, ORE issued the attached
memorandum, "Guidance on Use of Penalty Policies in Administrative Litigation", dated •
December 15,1995, reiterating the proper application of penalty policies in administrative
litigation. As the EAB has now confirmed its approval of the Agency's use of tne penalty
policies, there is no need to amend the December 15,1995, guidance, which shall remain in effect
until further notice.
«
If you have any questions regarding this memorandum, you may call Scott Garrison at 202
564-4047.
cc: Sylvia K. Lowrance
ORE Division Directors
000120
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
-Q J9Q7 .CfFICIOF
a |;7C" ENFORCEMENT AND
COMPLIANCE ASSURANCE
MEMORANDUM
SUBJECT: Modifications to EPA Penalty Policies to Implement the Civil Monetary Penalty
Inflation Rule (PursuanUo tj^ Debt Collection Improvement Act of 1996)
FROM: Steven A. Her
Assistant Ac
TO: Regional Administrators
The Environmental Protection Agency ("EPA'*) published a new rule in the Federal
Register - 40 CFR Part 19, Adjustment of Civil Penalties for Inflation - implementing the Debt
Collection Improvement Act of 1996 ("DCIA"), on December 31,1996. At the same time, we
also published minor conforming amendments to 40 CFR Part 27, Program Fraud Civil
Remedies. The rule took effect thirty days later on January 30,1997. This means all violations
occurring on or after January 31.1997. are subject to the new inflation-adjusted penalty
amounts.1 We have attached a copy of the published rule, and the March 20,1997, correction,
for your convenience.
1 There are two sets of exceptions to the January 31,1997, date for using adjusted
penalty maximums. The first exceptions are for the four penalty provisions added or revised by
the August 1996 amendments to the SDWA which have an effective date of August 6,1996.
Those penalty provisions were not subject to inflation adjustment. The applicable unadjusted
maximums for those provisions are now included in the March 20,1997, Table 1. These
provisions are 42 U.S.C. 300g-3(g)(3)(B), 42 U.S.C. 300g-3(g)(3)(C), 42 U.S.C. 300i(b) and
42 U.S.C. 300j-6(b)(2). The second exception is for the recently identified amendment affecting
TSCA, 15 U.S.C. 2615; through the Residential Lead-Based Paint Hazard Reduction Act of 1992
("Lead Paint Act"), 42 U.S.C. 4852d. This portion of the Lead Paint Act and the corresponding
regulations in 40 CFR Part 745, which are enforced through TSCA 15 U.S.C. 2615, were omitted
from the December 31,1996 rule-making. EPA anticipates performing a rule-making to adjust
42 U.S.C. 4852d, Part 745, and indirectly 15 U.S.C. 2615, within the next few months. The
effective date for these penalty provisions will be thirty days following their adjustment and
publication in the Federal Register.
Recycled/Recyclable . Printed with Vegetable Oil Based Inks on 100% Recycled Paper (40% Postconsumer) U U U I (L L.
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Page 2
This penalty policy memorandum modifies all of our existing civil penalty policies to
conform to the DCIA and the new rule. This memorandum also provides guidance on how to
plead penalties and how to determine the new maximum penalty amounts that may be sought in
single administrative enforcement actions under the Clean Water Act ("CWA"), the Safe
Drinking Water Act ("SDWA"), and the Clean Air Act ("CAA").
OVERVIEW
The primary purpose of the DCIA is to restore the deterrent effect of civil statutory
penalty provisions which have been eroded by inflation. In particular, the DCIA directed each
federal agency to review its respective civil monetary penalty ("CMP") provisions and to issue a
regulation adjusting them for inflation. The DCIA also requires periodic review .and adjustment
of the CMP's at least once every four years.
This first penalty inflation adjustment was limited by the DCIA to 10% above the
existing statutory provision's maximum amount. For EPA, this meant all the penalty provision
maximums, with the exception of a few new penalty provisions added by the 1996 SDWA
amendments (which did not require any adjustment), have been adjusted upward by 10%,
The statutory penalty provisions and the new maximum penalty amounts are found in the
attached Table 1 of 40 CFR 19.4 (as corrected on March 20,1997). These increases in the CMPs
apply only to violations which occur aft'er the date the increases take effect on January 30.1997 -
that is. violations which occur on or after January 31.1997.2 For example, CWA Section 309
previously authorized judicial penalties of up to $25,000 per day per violation; and now, since
the new rule became effective, the_n"ew maximum penalty amount is $27,500. Therefore, if a
violation subject to CWA section 309(d) started on January 1, 1997, and continued through
February 2,1997, the maximum statutory penalty liability would consist of 30 days of violations
at $25,000 per day, plus 3 days of violation at $27,500.
PENALTY POLICY CALCULATION CHANGES
For the time being, we are not planning to amend the specific language, penalty matrices
or formulas in any of our existing penalty policies based on the revised penalty maximums
contained in 40 CFR Part 19. If a sufficient need to revise the particular provisions of one or
more of the policies is identified, we will consider taking such action at a later time We are,
however, by this Policy, modifying all of our existing penalty policies, to increase the initial
gravity component of the penalty calculation by 10% for those violations subject to the new
Supra note 1.
.000123
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PageS
rule.3 We believe this is consistent with the Congressional intent in passing the DCIA and is
necessary to implement effectively the mandated penalty increases that we have set forth in 40
CFR Part 19.' Accordingly, each penalty policy is now modified to apply the appropriate
guidelines set forth below4. These new guidelines apply to all penalty policies, regardless of
whether the policy is used for determining a specific amount to plead in a complaint or for
determining a bottom-line settlement amount. (A complete list of all of our existing penalty
policies is provided at the end of this memorandum.)5
A. If all of the violations in a particular case occurred before the effective date of the
new rule, no changes in our penalty policies are necessary.
B. For those judicial and administrative cases in which some, but not all. of the
violations occurred after the effective date of the new rule, the penalty policy calculations are
modified by following these five steps:
1. Perform the economic benefit calculation for the entire period of the violation,
going beyond the January 30,1997, effective date of the new .rule if appropriate.6 Do not
apply any mitigation or adjustment factors (such as, good faith, ability to pay. litigation
considerations or supplemental environmental projects) at this point.
2. Apply the gravity component of the penalty policy in the standard way (without
economic benefit which has been covered in step 1, above) for all violations to produce
the gravity component value. Do not apply any mitigation or adjustment factors (such as
good faith, self-audits, ability to pay, litigation considerations or supplemental
environmental projects) at this point.
3 This ten percent increase should be used in virtually all cases. However, in some cases
the Region, after consulting with the applicable OECA Division, may increase the gravity
amount by less than 10% — e.g., only 5 % — if it believes the gravity amount prior to the
inflation is already sufficiently high to fully account for the .severity of the violations. For
example, if all of the violations that occurred after the effective date were extremely minor, the
Region may elect to inflate the gravity component for these violations by less than 10%.
4 Where no specific penalty policy currently applies, follow the general penalty policies,
which are also modified by this penalty policy. Likewise, all new penalty policies being
prepared should take the inflation adjustment of statutory maximums into account.
5 Whenever a copy of a particular penalty policy is provided to someone, a copy of this
modifying policy should be provided as well.
6 The calculation of economic benefit is not affected by the new rule. If there is no
identifiable economic benefit component in a penalty policy, then all of the penalty is considered
gravity for purposes herein.
000124
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Page 4
3. Determine the percentage of the resulting gravity component value which
occurred after the effective date of the penalty inflation adjustment, January 30.1997-
Multiply the post-effective date percentage by 0.10. Next, add 1 to the resulting value,
and this will provide the gravity adjustment factor. For example, if approximately 40%
of the violations in a case occurred on or after January 31,1997, the gravity adjustment
factor would be calculated as follows: [0.10 x .40] + 1 = 1.040 (the resulting gravity
adjustment factor).
4. Multiply the gravity component from step 2 by the gravity adjustment factor from
step 3. This produces a gravity component that has been adjusted based on the penalty
inflation rule.
5. Add the subtotals from steps 1 and 4, above. Adjust the total, as appropriate
pursuant to the applicable policy, for good faith, self-audits, ability to pay, litigation
considerations, supplemental environmental projects, or other applicable mitigation
factors.
C. If all the violations in a particular case occurred on or after the effective date of the new
rule, the penalty policy calculation is modified by following these three steps:
1. Following the existing guidance, calculate the economic benefit covering the
entire period of the violations. Do not apply any mitigation or adjustment factors (such
as good faith, ability to pay, litigation considerations or supplemental environmental
projects) at this point.
*
- ,'
2. Apply the penalty policy in the standard way to calculate the gravity component
(essentially everything except economic benefit, covered in stepl, above, is gravity). Do
not apply any mitigation or adjustment factors (such as good faith, self-audits, ability to
pay, litigation considerations or supplemental environmental projects) at this point. After
this calculation has been completed, multiply it by 1.10, This produces a gravity amount
increased by 10 % in accordance with the DCIA.
3. Add the adjusted gravity amount in step 2 to the economic benefit component.
Adjust this sum, as appropriate, pursuant to the applicable policy for good faith, self-
audits, ability to pay, litigation considerations, supplemental environmental projects or
other applicable mitigation factors.
PENALTY PLEADING
If all of the violations in a particular case occurred before the effective date of the new
rule, no changes in our pleading practices are necessary. If some of the violations in a particular
000125
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Page5
case occurred after the effective date, then in judicial cases using "notice pleading" - that is
pleading "up to the statutory maximum amount" (and in any administrative cases which use
notice pleading), the penalty amount pled should use the newly adjusted maximum amounts. For
example, in a civil judicial complaint alleging violations of section 301 of the Clean Water Act,
the prayer for relief would be written as follows:
Pursuant to Section 309(d) of the Clean Water Act, 33 U.S.C. § 1319(d), and 40
CFR Part 19, assess civil penalties against [name] not to exceed $25,000 per day
for each violation of Section 301(a) of the Act, 33 U.S.C. §131 l(a), that occurred
prior to January 31,1997; and $27,500 per day for each violation of Section 301
of the Act, 33 U.S.C. § 1311, that occurred on or after January 31,1997, up to the
date of judgment herein. .
If all of the violations in a particular case occurred after the effective date of the "new rule,
then in judicial cases using "notice pleading" (and in any administrative cases which use notice
pleading) the penalty amount pled should use the newly adjusted maximum amounts. For
example, in a civil judicial complaint alleging violations of section 301 of the Clean Water Act,
the prayer for relief would be written as follows:
Pursuant to Section 309(d) of the Clean Water Act, 33 U.S.C. § 1319(d), and 40
CFR Part 19, assess civil penalties against [name] not to exceed $27,500 per day
for each violation of Section 301 of the Act, 33 U.S.C. §1311, up to the date of
judgment herein.
ADMINISTRATIVE PENALTY CAPS FOR CWA. SDWA. AND CAA
The DCIA and 40 CFR Part 19 raised the maximum penalty amounts that may be sought
for individual violations in administrative enforcement actions, as well as the total amounts that
may be sought in a single administrative enforcement action. This increase is particularly
relevant for administrative enforcement actions under the CWA, SDWA, and CAA which are
limited by penalty maximums that may be sought in a single action, (commonly called "caps").
For example, prior to the DCIA and 40 CFR Part 19, CWA Class II administrative penalties were
authorized up to $10,000 per violation and not to exceed $125,000 in a single administrative
action; since the effective date of the new rule, the new penalty maximums are now SI 1,000 and
$137,500, respectively. Similarly, Part 19 also raised the total penalty amounts that may be
sought in a single administrative enforcement action under the CAA from $200,000 to 5220,000
(although higher amounts may still be pursued with the joint approval of the Administrator and
Attorney General).
The new penalty maximums/caps may be used only in a single administrative
enforcement action under the CWA, SDWA, and CAA, provided the individual penalties for the
post-effective date violations equal or exceed the previous unadjusted maximums fcapsX In
000126
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Page 6
other words, the penalties assessed can only exceed the old maximums/caps, up to the new
maximums/caps, based solely on penalties for the new violations. For example, in a CWA Class
II administrative enforcement complaint, there must have been at least 12 violations occurring
after January 30,1997, in order to exceed the previous maximum penalty of $125,000 (12
violations X $11,000 = $132,000). If there are not at least 12 violations occurring after January
30,1997, then the maximum amount which may be sought in a CWA Class II administrative
enforcement action is still $125,000.
As another example, in a CAA administrative enforcement action for violations of
Section 203(a)(l) of the CAA, there must be at least eight violations that occurred after January
30,1997, for the new $220,000 maximum penalty cap to apply (8 violations X $27,500 =
220,000). If there are not at least eight violations after January 30,1997, then the maximum
amount that may be sought in such a CAA administrative enforcement action is still S200.000
(unless otherwise increased by joint agreement of the Administrator or Attorney General).
CHALLENGES IN THE COURSE OF ENFORCEMENT PROCEEDINGS
If a defendant should choose to challenge the validity of applying the adjusted penalty
provisions on the grounds that EPA did not have the authority to promulgate the rule which
adjusted the penalty maximums, please notify the Multimedia Enforcement Division of the
challenge, so that OECA and the Region can coordinate our response before a response is filed.
We expect our response to argue that the statutory penalties were raised by an Act of Congress,
and, therefore, the Agency merely carried out a non-discretionary ministerial duty in publishing a
rule identifying the specific provisions and applying the Congressional formula for the
adjustment. . ^
FURTHER INFORMATION
Any questions concerning the new rule and implementation can be directed to Steven
Spiegel in the Multimedia Enforcement Division, our workgroup chair, via email, or to (703)
308-8507- Additionally, offices that identify penalty policies which may need individual
modifications should send a memorandum via email to Steven Spiegel, specifying the policy and
the suggested changes.
LIST OF EXISTING EPA CIVIL PENALTY POLICIES
MODIFIED BY THIS MEMORANDUM
General
Policy on Civil Penalties (2/14/84)
000127
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Paae?
A Framework for Statute-Specific Approaches to Penalty Assessments (2/14/84)
Guidance on Use of Penalty Policies in Administrative Litigation, (12/15/95)
glean Air Act - Stationary Sources
Clean Air Act Stationary Source Civil Penalty Policy (10/25/91) (This is a generic policy
for stationary sources.)
Clarifications to the October 25,1991 Clean Air Act Stationary Source Civil Penaltv
Policy (1/17/92) '
i
There are a series of appendices that address certain specific subprograms within the
stationary source program.
Appendix I - Permit Requirements for the Construction or Modification of Major
Stationary Sources of Air Pollution (Not Dated)
Appendix H - Vinyl Chloride Civil Penalty Policy (Not Dated)
Appendix HI - Asbestos Demolition and Renovation Civil Penalty Policy (Revised
5/5/921
Appendix IV - Volatile Organic Compounds Where Reformulation of Low Solvent
Technology is the Applicable Method of Compliance (Not Dated)
Appendix V - Air Civil Penalty Worksheet
Appendix VI - Volatile Hazardous Air Pollutant Civil Penalty Policy (Revised 3/2/881
Appendix VII - Residential Wood Heaters (Not Dated)
Appendix VIII - Manufacture or Import of Controlled Substances in Amounts Exceeding
Allowances Properly Held Under Protection of Stratospheric Ozone (11/24/89)
Appendix IX - Clean Air Act Civil Penalty Policy Applicable to Persons Who Perform
Service for Consideration oh a Motor Vehicle Ah- Conditioner Involving the Refrigerant
or Who Sell Small Containers of Refrigerant in Violation of 40 CFR Part 82? Protection
of Stratospheric Ozone, Subpart B (Not Dated) t ' .
Appendix X - Clean Air Act Civil Penalty Policy for Violations of 40 CFR Part 82,
Subpart F: Maintenance, Service, Repair, and Disposal of Appliances Containing .
Refrigerant (6/1/94)
Appendix XI - Clean Air Act Civil Penalty Policy for Violations of 40 CFR Part 82,
Subpart C: Ban on Nonessential Products Containing Class I Substances and Ban on
Nonessential Products Containing or Manufactured with Class II Substances (Not Dated)
" t
Clean Air Act - Mobile Sources
Volatility Civil Penalty Policy (12/1/89)
Civil Penalty Policy for Administrative Hearings (1/14/93)
Manufacturers Programs Branch Interim Penalty Policy (3/31/93)
Interim Diesel Civil Penalty Policy (2/8/94)
Tampering and Defeat Device. Civil Penalty Policy for Notices of Violation (2/28/94)
' Draft Reformulated Gasoline and Anti-Dumping Settlement Policy (6/3/96) ,
Q00128
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PageS
TSCA
Guidelines for the Assessment of Civil Penalties Under Section 16 of TSCA (7.7/80)
(Published in Federal Register of 9/10/80. Note that the first PCS penalty policy was
published along with it, but the PCB policy is now obsolete.) This is a generic policy for
TSCA sources. There are a series of policies that address certain specific subprograms
within TSCA. They are as follows: .
Record keeping and Reporting Rules TSCA Sections 8,12, and 13
(8/5/96)
PCB Penalty Policy (4/9/90)
TSCA Section 5 Enforcement Response Policy (6/8/89), amended (7/1.93)
TSCA Good Laboratory Practices Regulations Enforcement Policy (4/9/85)
TSCA Section 4 Test Rules (5/28/86)
TSCA Title H - Asbestos Hazard Emergency Response Act (AHERA)
Interim Final ERP for the Asbestos Hazard Emergency Response Act (1/31/89)
ERP for Asbestos Abatement Projects; Worker Protection Rule (11/14/89)
Safe Drinking Water Act - UIC
Interim Final UIC Program Judicial and Administrative Order Settlement Penalty Policy -
- Underground Injection Control Guidance No. 79 (9/27/93)
Safe Drinking Water Act - PWS
*
New Public Water System-Supervision Program Settlement Penalty Policy (5/25/94)
EPCRA
Final Penalty Policy for Sections 302,303,304,311, and 312 of EPCRA and Section 103
ofCERCLA(6/13/90)
Enforcement Response Policy for Section 313 of EPCRA and Section 6607 of the
Pollution Prevention Act (8/10/92); Low Volume Alternate Threshold ERP Revisions
(12/18/96)
Clean Water Act
Revised Interim Clean Water Act Settlement Penalty Policy, February 28,1995
Clean Water Act Section 404 Civil Administrative Penalty Actions Guidance on
Calculating Settlement Amounts
RCRA
000129
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Page 9
RCRA Civil Penalty Policy (October 1990)
IISI
T LS. EPA Penalty Guidance for Violations of UST Regulations (November 1990)
Guidance for Federal Field Citation Enforcement (OSWER Directive-No 9610-16)
(October 1993)
CEECLA
Final Penalty Policy for Sections 302,303,304,311, and 312 of EPCRA and Section 103
of CERCLA (6/13/90)
General FIFRA Enforcement Response Policy (7/2/90)
FIFRA Section 7(c) ERP (2/10/86)
Enforcement Response Policy for the Federal Insecticide, Fungicide and Rodenticide Act:
Good Laboratory Practice (GLP) Regulations (9/30/91)
Attachments
cc: (w/attachments)
OECA Office Directors
ORE Division Directors
OSRE Division Directors
Regional Counsels, Regions I - X
Director, Office of Environmental Stewardship, Region I
Director, Division of Enforcement and Compliance Assurance, Region II
Director, Compliance Assurance & Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice, Region VIII
Regional Enforcement Coordinators, Regions I - X'
Chief, EES.DOJ
Deputy and Assistant Chiefs, EES, DOJ
CMP Workgroup Members:
Mike Northridge, OSRE
Bob Ward, OGC-CCID
Susan Dax, OCFO/OC/FMD
Anthony Britten, OPPE
David Drelich, ORE, WED
Richard Ackerman, ORE-AED ,
Jocelyn Adair, ORE-AED
Charlie Garlow, ORE- AED
Robin Lancaster, ORE-TPED
Ann Pontius, OECA /OPPA
Gary Secrest, ORE-AED
Mary Andrews, ORE-RED
000130
-------
PaaelO
Nancy Ketcham-Colwill, OGC-ARD
Lone Schmidt, OGC-CCID
Richard Witt, OGC-WD
Robert Friedrich, OGC-IGD
Lynn Johnson, OSWER/OPM/PARMS
David R .Williams, OPPTS
Edie Goldman, Region 1 ORC
Wilkey Sawyer, Region 2 ORC
Judith Katz, Region 3
Leif Palmer, Region 4 ORC
Will Waisner, Region 4
Evan L. Pearson, Region 6
Alma Eaves, Region 7
Kim Muratore, Region 9
000131
-------
Tuesday
December 31, 1996
Part V
Environmental
Protection Agency
40 CFR Parts 19 and 27
Civil Monetary Penalty Inflation
Adjustment Rule; Final Rule
000132
-------
69360 Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules and Regulations
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Parts 19 and 27
[FRL-S671-1]
Civil Monetary Penalty Inflation
Adjustment Rule
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Final rule.
SUMMARY: The Environmental Protection
Agency ("EPA") is issuing this final
Civil Monetary Penalty Inflation,
Adjustment Rule as mandated by the
Debt Collection Improvement Act of
1996 to adjust EPA's civil monetary
penalties ("CMPs") for inflation on a
periodic basis. Prior to this new law,
EPA's penalties had never been adjusted
for inflation. This rule will allow EPA's
penalties to keep pace with inflation
and thereby maintain the deterrent
effect Congress intended when it
originally specified penalties.
This first mandatory adjustment
increases almost all of EPA's penalty
provisions by ten percent (except for
new penalty provisions enacted into law
in 1996. which are not being increased).
The Agency is required to review its
penalties again at least once every four
years thereafter and to adjust them as
necessary for inflation according to a
specified formula.
EFFECTIVE DATE January 30.1997.
FOR FURTHER INFORMATION CONTACT:
Steven M. Spiegel. Office of Regulatory
Enforcement. Multimedia Enforcement
Division. Mail Code 2248W. 401M
Street. SW. Washington. D.C. 20460. or
at (703) 308-8507. Further information
may also be requested by electronic mail
(e-mail) to:
spiegeljteven9epamail.epa.gov.
SUPPLEMENTARY INFORMATION: Pursuant
to die Federal Civil Penalties Inflation
Adjustment Act of 1990 (28 U.S.C. 2461
note; Pub. L. 101-410. enacted October
5.1990; 104 Stat. 890). as amended by
the Debt Collection Improvement Act of
1996 (31 U.S.C. 3701 note; Public Law
104-134. enacted April 26.1996; 110
Stat 1321). ("DCIA'l. each Federal
agency is required to issue regulations
adjusting for inflation the maximum
civil monetary penalties that can be
imposed pursuant to such agency's
statutes. With die adoption of this rule
implementing these statutes, all
violations which take place after
January 30.1997 will be subject to the
new statutory maximum civil penalty
amounts.
With the exception of the new penalty
provisions added by the 1996
amendments to the Safe Drinking Water
Act. all of die statutory penalty
provisions administered by EPA are
being increased. All of these increases
are for the maximum allowed, ten
percent. The affected penalty provisions
and their statutory maximum amounts.
are set out in Table 1 of the new 40 CFR
19.4.
Section 5 of the DCIA sets forth the
formula for adjusting the penalties for
inflation:
The Inflation adjustment described under
section 4 shall be determined by increasing
the maximum CMP or the range of minimum
and maximum CMPs. as applicable, for each
CMP by the cost-of-living adjustment. • • •
The term "cost-of-living" adjustment is the
percentage for each CMP by which the
Consumer Price Index (CPI) for the month of
June of the calendar year preceding the
adjustment, exceeds the Consumer Price
Index for the month of June of the calendar
year in which the amount of such CMP was
last set or adjusted pursuant to law. Any
increase determined under this amendment
shall be rounded • • -.,
However, the DCIA also sets a ten
percent cap on die first adjustment for
inflation. Since EPA's penalties have
never previously been adjusted for
inflation, this first starutorily required
adjustment will be limited to ten
percent Table A below sets forth each
CMP provision which is being increased
pursuant to die DCIA and die
intermediate calculations performed to
arrive at die adjusted final maximum
penalty contained in the last column
and in today's rule.
TABLE A.—SUMMARY OF CML MONETARY PENALTY INFLATION ADJUSTMENT CALCULATIONS
U.S. Cod*
citation
7 U.S.C. 1361(1) _
TU.S.C. 1361 (2) _
15U.S.C.2615 —
15 U.S.C. 2647(a) ..
31 U.S.C.
3802(aV1).
* r^ 'f*
31 U.S.C.
M02(aV2).
™*™/\*/*
33 U.S.C. 1319(d) ..
33U.S.C.
1319(g)(2)(A).
Clvfl monetary penalty
description m
FEDERAL INSECTICIDE. FUN-
GICIDE. & RODENTICIDE ACT
CIVIL PENALTY-GENERAL—
COMMERCIAL APPLICATORS.
ETC.
FEDERAL INSECTICIDE. FUN-
GICIDE. & RODENTICIOE ACT
CML PENALTY— PRIVATE AP-
PLICATORS-1ST I SUBSE-
QUENT OFFENSES OR VIOLA-
TIONS.
TOXIC SUBSTANCES CONTROL
ACT CML PENALTY.
ASBESTOS HAZARD EMER-
GENCY RESPONSE ACT CML
PENALTY.
PROGRAM FRAUD CML REM-
EDIES ACT/VIOLATION IN-
VOLVING FALSE CLAIM.
PROGRAM FRAUD CML REM-
EDIES ACT/VIOLATION IN-
VOLVING FALSE STATEMENT.
CLEAN WATER ACT VIOLATION/
CML JUDICIAL PENALTY.
CLEAN WATER ACT VIOLATION/
ADMINISTRATIVE PENALTY
PER VIOLATION AND MAXI-
MUM.
Yearpen-
, alty
flirtount
w»» last
'"set by
law
1978
197B
«
1976
, 1986
1986
1986
1987
1987
Maximum pen-
any amount set
by law «$ of
10/23/96
$5,000 __._.__
500/1.000
25,000
5.000
5.000
5,000 ................
25.000 — _.
10.000/25.000 ..
Inflation factor cal-
culation'
456.7/195.3
•
456.7/195.3
•
456.7/170.1
•
456.7/327.9
456.7/327.9
,
456.7/327.9
456.7/340.1
456.7/340.1
Maximum pen-
alty incnaM
amount after
P.L. 101-410
rounding'
S7.000
700/1,000 ____
40.000
2.000 _______
2 000 _____..
2.000 ________
'
10,000 __.___..
3.000/10,000 __
Maximum pen-
alty amount
after increai.
and P.L. 101-
410 rounding
$12.000
1,200/2,000 —
65,000 .._—_.
7,000
,
7.000
7,000
35,000
13.0XXV35.000 ..
Maxknum pen-
aay amount
after P.U 101-
410 rounding
and 10% nmit
S5.500
550/1.100
27,500
5.500
5,500
5.500
27.500
11.000/27,500
000133
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Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules and Regulations 69361
TABLE A.—SUMMARY OF CIVIL MONETARY PENALTY INFLATION ADJUSTMENT CALCULATIONS—Continued
US. Coda
^a^jf • m
cnauon
33 U.S.C.
1319(9X2X8).
33 U.S.C.
1321(bXER VIOLA.
TION PER DAY OR PER BAR-
REL OR UNIT.
CLEAN WATER ACT VIOLATION/
CIVIL JUDICIAL PENALTY OF
SEC311(c)*(«X1XB).
CLEAN WATER ACT VIOLATION/
CIVIL JUDICIAL PENALTY OF
SEC 3110).
CLEAN WATER ACT VIOLATION/
MINIMUM CIVIL JUDICIAL
PENALTY OF SEC 311(6X3)-
PER VIOLATION OR PER BAR.
REUUNIT.
MARINE PROTECTION. RE-
SEARCH AND SANCTUARIES
ACT VIOL SEC 104b(d).
MARINE PROTECTION. RE-
SEARCH AND SANCTUARIES
ACT VIOLATIONS— FIRST t
SUBSEQUENT VIOLATIONS.
SAFE DRINKING WATER ACT/
CIVIL JUDICIAL PENALTY OF
SEC 1414(6).
SAFE DRINKING WATER ACT/
CIVIL JUDICIAL PENALTY OF
SEC 1414(e).
SAFE DRINKING WATER ACT/
CIVIL JUDICIAL PENALTY OF
SEC. 1414(9X3XA). _^
SAFE DRINKING WATER ACT/
MAXIMUM ADMINISTRATIVE
PENALTY PER SEC.
1414(9X3X8).
CIVIL JUDICIAL PENALTY/VIOLA-
TIONS OF REQS— UNDER-
GROUND. INJECTION CON-
TROL.
CIVIL ADMINISTRATIVE PEN-
ALTY—VIOLATIONS OF
REQS— UNDERGROUND IN-
JECTION CONTROL— PER
VIOLATION AND MAXIMUM.
CIVIL ADMINISTRATIVE PEN-
ALTY—VIOLATIONS OF
REQS— UNDERGROUND IN-
JECTION CONTROL PER VIO-
LATION I MAXIMUM.
VIOLATION/OPERATION OF
NEW UNDERGROUND INJEC-
TION WELL.
WILLFUL VIOLATION/OPER-
ATION OF NEW UNDER-
GROUND INJECTION WELL.
ATTEMPTING TO OR TAMPER-
ING WITH PUBLIC WATER
SYSTEM/CIVIL JUDICIAL PEN-
ALTY.
FAILURE TO COMPLY W/ORDER
ISSUED UNDER SEC.
V441(cX1).
REFUSAL TO COMPLY WITH
REQS OF SEC. 1445(a) OR (6).
Yaarpan-
tty
amount
wattast
tat6y
law
1987
1990
1990
1990
1990
1990
1990
19S8
1988
• 1986
1986
1986
*
•/
•* 1986
1986
1986
1986
1974
1974
1986
1974
1986
Maximum pan-
a«y amount tat
by law a* of
10/23/96
10.00011 25.000
10.000/25,000 _
io.ooon2S.ooo
.
10,000 or ___.
1.000 par 6Ai -.
25.000 «.____
98,000 „„,,„„„„
100,000 or
3.000 par 6A|.
600 ™._..
50,000/125.000
25.000
25,000
25,000 ™
5.000
25,000
10.000/125.000
5.000/125.000 ..
5,000
10,000
20,000/50.000 ..
2.500
25,000
Inflation factor cat
cuiatton'
458.7/340.1
*
'
456.7/389.1
;
456.7/389.1
456.7/389.1
456.7/389.1
456 7/389 1
• ~»W* 9 m vO W» i
456.7/389.1
4S6.7/3S3.5
456.7/353.5
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
,
456.7/146.9
456.7/146.9
456.7/327.9
456.7/146.9
456.7/327.9
Maximum pao-
atylncraaM
amount altar
P.L 101-410
rounding1
3.000/40.000 —
2.0000.000
2.000720.000 _
*
5.000 or 200 __
par 6arral/unil _.
5.000 „__
5.000
15.000 or 1.000
parb/u.
200 .
15.000/40.000 _
10,000 ..............
10.000 »........._.
10.000
2.000
10.000 .
4.000/50,000 „...
2,000/50,000 ....
11,000
21.000
•
10.000/20.000 _
5.000
10,000
Maximum pan-
aly amount
Marlneraaaa
and P.L. 101-
410reuntiing
13.000/165.000
12.00000.000.
12.000/145 .000
15.000 or 1.200
par bair»l\irui ..
30.000
M AMI
vVI*UUU TI i iijii 11
115.000 or
4.000 par tar-
rcVunk.
800 _i. ;
65.000/1 65.000
35.000
35.000
35.000
7.000
35,000
14.0007175.000
7.000/175.000 .
s
16,000
31.000
30.000770.000 -
7,500 „,„,. „..____
35.000 .1.
MaxmumpM.
any amount
attar P.L 101-
410 rounding
andlOHbnft
11,000/137.500
11.000/27,500
11.000/137.500
11.000 or 1.100
par
banal of unit
\
27.500
«« CfM
27,500
.
11.000 or
3.300
per Untuni
660
55.000/137,500
27,530
27.500
27.500
5.500
.
27.500
1
11.000/137.500
5.500/137.500
5.500
11.000
22.000/55.000
t
9 7CA
{.tl wW
.
27.500
000134
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69362 Federal Register / Vol. 61. No. 252 / Tuesday. December 31, 1996 / Rules and Regulations
TABLE A.—SUMMARY OF CIVIL MONETARY PENALTY INFLATION ADJUSTMENT CALCULATIONS—Continued
U.S. Coda
CftltiOfl
CMI
penaly
Maximum pen-
ally amount
after increase
and P.L 101-
410 rounding
Maxnwm pen-
alty amount
after P.L. 101-
410 rounding
and 10% limit
Maximum pen-
alty increase
amount after
P.L 101-410
rounding*
aly I Maximum p«n-
Inflatton factor cat-
calatioo1
amount I anr amount set
1968 5,000/SO.OOO
1904 25.000
1984 25.000
1976 25,000
1977 25.000/200.000
1990 200.000 ;
1990 25.000
1986 25.000
1986 25.000
42U.S.C.300>-
23CD-
42U.S.C.
6928(aX3). .
42U.S.C.6928(C)_
ttU.S.C.6928(g)_
42U.S.C.
6928(hK2).
42U.S.C.6934(e)-
42 U.S.C. 6973(0)-
42 U.S.C.
6991e(aK3).
42U.S.C.
6991e(d)(1).
42U.S.C.6991e(d)
42U.S.C.6992(d)
(2)-
42 U.S.C. 6992d(a)
(<)•
42U.S.C.6992d(d)
42 U.S.C. 7413(b) .
42U.S.C.
7413(d)(1).
42U.S.C.
7413(dX3).
42U.S.C.7524(a) „
42U.S.C.7S24(a)
« U.S.C. 7S24(c)
«U.S.C.7545(d)
42U.S.C.
9604{eX5XB).
«U.S.C. 9606(b)
VIOLATIONS/SECTION 1463{b>-
FIRST OFFENSE/REPEAT OF
FENSE.
RESOURCE CONSERVATION A
RECOVERY ACT/VIOLATION
SUBTITLE C ASSESSED PER
ORDER.
RES. CONS, A REC. ACT/CON-
TINUED NONCOMPUANCE OF
COMPLIANCE ORDER.
RESOURCE CONSERVATION
RECOVERY ACT/VIOLATION
SUBTITLE C.
RES. CONS. A REC. ACT/NON-
COMPLIANCE OF CORREC-
TIVE ACTION ORDER.
RES. CONS. A REC. ACT/NON-
COMPLIANCE WITH SECTION
3013 ORDER,
RES. CONS. A REC. ACT/VIOLA-
TIONS OF ADMINISTRATIVE
ORDER
RES. CONS. A REC. ACT/NON-
COMPUANCE WITH UST
AOMIN. ORDER.
RES. CONS. A REC. ACT/FAIL-
URE TO NOTIFY OR SUBMIT
FALSE INFO.
VIOLATIONS OF SPECIFIED UST
REGULATORY REQUIRE-
MENTS.
NONCOMPUANCE W/MEDICAL
WASTE TRACKING ACT AS-
SESSED THRU ADMIN ORDER.
NONCOMPUANCE W/MEDICAL
WASTE TRACKING ACT
ADMIN ORDER.
MEDICAL WASTE TRACKING
ACT VIOLATIONS—JUDICIAL
PENALTY.
CLEAN AIR ACT/VIOLATIONS/
OWNERS A OPS OF STATION-
ARY AIR POLLUTION
SOURCES—JUDICIAL PEN-
ALTIES.
CLEAN AIR ACT/STATIONARY
AIR POLLUTION SOURCES-
ADMINISTRATIVE PENALTIES
PER VIOLATION AND MAXI-
MUM.
CLEAN AIR ACT/MINOR
VIOLATIONS/ STATIONARY
AIR POLLUTION SOURCES-
FIELD CITATIONS.
TAMPERING OR MANUFAC-
TURE/SALE OF DEFEAT DE-
VICES IN VIOLATION OF
7522(aX3XA) OR (a)(3XB>-BY
PERSONS.
VIOLATION OF 7522 (»)PXA) OR
(aX3XB}-BY MANUFACTUR-
ERS OR DEALERS: ALL VIO-
LATIONS OF 7S22(«) (1). (2),
(4). A (5) BY ANYONE.
ADMINISTRATIVE PENALTIES
AS SET IN 7S24(a) & 7545(d)
WITH A MAXIMUM ADMINIS-
TRATIVE PENALTY.
VIOLATIONS OF FUELS REGU-
LATIONS.
SUPERFUNO AMEND. & REAU-
THORIZATION ACT/NON-
COMPLIANCE WREOUEST
FOR INFO OR ACCESS.
SUPERFUND/WORK NOT PER
.FORMED VW1MMINENT. SUB-
STANTIAL ENOANGERMENT.
_ 5.SOO/S5.000
_ 27.500
27.50C/220.000
27.500
000135
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Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules and Regulations 69363
TABLE A.—SUMMARY of CIVIL MONETARY PENALTY INFLATION ADJUSTMENT CALCULATIONS—Continued
U.S. Cod*
citation
42 U.S.C. 9609(«) I
(D).
42 U.S.C. 9609(b) .
42 U.S.C. 9609(e) -
42 U S C 96O9fe)
^* W*<*»\*» *W**w^W^ ••
42 U.S.C. 11045(a)
& (b) (1). (2) A P).
42 U.S.C. 11045(b)
(2) 4 P).
42 U.S.C.
11045(3(1).
42 U.S.C.
11045(3(2).
42U.S.C. 11045(d)
(2) & (3).
CM monetary penally
description
SUPERFUNO/AOMIN. PENALTY
VIOLATIONS UNDER 42 U.S.C.
SECT. 9603. 9608. OR 9822+.
SUPERFUND/ADMIN. PENALTY
VIOLATIONS— SUBSEQUENT.
SUPERFUND/CIVIL JUDICIAL
PENALTY/VIOLATIONS OF
SECT. 9603. 9608. 9622.
SUPERFUNO/CIVIL JUDICIAL
PENALTY/SUBSEQUENT VIO-
LATIONS OF SECT. 9603,
9608.9622.
EMERGENCY PLANNING AND
COMMUNITY RIGHT-TO-KNOW
ACT CLASS 1 t II ADMINIS-
TRATIVE AND CIVIL PEN-
ALTIES.
EPCRA CLASS 1 & II ADMINIS-
TRATIVE AND CIVIL PEN-
ALTIES— SUBSEQUENT VIO-
LATIONS.
EPCRA CIVIL AND ADMINISTRA-
TIVE REPORTING PENALTIES
FOR VIOLATIONS OF SEC-
TIONS 11022 OR 11023.
EPCRA CIVIL AND ADMINISTRA-
TIVE REPORTING PENALTIES
FOR VIOLATIONS OF SEC-
TIONS 11021 OR 11043(b).
EPCRA— FRIVOLOUS TRADE
SECRET CLAIMS— CIVIL AND
ADMINISTRATIVE PENALTIES.
Year pen-
alty
einiouRt
was last
set by
tow
1986
1986
1986
1986
1986
.
1986
1986
1966
1986
Maximum pen-
ally amount set
by tow as of
10/23/96
25.000
75.000
25,000 ______
75.000
25,000
75,000
25,000
10,000 _______
25.000
Inflation factor cal-
culation'
456.7/327.9
,
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
456.7/327.9
Maximum pen-
aKy increase
amount alter
PJ_ 101-410
rounding1
10.000 _______
30.000 _______
10.000
30.000 __ '
"
10.000
30.000 _„....___
10.000 _._.....
4.000 _.___
10.000 _______
Maximum pen-
ally amourt
after increase
and P.L. 101-
410 rouncrg
35.000 _____
105.000
35.000
.
1OSOOQ
t
35.000
105,000 __,
35,000 -..-.,
•
u.ooo :_
35,000 ,..-..,......
Mannum pen-
alty amount
after P.L. 101-
410 rounding
and 10% Gnu
27.500
82.500
27.500
82.500
27.500
82.500
27.500
11. COO
27.500
< The "Wlation factor" b the reiuK of dividing mt June 1995 CPI by tne CPI for June of the year tne penalty was last set or adjusted.
' The penalties must be rounded after the inflation adjustment pursuant to Public Law 101-410 Sec SA.
Future adjustments also be made in
accordance with the statutory formula.
Since today's inflation adjustments are
being made in December 1996. the next
scheduled adjustment will cover
inflation from June 1996 to June of the
year in which the next adjustment is
made. The DCIA requires that penalties
be adjusted for Inflation at least once
every four years.
Procedural Requirements
I. Administrative Procedure Act
In accordance with 5 U.S.C. 553(b).
the Administrative Procedure Act
("APA"). EPA generally publishes a rule
in a proposed form and solicits public
comment on it before issuing the rule in
final.'However. 5 U.S.C. 553(b)(3)(B). of
the APA provides an exception to the
public comment requirement if the
agency finds good cause to omit
advance notice and public participation.
Good cause is shown when public
comment is "impracticable.
unnecessary^ or contrary to the public
interest".
Accordingly. EPA finds that providing
an opportunity for public comment
prior to publication of this rule is not
necessary because EPA is carrying out a
ministerial, non-discretionary duty
specified in an Act of Congress. This
rule incorporates requirements
specifically set forth in the DCIA
requiring EPA to issue a regulation
implementing inflation adjustments for
"all'fts civil penalty provisions by
October 23,1996. The formula for the
amount of the penalty adjustment is
prescribed by Congress in the DCIA as
well. Prior notice and opportunity to
comment are therefore unnecessary in
this case because these changes are not
subject to the exercise of discretion by
EPA. These technical changes, required
by law. do not substantively alter the
existing regulatory framework nor in
any way affect the terms under which
civil penalties are assessed by EPA.
II. Small Business Regulatory
Enforcement Fairness Act
Under 5 U.S.C. 801(a)(l)(A). as added
by the Small Business Regulatory
Enforcement Fairness Act of 1996
("SBREFA"). EPA submitted a report
containing this rule and other required
information to the U.S. Senate, the U.Si
House of Representatives and the
Comptroller General of the United
States prior to publication of the rule in
today's Federal Register. This rule is a
not a "major rule" as defined bv 5
U.S.C. 804(a).
III. Executive Order 12866-Regulatory
Review
Under Executive Order 12866. (58 FR
51735 (October 4.1993)). the Agency
must determine whether the regulatory
action is "significant" and therefore
subject to Office of Management and
Budget ("OMB") review and the
requirements of the Executive Order.
The Executive Order defines
"significant regulatory action" as one
that is likely to result in a rule that may:
(1) have an annual effect on the economy
of S100 million or more or adversely affect
In a material way the economy, a sector of
the economy, productivity, competition, jobs,
the environment, public health or safety, or
State, local, or tribal governments or
communities:
(2) create a serious inconsistency or
otherwise interfere with an action taken or
planned by another agency:
(3) materially alter the budgetary impact of
entitlements, grants, user fees, or loan
programs or the rights and obligations of
recipients thereof: or
(4) raise novel legal or policy issues arising
out of legal mandates, the President's
priorities, or the principles set forth in the
Executive Order.
000136
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69364 Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules and Regulations
EPA has determined that this rule is
not a "significant regulatory action"
under the terms of Executive Order
12866 and b therefore not subject to
OMB review.
IV. Unfunded Mandates Reform Act
Title n of the Unfunded Mandates
Reform Act of 1995 ("UMRA"). Public
Law 104-4. establishes requirements for
Federal agencies to assess the effects of
certain regulatory actions on State.
local, and tribal governments and the
private sector. Under sections 201.202
and 205 of the UMRA, EPA generally
must assess effects and prepare a
written statement of economic and
regulatory alternatives analyses for
proposed and final rules with Federal
mandates, as defined by the UMRA. that
may result in expenditures to State,
local, and tribal governments, in the
aggregate, or to the private sector, of
$100 million or more in any one year.
UMRA Section 201 excepts agencies
from assessing effects on State, local or
tribal governments or the private sector
of rules that incorporate requirements
specifically set forth in law. Since this
rule incorporates requirements
specifically set forth in the DCIA. EPA
is not required to assess its regulatory
effects under Section 201. Further, the
section 202 and 205 requirements do
not apply to today's action because they
apply only to- rules for which a general
notice of proposed rulemaking is
published, and such notice was not
published for this rule since it was not
required based on the finding of good
cause contained in Section I above.
Additionally, today's action contains no
Federal mandates for State, local or
tribal governments or for the private
sector because it does not impose any
enforceable duties on these entities.
In addition, even if the assessment
requirements of UMRA Title U
otherwise applied to this rule, the
requirements of section 203 of UMRA
(requiring EPA to develop a small
government agency plan before EPA
establishes any regulatory requirements
that may significantly or uniquely affect
small governments, including tribal
governments) would not apply here.
This rule contains no regulatory
requirements that might significantly or
uniquely affect small governments
because the prescribed inflation
adjustments do not change a small
government's regulatory obligations.
Additionally, this rule will have a
similar effect on all individuals and
entities subject to civil monetary
penalties.
V. Regulatory Flexibility Act
In accordance with 5 U.S.C. 603. the
Agency has determined that the
regulation being issued today is not
subject to the Regulatory Flexibility Act
("RFA"). which generally requires an
agency to conduct a regulatory
flexibility analysis of any significant
impact the rule will have on a
substantial number of small entities. By
its terms, the RFA applies only to rules
subject to notice-and-comment
rulemaking requirements under the
APA or any other statute. Today's rule
is not subject to notice and comment
requirements under the APA or any
other statute because it is exempted. As
discussed in Section I. while the rule is
subject to the APA, the Agency has
invoked the "good cause" exemption
from the APA notice and comment
requirements.
The Agency nonetheless has assessed
the potential oTthis rule to adversely
impact small entities. This rule contains
no regulatory requirements that might
significantly or uniquely affect small
entities because the prescribed inflation
adjustments have similar effect on all
entities subject to civil monetary
penalties and does not substantively
•alter the existing regulatory framework.
VI. Paperwork Reduction Act
This action contains no reporting or
record keeping requirements for any
non-federal persons or entities and
consequently.is not subject to the
Paperwork Reduction Act. 44 U.S.C.
3501etseq.
List of Subjects
40 CFRPart 19
Environmental protection.
Administrative practice and procedure.
Penalties.
40 CFRPart 27
Administrative practice and
procedure. Assessments. False claims.
False statements. Penalties.
Dated: December 20.1996.
Carol M. Browner.
Administrator.'
For the reasons set out in the preamble.
title 40. chapter I of the Code of Federal
Regulations is amended by adding a new part
19 as follows:
1. By adding a new part 19 to read as
follows:
PART 19—ADJUSTMENT OF CIVIL
MONETARY PENALTIES FOR
INFLATION
s«c
19.1 Applicability.
19.2 Effective Date.
19.3 [Reserved].
19.4 Penalty Adjustment and Table.
Authority: Pub. L 101-410.104 Scat. 890.
28 U.S.C. 2461 note: Pub. L 104-134.110
Stat 1321.31 U.S.C. 3701 note.
PART 19—ADJUSTMENT OF CIVIL
MONETARY PENALTIES FOR
INFLATION
§19.1 Applicability.
This part applies to each statutory
provision under the laws administered
by the Environmental Protection Agency
concerning the maximum civil
monetary penalty which may be
assessed in either civil judicial or
administrative proceedings.
§19.2 Effective Oat*.
The increased penalty amounts set
forth in this rule apply to all violations
under the applicable statutes and
regulations which occur after January
30.1997.
§19.3 [Reserved].
§19.4 Penalty Adjustment and Table.
The adjusted statutory penalty
provisions and their maximum
applicable amounts are set out in Table
1. The last column in the table provides
the newly effective maximum penalty
amounts.
TABLE 1 OF SECTION 19.4.—CIVIL MONETARY PENALTY INFLATION ADJUSTMENTS
U.S. Code citation •
Civil monetary penalty description
New maximum
penalty amount
7U.S.C. 138
7U.S.C. 136(2)
.15U.S.C. 2615 .....^^
TIT
31 U.S.C. 3802(a)(1)
FEDERAL INSECTICIDE, FUNGICIDE. & RODENTICIDE ACT CIVIL PENALTY— S5.500
.—COMMERCIAL APPLICATORS. ETC.
FUNGICIDE.&RgriFNTir'pc-t*"' ' IJI1 6l-fJ'M I Y'—PPI- 550/1.000
VATE APPLICATORni IM I'icii i iiUTFTn ii n 111 OFFENSES OR VIOLATIONS.
-rdXIU i>UUi!TANCbt> CONTROL ACTxivTTPEWWrtt^.™..... 27.500
ASBESTOS HAZARD EMERGENCY RESPONSE ACT CIVHTPEttttSV—___„ 5.500
PROGRAM FRAUD CIVIL REMEDIES ACT/VIOLATION INVOLVING FALSECtAl
000137
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Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996'/ Rules and Regulations 69365
TABLE 1 OF SECTION 19.4.—CML MONETARY PENALTY INFLATION ADJUSTMENTS—Continued
U.S. Code citation
Civfl monetary penalty description
New maxmum
penalty amount
31 U.S.C. 3802(a)(2) ............
33 U.S.C. 1319(d)
33 U.S.C. 1319(g)(2)(A) ....
33 U.S.C. 1319(g)(2)(B) ,
33 U.S.C. 1321(b)(6)(B)(l) .....
33 U.S.C. 1321(b)(6)(B)(ii) „...
33 U.S.C. 1321{b)(7)(A)
33 U.S.C. 1321(b)(7)(B)
33 U.S.C. 1321(b)(7)(C)
33 U.S.C. 1321(b)(7)(D)
. 33 U.S.C. 1414b(d)
33 U.S.C. 1415{a)
42 U.S.C. 300g-3(b)
42 U.S.C. 300g-3(c)
42 U.S.C. 300g-3(g)(3)(A)
42 U.S.C. 300g-3(g)(3}(B).....
42 U.S.C. 300h-2(b)(1)
42 U.S.C. 300h-2(c)(1)
42 U.S.C. 300h-2(c)(2)
42 U.S.C. 300h-3(c){1)
42 U.S.C. 300h-3{c)(2)
.42 U.S.C. 300M(b)
42 U.S.C. 300j(e)(2)
42 U.S.C..300j-4(e)
42 U.S.C. 300j-23(d) ^
42 U.S.C. 6928(a)(3).
42 U.S.C. 6928(c)
42 U.S.C. 6928(g) -
42 U.S.C. 6928(h)(2) »
42 U.S.C. 6934{e)
42 U.S.C. 6973(b)
42 U.S.C. 6991e(a)(3)
42 U.S.C. 6991e(d)(1)
42 U.S.C. 6991e(d)(2)
42 U.S.C. 6992d(a){2)..—
42 U.S.C. 6992d(a)(4)
PROGRAM FRAUD CIVIL REMEDIES ACT/VIOLATION INVOLVING FALSE STATE-
MENT.
CLEAN WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY
CLEAN WATER ACT VIOLATION/ADMINISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM.
CLEAN WATER ACT VIOLATION/ADMINISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM.
CLEAN WATER ACT VIOLATION/ADMIN PENALTY OF SEC 311(B)(3)&(J) PER VIO-
LATION AND MAXIMUM.
WATER ACT VIOLATION/ADMIN PENALTY OF SEC 311(B)(3)i(J) PER VIO-
iON AND MAXIMUM.
WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY OF SEC 311(b)(3)—
PER VIOLATION PER DAY OR PER BARREL OR UNIT.
CLEAN VATER ACT VIOLATION/CIVIL JUDICIAL PENALTY OF si
CLEAN MA-
CLEAN WATER
311(b){3)—PER
MARINE PROTB
MARINE PROTECT!
VIOLATION/CIVIL JUDICIAL PENALTY OF SEC 311Q) ..../....
' VIOLATION/MINIMUM CIVIL JUDICIAL PENALTY OF SEC
,TION OR PER BARREL/UNIT.
RESEARCH & SANCTUARIES ACT VIOL SEC
.RESEARCH AND SANCTUARIES ACT \0OLATIONS—
42 U.S.C. 6992d(d)
42 U.S.C. 7413(b)'.
42 U.S.C. 7413(d}(1)
42 U.S.C. 7413(d)(3) ....
42 U.S.C. 7524(3)
42 U.S.C. 7524(a)
42 U.S.C. 7524{c)
""A
42 U.S.C. 7545(d)
42 U.S.C. 9604(e)(5)(B)
FIRST AND SUBSEQUENT VIOLATIONS.
SAFE DRINKING WATER AOtfCIVlL JUDICIAL PENALTY OF SEC/f414(b)
SAFE DRINKING WATER ACT/OVIL JUDICIAL PENALTY OF SEC 1414(c)
SAFE DRINKING WATER ACT/CrVlL JUDICIAL PENALTY OF SEC. 1414(g)(3)(a> .....
SAFE DRINKING WATER ACT/MAXIMUM ADMINISTRATIVE PENALTY PER SEC.
1414(g)(3)(B).
CIVIL JUDICIAL PENALTY/VIOLATIONS\OF REQS—UNDERGROUND INJECTION
CONTROL (UIC).
CIVIL ADMIN PENALTY/VIOLATIONS OF Ul\REQS£-PER VIOLATION AND MAXI-
MUM.
CIVIL ADMIN PENALTY/VIOLATIONS OF UIC JfiQS—PER VIOLATION AND MAXI-
MUM.
VIOLATION/OPERATION OF NEW UNDERGROUND INJECTION WELL
WILLFUL VIOLATION/OPERATION OF NEW UNDERGROUND INJECTION WELI
ATTEMPTING TO OR TAMPERING WITH PUBLIC WATER SYSTEM/CIVIL JUDI-
CIAL PENALTY.
FAILURE TO COMPLY W/ORDER BSUED UNDER SEC. 1441(bM1)
REFUSAL TO COMPLY WITH REQS. OF SEC. 1445(a) OR (b) „
VIOLATIONS/SECTION 1463(b/-FIRST OFFENSE/REPEAT OFFEflfiE
RESOURCE CONSERVATION & RECOVERY ACT/VIOLATION SUBTITLE C AS-
SESSED PER-ORDER.
RES. CONS. 4 REC. .ACT/CONTINUED NONCOMPLIANCE OF COMPLIANCE
ORDER.
RESOURCE CONSERVATION & RECOVERY ACT/VIOLATION SUBTITLE C N
RES. CONS. & RE2. ACT/NONCOMPLIANCE OF CORRECTIVE ACTION ORDERS...
RES. CONS. & 8EC. ACT/NONCOMPLIANCE WITH SECTION 3013 ORDER
RES. CONS. 4/REC. ACT/VIOLATIONS OF ADMINISTRATIVE ORDER
RES. CONS/i REC. ACT/NONCOMPLIANCE WITH UST ADMINISTRATIVE ORDER
RES. CONS. & REC. ACT/FAILURE TO NOTIFY OR SUBMIT FALSE INFO
VIOLATJ0NS OF SPECIFIED UST REGULATORY REQUIREMENTS
NONCOMPLIANCE W/MEDICAL WASTE TRACKING ACT ASSESSED THRU ADMIN
Ol~
OMPLIANCE W/MEDICAL WASTE TRACKING ACT ADMINISTRATIVE
ORDER.
VIOLATIONS OF MEDICAL WASTE TRACKING ACT—JUDICIAL PENALTIES
CLEAN AIR ACT/VIOLATION/OWNERS & OPS OF STATIONARY AIR POLLUTION
SOURCES—JUDICIAL PENALTIES.
CLEAN AIR ACT/VIOLATION/OWNERS & OPS OF STATIONARY AIR POLLUTION
SOURCES—ADMINISTRATIVE PENALTIES PER VIOLATION & MAX.
CLEAN AIR ACT/MINOR VIOLATIONS/STATIONARY AIR POLLUTION SOURCES-
FIELD CITATIONS.
TAMPERING OR MANUFACTURE/SALE OF DEFEAT DEVICES IN VIOLATION OF
7522(a)(3)(A) OR (a)(3)(B)-BY PERSONS.
VIOLATION OF 7522(a)(3)(A) OR (a)(3)(B>-BY MANUFACTURERS OR DEALERS:
ALL VIOLATIONS OF 7522(a)(1). (2). (4). & (5) BY ANYONE.
ADMINISTRATIVE PENALTIES AS SET IN 7524(a) & (7545{d) WJTH A MAXIMUM
ADMINISTRATIVE PENALTY.
VIOLATIONS OF FUELS REGULATIONS
SUPERFUND AMEND. & REAUTHORIZATION ACT/NONCOMPLIANCE W/RE-
QUEST FOR INFO OR ACCESS.
5.500
1 27.500
I'll,000/27.500
; 11.000/137.500
11.000/27:500
11.0JJO/137.500 '
i.OOO or 1.100 per
barrel or unit
27,500
• 27,500
11.000 or 3.300
per barrel or unit
660
55.000/137.500
27.500
27,500
27,500
5.500
27,500
11.000/137.500
11,000
5.500
11.000
22.000/55.0CO
2.750
27.500
5.500/55.000
27.500
27.500
27.500
27,500
5.500
i.500
j 2\500
\"X
i 11.0C
! 27.500
27.500
27.500
27.500
27.500/220.000
! 5.500
2.750
27.500
220.000
27.5dO
27.500
00013i
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69366 Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules and Regulations
TABLE 1 OF SECTION 19.4.—CML MONETARY PENALTY INFLATION ATJJUSTMENTS—Continued
U.S. Code citation
Civil monetary penalty description
New maximum
penalty amount
42 U.S.C. 9606(b) „
42 U.S.C. 9609(a) & (b)
42 U.S.C. 9609(b) ..
42 U.S.C. 9609(c)
42U.S.C. 9609(C) • •
42 U.S.C. 11045(a) 4 (b)(1). (2)
&(3).
42 US.C. 11045(b) & (2)(3)
42 U.S.C. 11045{c)(1)
42 U.S.C. 11045(c)(2) ...
42 U.S.C. 11045(d) & (2)(3) —
NOT PERFORMED W/IMMINENT, SUBSTANTIAL 2
B, 9622
DNS OF SECT.
ERFUND/WORK
lERMENT.
SUPERFtJNQJAOMIN. PENALTY VIOLATIONS UNDER 42 U.S.C. SECT. 9603 9608
OR 9622. ^"""•»«-
SUPERFUNWADMIN^FENALTY VIOLATIONS-SUBSEQUENT
SUPERFUND/CML JUOlOfc^NALTY/VIOLATlONS OF SECT."
SUPERFUND/CML JUDICIAL PENALTY/SUBSEQUENT
9603. 9608. 9622.
EMERGENCY PLANNING AND COMMUN[TT>«GBf^^.KNOW ACT CLASS I & II
ADMINISTRATIVE AND CML PENALTIES. ^^
EPCRA CLASS I & II ADMINISTRATWB-7CND CML PBNftLTlES-SUBSEQUENT
VIOLATIONS.
EPCRA CML AND ADMINISTRATIVE REPORTING PENALTIES F&rVVIOLATIONS
OF SECTIONS 11023-OR11023.
EPCRA CMLANBTADMIN1STRATM1 REPORTING PENALTIES FOR VIOLAfU
OF SE5JJCNS 11021 OR 11043(b).
' .OUS TRADE SECRET CLAIMS—CML AND ADMINISTRATIVE
.TIES.
22.500
27.500
82.500
PART27-IAMENDED]
2. The authority citation for pan 27 is
revised to read as follows: .
Authority: 31 U.S.C. 3801-3812: Pub. L.
101-410.104 Stat. 890. 28 U.S.C. 2461 note.
Pub. L 104-134.110 Stat. 1321.31 U.S.C.
3701 note.
4. Section 27.3 is amended by revising
paragraphs (a)(l) and (b)(l) to read as
follows:
§ 27.3 Basis for civil penalties and
assessments.
(a) Claims. (1) Except as provided in
paragraph (c) of this section, any person
who makes a claim that the person
knows or has reason to know—
(i) Is false, fictitious, or fraudulent:
(ii) Includes or is supported by any
written statement which asserts a
material fact which is false, fictitious, or
fraudulent;
(iii) Includes, or is supported by. any
written statement that—
(A) Omits a material fact;
(B) Is false, fictitious, or fraudulent as
a result of such omission; and
(C) Is a statement in which the person
making such statement has a duty to
include such material fact; or
(iv) Is for payment for the provision
of property or services which the person
has not provided as claimed, shall be
subject, in addition to any other remedy
that may be prescribed by law. to a civil
penalty of not more than $5,500' for
each such claim.
(b) Statements. (1) Except as provided
in paragraph (c) of this section, any
person who makes a written statement
'that—
1 As adjusted In accordance with the Federal
Civil Penalties Inflation Adjustment Act of 1990
(Pub. L. 101-410.104 Stat. 890). as amended by the
Debt Collection Improvement Act of 1996 (Pub. L.
104-134.110 Slat. 1321).
(i) The person knows or has reason to
know—
(A) Asserts a material fact which is
false, factitious, or fraudulent: or
(B) Is false, factitious, or fraudulent
because it omits a material fact that the
person making the statement has a duty
to Include in such statement: and
(ii) Contains, or is accompanied -by, an
express certification or affirmation of
the truthfulness and accuracy of the
contents of the statement, shall be
subject, in addition to any other remedy
that may be prescribed by law, to a civil
penalty of not more than*S5.500: for
each such statement.
* *, * • •
|FR Doc. 96-32972 Filed 12-30-96:8:45 am]
BILLING CODE (SM-SO-P
1 As adjusted in accordance with the Federal
Civil Penalties Inflation Adhissxnt Act of 1990
(Pub. L. 101-410.104 Stat. S9C). as amended by the
Debt Collection Improvement Ac of 1996 (Pub. L.
104-134.110 Slat. 1321).
000133
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Thursday
March 20, 1997
Part VIII
Environmental
Protection Agency
40 CFR Parts 19 and 27
Civil Monetary Penalty Inflation
Adjustment Rule; Final Rule
o n 5
000140
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13514 Federal Register / Vol. 62. No. 54 / Thursday. March 20. 1997 / Rules and Regulations
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Parts 19 and 27
[FRL-S711-7]
Civil Monetary Penalty Inflation
Adjustment Rule
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Corrections To final rule.
SUMMARY: This document contains
corrections to the Civil Monetary
penalty Inflation Adjustment Rule, final
regulations (FRL-5671-1). which were
published Tuesday, December 31.1996.
(61FR 69359). The regulations adjusted
the Environmental Protection Agency's
("EPA'7 civil monetary penalties
("CMPs") for inflation as mandated by
the Debt Collection Improvement Act of
1996 ("DCIA"). A corrected version of
Table I. from 40 CFR 19.4. which now
lists all but one of the EPA's civil
monetary penalty authorities, appears
near the end of this notice.
EFFECTIVE DATE: January 30.1997.
FOR FURTHER INFORMATION CONTACT: For
further information, contact Steven M.
Spiegel, Office of Regulatory
Enforcement. Multimedia Enforcement
Division, Mail Code 2248W. 401 M
Street, SW, Washington, D.C. 20460. or
at (703) 308-8507. Further information
may also be requested by electronic mail
(e-mail) to:
spiegel.steven9epamail.epa.gov. The
December 31,1996 Final Rule and this
Correction are also available on the
Office of Enforcement and Compliance
Assurance's Web page at http//
www.epa.gov/oeca.
SUPPLEMENTARY INFORMATION:
Need For Correction
As published, the preamble and final
regulations contain errors which may
prove misleading and are in need of
clarification. The changes made through
these corrections are all technical in
nature and can be broken down into
three categories. First, there were five
instances in which the exact section of
a statute was not cited correctly in the
preamble (which errors were repeated in
the rule). Second, there were two errors
in the new maximum penalty figures.
Third, there are ciher minor hon- •
substantive changes, as well as the.
addition of explanatory information
which does not affect the original rule.
but provides a more complete and
understandable document and rule to
the public. The additions concern the
August 1996 amendments to the Safe
Drinking Water Act, which went into
effect on August 6.1996. For purposes
of clarity and providing the public with
one table that lists all of EPA's civil
penalty authorities, the four new civil
penalty provisions from the August
1996 amendments to the Safe Drinking
Water Act have been added to Table 1
in Section 19.4 (even though these
penalty provisions are not subject to
adjustment for inflation pursuant to the
DCIA at this time). These additions are
identified below. Thus the revised Table
1 of Section 19.4 now provides a list of
all but one of the applicable statutory
provisions and maximum civil
penalties. There is one statutory
provision which has not yet been
adjusted. EPA anticipates performing a
rule-making to adjust IS U.S.C. 2615. as
amended by the Residential Lead-Based
Paint Act of 1992. 42 U.S.C. 4852d. and
the corresponding regulations in 40 CFR
Part 745. which were omitted from the
December 31.1996 rule-making.
Effect of Correction
Since all of the corrections are
technical in nature and do not affect the
substance of the rule, the original
effective date of January 30,1997,
applies to those corrected provisions, as
well as to the other original provisions
of the final rule which did not require
correction. The identified corrections to
Table A in the preamble correspond to
the corrections and additions to Table 1
in Section 19.4. A corrected version of
Table 1.40 CFR 19.4, which now lists
all but one of EPA's civil monetary
penalty authorities, appears near the
end of this notice.
*
•Correction of Publication
Accordingly, the publication on
December 31.1996 of the preamble and
final regulations (FRL-5671-1) which
were the subject of F.R. Doc. 96-32972.
are corrected and added to as follows:.
Preamble [Corrected]
On page 69360, Table A.—Summary
of Civil Monetary Penalty Inflation
Adjustment Calculations, the first
column, is corrected as follows:
7 USC 1361(1) is corrected to read 7
USC 1361.(a)(l)—(the number 136. is
followed by the letter "1". not the
number one). ,
7 USC 1361(2) is corrected to read 7
USC 136l.(a)(2)—(the number 136, is
followed by the letter "1", not the
number one).
15 USC 2615 is corrected to 15 USC
2615(a).
On page 69361. Table A, is corrected
as follows:
33 U.S.C. 1321(b)(7)(A) in the first
column is correct, but the fourth column
figure of "10.000". is corrected to
"25.000". The seventh column figure of
15.000. is corrected to 30,000. The
eighth column figure of "11.000" is
corrected to "27.500"
33 U.S.C. 1321(b)(7)(D) in the first
column is correct, but the eighth
column figure of "11.000" is corrected
to "110,000".
42 U.S.C. 300i-l(b) is corrected to 42
U.S.C. 3001-1 (c).
On page 69362. for 42 U.S.C. 6934(e).
the fourth column, the figure "25.000"
is corrected to read "5,000".
On page 69363,42 U.S.C.
11045(d)(2)(3) is corrected to 42 U.S.C.
11045(d) (1).
In the first column, first sentence.
insert "will" so the sentence reads
"Future adjustments also will be made
in accordance with the statutory
formula."
Preamble [Additions]
Supplementary Information. On page
69360. in the third column, in the first
full sentence, add the phrase ", along
with the new penalty amounts set by the
1996 amendments to trie Safe Drinking
Water Act." between the words
"statutory maximum amounts" and "are
set out in Table 1' " ""
On page 69361.42 U.S.C. 300g-
3(g)(3)(B). in the first column is correct:
for the second column, change the word
"penalty" to "penalties": third column.
replace "1986" with "1996": fourth
column, replace "5.000" with <<5.000/
25,000"; replace the figures in the fifth,
sixth and seventh columns with "N/A";
and in the eighth column, replace
"5,500" with "5.000/25.000".
Following 42 U.S.C. 300g-3(g)(3)(B).
add a new row starting with 42 U.S.C.
300g-3(g)(3)(C) in the first column; for
the second column, insert SAFE
DRINKING WATER ACT/ THRESHOLD
REQUIRING CIVIL JUDICIAL ACTION
PER SEC. 1414(g)(3)(B) & (C): third
column, insert "1996"; fourth column.
insert "25.000"; insert "N/A" for the
figures in the fifth, sixth and seventh
columns; and in the eighth column.
"25.000".
Following 42 U.S.C. 300h-3(c)2. add
a new row for 42 U.S.C. 300i(b); for the
second column, insert SAFE DRINKING
WATER ACT/ FAILURE TO COMPLY
WITH IMMINENT AND SUBSTANTIAL
ENDANGERMENT ADMIN. ORDER;
third column, insert "1996"; fourth
column, insert "15.000": insert "N/A"
for the figures in the fifth, sixth and
seventh columns; and in the eighth
column, insert "15.000".
Following 42 U.S.C. 300j-4(c). add a
new row for 42 U.S.C. 300j-6(b)(2); for
the second column, insert SAFE
DRINKING WATER ACT/ FAILURE TO
COMPLY WITH ADMIN. ORDER
000141
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Federal Register / Vol. 62. No. 54 / Thursday. March 20. 1997 / Rules and Regulations 13515
ISSUED TO FED. FACILITY; third
column, Insert "1996"; fourth column.
insert "25.000"; insert "N/A" for the
figures in the fifth, sixth and seventh
columns; and in the eighth column.
insert "25.000".
Procedural Requirements
/. Small Business Regulatory
Enforcement Fairness Act
In the December 31,1996 notice. EPA
found good cause, pursuant to 5 U.S.C.
553(b)(3)(B) of the Administrative
Procedure Act ("APA"). that soliciting
public comment prior to publication of
the rule was not necessary because EPA
is carrying out a ministerial, non-
discretionary duty per direction of an
Act of Congress. EPA finds that good
cause continues to apply to this rule,
and therefore the effective date
provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 ("SBREFA"). do not govern the
effective date of today's action as well.
Additionally, the fact that these changes
are technical and do not affect the
substance of the previously issued rule
also meets the "good cause" exception
to the effective date requirements of
section 553(d) of the Administrative
Procedure Act as well. .
Under Executive Order 12866 (58 F.R.
51735. October 4.1993). this action is
not a "significant regulatory action"
and. is therefore not subject to review by
the Office of Management and Budget.
In addition, this action does not impose
any enforceable duty or contain any
unfunded mandate as described in the
Unfunded Mandates Reform Act of 1995
(PL. 104-4). Because this action is not
subject to notice-and-comment
requirements under the APA or any
other statute, it is not subject to the
provisions of the Regulatory Flexibility
Act(5U.S.C. GQletseq.).
Under 5 U.S.C. 801(a)(l)(A). as added
by SBREFA. EPA sub mined a report
containing this rule and other required
information to the U.S. Senate, the U.S.
House of Representatives and the
Comptroller General of the United
States prior to publicadon of the rule in
today's Federal Register. This rule is a
not a "major rule" as defined bv 5
U.S.C. 804(a).
PART 19 [CORRECTED WITH
ADDITIONS]
Beginning on page 69364. Table 1 of
Section 19.4—Civil Monetary Penaltv
Inflation Adjustments, is con-e-~*?d to
read as follows:
TABLE 1 OF SECTION 19.4.—CML MONETARY PENALTY INFLATION ADJUSTMENTS
U.S. Code citation
Civil monetary penalty description
New maximum penalty
amount
7 U.S.C. 1361.(a)(1)
7 U.S.C. 1361.(a)(2)
15 U.S.C. 2615(a)
15U.S.C..2647(a)
31 U.S.C. 3802(a)(1)
31 U.S.C. 3802(a){2)
33 U.S.C. 1319(d)
33 U.S.C. 1319(g)(2)(A)
33 U.S.C. 1319(g)(2)(B)
33 U.S.C. 1321 (b)(6)(B)(l) ..
33 U.S.C. 1321 (b)(6)(B)(li)..
33 U.S.C. 1321 (b)(7)(A)......
33 U.S.C. 1321(b)(7)(B) —
33 U.S.C. 1321(b)(7)(C) .....
33 U.S.C. 132T{b)(7)(D) .....
33 U.S.C. 1414b(d)
33 U.S.C. 1415(a)
FEDERAL INSECTICIDE. FUNGICIDE. & RODENTICIDE ACT CIVIL PENALTY-
GENERAL—COMMERCIAL APPLICATORS. ETC.
FEDERAL INSECTICIDE. FUNGICIDE. & RODENTICIDE ACT CIVIL PENALTY-
PRIVATE APPLICATORS—FIRST AND SUBSEQUENT OFFENSES OR VIOLA-
TIONS.
TOXIC SUBSTANCES CONTROL ACT CIVIL PENALTY
ASBESTOS HAZARD EMERGENCY RESPONSE ACT CIVIL PENALTY
PROGRAM FRAUD CIVIL REMEDIES ACT/VIOLATION INVOLVING FALSE
CLAIM.
PROGRAM FRAUD CIVIL REMEDIES ACT/VIOLATION INVOLVING FALSE
STATEMENT.
CLEAN WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY
CLEAN WATER ACT VIOLATION/ADMINISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM.
CLEAN WATER ACT VIOLATION/ADMINISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM. »
CLEAN WATER ACT'VIOLATION/ADMIN PENALTY OF SEC 311(b)(3)&(j) PER
VIOLATION AND MAXIMUM.
CLEAN WATER ACT VIOLATION/ADMIN'PENALTY OF SEC 311(b)(3)&fi) PER
VIOLATION AND MAXIMUM.
CLEAN WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY OF SEC 311(b)(3)—
PER VIOLATION PER DAY OR PER BARREL OR UNIT.
CLEAN WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY OF SEC
42 U.S.C. 300g-3(b)
42 U.S.C. 300g-3(c)
42 U.S.C. 300g-3(g)(3)(A)..
42 U.S.C. 300g-3(g)(3)(B)..
42 U.S.C. 300g-3(g)(3)(C)
42 U.S.C. 300h-2(b)(1)
42 U.S.C. 300h-2(c)(1)
42 U.S.C. 300h-2(c)(2)
42 U.S.C. 300h-3(c)(1)
42 U.S.C. 300h*3(c)(2)
CLEAN WATER ACT VIOLATION/CIVIL JUDICIAL PENALTY OF SEC 311fi)
CLEAN WATER ACT. VIOLATION/MINIMUM CML JUDICIAL PENALTY OF SEC
311(b)(3)—PER VIOLATION OR PER BARREL/UNIT.
MARINE PROTECTION, RESEARCH & SANCTUARIES ACT VIOL SEC 104b(d)
MARINE PROTECTION RESEARCH AND SANCTUARIES ACT VIOLATIONS-
FIRST & SUBSEQUENT VIOLATIONS.
SAFE DRINKING WATER ACT/CIVIL JUDICIAL PENALTY OF SEC 1414(b)
SAFE DRINKING WATER ACT/CIVIL JUDICIAL PENALTY OF SEC 1414(c) .
SAFE DRINKING WATER ACT/CIVIL JUDICIAL PENALTY OF SEC 1414{g)(3)(a) ..
SAFE DRINKING WATER ACT/MAXIMUM ADMINISTRATIVE PENALTIES PER
SEC 1414(g)(3)(B).
S.AFE DRINKING WATER ACT/THRESHOLD REQUIRING CIVIL JUDICIAL AC-
TION PER SEC 1414(g)(3)(C).
SDWA/CIVIL JUDICIAL PENALTY/VIOLATIONS OF REQS—UNDERGROUND IN-
JECTION CONTROL (UIC).
SDWA/CIVIL ADMIN PENALTY/VIOLATIONS OF UIC REQS—PER VIOLATION
AND MAXIMUM.
SDWA/CIVIL ADMIN PENALTY/VIOLATIONS OF UIC REQS—PER VIOLATION
AND MAXIMUM.
SDWA/VIOLATION/OPERATION OF NEW UNDERGROUND INJECTION WELL
SDWA/WILLFUL VIOLATION/OPERATION OF NEW UNDERGROUND INJECTION
WELL.
55,500.
S550/S1.CCO.
S27.500.
ss.soo.
S5.5CO.
S5.5CO.
S27.5CO.
S11.00C.S27,£CO.
S11.OCOiV.37.5CO.
S11.000/S27.500.
S11.00CVS137.500.
S27.SCOcrS1.1CO per bar-
rel cr unit
S27.5CO.
S27.5CO.
S110.000 or 53,200 per
barrel cr unit
S660.
S55.00CWS137.5CO.
S27.500.
S27.500.
527.500.
55,000/525.000.
525.000.
S27.500.
S11.0CO/S137.500.
S5.500/S137.500.
55,500. '
511.000.
000142
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13516 Federal Register / Vol. 62. No. 54 / Thursday. March 20. 1997 / Rules and Regulations
TABLE 1 OF SECTION 19.4.-CML MONETARY PENALTY INFLATION ADJUSTMENTS—Continued
U.S. Code citation
42 U S C 300i(b)
42 U.S.C. 300W(c)
42 U.S.C. 300j(e)(2)
42 U.S.C. 300HW
42 U.S.C. 300j-6(b)(2)
42 U.S.C. 300j-23(d) ...
42 U.S.C. 6928(a)P)
42 U S C 6928(C)
42 U S C. 6928(0) . .
42 U.S.C. 6928(h)(2)
42 U.S.C. 6934(e)
42 U.S.C. 6973(b)
42 U.S.C. 6991e(a)(3) ........
42 U.S.C. 6991e(d)(1)
42 U.S.C. 6991e(d)(2)
42 U.S.C. 6992d(a)(2) ... —
42 U.S.C. 6992d(a){4)
42 U.S.C. 6992d(d)
42 U.S.C. 7413(b)
42 U.S.C. 7413(d)(1)
42 U.S.C. 7413(d)(3)
42 U S C 7524{a)
42 U.S.C. 7524(a) „
42 U.S.C. 7524(C)
42 U S C 7545(d)
42 U.S.C. 9604(e)(5)(B)
42 U.S.C. 9606(b)(D- ;.
42 U.S.C. 9609 (a) 4 (b) ....
42 U S C 9609(b)
42 U.S.C. 9609{c)
42 U.S.C. 9609(c) _
42U.S.C.11045(a)4(b)
(1).(2)4(3).
42U.S.C. 11045(b)(2)4
(3).
42U.S.C. 11045(C)(1)._
42 U.S.C. 11045(c)(2)
42 U.S.C. 11045(d)(1)
Civil monetary penalty description
SDWA/FAILURE TO COMPLY WITH IMMINENT AMD «i IRCTAMTIAI
ENDANGERMENT ORDER. ouooi«mi«i.
SDWA/ATTEMPTING TO OR TAMPERING WITH PUBLIC WATER SYSTEM/CIVIL
JUDICIAL PENALTY.
SDWA/FAILURE TO COMPLY W/ORDER ISSUED UNDER SEC 1441(cim
SDWA/REFUSAL TO COMPLY WITH REQS. OF SEC. 1445(a) OR (b>
SDWA/FAILURE TO COMPLY WITH ADMIN. ORDER ISSUED TO FEDERAL'FA-
CIUTY.
SDWA/VIOLATIONS/SECTION 1463(b)-FIRST OFFENSE/REPEAT OFFENSE
RESOURCE CONSERVATION 4 RECOVERY ACT/VIOLATION SUBTITLE C A£
SESSED PER ORDER.
RES. CONS. 4 REC. ACT/CONTINUED NONCOMPLIANCE OP rnupi lANirc
ORDER.
RESOURCE CONSERVATION 4 RECOVERY ACT/VIOLATION SUBTITLE C
RES. CONS. 4 REC. ACT/NONCOMPLIANCE OF CORRECTIVE ACTION ORDER
RES. CONS. 4 REC. ACT/NONCOMPLIANCE WITH SECTION 3013 ORDER
RES. CONS. 4 REC. ACT/VIOLATIONS OF ADMINISTRATIVE ORDER
RES. CONS. 4 REC. ACT/NONCOMPLIANCE WITH UST ADMINISTRATIVE
ORDER.
RES. CONS. 4 REC. ACT/FAILURE TO NOTIFY OR FOR SUBMITTING FALSE
INFORMATION.
RCRA/VIOLATIONS OF SPECIFIED UST REGULATORY REQUIREMENTS
RCRA/NONCOMPLIANCE W/MEDICAL WASTE TRACKING ACT ASSESSED
THRU ADMIN ORDER.
RCRA/NONCOMPLIANCE W/MEDICAL WASTE TRACKING ACT ADMINISTRA-
TIVE ORDER.
RCRA/VIOLATIONS OF MEDICAL WASTE TRACKING ACT-JUDICIAL PEN-
ALTIES.
CLEAN AIR ACT/VIOLATION/OWNERS 4 OPERATORS OF STATIONARY AIR
POLLUTION SOURCES— JUDICIAL PENALTIES.
CLEAN AIR ACT/VIOLATION/OWNERS 4 OPERATORS OF STATIONARY AIR
POLLUTION SOURCES-ADMINISTRATIVE PENALTIES PER VIOLATION 4
MAX. ,
CLEAN AIR ACT/MINOR VIOLATIONS/STATIONARY AIR POLLUTION
SOURCES— FIELD CITATIONS.
TAMPERING OR MANUFACTURE/SALE OF DEFEAT DEVICES IN VIOLATION
OF 7522(a)(3)(A) OR (a)(3)(B>-BY PERSONS.
VIOLATION OF 7522(a)(3)(A) OR (a)(3)(B)— BY MANUFACTURERS OR DEAL-
ERS: ALL VIOLATIONS OF 7522(a)(1).(2). (4).4(5) BY ANYONE.
ADMINISTRATIVE PENALTIES AS SET IN 7524(a) 4 7545(d) WITH A MAXIMUM
ADMINISTRATIVE PENALTY.
VIOLATIONS OF FUELS REGULATIONS •
SUPERFUND AMEND. 4 REAUTHORIZATION ACT/NONCOMPLIANCE W/RE-
QUEST FOR INFO OR ACCESS.
SUPERFUND/WORK NOT PERFORMED W/IMMINENT. SUBSTANTIAL
ENDANGERMENT.
SUPERFUND/ADMIN. PENALTY VIOLATIONS UNDER 42 U.S.C. SECT. 9603.
9608, OR 9622.
SUPERFUND/ADMIN PENALTY VIOLATIONS — SUBSEQUENT ....'.
SUPERFUND/CIVIL JUDICIAL PENALTY/VIOLATIONS OF SECT. 9603, 9608.
9622.
SUPERFUND/CIVIL JUDICIAL PENALTY/SUBSEQUENT VIOLATIONS OF SECT.
9603. 9608. 9622.
EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT CLASS I 4 II
ADMINISTRATIVE AND CIVIL PENALTIES.
EPCRA CLASS 1 4 II ADMINISTRATIVE AND CIVIL PENALTIES-SUBSEQUENT
VIOLATIONS.
EPCRA CIVIL AND ADMINISTRATIVE REPORTING PENALTIES FOR VIOLA-
TIONS OF SECTIONS 1 1 022 OR 1 1 023.
EPCRA CIVIL AND ADMINISTRATIVE REPORTING PENALTIES FOR VIOLA-
TIONS OF SECTIONS 11021 OR 11043(0)..
EPCRA— FRIVOLOUS TRADE SECRET CLAIMS-CIVIL AND ADMINISTRATIVE
PENALTIES.
New manmum penalty
amount
515.000.
S22.000/S55.000.
52.750.
S2s!ooo!
55.500/555.000.
527.500.
997 CftA
527, tOO.
527.500.
55.500.
55.500.
527.500.
511.000.
511.000.
527.500.
527.500.
S27.5CO.
527.500.
S27.50C.S220.000.
S5.5CO.
52.750.
S27.5CO.
5220.000.
S27.5CO.
527.500.
527.500.
527.500.
582.500.
527.500.
582.500.
527.500.
582.500.
527.500.
511.000.
527,500.
000143
-------
Federal Register / Vol. 62. No. 54 / Thursday. March 20. 1997 / Rules and Regulations 13517
PART 27—{CORRECTED]
On page 69366, in the first column.
the amendatory instruction identified as
number "4" is corrected to "3".
Michael M. Stahl.
Deputy Assistant Administrator. Office of
Enforcement *nd Compliance Assurance.
IF* Doc 97-7069 Filed 3-19-97:8:45 am]
•LUNO CODC *MO-tt-P
000144
-------
E c-P- t. 9 tfce:
For plants in New York. Gerry
OeGaetano. (212) 264-6685. EPA Region
2- ' • • •
For plants in Florida and Kentucky.
Scott Davis. (404) 347-5014. EPA
Region 4 (address above). .••
For plants in Missouri. Jon Knodel.
(913) 551-7622. EPA Region 7.
SUPPLEMENTARY INFORMATION: Title IV of
ihe Clean Air Act directs EPA to
establish a program to. reduce the
idvetse effects of acidic deposition by
promulgating rules and issuing permits
to einission sources subject to the .
program. On January 11.1993. EPA •
promulgated final rules1 implementing
the program. Subsequently, several
parties Bled petitions fqr review of th»
rules with the U.S. Court of Appeals for
the District of Columbia Circuit. OB
November 18.1993. EPA published a
notice of proposed revisions to rules
regarding Phase I substitution and
reduced utilization plans [sections 404
(b) and (c) and 408(c)(l)(B) of the Actf.
On May 4.1994. EPA and other parties
signed a settlement agreement
addressing the substitution'and reduced
utilization issues.
In today's action. EPA is issuing
emits that are consistent with the May
i. 1994 settlement. Except as noted
. below, EPA approves for 1995^1999 ail
compliance options for which EPA
deferred action for 1996-1999 in the
draft permits, hi addition, except as
noted below, the numbers of
substitution and compensating unit
allowances allocated to each unit .for
-1995-1999 are identical to the numbers
of allowances allocated to each unit for
199S in the draft permits. The
additional allowances discussed beiow
are a one-time only allocation pursuant
to th« settlement Upon activation of
conditionally-approved plans.
substitution or compensating unit
allowances are allocated for the '
remaining years the plan is in effect.*
EPA issues the following permits
Northpon in New York.
Port Jefferson in New York.
Big Bend in Florida.
• F J Cannon in Florida: No change for.
unit GB01:4.581 substitution . •
allowances for each year and 9
additional allowances to unit GB02
upon activation of substitution plan:
'.003 substitution allowances for each
year and 437 additional-allowances to
unit CB03 upon activation of
ibstiiution plan: 7.570 substitution
Allowances for each year and 450 ;'
additional allowances to unit CB04
upcn activation of substitution plan:
1CU95 substitution allowances for each
year and 520 additional allowances to
unit CBOS upon activation of
substitution plan: 16.107 substitution
allowances for each year and 377
additional allowances to unit GBQ6
upon activation of substitution plan.
Hookers Point in Florida: 0
substitution allowances for each year
and 27 additional allowances to unit
HBOl upon activation of substitution
plan: 31 substitution allowances for
each year and 3 additional allowances
to unit HB02 upon activation of
substitution plan: 92 substitution
allowances for each year and 9
additional allowances to unit HB03
upon activation of substitution plan:
145 substitution allowances for each
year and 15 additional allowances to
unit HB04 upon activation of
'substitution plan: 124 substitution .
allowances for each year and 13
additional allowances to unit HB05
upon activation of substitution plan:
207 substitution allowances for each
year and 13 additional allowances to
unit HB06 upon activation of
substitution plan.
• Big Sandy in Kentucky.
Coleman in Kentucky.
Cooper in Kentucky. *
Dale in Kentucky: 2.115 substitution
allowances for each year and 226
additional allowances to unit 3 upon
activation of substitution plan, and 226
additional allowances if the unit
becomes affected for NO,: 1.729
substitution allowances for each year
and 166 additional-allowances to unit 4
upon activation of substitution plan.
and 166 additional allowances if the
unit becomes affected for NO,.
East Bend in Kentucky. . .
H L Spurieck in Kentucky: 14206
substitution allowances for each year
and 1.593 additional allowances to unit
2 upon activation of substitution plan.
and 1.593 additional allowances if the .
unit becomes affected for NO..-
R D Green in Kentucky: No change for
unit Gl:'S>327 substitution allowances
for each year and 492 additional
allowances to unit G2.
Sibley in Missouri: 2.782 substitution
allowances for each year and 28
additional allowances to unit l: 3.332
substitution allowances for each year
and 130 additional allowances to unit 2,
Dated: July i«. 1994.*
Brian J. McUaa.
Director. Acid Rain Division. Oflidi of
Atmospheric Projrnmi. Office of Air and
Radiation.
[FR Doc. 94-J8323 Filed 7-27-94: 8:«5 «m|
BHUNC cooe «uo-u-»
[FRL-S021-61
Restatement of Policies Related to
Environmental Auditing
AGENCY: Environmental Protection
Agency (EPA).
ACTION; Notice.
SUMMARY: The EPA Environmental
Auditing Policy Statement {"1986
Policy") was originally p.-Kii,^
Federal Register on July 9. 1986 (51 FR
25004). The 1986 Policy states that
"(c)larification of EPA's position
regarding auditing may help encourage
regulated entities to establish audit
programs or upgrade systems already in
place.** The goal of mis notice is to
clarify EPA's currant poUdos oa and
approach, to auditing* This notice *
summarizes salient points from the 1988
. Policy, which xeanains in effect. In
addition, *h*t p*^c» updates the
Agency's activities wtdtxespect to •
auditin and auditin policy and
4.
references pertinent language, from other
relevant Doiicy-documeats, in - ' "
anticipation of the public meeting oni>
auditing scheduled for July 27-28. 19*4,
'
This notice does not represent
EPA policy or position on
environmental auditing; all existing
policies, remain; in •flea.
L Auditing Public Meeting: Change of
Location . '
•The response* to EPA's ^"y^W""!*^
(59 FR 31914. June 20. 1994) to hold a
public meeting oa auditing on Jury 27-
. 28, 1994 has been overwhelming. Due to
the expected siae of the audience.
therefore, the Agency has changed the
location of this event Tteaew location •
is thai Stoufier Mayflower Hotel in
Washington. DC at 1 127 Connecticst *
Avenue. NW. Phone (202) 347-3000.
H. The Auditing PoUcyTiiMaaemiil
In response to a request by
Administrator Carol M. Browner, die
Office of Enforcement aad Compliance
Assurance (OEGAl'is rftttfreing the
Agency's current policy regarding
environmental auditing aad self-
evaluation by the regulated community.
EPA has committed to investigating the
perceived problems relating to auditing.
self-evaluation, and disclosure through
an empirical. uxfoa&*lioa-gathering
effort. The Agency must develop an
adequate information base to give
serious consideration to any policy
options and to ensure that any decision
to either reinforce, change, or
supplement existing policy is informed
by fact.
EPA hopes to collect such relevant
data through the implementation of four
actions this summer. First, the Agency
000146
-------
38456
Federal Renter / V-H. .VJ. No. 144 .- 7r.:s.-.*.:.i-.. '-j.'v 2'd. 1:304 /
will convene a publir rr.«iing en July
27-fcR. 1994. as an opportunity to obtain
s wide variety of views and tn sharpen
the focus on Jhesn issues. The range of
issues appropriate Tor discussion at the
public meeting include tb*
implementation of the 1986 Policy:
specific suggestions for auditing policy
options: State audit privilege legislation:
auditing in the context of criminal
enforcement: and advances in the field
of auditing sines 198$. Interested parties
are encouraged to wad the Federal
Register notice dated June 20.1994 (59
FR 31914) for. more details on the public
meeting.' '• ' . "
Second. EPA published in the June
21.1994 Federal Register (59 FR 320621
a notice requesting proposals for
Environmental Leadership-Program
(ELP) pilot projects. EPA expects that *
these pilot projects will generate useful
data oa auditing methodology and
measure*, and may also serve as .
vehicles for experimenting with policy-
driven incentives. . ' • '.
• Third. EPA will encourage the private
sector to collect data and survey
effect of enforcement policies on self-
evaluation and disclosure in the
regulated community. The Agency will
also seek input on auditing and related
issues front States; environmental and
public interest groups, and trade and
professional associations.
Finally, in this Federal Register
notice. EPA is restating salient points
from the 1986 Policy and reviewing its
activities and other policies relating to
environmental auditing. The goal of this
*nuiu.e is to clarify EPA's current
policies on and approach to auditing, in
order to ensure a well-informed policy
debate. _
if I. Review of General EPA Policy on
Environmental Auditing
.-t. EPA Sn<~f*ircgrt the Use of
£.v. :ran:Rf'ssc/ Auditing
EPA hs« vtively encouraged and .
.pj.-tn::pj:eJ ".n the development of ..
«T.v:ros:rr.rr.:.il auditing and improved
ttnvirena.-nul management practices .
sine* the niuMTJOs. In fact, the 1086
Policy has «?r. ed as rhe basis for
defining the crauice and profession of
environmental auditing. The 1986
PC.IH.V cler.rly statsn EPA 5iipp6rt'for
auditing:
Eff-r.tivr environmental iiuditingun !IM«|
i:> h^ivr fctrk of overall compl'tano? and
nnhio-H rif
••r.virsnmrntal auditing and supports us
•*••.«•;-:a:i>J u:<« by fgulatcU enti:.«s to ht'lp
r:--! tne Jtoals of'redftral. stile and
.-••A ;nir.rr.rn:.jl
Auditing serve* as a qu.il:r. a*«iKi.ti «
• hr» V to heip improve the ttTi«.iivrnr^s if
havr.rytng that management praotirrs JTK in
plate, functioning and adequate
Environmental audits evaluate, and art not a
>ub»titute for. direct compliance activities
*uch as obtaining permits, installing controls.
monitoring complianc*. reporting violations.
• • - • 9
* f
Environmental auditing has developed for
sound business reasons, particulariy a* a
means of helping regulated entities manage
pollution control affirmatively over time
iiutead of reacting to crises. Auditing can
result in improved facility environmental
performance, help communieau effective
solutions to eomraea environmental
problems, focus facility managers' attention
on current and upcoming regulatory .
requirements, and generate protocols and
checklists which help facilities better manage
themselves. Auditing also can result in.
. better-integrated management of
environmental hazards, since auditors .
frequently identify environmental liabilities
which go beyond regulatory compliance.
The Agency clearly supports auditing
to help ensure the adequacy of internal
systems to achieve, maintain, and
monitor compliance. By voluntarily
implementing environmental
management and auditing programs.
regulated entities can identify, resolve.
and avoid environmental problems.
EPA does not intend to tiioate or interfere
with the environmental management •'
practices-of privite or public organizations.
Nor does EPA intend to mandate auditing .
(though in certain instances EPA may sm>k to
include provisions for environmental
auiliting as part of settlement -tjjreejr.itm. as
noted below). Because environmental
auditing systems have been widely adopted.
on a voluntary basis in the past, ami bei a use
audit quality depends to a large iin;r*e upon
genuine management commitment to the
program and its objectives, auditing should
remain a voluntary activity.
Because senior managers of regulated
entities are ultimately responsible for
taking all necessary steps to ensure
compliance with environmental
requirements. EPA believes they have a
strong incentive to use reasonable
means, such as environmental auditing.
to secure reliable information shout
fcu.ility compliance status.
8. Definition nf Er.v:rcn.r,?s::l AU,
Elements of Effective Environment}
Auditing Programs
The 1986 Policy also defines
environmental auditing, and outlines
what EPA considers to be'the elements
of an effective environmental auditing
program. The 1986 .Policy presents th«
following definition:
Environmental auditing is a systematic.'
documented, periodic aad objective review
by regulated entities of facih'ty operations.
and practices related to meeting
environmental requirements. Audits on'be
designed to accomplish any or ail of !ae
following: verify compliance with
environmental requirements; evaluate the
effectiveness of environmental managemtni
system* already in place: or assess risks fan
regulated and unregulated materials and
practices.
An organization's auditing program
will evolve according to its unique
structures and circumstances. The 1986
Policy acknowledges this fact and.also
states EPA's belief that effective
environmental auditing programs
appear to have certain discernible
elements in common with other kinds of
audit programs. EPA generally considers
these elements important to ensure •
program effectiveness. This general
description of effective, mature audit
programs can help those starting audit
programs, especially Federal agencies
and smaller businesses. Regulatory
agencies may also use these elements in
negotiating environmental auditing
provisions for consent decrees. Finally.:
these elements can help guide states and
localities considering auditing •
initiatives; •
As stated in the 1986 Policjyan
effective environmental auditing system
will likely include the following general
elements: __^
L ExplicJrtop management support for
environmental auditing and commitment ro
follow-up on audit findings. Management
support may be demonstrated by a wnrirn
policy articulating upper management •
support for the auditing program, and far
compliance with all pertinent requirements.
including corporate policies and permit
requirements as well as Federal flat* rff.il
local statutes and regulations.
Management support for toe auditing
program also should be demonstrated by an
explicit written commitment to follow-up an
audit findings to correct identified proatesu
and prevent their recurrence.
II. An environ mental auditing function
independent of audited activities. The xWu*
or organizational locus of environmental
auditors should be sufficient to ensure
objective and unobstructed inquiry.
observation and testing. AuditorobriJivitv
should not be impaired by personal
relationships, financial or other confliusnl
interest, interference with free inquiry «r
judgment, or fear of potunti.il
OOOHT
-------
Federal Register / Vol. 59. No. 144 / Thursday. July 28. 1994 / Notices
38457
miote team suffmg aodeuditor ' ,
£avironmenul auditor* should
i at have ready access to the
Igt. skills, sad disciplines needed, to
,fi$h audit objectives. Each individual.
; should comply with the company's •
iooal standards of conduct. Auditors.
(fuMma or pan-time, should •
i iheir technical and analytical
i through continuing education
dit program objectives.
• resources and frequency. At a
-—. audit objectives should include
piianca with applicable • .
__ [laws and evaluating the
pof internal compliance policies.
.and personnel mining programs
(continued compliance.
i should be based, on a process which
j auditors: all corporate policies, -
: aod Federal, state, and local
j pertinent to the facility: and
_s« protocols addressing specific
i that should be evaluated by auditors.
Jdt written audit procedures generally
ibaosedfarpT
awiit scope. f^iMl^i*** audit
results, and
i nats that coll ecu analyzes
t orid documents information
t to achievt audit objectives.
i should be collected before and
{fn| so on-tita visit regarding '
iboBAsntal <"*?t*ip^t^T* (1) eov&onffiental
v —Bent effectiveness (21 and other
i 3J related to audit objectives and
M. i^is information yh the best
.Liable through use of appropriate audit
saiques,
. Relevant information supports audit '
iinp aod recommendations and is
asteat with the objectives for the audit •
• fte/y information helps the . '
taizatioa meet its goals.
lie audit process should include a
iodic review of the reliability- and
.-grity of this information and the means
4 to identify, measure, classify and report
vudit procedures, including the testing
sampling techniques employed, should
elected in advance. 10 the extent
"ieal. and expanded or altered if
,-mstances warrant. The process of
«ting. analyzing, interpreting and
Denting infarmatfon should provide
onable assurance that audit objectivity is
ntained and audit goals are met
?• A process (hot includes specific
•tdures to promptly prepare candid clear
appropriate written reports on audit
s corrective actions and schedules for
lr-*ntau'on. Procedures should be in
• , nsure that such information is
rounicjted to managers, including
'lyand 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 reparable to state or
Federal agencies. '
VIL A process that includes quality
assurance procedures to assure the accuracy
and thoroughness of environmental audits.
Quality assurance may be accomplished
through supervision, independent internal
reviews, external reviews, or rcombination
of these approaches. • •
C. EPA Activities Related to Auditing
Standards •
EPA is currently participating in two
major non-regulatory efforts to develop
voluntary standards for auditing and
environmental management systems.
rlrst. the International Organization of •
Standards (ISO), based in Geneva^
Switzerland, established in 1993 a
Technical Committee for Environmental
Management Standards (ISO-TG-207J.
'Subcommittee Two of TC-207 is in the
process of developing environmental
auditing standards. The standards fall
into three groups: Auditing Principles.
Auditing Procedures, and Auditor
Qualifications. Second, in the U.S., the
National Sanitation Foundation (NSF)
in Ann Arbor. Michigan, is developing
environmental auditing <*»n^fp^* that
are intended to be compatible with and
augment the ISO standards. Work is
proceeding rapidly within ISO and NSF.
with draft standards expected by the
•end of the year. . •
The proposed NSF and ISO auditing
standards are being developed within
the framework of overall environmental
management systems standards. Neither
ISO nor NSF intends to establish -
specific environmental standards;
instead both are seeking to provide
management tools that include auditing
•ards. The EPA 1986
Policy has been a central reference ;—«•
document for both, the ISO and NSF
work. As these new documents develop,
?5^'n*5 of auditor Qualifications and
explicit management commitment to
audit follow-up will be of particular
interest to EPA.
IV. Review of EPA Policy on Specific
Environmental Auditing Issues
A; Agency Requests for Audit Reports
EPA's 1986 Policy clearly states that:
• : . . EPA believes routine Agency requests
for'audit reports 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.
The 1986 policy also acknowledges
regulated entities' need to self-evaluate
environmental performance with some
measure of privacy. However, audit
reports may not shield monitoring.
compliance or other information that
would otherwise be reponable and/or
accessible to EPA even if there is no
explicit requirement to generate that
data. Thus, the 1986 Policy 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 dpes.tha 1986 Policy
alter EPA's authority to request and *
'receive any relevant information—
including *^>*\ contained in audit
reports—under various environmental
sumtas or mother administrative or ••
judicial proceedings.'
EPA's authority to request an audit report.
or relevant portions thereat will be exercised
on a case-by
-------
Federal Register / Vc-L 59. No. K4 / 7hi:rv:*y. Juiy 23. !9C«4 / Mnt:rrs
u-jil w,!l coa^•lqueo:iy ttupwa faol.-'n-s with
peer irovironmeaul records and
mnr» incjue.itly. Since effective
••cv.ronnwnial auditing helps maaagemust
uiJy and promptly corruct actual »r
tttiai prcbletss, audited iaaUtilili in i When '
regulated entities take —ir*-«H^ precaurioa*
to avoid noocompliance. expeditiousry. •
correct underlying eavitanmriiut problems) •
'JiTl'^'flff! thfffWg AUi
to prevent ri»eir
• tadtendoa
recurrence. EPA aiay
to consider such actions at honect aad
genuine efforts to assure consonance. Such*•:
coasidentiao appliee particularly when a
regulated eutity promptly reports; vioieiioBS
urcoraplUace data mat otherwise were act '
mquirati to be recorded or repotted to EPA,
These principles have been
incorporated into.the Agency's '
enforcement response and civil penalty
policies.
2. Audit Provisions'as Remedies in
Enforcement Settlements
The 1986 Policy include* the)
following language on audit provisions
as*remedies In enforcement settlements:
EPA may propose environmental auditing
provisions in coaaent decrees aad ia other
o
accomplish more efT«envely its pnmary
mission, narsely. to secure environmental
compliance. Indeed, auditing provisions in
•oforcemeat sunlements haw provided
.trverat Important benefits to the Agency by
enhancing its ability tec
• Address compliance at an entire facility
or at all f»nltrW»i owned or operated by a
parry ."rather than fust the violations
discovered during inspections: aad identify
and correct violations that may hare gone
undetected (and unearrecaad) otherwise;
top-level maaaaej
compliance; prod
procedures that e
maint
e corporate policies aad
ble a panv to achieve aad
a party to
poiitttiOB control arnnnBuverv
• . • . *
check of.
• Provide • quatttY
*•• • - -
verifying
It b tbe policy of EPA to seed* its judicial
aad admiaistratrveeafeccamat cases only
where violators can assure the Agency tact
their aoacanrpneace' will b* (or has been}
conceded* EPA • • • considers iiHliiliB} SB,
appropriate pert of a setueBke&t waere
IO%^VF ^^le ^lOBeoi^s^u sEf
rocue.
r 1/at both) of tha
^ two type* of <
should be considered lia enfoccemeat
settlemeatt]: ' '
1. CoapUuta Audit Au independent
-i«yjy*jii0q{ of tae cusent ^attif of a party's
compHence with applicable tiirjiiaj aad
lemuremectts. i^u^apptoeca
JDeesuresi be buDefl to roaedy ttncoveted
compliaac* probieae. and ia t
when coupled with a reouinmaat that the
root cauM of aoaoomsliaaca also be
'ovaluatfon of a party's euvinxnneittal
fc*fM*yilaiice) poltCMS* pracxicee. and controls^
Such evaJuaAoB 8My 4w!iitntMn lite ni!i d
for (1) A' fonnal TTirp^^T enviromaestal
complUnce policy, aad procedures for .
Unplemeatation of that policy: 12)
educational and training programs for
employees; (3) equipment purchase;
operation and maiateaaaoB programs: (4) •
environmental compliance officer programs
(or other organizational strueurss raleviat to
nvnplancaU (5) budgedog and planning
systems Cor environmental compliance: (6)
monitoring, record keeping and reporting
systems; (7) la-plant and community
emergency plans; (ft) internal
communications and control systems: and (9)
hazard identification and risk assessment.
Whether to «eek a compliance audit, a
management audit, or both wtil depend upon
the unique drnimttancaa of each case. A
compliance audit usually will be appropriate
where the violations uncoverod by Agency
inspections MIS* the llkaltbood thai
•:ivi.-r:;rp.fr.:a! r.oncnmpliince exists
«li«wh*re within a party's operations. A
ciarugcmest audit should be sought whc.,
appears that a major cnntribunng actor to
noncompliance ia inadeouau (or
nonexistenr) maaagerial aneerioo to
environmental ponoes, procedures or
staffing. Both types of audits should be ,
sought wbere both current Boacompfiasea
and shortcomings m a party's enrironmenai;
management practices need to be tddrsisea.'
C. EavicanmantetAaditiafaod ••
Criminal Enforcement Poiicf
Following EPA's 1986 Policy,:
significant deveio
evolut>*
criminal enforcement policy goreming.-
the us* of setf-ewdits and the voluntary
t • t * t *_^ • • • "•.
..
First on July U 1991, th« Depntatat !
flusticBtiismieguidnMtinitleaV •'
"Facton ID Oeciaians Go Criminal . •
Violations In Th* Ciy^yt Of Si
Voluntary C
Efforts By Tb* Viola**:" The gmdaace.-
mil thn [rnanl DTlJ poh'ry nn iiiillilm' '
It Is tha.pobcy of the Depamneatof hudce*
to eacouran seltaudlflng; «alf>potila|>aB4 ,
voluntary cudocara of en vlronmeibti ~ "f
violartoas by tae regulned eamawejrjr by '*
iadfeattaaisfaattbeM activities art* viewed «
mirigatlng boon la the DepertmeWi
cxerds* of criminaJ eofaameat dfaortoa.
•The guiHimat >ad tfae nmrrpier
ccsttJUiMQ tftaWft provide! at nuDMrwon
particular cas« pnsanu tho type of
drcumctances ia which lentencs woold'
be appropriates Th« factors to b0
consiuBTod iii txw rTJTf^ff tha
pepertment's prosecutorial dJscredan, •
in cases where tha law aad evidence-ate.
otherwiae «"*ft^^«f for pioeermlnn. '
include: voluntary disclosure;
cooperatiaK rjreventiT* meesures and
compliance programs; pervaslreness ef
nonconrpHance; mtenal disciplinary '
action: and subsequent compliance .
efforts. . . '
Second^ on November 11.1993. the
Final Draft Environmental Sentencing
Guidelines provided for tbe mitigation
of sentences where a court finds that tbe
following factors for environmental
compliance are satisfied: tine
management attention to compliance:
integration of environmental policies..
standards, and procedures; auditing.
monitoring, reporting and tracking
systems; regulatory expertise, training
and evaluation; incentives for
compliance; disciplinary procedures;
continuing evaluation ana
Improvement.
Finally, on January 12,19M.EPA's
Director of Criminal Enforcement Issued
a guidance entitled: The Exercise of*
• Investigative Discretion,"tlwt sets forth1
OOOH9
-------
Federal R-«Lit*r
28453
Sc Zautors thai «Jist:?.jji:i
promises to DCBQ or limit enforcement action.
a-pezticular facility or dec* of
facilities in exchange far the BM of
esvinameatal eudUnf systems. However.
such aejenciea^nay use ^^* discretion to
adhist eofercement actions oo-a case-by
-------
3460
Federal Roister / Vol .=59. Nu. 144 / Tr-ir»i::iy. •;:•>' JH. !'.!*••» I \*n: .(•»$•
improvements rwardin«{ nil asp«i ts nf
S.f.r.r,a suiliting ooliiry. Tins
-.formatisn presented here is mivid^d
jr ;he ccnvec^uce of uuerestod
irt.-ts, i.i prfcpsr&ion for the July .Jr-
H. 135M publh. meeting. The Agency
opes thai this information will clarify
3A'» arrant activities And policies
•slated to environmental auditing.
Tha Qfnai of Compliance will
:spond to written request* fcr espies of
le documents referenced in ibis notice,
-ad »1\ requtscs to: U-S/EPA. Office of
mpUscce. Atto: Ira R. Feldman.
,ecial Counsel. 401 M Street. NW
.503). \Vashi=gtoa. DC 20460.
seven A. Heimut.
svrtant .\dminisaator. Office of
njorcfment and Caaipliai^et Aaumac&.
~n Doc »4-1tt27 Filed 7-27-94: *<«S em|
fluent Guktetines Task Fore* Open
teeting
cfNCr: Environmental Protection
.gency (EPA).
cnON: Notice of meeting.
UMMARY: The Effluent Guidelines Task
orce, an EPA advisory committee, will
•.old < meeting to discuss improvements
o irte Agency's Effluent Guidelines
Togram. The meeting is open to the
ublic.
ATES: The meeting will be held on
'uesday, August 16, from te30 am to
:00 pm. and Wednesday. August 17.
904. from 8:30 am to 3:00 pm.
OOAESSES: The meeting will take place
t the Dupont Plaza Hotel. 1500 New
lampshire Avenue NW. Washington.
1C: Comments may be sent To Eric
Brassier, Effluent Guidelines Task
v.rce, Office of Water (4303). EPA. 401
-I V.re.H. S.W., Washington. O.C 20460.
OB RJRTMER INFOftMATlON CONTACT: Eric
:i- i«s!fr..it 202-260-7150. fax 202-260-
'l».S
^•?t>!.SM£NTART INFORMAHOK Pursuant
-.) >h? Federal Advisory Committee Act
Pt/b- L 32-*HJ). the Environmental
i-'rt !i.-.t:un Air-n.-.y g:v« notice of a
.M-trting of iri« Effluent Guidelines Task
•- j.t> iECT?-). Th* ECTF is a
>-:S crr.rr.jn'V' of ;hn 'National Advisory
flour.:.:! for Sir- ion mental Policy and
T. « hfinij?;;.- (NACSPT1. the external
pol:. ;.• ad . i-»>ry board to lh«
.••.;!n«ini «.-3tcr cf EPA.
T>i«r e/J FF wn.s established in Julv of
::,3t in nHvise EPA on the Effluent
:.i;ii!ts program, which develops
ri-^-jijtuons for dischargers of industrial
The T.-isk Forte <.on.«>!«its cf m«{:r.hi'rs
a;if>ointed by EPA from :r>^"^«"g
improvements to the. Effluent
Guidelines proc«iD. r^^TTfiP**^* should*
be sent to EPA at the above addnss.
Comments submitted by August 8 will
be considered by the Task Force at or
subsequent to tbe meeting.
Dated: July 14. 1994.
Ericj
Designated Federal Official, ffftfaa • '
•Caidelinea Task force.
(PR Doc 94-18330 PUed 7-Z7-M: ftfS ami
{FW.-5022-tl
Improving EPA's Indian
Operations . -
ths pubiiv: i-omment period to «
•hat the strongest options have!;
idbiicnud.
pyjauc couusiT PEWCO: Comments
must be received by September 12.
ADDRESSES: Comments should be sent to
Caren Rathstein.'Tribal Operations
Team. US EPA, Moil Coda U39, 401U
Street SW^ Washington. DC 2O46GL
FOR FURTHER I
Caren Rothstein'at 202-2SO-7519.
SUWtEMerTAJrr »
: Tba
Environmental Protection Agency h*a
made continual progress hi'
Tribal program
pursuant to Title III of the
U«-an \V:it.;r Ata (33 U^.C 1251 et »>q.).
AGENCY: U.S. Environmental protection
Agency.
ACTION: Solidting public comments an'
the agency's efforts to enhance Indian
program operations..
SUMMARY: The Environmental Protection
Agency (EPA) is soliciting comments
from the public on the following
potential approaches' for improving the
Agency's Tribal operations, including
the establishment of a new national
Indian Program Office. To obtain Tribal
input into this process, as well as input
on future Tribal matters, the EPA
Administrator convened the Tribal
Operations Committee (TOQ comprised
of Tribal representatives and EPA
Senior Managers. EPA is novr seeking
broader input on these approaches, artel
will consider comments received during
Agency's 19*4 Indian Policy, la Fiscal..
Year 19^. approximately S3S milfie* ,
and 165 woek-yeaes vana utiHred to- ,'
• implement H»A rndtan pragmas, either
through direct graatsio Tribes or
tbrougu Feueuu nnptevieDtanoD and
technical assistance to Tribes;
Regulations and guidance specific ta
Tribes have been Amliagud uadatattny>
of EPA's programs ofTablithtng ta.
process for Tribes to apply for
and program authoanatioa. Over
Treatment in the Same Mannar ts'
State detonxiinations. formerly
to as Treatment as* Stata, have
made undec-wiooa water pregfu&s.
Numerous Tribes have submktad water
quality standards Jbr aulhorizatSoa by
EPA. and three have-alremdy beea
approved. Many more Tribal' ,
applications are expected In-tbe-ronue.
for a broad array of EPA prograna.
The growth of EPA'* Indian proma '
has led to an increased uadetsUnomg of
UMI dOfldZSHfiSaf' 0* 0nTrtrOJUB6BaaaMl**avBUSi
to human hearth and tfaeejnrtraaineatt' '
within Indian Country by EPA aajtlbt'
Tribes. To promote improved * '.
cotnrmmications and partnersnlps with
Tribes to address tbesreoocesns. the
EPA Adtahristrator coaveiied a Tribal
OperaUcrns Conuninee (TOQ W meal '
with her and other EPA Senior
Management as co-regulatorsi on a
regular basis, and to provide Tribal
. input into Agency decision making thai
may affect Tribes,
The TOC is comprised of 18 Tribal
representatives, who are either Tribal
Leaders or Tribal environmental
officials selected by Tribes within EPA
regions.-There are Tribal representatives
from each ofEPA's regions except
Region III. which has no Federally
recognized Tribes.
On February 17.1994. at the first
official TOC meeting, the Administrator
committed to srrengthening the
Agency's Tribal operations and
reaffirmed the Agency's 13*4 hidlan
Policy. As one of th* Brst actions forth*
Tribal representatives to the TOC am) In
00015
-------
Notices
Federal Register / Vol. 60, No. 63./ Monday, April 3, 1995 / Notices Page 16875
HiissecSon of the FEDERAL REGISTEH -
quoins documents other than odes or
proposed rules that are applicable to trie
public. Notices of hearings and investigations,
meetings, agency decisions and
fuSngs, delegations of authority, filing of
petitions and applications and agency
statements of organization and functions are
ixampias of documents appearing in this
secfion.-
ENVIRONMENTAL PROTECTION
AGENCY.
.jFRL-8184-q ' . ' .&:-
Voluntary Environmental Self-Policing iLd
Self-Disclosure Interim Policy Statement'
AGENCY: Environmental Protection Agency
(EPA).
ACTION: Interim policy statement and request
for miiimf.nL
SUUUARY: The Environmental Protection
Agency (EPA) announces and requests
CO^O^OfiOX Q&^ 9^& IJDfiCXUXl POuC^r^ vO nffp^fliQC
niaf^j entities Thar conduct1
Hours of operation are 8 aun. to 5:30 pA.
Monday through Friday, except legal
/ holidays. Additional contacts are Geoff
Carver or Brian Riedei. at (202) 564-4187.
SUPPLEMENTARY INFORMATION:
L Background '. .
A. Introduction '' ' .
One of the Environmental Protection
Agency's most important responsibilities is
voluntary compliance evaluations ""^ »>««»
disclose and correct violations. These .
incentives Include eliminating or substantially
trdnnng the gravity component of ovfl
penalties and not referring cases for criminal
prosecution where spctifwl conditions'are
net The policy also states that EPA win not
iftjuest voluntary gTT"t* lepmi^ to tnggcr
enforcement investigations: This interim
policy was developed in close consultation:
with EPA's regional offices and the
Department of Justice, and will be applied
uniformly by the Agency's enforcement
programs. ' ' •
DATES: This interim J/oIlCy fTat*T*y* is
effective as interim guidance IS days after •
publication, in order to give the Agency time.
to coordinate implementation of the policy
throughout EPA Headquarters and the ..
Regions. EPA urges interested parties to
comment on 'h** interim policy in writing.
Comments must be received by EPA at the
address below by June i 1995.
ADDRESSES: Submit three copies of
comments to the U.S. EPA Air Docket. Mail
Code 6102,401 M Street. SW, Washington.
D.C 20460. attention: Docket #C-94-01.
FOR FURTHER INFORMATION CONTACT:
Additional documentation relating to the
development of tf"« fatirini policy is
contained in the environmental auditing
public docket. Documents from the docket
nay be requested by calling (202) 260-7548,
requesting an index to docket SC-94-01. and
f»ing document requests to (202) 260-4400.
obtainini
ithfede
protect public health and safegt
al laws that
ritbe
Tnat goal can be achieved only
with the voluntary cooperation of thousf — 'a.
0* DUS1&6SS6S 2QQ OCDCX IdCQl2£Cd CQT1*-*
subject to these requirements. Today, . is
announcing incentives for those who tsl •
responsibility for voluntarily evaluating,
disclosing and correcting violations. These
incentives, developed after nine months of
public meetings and empirical analysis, are
set forth in detail below and take effect in 15
days. At the same ii*n*L EPA expects to
continue a dialogue with
consider fimhcr reunem
tjiadaship Program (ELP) pilot projeca with
companies and public agencies to test criteria
for auditing and certification of voluntary
compliance programs. If success&J, standards
developed through Environmental Leadership
could lead to reduced inspections and public
recognition for companies or agencies with
staie-of-me-art compliance pmgr^nK in .
keeping with the President's announcement
on March 16.. 1995, EPA also will shortly be.
announcing additional enmpKan™* far^fj«»^
for *mafl businesses.
The Agency is especially interested to
relating to whether tt"* i
Tff this. JOCGTUO
policy. The incentives that EPA is offering
4^f) ^^A^ £a^^^K~A ^B^^to^K^^ ^^b^^L^^^^M^^B
I^^u ^uCO LA^IC^r ^A^S^A^3K C3EB^^va^Hw3v *
First, the Agency will completely rtimfnatft
gravity-based (or "punitive") pmaltica for
COflS^^dfiXCS O1T T3QO*lCv flt^CESDQCS icl2v *Ou22XC2Z!u^^
identify, ^ m this
'. policy. EPA win also reduce punitive
•rtCB^U^lfiS D^f 11^1 cO tJTv TQp CQ^DD3d6S CQ3C
meet most, but not afl. of these conditions.
• Second, EPA wiBnxK recommend to the
Department oif Justice that criminal charges
be brought *g-*'"** a company **"t'>*g is good
policy appropriately defines the criteria for
detenmning whether a self-audit, self-
evaluation or disclosure is voluntary, whether
the interim policy adequately preserves the •
Agency's authority to_assess a gravity penalty
component in appropriate cases: and whether.
and according to what criteria, the Agency
should CTnsidfr giving credit against the
economic benefit component of a penalty for •
state-of-the-art environmental management
systems. *
B. Public Process
In May 1994. the Administrator asked the
Office of Pj»ft« EMTTv-nf an1' commissions. State
attorneys general offices, district anomeys'
offices, environmental and public interest
groups, and professional environmental
auditing groups; and held a public comment
session in San Francisco on January 20. 1995.
'In addition to considering opinion from
stakeholders, EPA conducted its own analysis
of relevant farn For example, the Agency
considered EPA and other Federal policies •
iclating to environmental auditing, self-
disdosure, and correction, as well as
incentives suggested by State and local
policies and legislation, and by applications
submitted for the ELP pilot program. The
Agency also considered 'relevant surveys on
auditing practices and incentives.
tc 0060153
-------
C Purpose
This interim policy is intended to promote
environmental compliance by providing
greater certainty as to EPA's enforcement
response to voluntary self-evaluations, and
voluntary disclosure and prompt collection of
violations. The policy further provioes
guidance for States and local authorities in
encouraging this behavior among regulated
entitles.
Federal laws and regulations set minimum
standards for protecting human health and •
achieving environmental protection goals
such as clean air and clean water. EPA win
fn^tjnw to uphold tfac5f laws throngs
vigorous ^nft^^mf ** av M*HK IJJJIL . .
appropriately penalize violators. Penalties
help ensure a level playing field by ensuring
rhaf violators do not obtain an "*iftpy
economic advantage over their competitors
who made the necessary investment in
compliance. Penalties also promote protection
•of the environment and public health by
encouraging adoption of pollution prevention
and recycling practices that limit exposure to
liability for pollutant discharges and deterring.
future violations by the violator and others.
At the same time, the Agency recognizes
that we f*rmnt achieve rnartmn^ VH1 H>HltK*
without the cooperation of a regulated . •
community willing to act responsibly by
detecting, disclosing, and correcting .•
violations. Already, regulated entities have
many compelling incentives to i
as noted in EPA's 1986 auditing policy. .
Indeed, recent surveys show that die vast
majority of. large companies engage in
environmental a'Hi"ng and/or have*
gu^n tf itf SVSttmS IS place.
Nonetheless, EPA has concluded mat the
additional incentives in fofc «M»rfm policy •
will further promote the regulated
community's ra^yyiTT^Tn***** to adopting
systems for maximizin
D. Principles for Voluntary Compliance
The interim policy that EPA is announcing
today is based on seven principles:
1. Self-policing by regulated entities am
play a crucial role in rinding, fixing and
preventing violations. . •
2. Violations discovered through self-
policing should be disclosed and promptly
corrected.
3. Regulated entities that self-police and
that voluntarily disclose and self-correct
violations in accordance with this policy
should be a«*«?-d penalties that are
consistently and predictably lower than
penalties for those who do not.
4. Regulated entities that self-police and
voluntarily disclose and self-correct violations
in accordance with this policy should also not
be rscommeaded for criminal prosecution.
5. Providing predictable incentives for
voluntary disclosure and correction of
violations identified through self-policing
offers a positive alternative to across-the-
board privileges and immunities that could be
used to shield criminal misconduct, drive up
litigation costs and create an atmosphere of
distrust between regulators, industry and local
communities.
6: EPA should not seek voluntary ''
environmental audit information to trigger an
investigation of a civil or criminal violation
of environmental laws.
7. To preserve a level playing field, EPA
should recover any economic benefit realized
from violations of environmental'law.
£ Relationship to Emerging Standards
EPA also recognizes the development of
afvj sowing reliance on ^>^"^a
standards m the U.S. and omer countries. ••
These «"m«fanjf if properly crafted and
implemez'sd, can provide a powerful tool for
organiz""Sns to improve their overall
compliance with environmental requirements
•and move beyond compliance through
innovative approaches to pollution •
prevention. In addition to issuing f*"« interim
policy, EPA win continue to pursue a
dialogue with interested parties and to pilot.
policy approaches through programs such as
me ELP to determine how EPA can mai» use
of and encourage *»v- mpA*rA* .
IL Interim Policy
A. Definitions
• For purposes of this interim policy, the-
following definitions apply? •
"Environmental auditing" fe»* me * •
definition given to it in EPA's .1986 policy-
on environmental auditing, Le. "a systematic.
:ed, periodic and objective review by-
regulated entities of facility operations and'
practices related to mf**™? environ
l audit rept
'. means'alt
information rcJa&njt ^^ an-
but not including the
I information underlying or testimonial
evidence relating to such information.
"Regulated entity" means any entity,
including a federal, state, yf municipal
• facility, regulated under the federal
environmental laws **"** EPA administers.
• • "Self-evaluation" "**^"i« an assessment;
not necessarily meeting all the gritgrfo of a
full environmental audit, by a i
of its compliance with one or more
"Voluntary" means not required by
statute, regulation, permit, order.- or
.
B, Conditions
The conditions for rcdacing, civil penalties-
and not making criminal referrals in
accordance, with Sections U.C and n r> Of
this interim policy are as follows:
I. Voluntary self-policing. The regulated
entity discovers a violation through a
voluntary environmental audit or voluntary
self-evaluation appropriate to the size and
nature of the regulated entity, and
2. Voluntary discIesure.~Tbt regulated
entity, fully and voluntarily discloses the
violation in writing to all appropriate federal.
stale and local agenoes-as soon as it is
discovered (including a reasonable time to
determine that a violation exists), and prior
to (1) the commencement of a federal state
or local agency inspection, investigation or
. information request; (2). notice of a citizen '
suic (3) legal complaint by a third party, or
(4) the regulated entity's knowledge that the
discovery of .the violation by a regulatory
• agency or third parry was imminent; and '
• 3. Prompt correction. The regulated entity
corrects the violation either within 60 days of
discovering the violation or. if more time is
needed, as expeditiously as practicable; and
4. Remediation of imminent and substantial
endonsf-i:*-.. The regulated entity ... ;
•expedfc'-v- .y ,«medies any 'condin'on'that has'
• created o. .V • create an imrmn^r and
substantial sudangennent to human health or
the environmcQC and-* *
• S. Remediation of harm and prevention of •
repeat violations. The regulated entity
implements appropriate measures to remedy
' any environmental harm due to the violation
and to 'prevent a recurrence of the violation; •
and .
6. No lack of appropriate preventive '
measures. The violation does not indicate mat
*nft recniatcQ eooOT has r ^^^ to take .
aypiu^jj i arc steps to avoid repeat or rftdrring
violations; and •
7. Cooperation. The regulated entity
cooperates as required by EPA and provides
such- information as is reasonably necessary • .
and required by EPA to ^^rnr**^
applicability of this policy. Cooperation may
include providing all requested documents ..
to employees JTV^ a««i<^»"<^ in any
further investigations into the violation.
Where appropriate, EPA may require that •
to satisfy any of these conditions, a regulated ;
entity must enter rntoa written agreement.
administrative consent order or judicial
consent decree, particularly where compliance
' or remedial measures are complex or a
lengthy schedule for a"*'""^ and
trtarfayflfoiYtg compliance or remediating harm
is required. • .
C Reduce Civil Penalties for Voluntarily
Disclosed and Prompdy Corrected Violations.
. 1. Incentive ' •
Regulated g-nritto will be eligible for the •
following reductions in civil penalties:
a. EPA will eliminate all of the gravity
component of the penalty for violations by
regulated entities that meet conditions 1
through 7 outlined in Section ILB.. except for
violations involving (i) criminal conduct by
the regulated entity or any of its employes,
or (ii) an JTnTTtfngqt and substantial
eadangermeni. or serious »<^"ai harm, to
human hearth or the environment.
000154
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b. EPA may mitigate up to 75% of the
unadjusted gravity component of the penalty.
nft"S into account any of conditions 1-7 in
Section ILB. thai are met. in the following
eases
0) cases in which most but not all of tbe
conditions in Section ILB. are met; or '
(ii) cases involving an imminent and
substantial endangerment. but not serious
actual barm, in which all the conditions in
Section ILB. are mec or
• (iii) cases involving the disclosure of
criminal conduct in which all the conditions
in Section ILB. are met
c EPA will retain its full discretion to
recover any economic benefit gained as a
result of noncompliance to preserve a "level.
playing field" in which violators do not gain
a competitive advantage through
aoacompliancs: However. EPA may forgive
die entire penalty for violations which meet
conditions 1 through 7 outlined in Section
ILB. and, in EPA's discretion, do not merit
any penalty due to the insignificant amount •
of any economic benefit.
X Discussion
a. Providing a clear and significant
redaction in civil penalties for companies that
assume responsibility for finding, disclosing
and correcting violations will errata a strong
incentive for regulated entities to prevent or
fix violations before EPA expends '
enforcement resources. The policy sratrs
dearly the conditions under which EPA win
forgive all or pan of tbe gravity component
of a penalty for voluntary disclosure and
corrections
b. The policy appropriately preserves the
concept of recovering economic benefit. .
eiggpt wfaffg j{ if
commenter
industry commentersj
c Retaining EPA's discretion to collect the
gravity component of the penalty in •
appropriate cases, such as where a violation
i&VOlVeS criminal COndUCt, OT ""min^n^ ""^
substantial endangerment, win help to deter .
tbe most egregious environmental violations.
At the same Time, by preserving flexibility to
reduce the gravity element by op to 75% for
good faith efforts to disclose and promptly
comply even in those cases-, the policy will
retain an appropriate compliance incentive.
D, Limit Criminal Referrals for Voluntary
Disclosure and Correction of Violations
1. Incentive
EPA will not recommend to. the
Apartment of Justice 'hy cril
be brought against a regulated entity where
EPA determines f^af conditions 1—7 in .
Section ILB. above for reduction of civil •
penalties are met. and the violation does not
demonstrate or involve (1) a prevalent
corporate management philosophy or practice
ita: concealed or condoned environmental
violations;-(2) high-level corporate officials'
or managers' conscious involvement in or
willful blindness to the violation: or (3)
serious actual barm to hnmqn health or the
environment. This policy does not apply to
criminal acts of individual managers or
employees. Where EPA determines pursuant
to this Section that a criminal referral (b the
Department of Justice is unwarranted, EPA
may nonetheless proceed with civil
enforcement in accordance with Section DLC.
of this policy or other applicable enforcement
response and penalty policies.
2. Discussion . • •
Tbe policy will promote candid and
thorough self-policing by providing greater
certainty as to how EPA win exercise its
criminal investigative discretion to encourage
voluntary disclosure and prompt correction by
regulated entities.
£ Eliminate Routine Requests for Audit
Reports in Pre-Enforci. M Proceedings'
1. Incentive • '
EPA will not request a voluntary
environmental audit report to trigger a civil
or criminal investigation. For example, EPA
will not request an audit in routine .
inspections. Once the Agency has reason to
believe a violation has been committed, EPA
may seek through an investigation or
^nfnp-jmfnt aytiuii any information relevant
to identifying violations or determining
liability or extent of harm.
2. Discussion.
a. This policy makes clear that EPA win
not routinely tequest audit lepoits; At the
; n'tne, the poEcy in no way limits tbe
law privileges (045, attorney-client and work
product) as appropriate. EPA believes that
this clarification; along with the other
incmrives in this interim policy, should
greatly reduce any perception that
environmental audits may be flw*d n^fai^y in
environmental cnforcementr*
b. Witn respect to federal facilities,
although federal facility environmental audit
icpurrs may be accessible to the public under
the Freedom of Information Act (FOIA) in
certain circumstances, EPA cannot ntiliTS
FOIA to request information from other
federal agencies. Thus, EPA will apply this
• policy on requests for audit reports to federal
(and ffi"* and municipal) facilities the same.
as it does for other regulated entities.
•F. Applicability
This it»«grln« policy applies to violations
under all of the federal environmental statutes
tfrar EPA Ttfrv"**** and supersedes (unless
otherwise noted) any conflicting oc
inconsistent provisions in the media-specific
penalty or enforcement response policies and
EPA's 1986 Environmental Auditing Policy
Statement. Existing enforcement policies will
continue to apply in conjunction with this
interim policy, except where inconsistent witt
this policy. In addition, where appropriate.
EPA's Supplemental Environmental Project
Policy may at EPA's discretion be applied in
conjunction with this policy.
IEL Favor These incentives Over Broad
Privileges »*"f Immunities
• This interim policy offers a positive
alternative to across-the-board privileges and
immunities that could be used to shield
criminal misconduct, drive up litigation costs
and create an atmosphere of distrust between '
regulators, industry and local communities.
A. Discussion
1. Penalty immunity provisions for
voluntary disclosures of violations can give ."
lawbreakers an economic advantage over
their law-abiding competitors. It
to give substantial penalty reductions for
those who come forward with their violations
and promptly correct.**:. .. «, but to mainfafa a
MftVeT playing field, tV. ;«al and state
governments must be :«'e to recoup the
economic benefit of violations.
2. A principal rationale for environmental
audit privileges and penalty immunities for
voluntary disclosures is to reduce tbe
exposure of regulated entities that conduct
self-evaluations and act on the findings by.
immediately correcting violations. EPA has
addressed *h».< concern with the incentives for
disclosure and correction outlined above.
3. Privilege runs counter to efforts to open
up environmental dfisinnmaHng and
encourage public participation in matters that
affect people's homes, workplaces and
4. An environmental audit privilege could
be mi«"wf to shield bad actors or to frustrate
af^^.{o crucial fic^flj information.
5. Environmental «
-------
che sanctions a business faces for violating
federal law do not depend on where the
business is t*v**f»^ . .
Accordingly, to majpmin national
consistency: ' -
'A. EPA will scrutinize enforcement more
closely in states with audit privilege and/or
penalty immunity laws and may fi««i it
necessary to increase federal enforcement
where environmental self-evaluation
privileges or penalty immunities prevent a
St2£6 tirOm ODQttDlQZZ*
liability; ... . •
2. facts needed to establish the nature and
extent of a violation; - . .
3. •»pprr|p'-""* ffn^Wfif for tj ..... '"II^T and
snbscan&al enuansemient or senous harm to
recovering rrnnornic
• 4. appropriate sanctions or penaffies for*
criminal conduct and repeat violations; or
5. prompt correction of violanons, and
expeditious remediation of those that involve
imminent and substantial endangerment to
human fr»»'*h or the environment.
B. EPA will bring to the state's attention
any provisions of state audit privilege and/or
'penalty immunity «THT»^ tint raise any of the
concerns outlined above, and will work with
the state to address those concerns and ensure
V. Limitations on Applicability of This
This '">"**« policy jgo forth 'i****'!
guidelines which amend EPA's penalty
policies ui simations involving voluntary self-
policing, disclosure *"** correction. In
policy, these guidelines wfll aid EPA
personnel in proposing appropriate penalties
and judicial eufoiceineat actions. The interim
policy also serves to structure the Agency's
enforcement authority and states the
Agency's view as to die proper allocatr «t*
its enforcement resources. Deviations from
these guidelines, where merited, are
authorized so long as the reasons for the
'deviations are <
This interim policy is not fin^t agency
action, but is intended solely as guidance. It
is not intended, nor can it be relied upon, to
create any rights enforceable by any party fe
litigation with the United States. EPA
officials, may decide to follow the guidance
provided in this interim policy or to act at
variance witn the guidance based on analynj
of case-specific facts and circumstance!. •
Application of this policy to the fica of any
individual case is at the sole discretion of •
EPA and is not subject to review by any
court. In addition, the policy has no effect on
the calculation of any cleanup costs, remedial
costs, natural resources damages or •
emergency response costs »«-«~1iftd with a
• violation. EPA reserves the right to change
this interim policy at any time without public
notice. ' : * . ' . '
Dated: Much 30.1995.- •
"Assistant Adminisavur for Enforcement one
•Compliance Assurance.
(FR Doe. 95-8218 Ffled.3-31-95; 8:45 in]
BUMGCOOE
000156
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66706
Federal Register / VoL 60, No^ 246 / Friday. December 22, 1995 / Notices
ENVIRONMENTAL PROTECTION
AGENCY . .. - .
IPW.-WOO-11
Incentives for Self-Policing: Discovery,
Disclosure, Correction and Prevention
of Violations
AGENCY: Environmental Protection .
Agency (EPA).
ACTION; Final Policy Statement
SUMMARY: The Environmental Protection
Agency (EPA) today issues its final
policy to enhance protection of human
health and the environment by
encouraging regulated entities to
voluntarily discover, and disclose *ni*
correct violations of environmental
requirements. Incentives include
Or substantially reducing
the gravitycomponent of civil penalties
and not recommending cases for
criminal prosecution where specified
conditions are met. to those who
voluntarily self-disclose and promptly
correct violations. The policy also -
restates EPA's long-standing practice of
not requesting voluntary audit reports to
trigger enforcement investigations. This
policy was developed in dose
consultation with the U.S. Department
of Justice, states, public interest groups
and the regulated community, and will
' be applied uniformly by the Agency's
enforcement programs.
DATES: This policy is effective January '
22.1996.
FOR FURTHER INFORMATION CONTACT}
Additional documentation relating to
the development of this policy is
contained in the environmental auditing
public docket^ Documents from the
docket may be obtained by calling (202)
260-7548. requesting an index to docket
tC-94-01, and faxing document
requests to (202) 260-4400. Hours of '
operation are 8 ajn. to 5:30 p.m..
Monday through Friday, except legal
holidays. Additional contacts are Robert
Fentress or Brian Riedel. at (202) 564-
4187. . ' .
SUPPLEMENTARY INFORMATION:
L Explanation of Policy
A. Introduction
The Environmental Protection Agency
today issues its final policy to enhance •
protection of human health and the
environment by encouraging regulated
entities to discover voluntarily, disclose,
correct and prevent violations of federal
environmental law. Effective 30 days
from today, where violations are found
through voluntary environmental audits
or efforts that reflect a regulated entity's ,
due diligence, and are promptly "
disclosed and expedltiousiy corrected.
EPA will not seek gravity-based (La.. .'•
non-economic benefit) penalties and •
will generally not recommend criminal
prosecution against the regulated entity.
EPA will reduce gravity-based penalties
by 75% for violations that are- '..- •.
voluntarily discovered, and are
promptly disclosed and corrected, even
if not found through a formal audit or
due diligence. Finally, the policy' • • •
restates EPA's long-held policy and .
environmental audit reports.
The policy includes important'.- "
safeguards to deter irresponsible. •
behavior and protect the public and •>
environment For example, in addition
to prompt disclosure and expeditious'
correction, the policy requires • •-• ~~. '
companies to act to prevent recurrence
of the violation and to remedy any'jr:
environmental harm-which may have
occurred. Repeated violations at those
which result in actual harm or may .
present imminent and substantial •• ••
endangerment are not eligible for relief
. under this policy, and companies will
not be allowed to gain an economic. ,.-:
advantage over their competitors by
delaying their investment in -~— • •• -
compliance. Corporations remain.
criminally liable for violations that
result from conscious disregard of their
obligations under the law. and
individuals are liable for criminal
. misconduct
..The i'«g"«"'*«t of *h'« policy concludes
EPA's eighteen-month public evaluation
of the optimum way to encourage
voluntary self-policing while preserving
fair and effective enforcement The
incentives, conditions and exceptions '
announced today reflect thoughtful
-suggestions from, the Department of. •"
•Justice, state attorneys general and local
prosecutors, state environmental
agencies, the regulated community.'and
public interest organizations. EPA.
believes that it has found a balanced
and responsible approach, and will
conduct a study within three yean-to
determine the effectiveness of this.
policy.
B. Public Process
One of the Environmental Protection
Agency's most important
responsibilities is ensuring compliance
with federal laws that protect public
health and safeguard the environment
Effective deterrence requires inspecting.
bringing penalty actions and securing
compliance and remediation of harm.
But EPA realizes that achieving
compliance also requires the
cooperation of thousands of businesses-
and other regulated entities subjecfcto
these requirements. Accordingly, in
May of 1994. the Administrator asked
. the Office of Enforcement and
Compliance Assurance (OECA) to
determine whether additional
incentives were needed to encourage
voluntary disclosure and correction of
violations uncovered during
environmental audits.
EPA began its evaluation with 3 two-
day public meeting in July of 1994. in
Washington. D.C.. followed by a two-
day meeting in San Francisco on
January 19.1995 with stakeholders from
industry, trade groups, state
environmental commissioners and
attorneys general, district attorneys.
public interest organizations and
' professional environmental auditors.
The Agency also established and
maintained a public docket of testimony
presented at these meetings and all
comment and correspondence .
submitted to EPA by outside parties on
this issue. —' '
In addition to considering opinion
and information from stakeholders, the
Agency examined other federal and
state policies related to self-polidng.
self-disclosure and correction. The
Agency also considered relevant surveys
on auditing practices in the private
sector. EPA completed the first stage of
>h<« effort with the announcement of an
interim policy on April 3 of this year,
which denned conditions under which
EPA would reduce civil penalties and
not recommend Criminal prosecution for
, companies that audited, disclosed, and
corrected violations.
Interested parties were asked to
submit comment on the interim policy
by June 30 of this year (60 FR16875);
and EPA received over 300 responses
from a wide variety of private and
public organizations. (Comments on the
interim audit policy-are contained in the
•Auditing Policy Docket, hereinafter.
"Docket".) Further^ the'American Bar
Association SONREEL Subcommittee
hosted five days of dialogue with
representatives from the regulated.
industry, states and public interest
organizations in June and September of
>hi« year, which identified options for
strengthening the interim policy. The
'changes to the interim policy
announced today reflect insight gained
through comments submitted to EPA,
the ABA dialogue, and the Agency's
practical experience implementing the
interim policy.
.C. Purpose
This policy is designed to encourage
•greater compliance with laws and
regulations that protect human health
and the environment It promotes a
higher standard of self-policing by
waiving gravity-based penalties for
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..Federal Register / VdgJBagNo. 246 / Friday. December 22. 1995 / Notices
66707
violations that are promptly disclosed
and corrected, and which were
discovered through voluntary audits or
compliance management systems that
demonstrate due diligence. To further
promote compliance, the.policy reduces-
gravity-based penalties by 75% for any
violation voluntarily discovered and
promptly disclosed and corrected, even
Jf not found through an audit or
compliance management system. "'"*
EFA's enforcement program provides' •
a strong incentive for responsible ' • '
behavior by imposing stiff sanctions for
noncompuance. Enforcement has
contributed to the dramatic expansion .'
of environmental auditing measured in:
numerous recent surveys. For example. '
more than 90% of the corporate
respondents to a 1995 Price-Waterhouse
survey who conduct audits said that one
. of the reasons they did so was to find
and correct violations before they were'.
found by government inspectors. (A
copy of the Price-Waterhouse survey is
contained in the Docket as document
•Vm-A-76.)
At the same time, because government
resources are limited, maximum
compliance cannot be achieved without
active, efforts by the regulated
community to-police themselves. More
than half of the respondents to the same
1995 Price-Waterhouse survey said that
they would expand environmental .
auditing in exchange for reduced
penalties for violations discovered end
corrected. While many companies
already audit or have compliance
management programs. EPA believes
that the .incentives offered in this policy
will improve the frequency and quality .
of these self-monitoring efforts.
D. Incentives for Self-Policing ' ~~ '
Section C of EPA's policy identifies
• the major incentives that EPA will
provide to encourage self-policing, self- '""
disclosure, and prompt self-correction.
These include not seeking gravity-based
civil penalties or reducing them by
75%. declining to recommend criminal
prosecution for regulated entities that '
self-police, and refraining from routine .
requests for audits. (As noted in Section
C of the policy. EPA has refrained from
making routine requests for audit
reports since issuance of its 1986 policy
on environmental auditing.)
1. Eliminating Gravity-Based Penalties
Under Section C(l) of the policy. EPA
will not seek gravity-based penalties for.
violations found through auditing that
are promptly disclosed and corrected.
Gravity-based penalties will also be
waived for violations found through any
documented procedure for self-policing,
where the company can show that it has
a compliance management program that
meets-the criteria for due diligence in
Section B of the policy.
.Gravity-based penalties (denned in
Sections of the policy) generally reflect
thefsenousness of the violator's
beHavJOE. EPA has elected to waive such
penaltfec.for violations discovered
througb'dus diligence or environmental
audits, recognizing that these voluntary
effoztfplay a critical role in protecting
* inealth and the environment by
• *i • • •..- . •-• - 1 .
identifying, correcting and ultimately.'.
preventing violations. All of the
conditions set. forth in Section D, which
include prompt disclosure, and
expeditious correction.-must be satisfied
. for gravity-based penalties to be waived.'
• As iithje interim policy, EPA reserves
the right to collect any economic benefit
that may. have been realized as a result
of noncompliance, even where .
cornpanies.meet all other conditions of.'
the policy. Economic benefit may be
. waived,* however, where the Agency •
determines that it is h»«ignififamt-
. After considering public comment..
EPA has decided to retain the discretion
to recover economic benefit for two
reasons. First it provides an incentive . •
to comply on time. Taxpayers expect to
pay interest or a penalty fee if their tax-
payments are late; the same .principle
. should apply to corporations that nave .
delayed their investment in compliance.
Seconds-It is fair because it protects
responsible companies from being .
undercut by their noncomplying
competitors, thereby preserving a level
playing field. The concept of recovering
economic benefit was supported in
public comments by many stakeholders,
including Industry representatives (see,-
e.g.. Docket. E-F-39-. 0-^-28. and H-F-
« A% 4^^^ ^ . • ^
2. 75%-Reduction of Gravity
• The policy appropriately limits the
complete'waiver of gravity-based civil
penalties'to companies that meet the •
higher standard of environmental '•
auditing'or systematic compliance
management However, to provide
additional encouragement for the kind
of self-policing that benefits the public.
gravity-jbasexi penalties will be reduced
by 75% for a violation that is
voluntarily discovered, promptly .
disclosed-and expeditiously corrected.
even if it was not found through an
environmental audit and the company
cannot document due diligence. EPA
expects that this will encourage •'
companies to come forward and work
with the Agency to resplve
environmental problems and begin to
develop_an effective compliance • •
management program.'
Gravity-based penalties will be *
reduced 75% only where the company
meets all conditions in. Sections D(2)
through D(9). EPA has eliminated
language from the interim policy
indicating that penalties may be
reduced "up to" 75% where "most"
conditions are met because the Agency:
believes that all of the conditions in.
D(2) through D(9) are reasonable and
essential to achieving compliance. This
change also responds to requests for
greater clarity and predictability. . -
3. No Recommendations for Criminal
Prosecution • • ^ '
EPA has never recommended criminal
prosecution of a regulated entity based
on voluntary disclosure of violations
discovered through audits and disclosed
to the government before an •'' .
investigation was already under way.
' Thus, EPA will not recommend criminal
prosecution for a regulated entity that
uncovers violations through *
environmental audits or due-diligence,
• promptly discloses and expeditiously
corrects those violations, and meets all'
other conditions of Section D of the
This policy is limited to good actors.
and therefore has important limitations.
It will not apply, for example, when
corporate officials are consciously
involved in or willfully blind to
violations, or conceal or condone
noncompliance. Kinf» the regulated
entity must satisfy all-of the conditions
of Section D of the policy, violations .
that caused serious harm or which may
pose imminent and substantial
endangerment to human health or the
environment are not covered by this
policy. Finally, EPA reserves the right to
recommend prosecution for the criminal
conduct of any culpable individual.
Even where all of the conditions of
this policy, are not met however, it is
important to remember that EPA may.
decline to recommend prosecution of a
company or individual for many other
reasons under other Agency
• enforcement policies;- For example, the
Agency may.decline to recommend
prosecution where there is no
significant harm or culpability and the-
individual or corporate defendant has '
cooperated fully.
Where a company has met the-
conditions for avoiding a
recommendation for criminal
'prosecution under this policy, it "will
not face any civil liability for gravity-
based penalties. That is because the
same conditions for discovery.
disclosure, and correction apply in both
cases. This represents a clarification of
the interim policy, not a substantiv*
change.
000159 .
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66708
Federal Register / Vol 6g. No. 246 / Friday. December 22. 1995 / Notice,
4. No Routine Requests for Audits
EPA is reaffirming its policy, in effect
sines 1986, to refrain from routine
requests for audits. Eighteen months of
public testimony and debate have
produced no evidence that the Agency
has deviated, or should deviate, from
this policy.
If the Agency has independent
• evidence of a violation, it may seek
information needed to establish the
extent and nature of the problem and
the degree of culpability. In general. •
hov--9ver, an audit which results in
arc pt correction clearly will reduce
liability, not expand it Furthermore, a
review of the criminal docket did not
.. reveal a single criminal prosecution for'
violations discovered as a result of an
audit self-disclosed to the government.
S. Conditions
Section 0 describes the nine
conditions that a regulated entity must
meet in order for the Agency hot to seek
(or to reduce) gravity-based penalties
under the policy. As explained in the
Summary above, regulated entities that
meet all nine conditions will not face
gravity-based civil penalties, and will
generally not have to fear criminal
' prosecution. Where the regulated entity
meets all of the conditions except the
first ffKD). EPA will reduce gravity-
based penalties by 75%.
1. Discovery of the Violation Through
an Environmental Audit or Due
Diligence
Under Section 0(1). the violation
must have been discovered through
either (a) an environmental audit that is
systematic, objective, and periodic as
defined in the 1986 audit policy, or (b) .
a documented, systematic procedure or
practice which reflects the regulated .-.-
entity's due diligence in preventing. ~ .
detecting, and correcting violations. The
interim policy provided full credit for
any violation, found through "voluntary
self-evaluation," even if the evaluation
did not constitute an audit In-order to
receive full credit under the final policy.
any self-evaluation that is not an audit .
must be part of a "due diligence" ' ;
program. Both "environmental audit" •
ar••'. "due diligence" are defined in
St.tionB of the policy; . . -.
Where the violation is discovered
through a "systematic procedure or
'practice" which is not an audit, the
regulated entity will be asked to
document how its program reflects tba
-• criteria for due diligence as defined in
Section E of the policy. These criteria;
which are adapted from existing codes
of practice such as the 1991 Criminal
Sentencing Guidelines, were fully
discussed during the ABA dialogue. The
criteria are flexible enough to
accommodate different types and sizes
of businesses. The Agency recognizes
that a variety of compliance
management programs may develop
under the due diligence criteria, and
will use its. review under this policy to
determine whether basic criteria have
been met. , . - . . ." '; '
Compliance management programs "
which train and motivate production
staff to prevent, detect ana correct
violations on a daily basis are a valuable:
complement to periodic auditing. The
policy is responsive to -
recommendations received during
public comment and from the ABA«; .:*
dialogue to give'compliance "~J*
management efforts which meet ther
criteria for due diligence the same-••!
penalty reduction offered for -
environmental audits. (See. e.g* IW1-
39. H-E-18. and D-G-18 in the-Docket)'
EPA may require as a condition of
penalty mitigation that a dr 3iptipn of
the regulated entity's due d-Jgence •
efforts be made publicly available,. The
Agency-added this provision in •.
response to suggestions from
environmental groups, and believes that
• the availability of such information will
allow the public to judge the adequacy
of compliance management systems. .
lead to enhanced compliance, and foster
greater public trust in the integrity of
compliance management-systems.
2. Voluntary Discovery and Prompt
Disclosure
Under Section D<2) of the final policy.
the violation must have been identified ' -
voluntarily, and not through a . . .
monitoring, sampling, or auditing
procedure that is required by statute. . •
regulation, permit, judicial or
administrative order, or consent
agreement Section D{4) requires that. • •
disclosure of the violation be prompt
and in. writing. To avoid confusion and
respond to state requests for greater •.
clarity, disclosures under this policy
should be made to EPA. The Agency
will work closely with states in-r?
implementing the policy. • . "tr. •
The requirement that discovery of the •
violation oe voluntary is consistent with'
proposed federal and state bills which .
would reward those discoveries that the
regulated entity.can 'egitimateljr^&aK
attribute to its own voluntary efforts*.
The policy gives three specific ^£f
examples of discovery that wouldfnbt be
voluntary, and therefore would npf.be ..
eligible for penalty mitigation: _ix"
emissions violations detected through a
required continuous emissions monitor.
violations of NPDES discharge limits
found through prescribed monitoring.
and .violations discovered through a
compliance audit required to be
performed by the terms of a consent
order or settlement agreement
The final policy generally applies to
any violation that is voluntarily
discovered, regardless of whether the
violation is required to be: ported. This
definition responds to comments
pointing out that reporting requirements
are extensive, and that excluding t' >m
from the policy's scope would sevt sly
limit the incentive for self-policing (see
e.«MjII-O-48 in the Docket).
The Agency wishes to emphasize that
the integrity of federal environmental
law depends upon timely and accurate
reporting. The public relies on timely
and accurate reports from the regulated
community, not only to measure
compliance but to evaluate health or
environmental risk and gauge progress
in reducing pollutant loadings. EPA
expects the policy to encourage the kind
of vigorous self-policing that will serve-
these objectives, and not to provide an
excus* for delayed reporting. Where
violations of reporting requirements an
voluntarily discovered, they must be
promptly reported (as discussed below).
Where a failure to report results in •
imminent and substantial endangerment
or serious harm, that violation is not
covered under this policy (see
Condition D(8)). The policy also
requires the regulated entity to prevent
recurrence of the violation, to ensure-
that noncompliance with reporting
requirements is not repeated. EPA wilt' .
closely scrutinize the effect of the policy
in furthering the public interest in
timely and accurate reports from the
regulated community-'
tinder Section D(4), disclosure of the
violation' should be made within 10 .
days of its discovery, and in writing to..
EPA. Where a statute or regulation '
requires reporting be made in less than '
10 days, disclosure should be made
within the time limit established by law.
Where reporting within ten days is not'
practical because the violation is
complex and compliance cannot be-
determined within that period, the •
Agency may accept later disclosures if
the circumsiances do not present a
serious threat and the regulated entity
meets-its burden of showing that the
additional time was needed to
determine compliance status.
This condition recognizes that it is
critical for EPA to get timely reporting
of violations in order that it might have
clear notice of the. violations and the
opportunity to respond if necessary, as
well as an a-.curate picture of a given
facility's compliance record. Prompt
disclosure is also evidence of the
reguLated'entity's good faith in wanting '
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66709
to achieve or return to compliance as
soon as possible.
In the final policy, the Agency has -
ac led the words, "or may have
occurred." to the sentence. "The
regulated entity fully discloses that a
specific violation has occurred, or may
have occurred * * *." This change, •
which was made in response to
comments received, clarifies that where
an entity has some doubt about the
existence of a violation, the
recommended course is for it to disclose
and allow the regulatory authorities to
make a definitive determination. •
In general, the Freedom of
Information Act,will govern the
Agency's release of disclosures mad*
pursuant to this policy. EPA will.
independently of FOIA. make publicly
available any compliance agreements
reached under the policy (see Section H
of the policy), as well as descriptions of
due diligence programs submitted under
Section 0.1 of the Policy. Any material
claimed to be Confidential Business
Information will be treated in
accordance with EPA regulations at 40
"CFJtPartr
3. Discovery and Disclosure .
Independent of Government or Third
Party Plaintiff
Under Section D(3), in order to be
"voluntary", the violation must be
identified and disclosed by the
regulated entity prior to: the
commencement of a federal state or
local agency inspection, investigation,
or information request: notice of a
citizen suit: legal complaint by a third
party: the reporting of the violation to
EPA by a "whistleblower" employee;
and imminent discovery of the violation
by a regulatory agency.
This condition means that regulated
entities must have taken the initiative to
find violations and promptly report
• them, rather than reacting to knowledge
of a pending .enforcement action or
third-party complaint This concept was
reflected in the interim policy and in
federal and.state penalty immunity laws.
and did not prove controversial in the
public, comment process. ' '
4. Correction and Remediation
Section D(S) ensures that, in order to
receive the penalty mitigation benefits
available under the policy, the regulated
entity not only voluntarily discovers
and promptly discloses a violation, but
expeditiously corrects it. remedies any
harm caused by that violation
(including responding to any spill and
carrying out any removal or remedial
action requiredfay law), and
expeditiousiy certifies in writing to
appropriate state, local and EPA
authorities that violations have be«n
corrected. It also enables EPA to ensure
that the regulated entity will be publicly
accountable for its commitments
• through binding written agreements.
orders or consent decrees when.
necessary.
The final policy requires the violation
to be corrected within 60 days, or thai.
the regulated entity provide written
notice where violations may take longer
to correct EPA recognizes that some
violations can and should be corrected
immediately, while others (e.g^ when
capital expenditures are involved), may
take longer than 60 days to correct In
all cases, the regulated entity will be
expected to do its utmost to achieve or
return to compliance as expeditiously as
possible.
Where correction of the violation
depends upon issuance of a permit
which has been applied for but not
issued by federal or state authorities, the
Agency will, where appropriate, make
reasonable efforts to secure timely
review of the permit
5. Prevent Recurrence
Under Section D(6). the regulated
entity must agree to take steps to
prevent a recurrence of the violation.
including but not limited to
improvements to its environmental
auditing or due diligence efforts. The
final policy makes dear that the
preventive steps may include
improvements to a regulated entity's
environmental auditing or due diligence
efforts to prevent recurrence of the
violation.
In (he interim policy, the Agency
required that the entity implement
appropriate measures to prevent a.
recurrence of the violation* a
requirement that'operates prospectively.
However, a separate condition in the
interim policy also required that the
violation not indicate "a failure to take
appropriate steps to avoid repeat or
recurring violations"—a requirement
that operates retrospectively. In the
interest of both clarity and fairness, the
Agency has decided for purposes of this
condition to keep the focus prospective
and thus to require only that steps be
taken to prevent recurrence of the
violation after it has been disclosed.
6. No Repeat Violations
In response to requests from
commenters (see, e.g., n-F-39 and n-G—
18 in the Docket). EPA has established
"bright lines" to determine when
previous violations will bar a regulated
entity from obtaining relief under this
policy. These will help protect the
public and responsible companies by
ensuring that penalties are not waived
for repeat offenders. Under condition
D(7). the same or closely-related
violation must not have occurred
previously within the past three years at
the same facility, or be part of a pattern
of violations on the regulated entity's
pan over the past five years. This
provides companies with a continuing
incentive to prevent violations, without
being unfair to regulated entities
responsible for managing hundreds of
facilities. It would be unreasonable to
provide unlimited amnesty for repeated
violations of the same requirement
The term "violation" includes any
violation subject to a federal or state
civil judicial or administrative order.
consent agreement, conviction or plea
agreement Recognizing that minor
violations are sometimes settled without
a formal action in court, the term also
covers any act or omission for which the
regulated entity has,received a penalty
reduction in the past Together, these
conditions identify situations in which
the regulated community has had clear
notice of its nbncomplianca and an
opportunity to correct
7. Other Violations Excluded
• Section D(8) makes clear that penalty
reductions are not available under this
policy for violations that resulted in
serious actual harm or which may have
presented an imminent and substantial -
endangerment to public health or the
environment Such events indicate a
serious failure (or absence) of a self-
policing program, which should be
designed to prevent such risks, and it
would seriously undermine deterrence
to waive penalties for such violations.
These exceptions are responsive to
suggestions from public interest
organizations, as.well as other
commenters. (See, e.g., n-F-39 and 0-
G-l 8 in the Docket.) • •
The final policy also excludes penalty
reductions for violations of the specific
terms of any order, consent agreement.
or plea agreement (See, n-E-60 in the
Docket) Once a consent agreement has
been negotiated, there is little incentive
to comply if there are no sanctions for
violating its specific requirements. The
exclusion in this section applies to
violations of the terms of any response,
removal or remedial action covered by
a written agreement
8. Cooperation
Under Section D(9), the regulated
entity must cooperate as required by
EP.A and provide information necessary
to determine the applicability of the
policy. This'condition is largely
unchanged from the interim policy. In
the final policy, however, the Agency
has added that "cooperation" includes
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assistance in determining the facts of
any related violations suggested by the
disclosure, as well as of the disclosed
violation itself. This was added to allow
the agency to obtain information about
" any violations indicated by the
disclosure, even when the violation U
not initially identified by the regulated
entity.
F. C: position to Privilege .
The Agency remains firmly opposed
to the establishment of a statutory •
evidentiary privilege for environmental
audits for the following reasons:
1. Privilege, by definition, invites
secrecy, instead of the openness needed
to build public trust in industry's ability.
, to self-police. American law reflects the .
high value that the public places on fair
access to the facts. The Supreme Court.
for example, has said of privileges that.
"[wjhatever their origins, these
' exceptions to the demand for every
man's evidence are not lightly created
nor expansively construed, for they are
in derogation of the search for truth."
United States v. Nixon. 418 US. 683
(1974). Federal courts have
unanimously refused to recognize a
privilege for environmental audits in the
context of government investigations.
See. e.g.. United States v. Dexter. 132
. FJUD. 8.9-10 (D.Conn. 1990)
(application of a privilege "would
effectively impede [EPA'sl ability to
enforce the Clean Water Act. and would.
be contrary to stated public policy.")
2. Eighteen months have failed to
produce any evidence that a privilege is
needed. Public testimony on the interim
policy confirmed that EPA rarely uses
audit reports as evidence. Furthermore.
surveys demonstrate that environmental
auditing has expanded rapidly over the
past decade without the stimulus of a
privilege. Most recently, the 1995 Price
Waterhouse survey found that those few
large or mid-sized companies that do
not audit generally do not perceive any
need to; concern about confidentiality
ranked as one of the least important
factors in their decisions..
3. A privilege would invite
defendants to claim as "audit" material
almost any evidence the government
needed to establish a violation or
determine who was responsible-. For
example, most audit privilege bills
under consideration in federal and state
legislatures would arguably protect
factual information—such as health
studies or contaminated sediment
data—and not just the conclusions of
the auditors. While the government
might have access to required
monitoring data under the law. as some
industry commenters have suggested, a
privilege of that'nature would cloak
underlying facts needed to determine
whether such data were accurate. •
4. An audit privilege would breed
litigation, as both parties struggled to
determine what material fell within its
scope. The problem is compounded by
the lack of any dear national standard
for audits. The "in camera" (La., non-
public) proceedings used to resolve
these disputes under some statutory
schemes would result in a series of
time-consuming, expensive mini-trials.
5. The Agency's policy eliminates the
need for any privilege as against the
government, by reducing civil penalties
and criminal liability for those
companies that audit, disclose and
correct violations. The 199S Price
Waterhouse survey indicated that
companies would expand their auditing
programs in exchange for the kind of
incentives that EPA provides in its
policy.
6. Finally, audit privileges are.
strongly opposed by the law
enforcement community, including the
National District Attorneys Association.
as well as by public interest groups.
(See.'e.g.. Docket. fl-C-21. Q-C-28. B-
c-52. rv-o-io. n-c-25. n-c-33. n-c-
52. H-C-48, and II-G-13 through U-G-
24.)
G. Effect on States .
The final policy reflects EPA's desire
to develop fair and effective incentives
for self-policing that will nave practical
value to states that share responsibility
for enforcing federal environmental
laws. To that end. the Agency has
consulted closely with state officials in
developing this policy, through a series
of special meetings and conference calls
in addition to the extensive opportunity
.for public comment. As fresult EPA
believes its final policy is grounded in
common-sense principles that should
prove useful in the development of state
programs and policies.
As always, states an encouraged to
experiment with different approaches
that do not jeopardize the fundamental •
national interest in assuring that
violations of federal law do not threaten
the public health or the environment, or
make it profitable not to comply. The
Agency remains opposed to state
legislation that does not include these
basic protections, and reserves its right
to bring independent action against
regulated entities for violations of
federal law that threaten human health
or the environment, reflect criminal
conduct or repeated noncompliance, or
allow one company to make a
substantial profit at the expense of its
law-abiding competitors. Where a state
has obtained appropriate sanctions
needed to deter such misconduct, there
is no need for EPA action.
K. Scope of Policy
EPA has developed this document as
a policy to guide settlement actions.
EPA employees will be expected to
follow this policy, and the Agency will
take steps to assure national consistency
in application. For example, the Agency
will make public any compliance
agreements reached under this policy;
in order to provide the regulated
community with fair notice of decisions
and greater accountability to affected
communities. Many in the regulated
community recommended that the
Agency convert the policy into a
regulation because they felt it might
ensure gnater,consistency and
predictability. While EPA is taking steps
to ensure consistency and predictability
and believes thatjt will be successful.
the Agency will consider this issue and
will provide notice if it determines that
a rulemaking is appropriate.
IL Statement of Policy: Incentives'/or
Self-Policing
Discovery. Disclosure. Correction and
Prevention
A. Purpose
This policy is designed to enhance
protection of human health and the
environment by encouraging regulated
entities to voluntarily discover, disclose.
correct and prevent violations of federal
environmental requirements.
B. Definitions
For purposes of this policy, the
following definitions apply:
"Environmental Audit" has the
definition given to4t in EPA's 1986
audit policy on environmental auditing,
i.e.. "a systematic, documented.
periodic and objective review by
regulated entities of facility operations
and practices related to meeting
environmental requirements."
"Due Diligence" encompasses the
regulated entity's systematic efforts.
appropriate to the size and nature of its
business, to prevent, detect and correct
violations through all of the following:
(a) Compliance policies, standards
and procedures that identify how
employees-and agents are to meet the
requirements of laws, regulations.
permits and other sources of authority
for environmental requirements;
(b) Assignment of overall
responsibility for overseeing compliance
with policies, standards, and
procedures, and assignment of specific
responsibility for assuring compliance
at each facility or operation:
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667H.
(c) Mechanisms for systematically
assuring that compliance policies.
standards and procedures are being
carried out. including monitoring and
auditing systems reasonably designed to
detect and correct violations, periodic
evaluation of the overall performance of
the compliance management system.
and a means for employees or agents to
report violations of environmental
requirements without fear of retaliation:
(d) Efforts to communicate effectively
the regulated entity's standards and
procedures to all employees and other
agents;- •
(e) Appropriate incentives to *
managers and employees to perform in
accordance with die compliance
policies, standards and procedures,
including consistent enforcement ,
through appropriate disciplinary.
mechanisms; and
(0 Procedures for the prompt and.
appropriate correction of any violations,
and any necessary modifications to the
regulated entity's program to prevent
future violations.
"Environmental audit report" means
the analysis, conclusions, and
recommendations resulting from an'
environmental audit, but does not
include data obtained in. or testimonial
evidence concerning, the environmental
audit •
"Gravity-based penalties" are that
portion of a penalty over and above the
economic benefit, i.e.. the punitive .
portion of the penalty, rather than that •
portion representing a defendant's
economic gain from non-compliance.
(For further discussion of this concept
see "A Framework for Statute-Specific
Approaches to Penalty Assessments",
tGM-22,1980, U.S. EPA General
Enforcement Policy Compendium).
. "Regulated entity" means any entity.
including a federal, state or municipal
agency or facility, regulated under
federal environmental laws. - ...
C Incentives for Self-Policing
1. No Gravity-Based Penalties
Where the regulated entity establishes
that it satisfies all of the conditions of
Section D of the policy. EPA will not .
seek gravity-based penalties for
violations of federal environmental
requirements.
2. Reduction of Gravity-Based Penalties
by 75%
EPA will reduce gravity-based
penalties for violations of federal
environmental requirements by 75% so
long as the regulated entity satisfies all
of the conditions of Section D(2)
through D(9J below.
3. No Criminal Recommendations
(a) EPA will not recommend to the
Department of Justice or other
prosecuting authority that criminal
charges be brought against a regulated
entity where EPA determines that all of
the conditions in Section D are satisfied.
so long as the violation does not
demonstrate or involve:
(i) a prevalent management ;
philosophy or practice that concealed or
condoned environmental violations; or
(ii) high-level corporate officials' or
managers' conscious involvement in. or
willful blindness to. the violations.
' (b) Whether or not EPA refers the-
regulated entity for criminal prosecution
under this section, the Agency reserves.
the right to recommend prosecution for
the criminal acts of individual managers
or employees under existing policies
guiding the exercise of enforcement
discretion.
4. No Routine Request for Audits•
EPA will not request or use an
environmental audit report to initiate a
civil or criminal investigation of the
entity. For example. EPA will not
request an environmental au'dit report in,
routine inspections. If the Agency has
independent reason to believe that a •
violation has occurred, however. EPA
may seek any information relevant to
identifying violations or determining •
• liability or extent of harm.
0. Conditions
1. Systematic Discovery
The violation was discovered through:
(a) an environmental audit: or
(b) an objective, documented,
systematic procedure or practice
reflecting the regulated entiJx> due
diligence in preventing, detecting, and
correcting violations. The regulaed
entity must provide accurate and
complete documentation to the Agency •
as to how it exercises due diligence to
prevent detect and correct violations
according to the criteria for due
diligence outlined in Section B. EPA
may require as a condition of penalty
mitigation that a description of the
regulated entity's due diligence efforts
be made publicly available.
2. Voluntary Discovery
The violation was identified
voluntarily, and not through a legally
mandated monitoring or sampling
requirement prescribed by statute.
regulation, permit, judicial or
administrative order, or consent
agreement For example, the policy does
not apply to:
(a) emissions violations detected
through a continuous emissions monitor
(or alternative monitor established in a
permit) where any such monitoring is
required:
(b) violations of National Pollutant
Discharge Elimination System (NPDES)
discharge limits detected through
required sampling or monitoring;
(c) violations discovered through s
compliance audit required to be
performed by the terms of a consent
order or settlement agreement •
3. Prompt Disclosure
The regulated entity fully discloses a
specific violation within 10 days (or
such shorter period provided by law)
after it has discovered that the violation
has occurred, or may have occurred, in
writing to EPA;
4. Discovery and Disclosure
Independent of Government or Third
Party Plaintiff
The violation must-also be identified-
and disclosed by the regulated entity
prior to:
(a) the commencement of a federal,
state or local agency inspection or
investigation, or the issuance by such
agency of an information request to the
regulated entity;
(b) notice of a citizen suit;
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7. No Repeat Violations,
The specific violation (or closely
related violation) has not occurred
previously within the past three yean at
the same facility, or is not part of a •
pattern of federal, state or local
violations by die facility's parent .
organization (if any), which have
. occurred within tha past five years. For
the purposes of this section, a violation
is: . "
(a) any violation of federal, state or
' local environmental law identified in a
judicial or administrative order, consent •
agreement or order, complaint, or notice
of violation, conviction or plea
agreement: or
(h) any act or omission for which the"
regulated entity has previously received
penalty mitigation from EPA or. a state
or local agency.
8. Other Violations Excluded
The violation is not one which (i)
resulted in serious actual harm, or may
have presented an imminent and
substantial endangerment to. human
health or the environment, or (ii)
violates the specific terms of any
judicial or administrative order, or
consent agreement.
9. Cooperation
The regulated entity cooperates as
requested by EPA and provides such
information as is necessary and
requested by EPA to determine
applicability of this policy. Cooperation
includes, at a minimum, providing all
requested documents and access to
employees and assistance in
Investigating the violation, any
noocompliance problems related to the
disclosure, and any environmental
consequences related to the violations. .
E. Economic Benefit"
EPA will retain its full discretion to
recover any economic benefit gained as
a result of noncompliance to preserve a
"level playing field" in which violators
do not gain a competitive advantage
over regulated entities that do comply.
EPA may forgive the entire penalty for
violations which meet conditions 1
through 9 in section D and; in tha
Agency's opinion, do not merit any
penalty due to the insignificant amount
of any economic benefit.
F. Effect on State Law. Regulation or
Policy
EPA will work closely with states to
encourage their adoption of policies that
reflect the incentives and conditions
outlined in this policy. EPA remains
firmly opposed to statutory
environmental audit privileges that
shield evidence of environmental
violations and undermine the public's
right to know, as well as to blanket
immunities for violations that reflect
criminal conduct, present serious
threats or actual harm to health and the
environment, allow noncomplying
companies to gain an economic
advantage over their competitors, or
reflect a repeated failure to comply with
federal law. EPA will work with states
to address any provisions of state audit
privilege or immunity laws that are
inconsistent with this policy, and which
may prevent a timely and appropriate
response to .significant environmental
violations. The Agency reserves its right
to take necessary actions to protect
public health or the environment by
enforcing against any violations of
federal law.
G. Applicability
(1) This policy applies to the
assessment of penalties for any
violations under all of the federal
environmental statutes that EPA
administers, and supersedes any
inconsistent provisions in media-
specific penalty or enforcement policies
and EPA's 198S Environmental
Auditing Policy Statement
(2) To the extent that existing EPA
enforcement policies are not .
inconsistent they will continue to apply
in conjunction with this policy.
However, a regulated entity that has
received penalty mitigation for
satisfying specific conditions under this
policy may not receive additional
penalty mitigation for satisfying the
same or similar conditions under other
policies for the same violation(s), nor
will this poBcy apply to violations
which have received penalty mitigation
under other policies.
• (3) This policy sets forth factors for
consideration that will guide the
Agency in the exercise of its
prosecutorial discretion. It states the
Agency's views as to the proper
allocation of its enforcement resources.
The policy is not final agency action.
and is intended as guidance. It does not
create any rights, duties, obligations, or
defenses, implied or otherwise, in any
third parties.
(4) This policy should be used
whenever applicable in settlement
negotiations for both administrative and
civil judicial enforcement actions. It is
not intended for use in pleading, at
hearing or at trial The policy may be
applied at EPA's discretion to the
settlement of administrative and judicial
enforcement actions instituted prior to,
but not yet resolved, as of the effective
date of this policy.
H. Public Accountability
(1) Within 3 years of the effective date
of this policy, EPA will complete a
study of the effectiveness of the policy
in encouraging: - . .'._._ .._
(a) changes in compliance behavior
within the regulated community,
including improved compliance rates;
(b) prompt disclosure and correction
of violations, including timely and
accurate compliance with reporting
requirements;
(c) corporate compliance programs
that are successful in preventing
violations, improving environmental
performance, and promoting public
disclosure:
(d) consistency among state programs
that provide incentives for voluntary
compliance.
EPA will make the study available to
the public.
(2) EPA will make publicly available
the terms and conditions of any
compliance agreement reached under
this policy, including the nature of the
violation, the remedy, and the schedule
for returning to compliance.
L Effective Date •
This policy is effective January 22,
1996.
Dated: December 18.1995.
Steven A. Herman,
Astistant Administrator for Enforcement and
Compliance Assurance.
[FR Doc 95-31146 Filed 12-21-95; 8:45 ami
MUJNQCOOe VUO-40-f
000164
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Audit Policy Interpretive Guidance
January 1997
Office of Regulatory Enforcement
U.S. Environmental Protection Agency
Washington, D.C.
000166
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JAN 151997
MEMORANDUM
SUBJECT: Issuance of Audit Bolicy Interpretive Guidance
OFFICE OF
ENFORCEMENT AND
COMPUANCEASSURANCE
FROM: Steven A.
ASStSt&XXt An
TO: Regional Administrators
Assistant Attorney General, Environment and Natural Resources Division
Attached is the:"Audit Policy Inteipretive Guidance':that the ORE-led "Quick Response
Team" (QRT) has developed since issuance of the Audit Policy, formerly known as the policy on
"Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,H60
Fed. Reg. 66706 (December 22,1995).
As you may recall, we established the QRT to make expeditious, fair, and nationally
consistent recommendations concerning the applicabile of the policy to specific enforcement
cases. This Interpretive Guidance builds upon the July 1994 "Redelegations" effort, which
focused Headquarters' involvement on case-specific matters raising issues of national significance
e.g., novel interpretations of the Audit Policy). The attached guidance is based upon nationally
significant issues that have confronted the QRT in consulting with Regions on more than two
dozen cases over the past several months. During the process of evaluating these cases, the QRT
has identified numerous interpretive issues that could benefit from further guidance.
This Interpretive Guidance document - presented as a series of generic Questions and
Answers - is intended to aid both the government and the regulated community in implementing
the Audit Policy. Within the next two weeks, we anticipate that it will be publicly available via
the Internet, at http://es.ineL gov/oeca/epapolguid. html, and through the Audit Policy Docket at
Waterside Mall in Washington D.C. (202-260-7548). The QRT welcomes comment on this
Interpretive Guidance and suggestions for additional interpretive issues that may be appropriate
for resolution in future'guidahce. As new issues warranting guidance arise, ORE will issue
addenda to this Guidance and will place any such updates in these two locations. We also are
working to make all of these items-easily accessible on the Agency's Local Area Network (LAN)
system and we will apprise you of, our progress in that regard.
000167
-------
I very much appreciate the efforts of the Audit Policy QRT in developing this guidance,
and I encourage you to take advantage of the QRT's extensive experience and expertise in dealing
with Audit Policy issues. As you will note from the membership list attached to the end of the
Interpretive Guidance, the QRT is led by the Office of Regulatory Enforcement and is comprised
of senior staff and managers from all civil enforcement media, the criminal enforcemenprogram,
the federal facilities program, the OECA compliance and policy offices, two Regions, and the
Department of Justice. The broad participation on the QRT. its senior level of involvement, and
its intensive effort to resolve these issues swiftly in the attached guidance, all demonstrate the
strong commitment of OEC A and the Clinton Administration to ensuring that implementation of
the Audit Policy continues to be an even greater success in the months ahead and beyond.
I encourage you to contact me, or to have your staff contact Gary A. Jonesi (Audit QRT
Chair) at 202-564-4002, if you have any questions regarding this Interpretive Guidance.
Attachment
cc:, OEC A Office Directors
ORE Division Directors
Regional Counsel
Regional Enforcement Coordinators
Chief Environmental Enforcement Section, Department of Justice
Deputy & Assistant Chiefs, Environmental Enforcement Section, Department of Justice
Audit Policy Quick Response Team
oooores
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. E~planatOty N.2m
This document was prepared by EPA's Audit Policy "Quick Response Team" (QRT). The QRT .
is chaired by the Office ofReguJatory Enforcement, ~d itis charged with making expeditious,
fair, and nationally consistent recommendations concerning the applicability of the December 22,
1995 policy on "Incentives for Self-Policing: Discovery, Disclosure. Corr~~on and Prevention of
Violations" (referred to in this document as the final Audit Policy) to specific enforcement cases. .
A copy of the final Audit Policy is provided as .Attachment 1 to this document
As of the date of this document, the QRT has evaluated more tan two dozen cases for potential
Audit Policy applicati9D, most of which have resulted in significant gravity-based penalty
reductions. Attachments 2 and 3 summarize some of those cases in the "Audit Policy Update" .
neWsletters.. During the process of evaluating these cases, the QRT has identified several
interpretive issues that could benefit .from. further guidance. This interpretive guidance document,
presented as a series of Questions and Answers (Qs and As), is intended to aid in implementation
. of the Audit Policy. It includes discussion of many of the most Significant issues raised to the
QRT's attention. The QRT welcomes comment on this document, and on additional interpretive
. issues that may be appropriate for resolution in future guidance. A list of QRT members is'
. presented in Attachment 4. . . . .
. .
This document sets forth guidance for the Agency's use in exercising its enforcement discretion.
It is not final agency action and it does not create any rights, duties, obligations, or defenses,
~mpli~ or otherwise, in any third parties. .
This document can be found on the Internet at http://es.inel.gov/oeca/epapolguid.html, and in
EP A's Audit Policy Docket located at the EP A Headquarters Air Docket, at Waterside Mall in
Washington, D.C. (202-260-7548). Revisions or additions to this guidance also will be made
publicly available at these two locations. .
ff~il;P~:Zi#.W~g~~~':ii::iI':mW@rtWBmtl~i{illEgli[lfBI!:ifW@ii@:i:i:::::::m:::::iii:!=:i:i!:!@mi:Im:iimr:::':t:!':=}i::::::!i::'i:':I!iIJt.m1¥h.flAA!
000169
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Audit Policy Interpretive Guidance
TABLE OF CONTENTS
Summary of Questions and Answers ........ ... ....... . ...... . ....................... .... ...... f jv
Interpretive Issues:
Voluntary Discovery (Section D.2. of Audit Policy)
Di'scoveiy of Violations During Audits Required By Settlements ................. 1
i
Discovery of Violations Under Clean Air Act Title V Permit Applications ..... 2
' *
Prompt Disclosure (Section D3. of Audit Policy)
Consolidation of Similar Disclosures ................. . ......... . ....................... 3
Submitting Information Without Disclosing Specific Violations .................. 4
Requirement For Disclosures To Be In Writing and to EPA ............ . ......... 5
Definition Of When A Violation "May Have Been Discovered" ................. 6
Disclosure Before Violations Occur ......... . ......................... _... ........... 7
Repeat Violations (Section D.7. of Audit Policy)
Determining Whether Repeat Violations Bar Penalty Mitigation ...... . .......... 8
Informal Enforcement Responses and Repeat Violations .................. . ....... 9
Applicability (Section G. of Audit Policy)
Further Penalty Reductions Beyond The Audit Policy ........................ .... 10
Inconsistencies Between Audit Policy and Statute-Specific
Penalty Policies ............................................. : ....... : ................... n
Applicability of Audit Policy in Litigation ......................................... 12
.000170
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Degree of Confonnance to The Audit Policy's Conditions
Miscellaneous
EPA Inspections While Audits Are Being Performed
Impact Of Prior Owner or Operator's Pattern of Violations On Subsequent
Owner/Operator's Eligibility Under The Audit Policy '.
Resolving Audit Policy Determinations Through Informal Or
Formal Means .'.
13
14
IS
16
Background Information:
Policy on"Incentives for Self-Policing: Discovery,
Disclosure^Correction and Prevention of Violations,"
60 Fed. Reg. 0&SQ6 (December 22,1995), ^^Afiachment 1
Audit Policy Update, VoXL No. 1 (April 1996): lists
disclosures and settlements under the Audit Policy,'.
for making disclosures, etc. ...T^s. ^C.. Attachment 2
Audit Policy Update (January 1997): Hsts^Usclosures and settlements
under the Audit Policy, EPA contacts for making disclosures, etc Attachment 3
List of Audit Policy "QuickResponse Team" (QRT)
Members .^l. .7... Attachment 4
AwStPolicy Interpretive Gwdaacc
''' r,' ',: -, \
-.'. '• ":'tf"',s<-> ,'J
000171
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Summary of Questions and An
Below is a summary of key points raised in the Iirterpretive Guidance's Questions and Answers. Not every rationale
supporting reference, and subtlety associated wim these issues are included m this summary. Readers are advised to'
see the full text of the Qs and As immediately following this summary.
1. Cm a violator be deemed to lim voluntaify
during die conduct of a compliance audit mat is required as part of a binding settlement?
i t *
nance
Where a violator - without airy legal obligation to do so - already hascomnutJcdtoccflductingaccinpU,
auditor/or to any formal or informal enforcement response (e.g.. complaint filing or other circumstance
described in Section ILD.4. of die policy), an obligation to conduct such an audit with the same material
scope and purpose can be incoipoialed into a binding settlement with EPA without automatically
disqualifying violations discovered under the audit from obtaining penalty mitigation under the Audit Policy.
(See Question #1 on page 1 for more detailed explanation.)
1 Can violations identified in a required compliance certification accompanying an initial application for a
Clean Air Act Title V operating permit be eligible for penalty mitigation under the final Audit Policy?
Generally no, because discovery of violations in meae cirnnmgtqn
-------
5. Why must disclosures be in writing and to EPA?
This protects both EPA and the submitter by eliminating any uncertainty about the timing and content of the
disclosure, and it expedites EPA's process of evaluating claims for penalty mitigatioa (See Question #5 on
page 5 for more detailed explanation.)
6. At what point does an entity have to disclose to EPA that a violation "may have occurred?"
The regulated entity must disclose violations when mere is an objectively reasonable factual basis for
concluding mat violations may have occurred. Where me facts underlying the violation are clear but the
existence of a violation is in doubt due to the possibility of differing interpretations of the law, the regulated
entity should disclose the potential violations. (See Question #6 on page 6 for more detailed explanation.)
7. If potential violations arc disclosed before they occur, are they eligible for penalty reductions under the lal
Audit Policy?
Yes, provided the regulated entity uses all best efforts to avoid the violations. The policy is designed to
encourage disclosure as expeditioush/ as possible. This can be as late as 10 days after discovery that a
violation occurred or may have occurred, or as early as when a compliance problem is identified. Once the
violation actually occurs, EPA may men mitigate any potential penalty. (See Question #7 on page 7 for more
detailed explanation.)
8. How does EPA determine if disclosed violations are repeated within the 3-year time frame specified in the
final Audit Policy's repeat violations provision?
The 3-year period begins to run when the government or third party has given the violator notice of a specific
violation (e.g.. through a complaint, consent order, notice of violation, receipt of an inspection report, citizen
suit, receipt of penalty mitigation through a compliance assistance project). If the same type of violations or
closely related violations occur at the same facility within three years of such notice, they are repeat violations
and are ineligible for penalty mitigation under the final Audit Policy. (See Question #8 on page 8 for more
detailed explanation.)
9. Do non-penalty enforcement responses such as notices of violation or warning letters constitute a previous
violation for purposes of the policy's repeat violations provision?
Generally yes, as long as the notification identifies specific violations and the allegations are not later
withdrawn or defeated. (See Question #9 on page 9 for more detailed explanation.)
10. hi cases where a 75% gravity-based penalty reduction is appropriate under the Audit Policy, can the penalty
be further reduced in consideration of supplemental environmental projects (SEPs), good faith, or other
factors as justice may require?
Yes, as long as such further penalty mitigation is for activities that go beyond the conditions outlined in the
final Audit Policy, and provided that economic benefit of noncompliance is recovered as required by existing
Agency policies. (See Question #10 on page 10 for more detailed explanation.)
11. Where statute-specific penalty policies provide for different penalty reductions incases of self-policing or
voluntary disclosure, which policy takes precedence?
The final Audit Policy takes precedence over any other policies that offer penalty reductions for satisfying the
same conditions (e.g.. the voluntary discovery, disclosure, and correction of violations). In most
circumstances, the Audit Policy will offer more generous incentives. (See Question # 11 on page 11 for more
detailed explanation.)
-------
16.
12.
Why is use of the final Audit Policy limited to settlement proceedings rather than being applicable also to
adjudicatay proceedings?
13.
The policy is intended to create incemives for self-policing, prompt disclosure, and expeditious COII'eCtion in a
mannf'J' that most effectively allocates scarce Agenr;y resOurces. I.imihr!g use of the policy to settlement also
; reduces transaction costs for the regulated mmmuni1¥. Making it the object of adversariallitigation is
inconsistcDt with 1his carefully considered approach to strPamlining ~ enforcement process. (SeeQuestion
# 12 on page 12 for more detailed explJ1J1l'tior\) .
-Must the specific conditions orthe final Audit Policy be met in order to ciuaillY for penal1¥ reductions, or is
consistency With the general thrust of the policy sufficieitt ( sa.. where disclosure of violations occurs within
30 days but nOt within the 10-daY, period specified in the policy)? - .
The specific conditions must be met If1hey an: not met, EP A instead will utilize the t1exibili1¥ provided
undec its statute-specific penahy policies to recognize good faith efforts BOd determine the extent to which
- penahy reductions an: appropria1e. (See Question # 13 on page 13 for more detailed explanation.)
14. -. ShoUld the government agree to no inspections, Ccwer inspections or other limits on enforcement authorities
- during the time periods in which an audit is being performed? -
Although not explicitly addressed in the final Audit Policy, EP A's longstanding policy is not to agree to limit
its non-penalty enforcement authorities as a provision of settlement or otherwise. WhiIc EP A may consider
such a facility f'? be a lower inspection priority than a facili1¥ that is DOt known to be auditin& whether and
when to conduct an inspection does, and shouJd,-remain a maUer of Agent;y discretion. (See Question # 14 on
page 14 for more detailed explanation.) -
15.
If an owner or operator discovers at its facili1¥ a violation that began when the facili1¥ was owned and/or
opcnitcd by a previous enti1¥, can the sUbsequent owner/operator receive penal1¥ mitigation under the final
Audit Policy? Can the previous owner/operator also obtain such mitigation? -
In both cases, the regulated entitY must meet all conditioos in the final Audit Policy, including the requirement
for prompt disclosure. If there has been an arm' s length transaction between the entities and they are .
considered separate, there may be situations where a subsequent owner/operator can receive penal1¥
mitigation while the previous owner/operator cannot ( sa.. where the subsequent owner discloses violations
promptly to EP A and the previous owner had not disclosed such violations). Sepanite entities are considered
independently, and applicability of the policy is based on the merits of each individual enti1¥'s actions. (See
QueStion #15 on page 15 for more detaiIcd explanation.) - -
Must all penalty mitigation based upon application of the final Audit Policy be effectuated through one -
- uniform 1¥pe of document such as a formal settlement agreement or is there flexibility to use other
mechani
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m; Discovery of Violations During Audits Reouir«»d By S*nfrmfnt1
Q: Can a violator be deemed to have "voluntarily" discovered its violations, and thus potentially
be eligible for penalty mitigation under the final Audit Policy, where the violations are
discovered during the conduct of a compliance audit that is required as part of a binding
settlement (feg» in a consent decree or consent agreement)?
\ ( i
A: Yes, but only imder certain circumstances. The final Audit Policy requires discovery of violations to
be voluntary in order to obtain any penalty mitigation, and it defines such voluntariness so as to
exclude situations where me violations are "discovered through a compliance audit required to be
performed by the terms of a consent order or settlement agreement" 60 Fed Reg. 66706,66708
(Dec. 22,1995). This language, however, should not be read in isolation, because doing so would
unduly preclude penalty mitigation under the policy and create a significant disincentive for future
settling patties to bind frsmsetves in settlement documents to doing compliance ^ufog In the same
section of me &ial policy, two key goals are expressed: (1) to encourage the conduct of audits; and
(2) to "reward those discoveries mat the regulated entity can legitimately attribute to its own
voluntary efforts." M. at 66708.
Where a violator - without any legal obligation to do so - already has committed to conducting a
. compliance audit prior to any formal or informal enforcement response ( e.g.. complaint filing or
other circumstance described in Section U.D.4. of the policy), an obligation to conduct such an audit
with the same material scope and purpose can be incorporated into a binding settlement with EPA
without automatically disqualifying violations discovered under the audit from obtaining penalty
mitigation under the Audit Policy.1 ID such cases, EPA should describe the voluntary nature of the
audit in the settlement document, so that it is distinguishable from other provisions that are not
eligible for penalty mitigation under the policy. By allowing audit provisions in settlements to be
potentially eligible for penalty mitigation in these limited circumstances, EPA is able to shape the
content and timing of audits, ensure their performance through enforceable terms, and more
effectively achieve the goals of me final policy. '
1 Where there is any indication that the audit is less than completely voluntary ( fi^,
the violator committed to doing an audit after some sort of enforcement response as noted
above, where the violator is a small business and received penalty credit under EPA's May
1995 Supplemental Environmental Project (SEP) policy, etc.), the violations discovered as
a result of the audit are not voluntary and are not eligible for penalty mitigation under this
policy.
-.- - - January 1*9?
• J '
000175
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#2: Discovery of Violations Under Clean Air Act Title V Permit Applications
Q: Can violations or potential violations that are identified in a required compliance certification
accompanying an initial application for a Clean Air Act (CAA) Title V operating permit be
eligible for penalty mitigation under the final Audit policy?
V
A: Generally no, because the manner in which such violations are discovered normally win not satisfy
die policy's requirement of'Voluntary discovery." Under the final Audit Policy, the violation must
be "identified voluntarily, and not through a legally mandated monitoring or sampling requirement
prescribed by statute, regulation, permit, judicial or administrative order, or consent agreement" 60
Fed. Reg. at 66711. The regulations implementing Title V of the CAA require applicants to analyze
comprehensively and describe completely the source's compliance status, 40 C.F.R. § 70.5(cX8), and
to include in the required compliance certification a statenieat mat the certification is "based on
information and belief formed after reasonable inquiry" [Emphasis added] 40 C.F.R. § 70.5(d). The
comprehensive nature of the compliance analysis, together with the specific mandpfc to conduct an
"inquiry" and submit a compliance certification, imposes an affirmative duty for Title V permit
applicants to review the CAA requirements to which the source is subject, and to determine the
source's compliance with each requirement To do so, applicants must find and analyze any
information needed to determine compliance status, inctud^ data generated by existing monitoring
and sampling methods. Since an applicant for a Tide V air operating permit cannot certify to
compliance or noncompliance without first evaluating all available relevant information to determine
whether violations exist, a CAA Tide V permit applicant generally cannot claim mat the discovery of
violations or potential violations was voluntary.2
This does not foreclose the possibility that an entity might be able to demonstrate that its inquiry
exceeded its obligations under § 70.5, but any such claim would have to be reviewed on a case-by-
case basis. Moreover, if disclosures of noncompliance occur outside the context of the Title V
permit application process, discovery of such violations may be considered voluntary and eligible for
penalty mitigation under the final Audit Policy (e.g.. where both the discovery and disclosure occur
well in advance of, and are not prompted by, the application process). Similarly, disclosures
occurring after the permit application process ( e.g.. prior to a permit decision, or after permit
issuance or denial) potentially could involve voluntary discovery, such as where new or previously
unforeseeable violations are discovered and disclosed. Such determinations, however, would be
made on a case-by-case basis.
2 EPA emphasizes mat this approach is based on the unique language of the Title V
permit application regulations. Where other statutory permit application programs ( e.g.. theRCRA
hazardous waste permit program, the Clean Water Act NPDES permit program, the Clean Air Act
Acid Rain permit program, the Safe Drinking Water Act Underground Injection Control program) do
not impose a similarly comprehensive duty to inquire about, analyze, and report violations at the
permit application stage, violations discovered pursuant to such permit application requirements may
qualify as voluntary discovery and, thus, are potentially eligible for Audit Policy penalty mitigation.
000176
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Consolidation of Similar Disclosures
Q: la order to comply with the prompt disclosure requirement under the final Audit Policy, must
an entity planning to perform an audit of numerous similar facilities send a separate
notification to EPA within 10 days of discovering each violation, or can the violator
consolidate its disclosures and submit them to EPA later?
A: Consolidation of disclosures is acceptable in certain cireiTmsfrnres. provided the Audit Policy's
"prompt disclosure" requirement is met This provision recognizes EPA's need to have clear and
timely notice of violations, so mat the Agency can respond quickly and appropriately to potential
health or environmental risks and can accurately evaluate a company's compliance status. 60 Fed
Reg. at 66708. Prompt disclosure is also evidence of the regulated entity's good faith in wanting to
achieve or return to compliance as soon as possible. 60 Fed Reg. at 66708-66709. The policy
requires mat disclosure be made within 10 days of discovery mat a violation has occurred or may
have occurred, except where an applicable statute or regulation requires reporting in a shorter time
frame. The Agency has the flexibility to accept later disclosures in situations where "reporting within
10 days is not practical because the violation is complex and compliance cannot be determined within
that period," as long as "the circumstances do not present a serious threat and me regulated entity
meets its burden of showing that the additional time was needed to determine compliance status." 60
Fed. Reg. at 66708.
EPA encourages the conduct of intensive company-wide or multi-facility audits, and a consolidated
reporting framework may be appropriate in certain circumstances. Specifically, although a
consolidated reporting arrangement may take many forms depending on the duration and scope of the
proposed audit, the audit must be completed expeditiousry and the reporting arrangement must
ensure that EPA receives sufficient specific information up front to allow it to respond to any health
or environmental risks that may stem from the violations. At a minimum, this must include the
identity and location of all facilities that may raise similar compliance concerns and a description of
the potential violations. (EPA recognizes that the description of potential violations may be generic
in nature where the numerous faculties being audited conduct similar operations.) Providing this
minimal information within 10 days should not be an undue hardship, and it will be a significant help
to EPA in its efforts to process requests for Audit Policy penalty mitigation in an expeditious
As long as the initial disclosure contains this minimum information and complies with the time •
period set out in the final Audit Policy, the Agency recognizes that the prompt disclosure requirement
can allow for such disclosures to be supplemented at a later time ( £&, the audit results concerning
the suspected violations can be consolidated into a subsequent submission to EPA). In such cases,
EPA would consider the prompt disclosure requirement to have been met because the timeliness of
disclosure would be based upon the initial submission of information. The Agency notes, however,
that it will consider disclosures to be untimely where factual inferences can be drawn about other
probable violations (e.g.. where the violator's operations .and practices are homogeneous in nature) if
the above-mentioned minimum information regarding such violations are not disclosed within the 10-
day period specified in the final Audit Policy.
000177
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. " .
, 14: Submitthur 1Df0rmatioa Without :P~R sDecmc Violatioas
, . ,
' "
. . . . '. '. . . . ',...r." ',' -
. . Q:. Do subm~ oIlDIDimadciia nqaInd by I8w (e.£~ 181esubm!U8i ofla F.Pc:iA
relJOl'tlaa foDa,late sUbmittal of . CIeaa ,water" Act. IIkWiarge moaito,rlal report).,' ,
meet the ~ta8tI for dlsdo:mre UDder the fIuI.. PoQq 'where such . ~~t.'
subm"" 1ft ~leCOmpaa1ed by . writtea cI1sdosUe th8t . YIolatioa has or mAi'::
baYe~~t;. ... ... . '. r.:C~:..': . '.... .';~{
A: No. Undei the fiD8I Audit Policy, an entity must/UllY disClOse.that,sptciJic viDlIlIions . ':'
. occu,md or may haW occurred, ~d such disclosure mUSt be ~ prompdy within the ""
. specified time period ill order to be eligible for penalty mitipdoa. 60 Fed. Rei. at
' 66711.; The COiIdidona of me policy are not fulfilled b)'themere CBlClosure of facuor: .
otherinformadoli.' 1be pOlicy'. explicit reference to lisPecific violations- is meant to' ,
require clear nodce to, EPt\ that. complianCe problem hu ~ 'or exiatI, and
,'~:' PI'OteCU the repl8d entiiy by eliminatin" any doubt as to 'wbecber 'a disclosure baa -
. ' . . been made.;' LaIe submission of required information withoUt anyac:eompanyin" ' '
. .." " discloSure COIICemina the exiilrnce ot poisible violations does not COIistiul1e"fWI '
cIiIcIo.ue of a speCific violation. ulider die Audit Policy. " Full disclosure of potential
' , . violadona i8 ,ReOefrarY for EPA to get 8Icltar nqtice of the violationi aDd 1be " .'
, opportunity to. relp()ftd if ~Iary, u well u an acCurale piccure of. given facility'. ,
. compliance record.. 60 FeeL- Re,. at ~708., With~t. ~fic reference to the ~
that ~ illformadoo i8 beina ~bmiaed Iare and that it constitu~ or may constitute .
. violadoa, EPA wiD, not have clear notice of the pOtential violadons and itaabtlity to
respond to potential threaIa ~y be hampered.. '
- ,
'..""'"
::- .
.... . ~
. ~::;:,,-..:' :Fr, '," :::<.",'"~: :~'~':f ~~', j ~: ;',',--, ",',' ,'~\'.;'- :~'" .";"x;"'~'-'. ::-'-"--~,:
.l'lQ'~J4ii:;:;;i¥:£::" ' .', ,: ,,: :.;:':~':;",,'i,:tZ{t~~:;1;;:;MEM.{~.' "',
, .
I'
000178
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IS: Requirement For Disclosures To Be In Writing and to EPA
Q: Why must disclosures under the final Audit Policy be in writing and to EPA?
•"* * . ' .
* . »
A:. Disclosures under the Audit Policy must be "in writing to EPA," 60 Fed. Reg. at
66711, because prompt written disclosure to EPA gives it "clear notice of the
violations and the opportunity to respond if necessary, as well as an accurate picture of
a given facility's compliance record." 60 Fed. Reg. at 66708. Also, the policy
recognizes mat government resources are limited. It serves the interests of both the
. disclosing entity and the government to be absolutely clear about the full character and
extent of the disclosure. Otherwise, unnecessary energy is expended in determining
whether an oral disclosure occurred. Also, requiring disclosures to be in writing and
to EPA has die effect of expediting EPA's process of evaluating claims for penalty
mitigation under the final Audit Policy. Where EPA receives oral notice of violation
from those who would like Audit Policy penalty mitigation. Agency staff are
encouraged to advise the disclosing entity as to the importance of putting the disclosure
in writing. u : .-..:•, ,
000179
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#6: Definition Of When A Violation "May Have Occurred**
Q: At what point does a party have to disclose to EPA that a violation "may have
occurred** in order to qualify for penalty mitigation under the final Audit Policy?
A: The final Audit Policy requires that a regulated entity fully disclose "a specific violation
within 10 days (or such snorter period provided by law) after it has discovered that the
violation has occurred, or may have occurred^ in writing to EPA." 60 Fed. Reg. at 66711
[emphasis added]. The policy explains that the Agency added the phrase "or may have
occurred" to respond to comments received on the Interim Audit Policy, and to clarify
that where an entity has some doubt about the existence of a violation, the recommended,
course is for it to disclose and allow the regulatory authorities to make a definitive
determination about whether the violation occurred. 60 Fed. Reg. at 66709.
x .. /
The regulated entity should report possible violations to the Agency when there is a
reasonable basis for concluding that the violations have occurred. Two components go
into this analysis: (1) an evaluation of known facts; and (2) application of legal
requirements to such facts. Absolute factual and legal certainty is not necessary in order
to require disclosure under me policy. This is particularly true where there is a reasonable
certainty as to the facts underlying potential violations. For example, if a company
discovers a release violation due to inadequate design of equipment used at one facility
and this same equipment is used at other facilities it owns throughout the country, an
inference can be drawn that other violations may have occurred and the company should
disclose these other possible violations to the Agency at the same time it discloses the
initial violation. Although additional data concerning the other facilities may be disclosed
to EPA more than 10 days later, the initial disclosure should include information as to the
identity, location, and nature of the suspected violations at such other facilities (see
Question and Answer #3 above). In this situation, the company should investigate its
other facilities to verify whether the violations actually occurred, perform any necessary
corrective measures or remediation, and comply with the other criteria articulated in the
Audit Policy in order to receive penalty mitigation for these other violations.
Even where the facts underlying a possible violation are clearly known, there may be some
doubt as to whether such facts give rise to a violation as a matter of law (e.g.r due to
differing legal interpretations). As long as there is an objectively reasonable factual b • is
upon which to base a possible violation, disclosure should occur and EPA will make a
definitive determination concerning whether such facts actually present a violation of law.
000180
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ffi Disclosure Before Violations Occur
Q: If {potential violations are disclosed before they occur, are they eligible for penalty
reductions under the final Audit Policy?
A: Generally yes. For example, if th* violations cannot be avoided despite the regulated
entity's best efforts to comply (&&, where an upcoming requirement to retrofit a tank
cannot be met due to unforeseeable technological barriers), EPA may mitigate the gravity-
based penally once the violation actually occurs.
The policy requires violators to disclose violations fully and promptly, and it defines such
prompt disclosure generally to require disclosure "within 10 days (or such shorter period
provided by law) after it has discovered that the violation has occurred, or may have
occurred." 60 Fed. Reg. at 66711. The use of the past tense in this phrase reflects EPA's
recognition of the most common types of disclosure that occur, i.e., involving past
violations (as opposed to possible future violations). Nevertheless, the essence of this
requirement in the policy is on prompt self-disclosure of compliance deficiencies. The
language requiring disclosure generally "within 10 days" should not be read to preclude
disclosure as early as possible, including before the violation actually has occurred. Once
the violation actually occurs, these violations may be eligible for Audit Policy penalty
mitigation where a violator can establish to EPA's satisfaction based on objective evidence
that it has employed all best efforts to avoid the violations. By allowing for disclosure as
soon as possible, the policy may even encourage potential violators to work with EPA in a
way that can minimize or eliminate the compliance concern before it actually occurs.
,,>"*?•-,',' ' 7 "•''-"> ","J- *'".. ""',''\'t ^ ' January 1$$'}.
- "/ ,' ' , * t , . t, *r . "• ? * ' '' ••"*• *
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#8: Detenninine Whether Repeat Violations Bar Pen~ Mme.non
Q:
How does EP A determine if disclosed violanons (aU within the 3-year time period specified in
the final Audit Policy's repeat violations provision!
A:.
Violations are considered to be repeat violations 1hat are not eligible for penaI~ mitigatiotl when the
subsequeDtly discovered and disclosed vioiationsare: (1) the same or closely related 10 the cxiginal .
violations and have occumd at the same facility within.the past three years; or (2) part of a pattern of
federal, S- or l~ violations by the company's parent organization, if any, within the past five
years. 60 Fed. Reg. at 66712. The purpose of the repeat violations provision in the policy is 10
o . "detec irresponsible behavior and protect the public and environment" 60 Fed. Reg. at 66706. It
also "provides companies with a cnntim,i"8 incentive to preYC71t violations, without being unfair to
regUlated entities responsible for managing hundreds of facilities." . 60 Fed. ~ at 66706.
Two questioas must be answered in order 10 determine whether the violations are repeat violations
ineligible for penalty mitigation UDder the final Audit Polic:y: (I) when the 3-year period begiOs; and
(2) whether the violatioas which arc disclosed, and for which the violaur seeks penalty riiitigation,
fall within.the subsequent 3-ycar period. As to the first question, the 3-ycar pCrlod begins to run
when the violator first receives notice of the original violations. 3 Such DOtice can take several forms,
including .notification by EP A or a State or local agency through receipt of a judicial or
adminimativc order, consent agreement or order, complaint, conviction or plea agreement, notice of
. violation such as a letter or inspec:tion report, notice dwing an inspection, or even thtough a third
party complaint (Ur. in a citizen suit). A violator also may be put on notice of particular .
environmental violations when it obtains penalty mitigation for such violations ftOm EP A, a St3te, or
a local agency (u.. under EPA's Smoll BusinesS Compliance Incentives policy). As noted in the
final Audit Po1icy, these circumstances collectively "identify .situations in which the regulated
communi~ has had clear notice of its noncompliance and an op~ to correct" 60 Fed. Reg. at
. 66709. Where a government or third party has giveri such notice of noncompliance, the same or
closely related violations caDDOt be repeated within the subsequent 3-year period following such
. notice. 11ms, the 3-year period begins to run when such clear no~ce of noncompliance is received, .c
without regard to when the original violations cited in that notice actually occurred
As to the secood question, EP A looks to whether the disclosed violations actually occurred within
the 3-year period following the original noticelmitigation. If the violations occurred within this
. period, they would be considered repeat violations and would not be ~ligible for penalty mitigation
under the polic:y because COITeCtive measures should have prevented such a recurrence. u: however,
those violatioas occurred either before the original notice of noncompliance was received by the
violator or after the 3-year period running fiom the original notice, they would not be considered
repeat violations UDder the final Audit Policy. Thus, repeat violations are determined by the date
that such subsequent violations occur, without regard to when notice o[ Such subsequent violations
is given to the Violator. . .
3 Typica1ly~ the Agery;;y will provide written notice of violations because it recognizes the
significant benefits to providing such notice in writing, including the minimization of uncertaintY
'concerning when such notice was received and its contents.
4 In determining whether a "pattern of violations" has occurred within the past five years,
notice of earlier violations is less relevant The inquiry into whether a pattern existS more
appropriately focuses on the dates that all violations actually occurred. I
a;#.~;eigp¥r.~il.i~rr!:i~i::[~:i@[1[tI[[i~I~1;:i:£II[::::1I::;~;i:;:IIli;ii&:i[I~~1:;:imm~:::;;;if:iJ;:i:i:~tt[mI[1:~I~;iI[:;fmmt;;El]:t::IiIiI;Z~IY:1m
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#9: Informal Enforcement Responses and Repeat Vinlafrmf
Q: Do non-penalty enforcement responses such as notices of violation or warning letters
constitute a previous violation for purposes of the policy's repeat violations
provision?
A: Generally yes. The repeat violations provision defines such violations to encompass
formal and informal enforcement responses, and nonenforcement responses mat result in
penalty mitigation. 60 Fed. Reg. at 66712 (specifically including a reference to any
violation identified in a "... notice of violation.") The common theme is that a
government entity has notified the violator that it believes a violation has occurred, and, as
a result, the government reasonably can expect the regulated entity to take whatever steps
are necessary to prevent similar violations.
x.
Notices of violation (NOVs) and warning letters may be worded in many different ways
(ejk sometimes alleging particular violations and sometimes speaking only generally in
terms of an upcoming need to comply with a new requirement). The tide or caption on
such documents is not necessarily dispositive for purposes of the repeat violations
provision. The substance of the NOV, warning letter, or other correspondence - usually
found in the text of such documents — determines whether, it provides notice of an alleged
violation. If such documents give the regulated entity notice of allegations of specific
deficiencies in compliance and those allegations are not later withdrawn or defeated, any
subsequent violations would be considered repeat violations if they occurred within the
time periods outlined in the final Audit Policy. If, however, the substance of the document
merely provides a prospective statement of new requirements not yet violated (&&, in a
compliance assistance guide), the notice or letter would not be considered an enforcement
response for purposes of the repeat violations provision.
000183
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#10: Further Penalty Reductions Bevond The Audit Policy
Q: In cases where a 75% gravity-based penalty reduction is appropriate under the final
Audit Policy, may the penalty be further reduced in consideration of supplemental
environmental projects (SEPs), good faith, or "other factors as justice may require"
as long as any economic benefit of noncompliance (EBN) b recovered?
A: Where a 75% gravity-based penalty reduction is appropriate under the final Audit Policy,
further penalty reductions may be obtained for activities that go beyond the specific
conditions required under the final Audit Policy. For example, further reductions
generally may be warranted where a violator agrees to undertake a supplemental
environmental project (SEP) and the project meets the criteria established for SEPs in the
Agency's SEP Policy. The Audit Policy, however, precludes "additional penalty
mitigation for satisfying the same or similar conditions." 60 Fed. Reg. at 66712. Thus, if
the particular project that the violator proposes to undertake as a SEP must be carried out
in order to receive a penalty reduction under the audit policy, additional credit may not be
given under the SEP Policy. For example, where EPA determines mat an audit must be
carried out at a large complex facility in order to prevent a recurrence of violations, SEP
credit may not be provided for conducting mis audit Note, however, that SEP credit
could be provided if EPA determined that such an audit was not necessary to prevent a
recurrence of violations.
Similarly, additional penalty reductions for good faith and "other factors as justice may
require" may be provided only where the specific activities justifying those reductions are
not required in order to receive a 75% penalty reduction under the Audit Policy. Thus, the
prompt disclosure of a violation ordinarily would not qualify a company for additional
' good faith penalty reductions since the disclosure clearly is required by the Audit Policy.
On the other hand, a violator mat takes steps to correct and remediate a violation in a
manner that is above and beyond the steps normally expected in order to qualify for
mitigation under the Audit Policy (ej^, quicker or more extensive correction) may qualify
for a good faith reduction.
As to economic benefit of noncompliance (EBN), the Audit Policy restates the Agency's
longstanding position that recovery of any significant EBN is important in order to
preserve a level playing field for the regulated community. The Audit Policy does not
revise or modify any other Agency policies (e.g.r the SEP Policy) concerning recovery of
EBN.
000184
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#111 Inconsistencies Between Audit Policy and Statute-Specific Penalty PoliHi*
Q: Where statute-specific penalty policies provide for different penalty reductions in
cases of self-policing or voluntary disclosure, which policy takes precedence?
' ' • " -; •
A: The final Audit Policy states clearly that it "supersedes any inconsistent provisions in
media-specific penalty or enforcement policies" but that such policies continue to apply
where they are not inconsistent (Emphasis added] 60 Fed. Reg. at 66712. (If not
inconsistent, the Audit Policy states that such existing EPA enforcement policies continue
to apply in conjunction with the Audit Policy provided that the regulated entity has not
already received penalty mitigation for similar self-policing or voluntary disclosure
activities. 60 Fed. Reg. at 66712.) In most circumstances, the final Audit Policy will
result in a greater penalty mitigation than under any media-specific penalty or enforcement
policy. In such cases, the Audit Policy's greater penalty reductions take precedence.
In some circumstances, however, the Audit Policy may provide for less penalty mitigation
(e.g.r 75% penalty reductions where the violations are not discovered through a systematic
discovery, as opposed to potential 80% or greater reductions for such cases under another
penalty policy). Here too, the Audit Policy takes precedence. This is because the Audit
Policy is a more recent and more detailed statement as to the precise national strategy for
providing incentives for self-policing, prompt disclosure, and expeditious correction and .
remediation. Therefore, in order to qualify for 75% penalty reductions or greater for
activities related to voluntary discovery, disclosure, and remediation/correction, the Audit
Policy provides a minimum standard of behavior that must be met * As long as the criteria
in the Audit Policy are met, the certainty and national consistency provided by the penalty
reductions in the Audit Policy would apply.
5 For activities unrelated to voluntary discovery, disclosure, and remediation/correction,
additional penalty mitigation is available as described in Question and Answer #10.
000185
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#12: Applicability of Audit Policy in Litigation
Q: Why b use of the final Audit Policy limited to settlement proceedings rather than
being applicable also to adjudicatory proceedings?
A: The final Audit Policy expressly limits its applicability to settlement contexts, and states
that "[i]t is not intended for use in pleading, at hearing, or trial," 60 Fed. Reg. at 66712,
because the Agency wanted to create these incentives for self-policing, prompt disclosure,
and expeditious correction in a manner that most effectively allocates scarce Agency
resources and reduces transaction costs for the regulated community. Subjecting the
policy to litigation and judicial review is inconsistent with this carefully considered
approach to streamlining the enforcement process. As noted in the final Audit Policy,
EPA. intends to apply the policy uniformly hi settlements across all of the Agency's
enforcement programs. However, where enforcement matters are not resolved through
settlement, but instead proceed to litigation, the Audit Policy is not applicable, and any
attempt to apply the policy in such contexts is inappropriate.
000186
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: Degree of Conformance to The Audit Policy's Conditions
Q: Must the specific conditions of the final Audit Policy be met in order to qualify for
penalty reductions, or is consistency with the general thrust of the policy sufficient
(fag,, where disclosure of violations occurs within 30 days but not within the 10-day
period specified in the policy)?
A: The specific conditions must be met Although the final Audit Policy is intended as
guidance, the Summary section states EPA's intent to apply the policy uniformly across
the Agency's enforcement programs. 60 Fed. Reg. at 66706. Those who disclose
violations after the policy's January 22,1996 effective date have been put on notice as to
the behavior that is expected in order to get penalty reductions. EPA also has the
discretion to apply the policy to disclosures occurring prior to the policy's effective date.
u such cases, however, if the policy's conditions have not been met, EPA instead will
utilize the flexibility provided under its statute-specific penalty policies to recognize good
faith efforts and determine the extent to which penalty reductions are appropriate.
000187
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#14: EPA In$pedions While Aud.its Are ~ormed
Q: -, ShoUld the government agree to no inspections, fewer inspections, or other limits on'
- its eDforcelD~Dt authorities during the" time periods in which an audit is being
performed? . .' -
A:
Although not explicitly addressed, in the final AUdit Policy, EPA'sIongstanding policy is
nOt to agree to limit its non-penalty enforcement authorllies as a provision of settlement or
otherwise. While EP A may consider such a facility to be a lower inspection priorjty than a
facility that is not known to be auditing, whether-and when to conduct an inspection does,
and should, remain a matter of Agency. discretion. If the Agency's inspection or other
'enforcement authorities were limited, this could compromise the Agency's ability to -
- respond to citizen complaints or: site conditions posing a potentially seriolis threat to
' human health or the environment, or its ability to assure the public'as to the compliance
status ofa given facility.
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000188
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#15; Impact Of Prior Owner or Operator's Pattern of Violations On Subsequent
fHmer/Operator's Eligibility Under The Audit Policy
Q: If an owner or operator ("owner/operator") discovers at its facility a violation that
began when the facility was owned and/or operated by a previous entity, may the
subsequent owner/operator receive penalty mitigation under the final Audit Policy?
May the previous owner/operator also obtain such mitigation?
A: The subsequent owner/operator may obtain penalty mitigation if it meets all of the policy's
conditions, including prompt disclosure to EPA as soon as it discovers the violation. For
purposes of the final Audit Policy, the previous owner/operator's actions will not be
imputed to the successor, except where the relationship between the companies makes
imputing such actions appropriate (e.g.. where the subsequent owner/operator is a wholly
owned subsidiary of, and controlled by, the previous owner operator). For example, if
there has been an arm's length transaction between the entities and they are considered
separate (e.g.. where the subsequent owner/operator is not considered merely a continuing
enterprise), there may be situations where a subsequent owner/operator may receive
penalty mitigation while the previous owner/operator cannot One such situation would
be where the previous owner/operator had discovered a violation during the time that it
owned the facility but did hot disclose such a violation to EPA. In such a case, the
previous owner would fail to meet the policy's prompt disclosure condition and it would
be ineligible for penalty mitigation under the final Audit Policy. If the subsequent
owner/operator disclosed the violation to EPA promptly after it discovered the violation,
it still could be eligible for penalty mitigation under the Audit Policy. Thus, separate
entities are considered independently, and applicability of the policy is based on the merits
of each individual entity's actions.
000189
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#16: Resolving Audit Policy Determinations Through Informal Or Formal Means
Q: Must all penalty mitigation based upon application of the final Audit Policy be
effectuated through one uniform type of document such as a formal settlement
agreement or is there flexibility to use other mechanisms such as informal letters?
A: Where applicability of the policy arises in the context of settling a pending enforcement
action, the penalty mitigation will be effectuated through the normal process used to settle
pending cases in the various media-specific programs that EPA enforces — normally
through formal enforceable settlement agreements.' •
Even in enforcement matters that have not yet matured into pending cases ( L&, before any
complaint is filed), an enforceable order normally is used in order to ensure payment of
any penalties and/or completion of any compliance obligations. This would occur. (1)
when the final Audit Policy would provide for 75% mitigation; (2) if an economic benefit
penalty component was being recovered; or (3) where any compliance measures are
necessary. . ' .
EPA specifically stated in the policy that it may require a regulated entity to enter into a
"publicly available written agreement, administrative consent order or judicial consent
decree, particularly where compliance or remedial measures are complex or a lengthy
schedule for attaining and maintaining compliance or remediating harm is required." 60
Fed. Reg. at 66711. EPA also notes mat it may require as a condition of settlement mat any
penalty mitigation premised on the final Audit Policy be contingent upon the completeness and
accuracy of die violator's representations.
In the absence of a pending enforcement action, where 100% of the gravity-based penalty
is being waived and there is no economic benefit penalty component and no outstanding
compliance obligations, several of EPA's media-specific enforcement policies do not
• require that resolution of the matter occur through a formal settlement document. The
final Audit Policy applies to enforcement settlements for all the regulatory statutes under
which EPA seeks gravity based penalties. Flexibility is necessary to meet the myriad
settlement conditions that may be employed as part of such settlements and the numerous
objectives to be accomplished. The use of a uniform document for self-disclosure
settlements could hamper the settlement process and may even prevent EPA from meeting
some objectives of the underlying case (&&* the need to expedite resolution of the case).
Regardless of the approach taken to effectuate such penalty mitigations, EPA will track
this data for purposes of implementing the repeat violations provision and it will
"independently of FOIA, make publicly available any compliance agreements reached
under the policy." 60 Fed. Reg. 66709.
6 In matters where judicial action is contemplated, EPA consults with the Department
of Justice (DOJ) in the Audit Policy determination. Where judicial actions are
pending, DOJ approves and files formal consent decrees.
Guidance ~ ""• " ~"'S . 16 ' " V ' ,* "'-" ' ' '> " '" : *
000190
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SUPPUMENTALENVIRONMENTALPROJECTSPOLICY
S.EPA
EPA SUPPLEMENTAL ENVIRONMENTAL
PROJECTS POLICY
Effective May 1,1998
A. INTRODUCTION
1. Background •
In settlements of environmental enforcement cases, the U.S. Environmental
Protection Agency (EPA) requires 'the alleged violators to achieve and maintain
compliance with Federal environmental laws and regulations and to pay a civil
penalty- To further EPA's goals to protect and enhance public health and the
environment, in certain instances environmentally beneficial projects, or
Supplemental Environmental Projects (SEPs), may be part of the settlement.
This Policy sets forth the types of projects that are permissible as SEPs, the
penalty mitigation appropriate for a particular SEP, and the terms and
conditions under which they may become part of a settlement. The primary
purpose of this Policy is to encourage and obtain environmental and public
health protection and improvements that may not otherwise have occurred
without the settlement incentives provided by this Policy.
In settling enforcement actions, EPA requires alleged violators to promptly
cease the violations and, to the extent feasible, remediate any harm caused by
the violations. EPA also seeks substantial monetary penalties in order to deter
noncompliance. Without penalties, regulated entities would have an incentive to
delay compliance until they are caught and ordered to comply. Penalties
promote environmental compliance and help protect public health by deterring
future violations by the same violator and deterring violations by other members
of the regulated community. Penalties help ensure a national level playing field
by ensuring that violators do not obtain an unfair economic advantage over their
competitors who made the necessary expenditures to comply on time. Penalties
also encourage regulated entities to adopt pollution prevention and recycling
techniques in order to minimize their pollutant discharges and reduce their
potential liabilities. .
Statutes administered by EPA generally contain penalty assessment criteria that
a court or administrative law judge must consider in determining an appropriate
penalty at trial or a hearing. In the settlement context, EPA generally follows
these criteria in exercising its discretion to establish an appropriate settlement
penalty. In establishing an appropriate penalty, EPA considers such factors as
the economic benefit associated with the violations, the gravity or seriousness of
0001.92
07/31/9"
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V SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY wys.wyg^/9/httpi'/es.eiM.gov/oe
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wysiwyg^/9/http^/es.epa.gov/oixa/sep/sepfin.UaBil
(1) Ensure that the project meets the basic definition of a SEP. (Section B)
(2) Ensure that all legal guidelines, including nexus, are satisfied. (Section C)
(3) Ensure that the project fits within one (or moire) of the designated categories
of SEPsi (Section D)
(4) Determine the appropriate amount of penalty mitigation. (Section E)
(5) Ensure that the project satisfies all of the implementation and other criteria.
4 .' •
(Sections F.G.H, I and J) .
4. Applicability
This Policy revises and hereby supersedes the February 12, 1991 Policy on the
Use of Supplemental Environmental Projects in EPA Settlements and the May
1995 Interim Revised Supplemental Environmental Projects Polity. This Policy
applies to settlements of all civil judicial and administrative actions filed after the
effective date of this Policy (May 1, 1998), and to all pending cases in which the
government has not reached agreement in principle with the alleged violator on
the specific terms of a SEP. v
This Policy applies to all civil judicial and administrative enforcement actions
taken under the authority of the environmental statutes and regulations that EPA
administers. It also may be used by EPA and the Department of Justice in
reviewing propose! SEPs in settlement of citizen suits. This Policy also applies
to federal agencies that are liable for the payment of civil penalties. Claims for
stipulated penalties for violations of consent decrees or other settlement
agreements may not be mitigated by the use of SEPs.^
This is a settlement Policy and thus is not intended for use by EPA, defendants,
respondents, courts or administrative law judges at a hearing or in a trial.
Further, whether the. Agency decides to accept a proposed SEP as part of a
settlement, and the amount of any penalty mitigation that may be given for a
particular SEP, is purely within EPA's discretion. Even though a project appears
to satisfy all of the provisions of this Policy, EPA may decide, for one or more
reasons, that a SEP is not appropriate (e.g., the cost of reviewing a SEP
proposal is excessive, the oversight costs of the SEP may be too high, the
defendant/respondent may riot have the ability or reliability to complete the
proposed SEP, or the deterrent value of the higher penalty amount outweighs
the benefits of the proposed SEP).
This Policy establishes a framework for EPA to use in exercising its enforcement
discretion in determining appropriate settlements. In some cases, application of
this Policy may not be appropriate, in whole or part. In such cases, the litigation
team may, with the advance approval of Headquarters, use an alternative or
modified approach.
00019407/31/98K
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. X SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
B. DEFINITION AND KEY CHARACTERISTICS OF A SEP
Supplemental environmental projects are defined as environmentally beneficial
. projects which a defendant/respondent agrees to undertake in settlement of an
enforcement action, but which the defendant/respondent is not otherwise
legally required to perform. The three bolded key parts of this definition are
elaborated below.
"Environmentally beneficial" means a SEP must improve, protect, or reduce
risks to public health, or the environment at large.. While in some cases a SEP
may provide the alleged violator with certain benefits, there must be no doubt
that the project primarily benefits the public health or the environment. .
"In settlement of an enforcement action" means: 1) EPA has the opportunity to
help shape the scope of the project before it is implemented; and 2) the project is
hot commenced until after the Agency has identified a violation (e.g., issued a
notice of violation, administrative order, or complaint).^ .
' • .
"Not otherwise legally required to perform means11 the project or activity is not
required by any federal, state or local law or regulation. Further, SEPs cannot
include actions which the defendant/respondent is likely to be required to
perform: .
(a) as injunctive relief in the instant case;
(b) as injunctive relief in another legal action EPA, or another regulatory agency
could bring; ,
(c) as part of an existing settlement or order in another legal action; or,
. * t
(d) by a state or local requirement.
SEPs may include activities which the defendant/respondent will become legally
obligated to undertake two or more years in the future, if the p, eject v.'ill result
hi the facility coming into compliance earlier than the deadline. Such
"accelerated compliance" projects are not allowable, however, if the regulation
or statute provides a benefit (e.g., a higher emission limit) to the
defendant/respondent for early compliance.
Also, the performance of a SEP reduces neither the stringency ndr timeliness
requirements of Federal environmental statutes and regulations. Of course,
performance of a SEP does not alter the defendant/respondent's obligation to '
remedy a violation expeditipusly and return to compliance.
C. LEGAL GUIDELINES
EPA has broad discretion to settle cases, including the discretion to include
SEPs as an appropriate part of the settlement. The legal evaluation of whether a
proposed SEP is within EPA's authority and consistent with all statutory and fi fl 0 1 9 5
22 ' 07/31/9810*
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J?PLEMENTAL ENVIRONMENTAL PROJECTS POLICY
Constitutional requirements may be a complex task. Accordingly, this Policy
uses five legal guidelines to ensure that our SEPs are within the Agency's and a
federal court's authority, and do not run afoul of any Constitutional or statutory
requirements.^ .
1 . A project cannot be inconsistent with any provision of the underlying
statutes. • '
* . "'
2. All projects must advance at least pne of the objectives of the environmental
statutes that are the basis of the enforcement action and must have adequate
nexus. Nexus is the relationship between the violation, and the proposed project.
This relationship exists only i£
a. the project is designed to reduce the likelihood that similar violations will
• occur in the future; or
b. the project reduces the adverse impact to public health or the environment to
which the violation at issue contributes; or ; '
c. the project reduces the overall risk to public health or the environment
potentially affected by the violation at issue.
Nexus is easier to establish if the primary impact of the project is at the site
where the alleged violation occurred or at a different site in the same ecosystem
or within the immediate geographic^ area. Such SEPs may have sufficient
nexus even if the SEP addresses a different pollutant in a different medium. In
limited cases, nexus may exist even though a project will involve activities
outside of the United States.^ The cost of a project is not relevant tq whether
: there is adequate nexus.
3. EPA may not play any role in managing or controlling funds that may be set
aside or escrowed for performance of a SEP. Nor may EPA retain authority to
manage or administer the SEP. EPA may, of course, perform oversight to
ensure that a project is implemented pursuant to the provisions of the settlement
and have legal recourse if the SEP is not adequately performed.
'..'•
• «
4. The type and scope of each project are defined in the signed settlement
agreement. This means the "what, where and when" of a project are defined by
the settlement agreement. Settlements in which the defendant/respondent agrees
to spend a certain sum of money on a project(s) to be defined later (after EPA
or the Department of Justice signs the settlement agreement) are not allowed.
5. a. A project cannot be used to satisfy EPA's statutory obligation or another
federal agency's obligation to perform a particular activity. Conversely, if a
federal statute prohibits the expenditure of federal resources on a particular
activity, EPA canriot consider projects that would appear to circumvent that
prohibition
000196
07/31/9
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V SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
b. A project may not provide EPA or any federal agency with additional
resources to perform a particular activity for which Congress has specifically
appropriated funds. A project may not provide EPA with additional resources to
perform a particular activity for which Congress has earmarked funds in an
appropriations committee report.^ Further, a project cannot be used to satisfy
EPA's statutory or earmark obligation, or another federal agency's statutory
obligation, to spend funds on a particular activity. A project, however, may be
related to a particular activity for which Congress has specifically appropriated
or earmarked funds.
c. A project may not provide additional resources to support specific activities
performed by EPA employees or EPA contractors. For example, if EPA has
developed a brochure to help a segment of the regulated community comply
with environmental requirements, a project may not directly, or indirectly,
provide additional resources to revise, copy or distribute the brochure.
d. A project may not provide a federal grantee with additional funds to perform
a specific task identified within an assistance agreement.
D. CATEGORIES OF SUPPLEMENTAL ENVIRONMENTAL
PROJECTS
EPA has identified seven specific categories of projects which may qualify as
SEPs. In order for a proposed project to be accepted as a SEP, it must satisfy
the requirements of at least one category plus all the other requirements
established in this Policy.
1. Public Health
i /
A public health project provides diagnostic, preventative and/or remedial
components of human health care which is related to the actual or potential
damage to .human health caused by the violation. This may include
epidemiological data collection and analysis, medical examinations of potentially
affected persons, collection and analysis of bipod/fluid/ tissue samples, medical
treatment and rehabilitation therapy.
Public health SEPs are acceptable only where the primary benefit of the project
is the population that was harmed or put at risk by the violations.
2. Pollution Prevention
A pollution prevention project is one which reduces the generation of pollution
through "source reduction," i.e., any practice which reduces the amount of any
hazardous substance, pollutant or contaminant entering any waste stream or
otherwise being released into the environment, prior to recycling, treatment or
disposal. (After the pollutant or waste stream has been generated, pollution
prevention is no longer possible and the waste must be handled by appropriate
recycling, treatment, containment, or disposal methods.)
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Source reduction may include equipment or technology modifications, process
or procedure modifications, reformulation or redesign of products, substitution
of raw materials, and improvements in housekeeping, maintenance, training,
inventory control, or other operation and maintenance procedures. Pollution
prevention also includes any project which protects natural resources through
conservation or increased efficiency in the use of energy, water or other
materials. "In-process recycling," wherein waste materials produced during a
manufacturing process are returned directly to production as raw materials on
site, is considered a pollution prevention project.
In all cases, for a project to meet the definition of pollution prevention, there
must be an overall decrease in the amount and/or toricity of pollution released
to the environment, not merely a transfer of pollution among media. This
decrease may be achieved directly or through increased efficiency (conservation)
in the use of energy, water or other materials. This is consistent with the
Pollution Prevention Act of 1990 and the Administrator's "Pollution Prevention
Policy Statement: New Directions for Environmental Protection," dated June
15,1993
f *' w
3. Pollution Reduction ^
If the pollutant or waste stream already has been generated or released, a
pollution reduction approach — which employs recycling, treatment
containment or disposal techniques — may be appropriate. A pollution reduction
project is one which results in a decrease in the amount and/or toxicity of any
hazardous substance, pollutant or contaminant entering any waste stream or
otherwise being released into the environment by an operating business or
facility by a means which does not qualify as "pollution prevention," This may
include the installation of more effective endrof-process control or treatment
technology, or improved containment, or safer disposal .of an existing pollutant
source. Pollution reduction also includes "out-of-process recycling," wherein
industrial waste collected after the manufacturing process and/or consumer
waste materials are used as raw materials for production off-site.
4. Environmental Restoration and Protection
An environmental restoration and protection project is one which enhances the
condition of the ecosystem or immediate geographic area adversely affected.^
These projects may be used to restore or protect natural environments (such as
ecosystems) and man-made environments, such as facilities and buildings. This
category also includes any project which protects the ecosystem from actual or
potential damage resulting from the violation or improves the overall condition
of the ecosystem.^ Examples of such projects include: restoration of a wetland
in the same ecosystem along the same avian flyway in which the facility is
located; or purchase and management of a watershed area by the
defendant/respondent to protect a drinking water supply where the violation
(e g a reporting violation) did not directly damage the watershed but
potentially could lead to damage due to unreported discharges. This category
also includes projects which provide for the protection of endangered species ' Q 0 0 1 9 8
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(e.g., developing conservation programs or protecting habitat critical to the
well-being of a species endangered by the violation).
In some projects where a defendant/respondent has agreed to restore and then
protect certain lands, the question arises as to whether the project may include
the creation or maintenance of certain recreational improvements,, such as hiking
and bicycle trails. The costs associated with such recreational improvements
may be included in the total SEP cost provided they do not impair the
environmentally beneficial purposes of the project and they constitute only an
incidental portion of the total resources spent on the project.
' . . • N
,
In some projects where the parties intend that the property be protected so that
the ecological and pollution reduction purposes of the land are maintained in
perpetuity, the defendant/respondent may sell or transfer the land to another
party with the established resources and expertise to perform this function, such
as a, state park authority. In some cases, the U.S. Fish and Wildlife Service or
the National Park Service may be able to perform this function.^
With regard to man-made environments, such projects may involve the
remediation of facilities and buildings, provided such activities are not otherwise
legally required. This includes the removal/mitigation of contaminated materials,
such as soils, asbestos and lead paint, which are a continuing source of releases
and/or threat to individuals.
5. Assessments and Audits
Assessments and audits, if they are not otherwise available as injunctive relief,
are potential SEPs under this category. There are three types of projects in this
category: a. pollution prevention assessments; b. environmental quality
assessments; and c. compliance audits. These assessments and audits are only
acceptable as SEPs when the defendant/respondent agrees to provide EPA with
a copy of the report. The results may be made available to the public, except to
the extent they constitute confidential business information pursuant to 40 CFR
Part2, SubpartB. ' . '
•
a. Pollution prevention assessments are systematic, internal reviews of specific
processes and operations designed to identify and provide information about
opportunities to reduce the use, production, and generation of toxic and
hazardous materials and other wastes. To be eligible for SEPs, such assessments
must be conducted using a recognized pollution prevention assessment or waste
minimization procedure to reduce the likelihood of future violations. Pollution
preventiort assessments are acceptable as SEPs without an implementation
commitment by the defendant/respondent. Implementation is not required
because drafting implementation requirements before the results of an
assessment are known is difficult. Further, many of the implementation
recommendations may constitute activities that are in the defendant/respondent's
own economic interest.
b. Environmental quality assessments are investigations of: the condition of the
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kSUPPLEMENTALENVlRONMENTALPROJECTSPOUCY
environment at a ate not owned or operated by the defendant/respondent; the
environment impacted by a site or a faculty regardless of whether the site or
facility is owned or operated by the defendant/respondent; or threats to human
Health or the environment relating to a site or a facility regardless of whether the
she or feqlhy is owned or operated by the defendant/respondent These include,
but are not limited to: investigations of levels or sources of contamination in any
environmental media at a site; or monitoring of the air, soil, or water quality
surrounding a site or facility. To be eligible as SEPs, such assessments must be
conducted in accordance with recognized protocols, if available, applicable to
the type of assessment to be undertaken. Expanded sampling or monitoring by
a defendant/respondent of its own emissions or operations does not qualify as
a SEP to the extent it is ordinarily available as injunctive relief.
Environmental quality assessment SEPs may not be performed on the following
types of sites: sites that are on the National Priority List under CERCLA § 105,
40 CFR Part 300, Appendix B; sites that would qualify for an EPA removal
action pursuant to CERCLA §104(a) and the. National Oil and Hazardous
Substances Pollution Contingency Plan, 40 CFR § 300.415; and sites for which
the defendant/respondent Or another party would likely be prdered to perform a
remediation activity pursuant to CERCLA §106, RCRA §7003, RCRA 3008(h),
CWA § 3 1 1, or another federal law.
c. Environmental compliance audits are independent evaluations of a'
defendant/respondent's compliance status with environmental requirements.
Credit is only given for the costs associated with conducting the audit. While the
SEP should require all violations discovered by the audit to be promptly
corrected, no credit is given for remedying the violation since persons are
required to achieve and maintain compliance with environmental requirements.
In general, compliance audits are acceptable as SEPs only when the
defendant/respondent is a small business or small community .^-^ ^
6. Environmental Compliance Promotion
An environmental compliance promotion project provides training or technical
support to other members of the regulated community to: 1) identify, achieve
and maintain compliance with applicable statutory and regulatory requirements
or 2) go beyond compliance by reducing the generation, release or disposal of
pollutants beyond legal requirements. For these types of projects, the
defendant/respondent may lack the experience, knowledge or ability to
implement the project itself, and, if so, the defendant/respondent should be.
required to contract with an appropriate expert to develop and implement the
compliance promotion project. Acceptable projects may include, for example,
producing a seminar directly related to correcting widespread or prevalent
violations within the defendant/ respondent's economic sector.
fi •
Environmental compliance promotion SEPs are acceptable only where the
primary impact of the project is focused on the same regulatory program
requirements which were violated and where EPA has reason to believe that
compliance in the sector would be significantly advanced by the proposed
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V SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
project. For example, if the alleged violations involved Clean Water Act
pretreatment violations, the compliance promotion SEP must be directed at
ensuring compliance with pretreatment requirements. Environmental compliance
promotion SEPs are subject to special approval requirements per Section J
below.
7. Emergency Planning and Preparedness
An emergency planning and preparedness project provides assistance — such as
computers and software, communication systems, chemical emission detection
and inactivation equipment, HAZMAT equipment, or training — to a responsible
state or local emergency response or planning entity. This is to enable these
organizations to fulfill their obligations under the Emergency Planning and
Community Right-to-Know Act (EPCRA) to collect information to assess the
dangers of hazardous chemicals present at facilities within their jurisdiction, to
develop emergency response plans, to train emergency response personnel and
to better respond to chemical spills.
EPCRA requires regulated sources to provide information on chemical
production, storage and use to State Emergency Response Commissions
(SERCs), Local Emergency Planning Committees (LEPCs) and Local Fire
Departments (LFDs). This enables states and local communities to plan for and
respond effectively to chemical accidents and inform potentially affected citizens
of the risks posed by chemicals present in their communities, thereby enabling
them to protect the environment or ecosystems which could be damaged by an
accident. Failure to comply with EPCRA impairs the ability of states and local
communities to meet their obligations and places emergency response personnel,
the public and the environment at risk from a chemical release.
Emergency planning and preparedness SEPs are acceptable where the primary
impact of the project is within the same emergency planning district or state
affected by the violations and EPA has not previously provided the entity with
financial assistance for the same purposes as the proposed SEP. Further, this
type of SEP is allowable only when the SEP involves non-cash assistance and
there are violations of EPCRA, or reporting violations under CERCLA § 103,
or CAA § 112(r), or violations of other emergency planning, spill or release
requirements alleged in the complaint
8. Other Types of Projects
Projects determined by the case team to have environmental merit which do not
fit .within at least one of the seven categories above but that are otherwise fully
consistent with all other provisions of this Policy, may be accepted with the
advance approval of the Office of Enforcement and Compliance Assurance.
9. Projects Which Are Not Acceptable as SEPs
The following are examples of the types of projects that are not allowable as
SEPs:
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\ SUPPLEMENTAL ENVIRONMENTAL PROJECTS POUCY
~l9l!J1ttp://cs.epa.goV/oeca/sepisepfmaLhllli
considerations), except for the SEP.
, ,
c. The' amounts in steps l.a and b are added. This sum is the, mjnimum amount
that would be necessary tc! settle the case withqut a SEPt '
Step 2: ~um Penalty Amount With a SEP
,
> The minimum penalty amount must equal or exceed the economic benefit of
, ' noncompliance plus 10 percent of the gravity component, or 25 percent of the
gra~ component only, whichever is greater. The minimum penalty'amount is
calcUlated as follows:. " . . '
a. Calculate 10 percen~ of gravity (multiply amoqrrt in step l.b by 0.1).
.b. Add econol1\iC? benefit (amo~t in step l.a) to amount in step 2.a.
c. Calculate 2S percent of~avity (multiply amount in step I.b by 0.25),:,
. ,
d. Identify the minimum penalty amount: the' greater of step2.c or step 2.b.illl
Step 3. Calculate the SEP Cost
The net present aft~r-tax cost of the SEP, hereinafter called the "SEP COST," is .
the maximUlJ) amount that EP A may take ilito consideration in determining an,
appropriate penalty mitigation for perfonnance of a SEP. In order to facilitate
evaluation of the SEP COST of a proposed project, the Agency has developed a
computer model called PROJECT. !ill There are three types of costs that may
be aSsociated with performance of a SEP (which are entered into the PROJECT
, model): capital Costs (e.g., equipment, buildings); one-time nondepreciable costs
, (e.g., removing contaminated materials, purchasing land, deveioping a
compliance promotion seminar); and annual operation costs and savings (e.g.,
, labor, c:hemi~als, water, power, raw materials).ill1 ' '
To use PROJECT, the Agency needs reiiable estimate~ of the costs associated
'with a defendant/respondent's performance of a SEP, as well as any savings due
" to such factors as energy efficiency gains, reduced materials costs, reduced
. 'waste disposal costs, or increases in productivity. For example, if the annual
expenditures in labor and inaterials of operating a new waste recycling process
is $100,000 per year, but the new process reduces existing hazardou~ waste
disposal expenditures by $30,000 per year, the net cost of $70,000 is entered'
. into the PROJECT model (variabl~ 4).
In order to run the PROJECT model properly (i.e., to produce a reasonable
estimate ofthe net present after-tax cost of the project), 'the number of years
that annual operation costs or savings will be expended in performing the SEP
must be specified. At a minimum, the defendant/respondent must be required to
implement the project for the same number of years used in the PROJECT'
model calculation. (For example, if the settlement agreement requires the
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|SUPilEMENTALENVIRONMENTALPR(yECTSPOUCY
defendant/respondent to operate the SEP equipment for two years, two years
should be entered as the input for number of years of annual expense in_the
PROJECT model.) If certain costs or savings appear speculative, they should
not be entered into the PROJECT model. The PROJECT model is the primary
method to determine the SEP COST for purposes of negotiating settlements.*1^
. EPA does not offer tax advice on whether a regulated entity may deduct SEP
expenditures from its income taxes. If a defendant/respondent states that it wfll
:: Vrtd^ct the cost of a SEP from its taxes and it is wil^^
the settlement document, and provide the Agency with certification upon -
completion of the SEP that it has not deducted the SEP expenditures, the
PROJECT model calculation should be adjusted to calculate the iSEP Cost
without reductions for taxes. This is a simple adjustment to the PROJECT
model: just enter a zero for variable 7, the marginal tax rate. If a business is not
willing to make this commitment, the marginal t^x rate in variable 7 should not
be set to zero; rather tile default settings (or a more precise estimate of the
business1 marginal tax rates) should be used in variable 7. .
If the PROJECT model reveals that a project has a negative cost during the
period of performance of the SEP/this means that it represents a positive cash
flow to the defendant/respondent and is a profitable project. Such a project is
generally not acceptable as a SEP. If a project generates a profit, a
defendant/respondent should, arid probably will, based on its own economic
interests, implement the project. While EPA encourages regulated entities to
undertake environmentally beneficial projects that are economically profitable,
EPA does not believe violators should receive a bonus in the form of penalty
mitigation to undertake such projects as part of an enforcement action. EPA
. does not offer subsidies to complying companies to undertake profitable
environmentally beneficial projects and it would thus be inequitable and perverse
to provide such subsidies only to violators. In addition, the primary goal of
- SEP4 is to secure a favorable environmental or public health outcome which
would not have occurred but for the enforcement case settlement. To allow SEP
. penalty mitigation for profitable projects would thwart this goal.^21
Amount
• . * • ...
Step 4.a: Mitigation Percentage. After the SEP COST has been calculated, EPA
should determine what percentage of that cost may be applied as mitigation
against the amount EPA would settle for but for the SEP. The quality of the
SEP should be examined as to whether and how effectively it achieves each of
the following six factors listed below. (The factors are not listed hi priority
order.) ' .
Benefits to the Public or Environment at Large. While all SEPs benefit public
health or the environment, SEPs which perform well on this factor will result in
significant and quantifiable reduction in discharges of pollutants to the
environment and the reduction in risk to the general public. SEPs also will
perform well on this factor to the extent they result in significant and, to the
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extent possible, measurable progress in protecting and restoring ecosystems
(including wetlands and endangered species habitats).
Innovativeness. SEPs which perform well on this factor will further the
development, implementation, or dissemination of innovative processes,
technologies, or methods which more effectively: reduce the generation, release
or disposal of pollutants; conserve natural resources; restore and protect
ecosystems; protect endangered species; or promote compliance. This includes
"technology forcing" techniques which may establish new regulatory
"benchmarks."
Environmental Justice. SEPs which perform well on this factor will mitigate
damage or reduce risk f o minority or low income populations which may have
been disproportionately exposed to pollution or are at environmental risk.
Community Input. SEPs which perform well on this factor will have been
developed taking into consideration input received from the affected
community. No credit should be given for this factor if the defendant/respondent
did not actively participate in soliciting and incorporating public input into the
SEP.
Multimedia Impacts. SEPs which perform well on this factor will reduce
emissions to more than one medium.
Pollution Prevention. SEPs which perform well on this factor will develop and
implement pollution prevention techniques and practices.
The better the performance of the SEP under each of these factors, the higher
the appropriate mitigation percentage. The percent of penalty mitigation is
. within EPA's discretion; there is no presumption as to the correct percentage pf
mitigation. The mitigation percentage should not exceed 80 percent of the
SEP COST, with two exceptions:
(1) For small businesses, government agencies or entities, and non-profit
organizations, this mitigation percentage of the SEP COST may be set as high
as 100 percent if the defendant/respondent can demonstrate the project is of
outstanding quality. .
(2) For any defendant/respondent, if the SEP implements pollution prevention,
the mitigation percentage of the SEP COST may be set as high as 100 percent if
the defendant/respondent can demonstrate that the project is of outstanding
quality.
If the government must allocate significant resources to monitoring and
reviewing the implementation of a project, a lower mitigation percentage of the
SEP COST may be appropriate.
In administrative enforcement actions in which there is a statutory limit
(commonly called "caps") on the total maximum penalty that may be sought in a
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single action, the cash penalty obtained plus the amount of penalty mitigation
credit due to the SEPs shall npt exceed the limit.
Step 4.b: SEP Mitigation Amount. The SEP COST (calculated pursuant to step
3) is multiplied by the mitigation percentage (step 4.a) to obtain the SEP
mitigation amount, which is the amount of the SEP cost that may be used in
potentially mitigating the preliminary settlement penalty.
Step S: Final Settlement Penalty
S.a. The SEP mitigation amount (step 4.b) is then subtracted from the settlement
amount without a SEP (step 1 .c).
^ . , ,
S.b The greater of step 2.d or step S.a is the minimum final settlement penalty
allowable based on the performance of the SEP.
F. LIABILITY FOR PERFORMANCE
Defendants/respondents (or their successors in interest) are responsible and •.
legally liable for ensuring that a SEP is completed satisfactorily. A
defendant/respondent may not transfer this responsibility and liability to
someone else, commonly called a third party. Of course, a defendant/respondent
may use contractors or consultants to assist it in implementing a SEP.^
G. OVERSIGHT AND DRAFTING ENFORCEABLE SEPS
The settlement agreement should accurately and completely describe the SEP.
(See related legal guideline 4 in § C above.) It should describe the specific
actions to be performed by the defendant/respondent and provide for a reliable
and objective means to verify that the defendant/respondent has timely
completed the project. This may require the defendant/respondent to submit
periodic reports to EPA. The defendant/respondent may utilize an outside
auditor to verify performance, and the defendant/respondent should be made
responsible for the cost of any such activities. The defendant/respondent remains
responsible for the quality and timeliness of any actions performed or any
reports prepared or submitted by the auditor. A final report certified by an
appropriate corporate official, acceptable to EPA^ and evidencing completion of
the SEP and documenting SEP expenditures, should be required.
. To the extent feasible, defendant/respondents should be required to quantify the
benefits associated with the project and provide EPA with a report setting forth
how the benefits were measured or estimated. The defendant/respondent
should agree that whenever it publicizes a SEP or the results of a SEP, it
will state in a prominent manner that the project is being undertaken as
part of the settlement of an enforcement action.
The drafting of a SEP will.vary depending on whether the SEP is being
performed as part of an administrative or judicial enforcement action. SEPs with
long implementation schedules (e.g., 18 months or longer), SEPs which require Q Q Q 2 Q 6
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EPA review and comment on interim milestone activities, and other complex
SEPs may not be appropriate in administrative enforcement actions. Specific
guidance on the proper drafting of settlement documents requiring SEPs is
provided in a separate document.
H. FAILURE OF A SEP AND STIPULATED PENALTIES
If a SEP is not completed satisfactorily, the defendant/respondent should be
required, pursuant to the terms of the settlement document, to pay stipulated
penalties for its failure. Stipulated penalty liability should be established for each
of the scenarios set forth below as appropriate to the individual case.
. 1. Except as provided in paragraph 2 immediately below, if the SEP is not
completed satisfactorily, a substantial stipulated penalty should be required. .
Generally, a substantial stipulated penalty is between 75 and 150 percent of the
amount by which the settlement penalty was mitigated pn account of the SEP.
2. If the SEP is not completed satisfactorily, but the defendant/respondent:
a) made good faith and timely efforts to complete the project; and b) certifies,
with supporting documentation, that at least 90 percent of the amount of
money which was required to be spent was expended on the SEP, no stipulated
penalty is necessary.
3. If the SEP is satisfactorily completed, but the defendant/respondent spent less
than 90 percent of the amount of money required to be spent for the project, a
small stipulated penalty should be required. Generally, a small stipulated penalty
is between 10 and 25 percent of the amount by which the settlement penalty was
mitigated on account of the SEP.
4. If the SEP is satisfactorily completed, and the defendant/respondent spent at
least 90 percent of the amount of money required to be spent for the project, no
stipulated penalty is necessary.
/ ,
The determination's of whether the SEP has been satisfactorily completed (i.e.,
pursuant to the terms of the agreement) and whether the defendant/respondent
has made a good faith, timely effort to implement the SEP should be reserved to
the sole discretion of EPA, especially in administrative actions in which there is
often no formal dispute resolution process.
L COMMUNITY INPUT
In appropriate cases, EPA should make special efforts to seek input on project
proposals from the local community that may have been adversely impacted l>y
the violations.^ Soliciting community input into the SEP development process
can: result in SEPs that better address the needs of the impacted community;
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promote environmental justice; produce bettercormmmity understanding of '
EP A enforcement; and improve relations between -the~coriununity and the " ,
violating facility. Community involvement ~ SEPs may be most appropriate in
cases where the range of pos~Dle SEPs is great and/or multiple SEPs may be
negotiated.' '" ,
When soliciting' community input, the EP A negotiating team should follow the
four guidelines set forth below.
.~.,.
..~.:;.-
, '
I. Community inpUt should be sought after EP A knows that the. '
, defendant/respondent is interested in doing a S~ and is willing to seek
co~unity input, approximately how much money ~y be, available for doing a
SEP, arid t~ settlement of the enforcement action is.1ikely. If these conditions
are not ~tisfied,EP A will hav~ very little information to provide communities'
. regarding the scope of possible SEPs., " , ,
,2. The EP A negotiating team should use both informal and formal methods to
contact the local community. Informal methods may involve telephone calls to
'local community organizations, local churches, local elected leaders, local '
. chambers 'of commerce, or other groups. SinceEP A raay not be able to identify
all intereste4 cOmmunity groups, a pub.lic notice in a loc~ newspaper may be
, appropriate' , ',' 'i
, '
, "
I.' " ,
, ,.
3. To ensure that communities have a meaningful oppOI1¥nity to participate, the
EP A negotiating team should provide information to communities about what
SEPs are, the opportunities and limits of such projects, the confidential nature of
settlement negotiations;.and the reasonable pQssibilities and limitations in the
current enforcement action: This 'can be done by holding a pubiic meeting, .
. usually in the evening, at a local sChool or facility.' The EP A negotiating team
may wish to use copununity outreach ~erts at EP A or the Department of
Jlist.iceiri conducting this meeting. Sometimes the defendant/respondent may
play an active role at this meeting and have its own experts assist in the proc~ss.
. . . "
4. After the initial public meeting, the eXtent of community input and ,
participation in the- SEP developn,1ent process Will have to be determineq. The .
amount of q1put and participation is likely to vary with each case. Except in
extraordinary circumstances and with agreement of the parties, representatives
of community groups will not partlcipat~direct1y in the settlement negotiations.
This restriction is necessaIY because of the confidential nature of settlement
negotiations and because there i,s often no equitable process to detennine which
community gr?UP should directly participate in the negotiations. '
J. EPA PROCEDURES
I. Approvals
The authority of a gove~ent official to approve a SEP is included in the
official's authority to settle an enforce~ent case and thus, subject to the'
exceptions set forth here. no special approvals are required. The special
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approvals apply to both administrative and judicial enforcement actions as
follows: .
a. Regions iIi which a SEP1s proposed for implementation shall be given the
opportunity to review and comment on the proposed ~EP. .
b. In all.cases in which a project may not fully comply with the proVisions of-this.
Policy (e.g., see footnote 1), the SEP must be approved by the EP A Assistant
.. Administrator for Enforcement and Compliance Assurance. If a project does not
fully comply with all of the legal guidelines in this Policy, the request for ..
approval must set forth a legal analysis supporting the conclusion that the
project is within EP A's legal authority and is not otherwise inconsistent with-
law. ... . . .
. ,
c. In all'cases in which a SEP would involve activities outside the United States"
. the SEP must be approved in advance by the Assistant Administrator and, for
judicial cases only, the AssIstant Attorney General for the ERvironment and .
Natural Resources Division of the Department of Justice.
d: In all cases in which an environmental compliance promotion project (section.
D.6) or a project in the "other" category (section D.8) is contemplated, the
project must be approved in advance by the appropriate office in OECA, unless
otherwise delegated. .
2. Documentation and Confidentiality
In each casein which a SEP is included as part of a settlement, an'explanation of
the SEP with supporting ma!~als (including the PROJECT model printout, .
where applicable) ,must be irlCtuded as part of the case file. The explanation of
the SEP should explain how'the five steps set forth in Section A3 above have
been used to evaluate the project""and include a description, of the expected..
benefits associated with the SEP. The explan~tion must include a description by
the enforcement a~omey of how nexus and the other legal guidelines ar~ .
satisfied. .
. . .
. Documentation and explanations of a particular SEP may constitute confidentiai.
settlement information that is exempt trom disclosure under the Freedom of
Information Act, is outside the scope of discovery, and is protected by various
privileges, including the attorney-client privilege and the attorney work..product
privilege. While individual Agency evaluations of proposed SEPs are
confidential, privileged documents, this Policy is a public document apd may be
released to anyone upon request. . .
, This Policy is Primarily for the use of u.s. EP A enforcement personne/.in seitling cases. El
the right to change this Policy at any time, withollt prior nO!ice, or to act at variance to this
This Policy does not create anY rights, duties, or obligations, implied or otherWise, in any ti
parties.
¥'<.r'
..
~ - .-' "
f22 .
.000209
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SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
ATTACHMENT
s
SEP PENALTY CALCULATION WORKSHEET
This worksheet should be used pursuant to section E of the Policy.
Specific Applications of this Worksheet in a Case Are Privileged, Confidential
Documents.
STEF
AMOUNT
STEP 1: CALCULATION OF SETTLEMENT AMOUNT WITHOUT A SEP,
l.a. BENEFIT: The applicable penalty policy is used to calculate the economic
benefit of noncompliance. • '
l.b. GRAVITY: The applicable penalty policy is used to calculate the gravity
component of the penalty; this is gravity after all adjustments in the applicable
policy:
l.c SETTLEMENT AMOUNT without a SEP: Sum of step l.a plus l.b.
$
$
$
STEP 2: CALCULATION OF THE MINIMUM PENALTY AMOUNT WITH A SEP
2.a 10% of GRAVITY: Multiply amount in step l.b by 0.10
2.b BENEFIT PLUS 10% of GRAVITY: Sum of step l.a plus step 2.a.
1 — ^
2.c. 25 % of GRAVITY: Multiply amount in step l.b by 0.25. ||$
2.d MINIMUM PENALTY AMOUNT: Select greater of step 2.c or step 2.b. |$
STEP 3: CALCULATION OF THE SEP COST USING PROJECT MODEL.
1$
STEP 4: CALCULATION OF MITIGATION PERCENTAGE AND MITIGATION
AMOUNT..
4.a. SEP Cost Mitigation Percentage. Evaluate the project pursuant to the 6
mitigation factors in the Policy. Mitigation percentage should not exceed 80 %
unless one of the exceptions applies.
4.b. SEP Mitigation Amount. Multiply step 3. by step 4.a
%
|$
STEP 5: CALCULATION OF THE FINAL SETTLEMENT PENALTY.
5.a Subtract step 4.b from step 1 .c
5.b. Final Settlement Penalty: Select greater of step 2.d or step 5.a.
$
$
1. In extraordinary circumstances, the Assistant Administrator may consider
mitigating potential stipulated penalty liability using SEPs where: (1) despite the
circumstances giving rise to the claim for stipulated penalties, the violator has
the ability and intention to comply with a new settlement agreement obligation
to implement the SEP; (2) there is no negative impact on the deterrent purposes
of stipulated penalties; and (3) the settlement agreement establishes a range for
stipulated penalty liability for the violations at issue. For example, if a
respondent/defendant has violated a settlement agreement which provides that a
violation of X requirement subjects it to a stipulated penalty between $1,000
and $5,000, then the Agency may consider SEPs in determining the specific
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A SUPPLEMENTAL ENVIRONMENTAL PROJECTS POUCY
wysiwyg:! 191bttp:l/cs.cpa.gov/ooca/teplsepfmal.htzaj
penalty amount that should be demanded.
, ,
, 2. Since the primaI}r purpose of this P~licy is to obtain enviroiunental or public
health benefits that may not have ~ "but for" the settlement, projects' ,
, which the defendant has previously committed to perfonn or have been started
befor~ the Agency bas identified a violation are not eligible as SEPs. Projects'
, which have been commiued to or started before the identifica.tion of a violation
'may rDitigate the penalty in other ways. Depending on the speCifics,' if a '
" , regulated entity had initiated environm~ntany beneficial.projects before the
enforCement process commenced, the initial peIi<y calculation could be lower
due to th~ absence of recalcitrance, no history of other violations, good faith
, efforts, less severity of the violations, or a shor:ter duration of the violations. '
- . ". '.
.' ..
. . 3. The '~~t~' EP A administers generally'pr~vtde a co~ with broad authbrity ,
to' or4er a defendant to cease its violations, take necessary steps to prevent ,
futQre violations,' and to r~ediate any hann caused by the violations. If a court
is likely to order a defendant" to perfonn a specific activity in a p~icular ~
such an activity does not qualify as 'a SEP.' ,
, ,
4. These lega! guidelines are baSed on fed~law as it applies to EPA; States
may have more or less Bexibilityin the use of SEPs depel1:ding on their laws.
5. The immediate geographic area will generally be the area within a 50 mile
radius of the site on which the violations occ.urred. Ecosystem or geographic
proximity is not by itself a sufficient basis for nexus; a project must always
satisfy subp~graph a, b, or c in the ~efinition of nexus. ,In some cases, a project
may be perfonned at a facility or site not owned by the defendant/respondent.
6. All projects which would include activities outside the U.S. must be approved'
in advance by H~dquarters artdlor the Department of Justice. See section J:
1. Earmarks are instructions for changes to E:PA's.discretionary budget authority
. made by appropriations committee in committee reports that the AgenCy ,
generally honors as a 'matter of poliCy. " ,
, ,8. IfEP.Alacks 8uthoritY t9 require repaiJ: of the damage caused by the
, ~olation, then repaiT itself may ~nst~tute a SEP.' " ' ' .
9. Simply preventing new discharges into the ecosystem, as opposed to taking
affirmative action directly related to preserving existing conditions at a property,
would no~' constitute a restoration and protecti
-------
entity that employs 100 or fewer individuals. Small businesses could be
individuals, privately held corporations, formers, landowners, partnerships and
others. A small community is one comprised of fewer than 2,500 persons.
12. Since most large companies routinely conduct compliance audits, to mitigate
penalties for such audits would reward violators for performing an activity that
most companies already do. In contrast, tnese audits are not commonly done by
small businesses, perhaps because such audits may be too expensive.
13, Pursuar?t to the February 1995 Revised Interim Clean Water Act Settlement
Penalty Policy, section V, a smaller minimum penalty amount may be allowed
for a municipality.
14. A copy of the PROJECT computer program software and PROJECT User's
Manual may be purchased by calling that National Technology Information
Service at (800) 553-6847, and asking for Document #PB 98-500408GEI, or
they may be downloaded from the World Wide Web at
"http://www.epa. gov/oeca/models/".
15. The PROJECT calculated SEP Cost is a reasonable estimate, and not an
exact after-tax calculation. PROJECT does not evaluate the potential for market
benefits which may accrue with the performance of a SEP (e.g., increased sales
of a product, improved corporate public image, or improved employee morale).
Nor does it consider costs imposed on the government, such as the cost to the
Agency for oversight of the SEP, or the burden of a lengthy negotiation with a
defendant/ respondent who does not propose a SEP until late in the settlement
process; such factors may be considered in determining a mitigation percentage
rather than in calculating after-tax cost.
16. See PROJECT User's Manual, January 1995. If the PROJECT model
appears inappropriate to a particular fact situation, EPA Headquarters should be
consulted to identify an alternative approach. For example, PROJECT does not
readily calculate the cost of an accelerated compliance SEP. The cost of such a
SEP is only the additional cost associated with doing the project early (ahead of
the regulatory requirement) arid it needs to be calculated in a slightly different .
manner. Please consult with the bffice Of Regulatory Enforcement for
directions on how to calculate the costs of such projects. '
17. The penalty mitigation guidelines provide that the amount of mitigation
should not exceed the net cost of the project. To provide penalty mitigation for
profitable projects would be providing a credit in excess of net costs.
18. Non-profit organizations, such as universities and public interest groups,
may function as contractors or consultants.
19. In civil judicial cases, the Department of Justice already seeks public
comment on lodged consent decrees through a Federal Register notice. See 28
CFR §50.7. In certain administrative enforcement actions, there are also public
• notice requirements that are followed before a settlement is finalized. See 40 , Q 0 0 2 t ?
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• on Complin6* Incentives For Small Businesses
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v/EPA
Policy on Compliance Incentives For Small
Businesses
Issued May 20,1996; effective June 10,1996
A. INTRODUCTION
This document sets forth the U.S. Environmental Protection Agency's
Policy on Compliance Incentives for Small Businesses. This Policy is
one of the 25 regulatory reform initiatives announced by President
Clinton on March 16,1995, and implements, in part, the Executive
Memorandum on Regulatory Reform, 60 FR 20621 (April 26, 1995).
The Executive Memorandum provides in pertinent part:
To the extent permitted by law, each agency shall use its discretion to
modify the penalties for small businesses in the following situations.
Agencies shall exercise their enforcement discretion to waive the
imposition of all or a portion of a penalty when the violation is corrected
within a time period appropriate to the violation in question. For those
violations that may take longer to correct than the period set by the
agency, the agency shall use its enforcement discretion to waive up to
100 percent of the financial penalties if the amounts waived are used to
bring the entity into compliance. The provisions [of this paragraph] shall
apply only where there has been a good faith effort to comply with
applicable regulations and the violation does not involve criminal
wrongdoing or significant threat to health, safety, or the environment.
This Policy also implements section 323 of the Small Business
Regulatory Enforcement Fairness Act of 1996, signed into law by the
President on March 29,1996.
As set forth in this Policy, EPA will refrain from initiating an enforcement
action seeking civil penalties, or will mitigate civil penalties, whenever a
small business makes a good faith effort to comply with environmental
requirements by receiving compliance assistance or promptly disclosing
the findings of a voluntarily conducted environmental audit, subject to
certain conditions. These conditions require that the violation: is the
small business's first violation of the particular requirement; does not
oflO
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involve criminal conduct; has not and is not causing a significant health,
safety or environmental threat or harm; and is remedied within the
corrections period. Moreover, EPA will defer to State actions that are
consistent with the criteria set forth in this Policy.
B. BACKGROUND
The Clean Air Act (CAA) Amendments of 1990 require that States
establish Small Business Assistance Programs (SBAPs) to provide
technical and environmental complianceassistance to stationary
sources. On August 12,1994, EPA issued an enforcement response
policy for stationary sources which provided that an authorized or
delegated state program may, consistent with federal requirements,
either:
(1) assess no penalties against small businesses that voluntarily
seek compliance assistance and correct violations revealed as a
result of compliance assistance within a limited period of time; or
(2) keep confidential information that identifies the names and
locations of specific small businesses with violations revealed
through compliance assistance, where the SBAP is independent
of the state enforcement program.
In a further effort to assist small businesses to comply with
environmental regulations, and to achieve health, safety, and
environmental benefits, the Agency is adopting a broader policy for all
media programs, including water, air, toxics, and hazardous waste.
C. PURPOSE
This Policy is intended to promote environmental compliance among
small businesses by providing incentives for them to participate in
on-site compliance assistance programs and to conduct environmental
audits. Further, the Policy encourages small businesses to
expeditiously remedy all violations discovered through compliance
assistance and environmental audits. The Policy accomplishes this in
two ways: by setting forth a settlement penalty Policy that rewards such
behavior, and by providing guidance for States and local governments
to offer these incentives.
D. APPLICABILITY
This Policy applies to facilities owned by small businesses as defined
here. A small business is a person, corporation, partnership, or other
entity who employs 100 or fewer individuals (across all facilities and
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operations owned by the entity). This definition is a simplified version of
the CAA 6507 definition of small business. On balance, EPA
determined that a single definition would make implementation of this
Policy straightforward and would allow for consistent application of the
Policy in a multimedia context.
This Policy is effective June 10,1996, and on that date supersedes the
Interim version of this Policy issued on June 13,1995 and the
September 19,1995 Qs and As guidance on the Interim version. This
Policy applies to all civil judicial and administrative enforcement
actionstaken under the authority of the environmental statutes and
regulations that EPA administers, except for the Public Water System
Supervision Program under the Safe Drinking Water Act. This Policy
applies to all such actions filed after the effective date of this Policy,
and to all pending cases in which the government has not reached
agreement in principle with the alleged violator on the amount of the
civil penalty.
This Policy sets forth how the Agency expects to exercise its
enforcement discretion in deciding on an appropriate enforcement
response and determining an appropriate civil settlement penalty for
violations by small businesses. It states the Agency's views as to the
proper allocation of enforcement resources. This Policy is not final
agency action and is intended as guidance. It does not create any
rights, duties, obligations, or defenses, implied or otherwise, in any
third parties. This Policy is to be used for settlement purposes and is
not intended for use in pleading, or at hearing or trial. To the extent that
this Policy may differ from the terms of applicable enforcement
response policies (including penalty policies) under media-specific
programs, this document supersedes those policies. This Policy
supplements, but does not supplant the August 12,1994 Enforcement
Response Policy for Treatment of Information Obtained Through Clean
Air Act Section 507 Small Business Assistance Programs.
E. CRITERIA FOR CIVIL PENALTY MITIGATION
EPA will eliminate or mitigate its settlement penalty demands against
small businesses based on the following criteria:
(1) The small business has made a good faith effort to comply
with applicable environmental requirements as demonstrated by
satisfying either a. orb. below.
(a) Receiving on-site compliance assistance from a
government or government supported program that offers
services to small businesses (such as a SBAP or state
university), and the violations are detected during the
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compliance assistance. If a small business wishes to obtain
a corrections period after receiving compliance assistance
from a confidential program, the business must promptly
disclose the violations to the appropriate regulatory agency.
(b) conducting an environmental audit (either by itself or by
using an independent contractor) and promptly disclosing in
writing to EPA or the appropriate state regulatory agency all
violations discovered as part of the environmental audit
pursuant to section H of this Policy.
For both a. and b. above, the disclosure of the violation must occur
before the violation was otherwise discovered by, or reported to the
regulatory agency. See section 1.1 of the Policy below. Good faith also
requires that a small business cooperate with EPA and provide such
information as is necessary and requested to determine appl icability of
this Policy.
(2) This is the small business's first violation of this
requirement. This Policy does not apply to businesses that have
previously been subject to an information request, a warning
letter, notice of violation, field citation, citizen suit, or other
enforcement action by a government agency for a violation of that
requirement within the past three years. This Policy does not
apply if the small business received penalty mitigation pursuant to
this Policy for a violation of the same or a similar requirement
within the past three years. If a business has been subject to two
or more enforcement actions for violations of environmental
requirements in the past five years, this Policy does not apply
even if this is the first violation of this particular requirement.
(3) The business corrects the violation within the corrections
period set forth below.Small businesses are expected to remedy
the violations within the shortest practicable period of time, not to
exceed 180 days following detection of the violation. However, a
small business may take an additional period of 180 days, i.e.. up
to a period of one year from the date the violation is detected,
only if necessary to allow a small business to correct the violation
by implementing pollution prevention measures. For any violation
that cannot be corrected within 90 days of detection, the small
business should submit a written schedule, or the agency should
issue a compliance order with a schedule, as appropriate.
Correcting the violation includes remediating any environmental
harm associated with the violation, as well as implementing steps
to prevent a recurrence of the violation.
(4) The Policy applies if:
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these policies allow for mitigation of the penalty where there is a
documented inability to pay all or a portion of the penalty, thereby
placing emphasis on enabling the small business to finance
compliance. See Guidance on Determining a Violator's Ability to Pay a
Civil Penalty of December 1986. Penalties also may be mitigated
pursuant to the Interim Revised Supplemental Environmental Projects
Policy of May 1995 (60 F.R. 24856, 5/10/95) and Incentives for
Self-Policing: Discovery, Disclosure, Correction and Prevention of
Violations Policy of December 1995 (60 F.R. 66706, 12/22/95).
G. COMPLIANCE ASSISTANCE
1. Definitions and Limitations
Compliance assistance is information or assistance provided by EPA, a
State or another government agency or government supported entity to
help the regulated community comply with legally mandated
environmental requirements. Compliance assistance does not include
enforcement inspections or enforcement actions.
In its broadest sense, the content of compliance assistance can vary
greatly, ranging from basic information on the legal requirements to
specialized advice on what technology may be best suited to achieve
compliance at a particular facility. Compliance assistance also may be
delivered in a variety of ways, ranging from general outreach through
the Federal Register or other publications, to conferences and
computer bulletin boards, to on-site assistance provided in response to
a specific request for help.
The special penalty mitigation considerations provided by this
Policy only apply to civil violations which were identified as part of
an on-site compliance assistance visit to the facility. If a small
business wishes to obtain a corrections period after receiving
compliance assistance from a confidential program, the business must
promptly disclose the violations to the appropriate regulatory agency
and comply with the other provisions of this Policy. This Policy is
restricted to on-site compliance assistance because the other forms of
assistance (such as hotlines) do not expose a small business to an
increased risk of enforcement and do not provide the regulatory agency
with a simple way to determine when the violations were detected and
thus when the violations must be corrected. In short, small businesses
do not need protection from penalties as an incentive to use the other
types of compliance assistance.
2. Delivery of On-Site Compliance Assistance By Government
Agency or Government
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Supported Program
Before on-site compliance assistance is provided under this Policy or a
similar State policy, businesses should be informed of how the program
works and their obligations to promptly remedy any violations
discovered. Ideally, before on-site compliance assistance is provided
pursuant to this Policy or similar State policy, the agency should
provide the facility with a document (such as this Policy) explaining how
the program works and the responsibilities of each party. The document
should emphasize the responsibility of the facility to remedy all
violations discovered within the corrections period and the types
ofviolations that are excluded from penalty mitigation (e.g., violations
that caused serious harm). The facility should sign a simple form
acknowledging that it understands the Policy. Documentation
explaining the nature of the compliance assistance visit and the penalty
mitigation guidelines is essential to ensure that the facility understands
the Policy.
At the end of the compliance assistance visit, the government agent
should provide the facility with a list of all violations observed and
report within 10 days any additional violations identified resulting from
the visit, but not directly observed, e.g., results from review and
analysis of data or information gathered during the visit. Any violations
that do not fit within the penalty mitigation guidelines in the Policy -
e.g., those that caused serious harm ~ should be identified. If the
violations cannot all be corrected within 90 days, the facility should be
requested to submit a schedule for remedying the violations or a
compliance order setting forth a schedule should be issued by the
agency.
3. Requests for On-Site Compliance Assistance
EPA, States and other government agencies do not have the resources
to provide on-site compliance assistance to all small businesses that
request such assistance. This Policy does not create any right or
entitlement to compliance assistance. A small business that requests
on-site compliance assistance will not necessarily receive such
assistance. If a small business requests on-site compliance assistance
(or any other type of assistance) and the assistance is not available,
the government agency should provide a prompi response indicating
that such assistance is not available. The srnall business should be
referred to other public ami private sources of assistance that may be
available, such as clearinghouses, hotlines, an^ extension services
provide by some universities. In addition, the sjnajl business should be
informed that it may obtain the benefits offered by this Policy by
conducting an environmental audit pursuant to the provisions of this
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Policy.
H. ENVIRONMENTAL AUDITS
For purposes of this Policy, an environmental audit is defined as "a
systematic, documented, periodic and objective review by regulated
entities of facility operations and practices related to meeting
environmental requirements." See EPA's new auditing policy, entitled
Incentives for Self-Policing, 60 F.R. 66706, 66711, December 22,1995.
The violation must have been discovered as a result of a voluntary
environmental audit, and not through a legally mandated monitoring or
sampling requirement prescribed by statute, regulation, permit, judicial
or administrative order, or consent agreement. For example, the Policy
does not apply to:
(1) emissions violations detected through a continuous emissions
monitor (or alternative monitor established in a permit) where any
such monitoring is required;
(2) violations of National Pollutant Discharge Elimination System (
NPDES) discharge limits detected through required sampling or
monitoring; or
(3) violations discovered through an audit required to be
performed by the terms of a consent order or settlement
agreement.
The small business must fully disclose a violation within 10 days (or
such shorter period provided by law) after it has discovered that the
violation has occurred, or may have occurred, in writing to EPA or the
appropriate state or local government agency.
ENFORCEMENT
To ensure that this Policy enhances and does not compromise public
health and the environment, the following conditions apply:
(1) Violations detected through inspections, field citations,
reported to an agency by a member of the public or a"
whistleblower" employee, identified in notices of citizen suits, or
previously reported to an agency as required by applicable
regulations or permits, remain fully enforceable.
(2) A business is subject to all applicable enforcement response
policies (which may include discretion whether or not to take
formal enforcement action) for all violations that had been
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detected through compliance assistance and were not remedied
within the corrections period. The penalty in such action may
include the time period before and during the correction period.
(3) A State's or EPA's actions in providing compliance assistance
is not a legal defense in any enforcement action. This Policy does
not limit EPA or a state's discretion to use information on
violations revealed through compliance assistance as evidence in
subsequent enforcement actions.
(4) If a field citation is issued to a small business (e.g. under the
Underground Storage Tank program), the small business may
provide information to the Agency to show that specific violations
cited in the field citation are being remedied under a corrections
schedule established pursuant to this Policy or similar State
policy. In such a situation, EPA would exercise its enforcement
discretion not to seek civil penalties for those violations.
J. APPLICABILITY TO STATES
EPA recognizes that states are partners in enforcement and
compliance assurance. Therefore, EPA will defer to state actions in
delegated or approved programs that are generally consistent with the
criteria set forth in this Policy. Whenever a State agency provides a
correction period to a small business pursuant to this Policy or a similar
policy, the agency should notify the appropriate EPA Region. This
notification will assure that federal and state enforcement responses
are properly coordinated.
K. Public Accountability
Within three years of the effective date of this Policy, EPA will conduct
a study of the effectiveness of this Policy in promoting compliance
among small businesses. EPA will make the study available to the
public. EPA will make publicly available the terms of any EPA
agreements reached under this Policy, including the nature of the
violation(s), the remedy, and the schedule for returning to compliance.
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Last Updated: February 27, 1998
URL: http://es.epa.gov/oeca/smbusi.html
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I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
DEC I'6 1986
MEMORANDUM
SUBJECT: Guidance on Determining a Violator's
•Ability to Pay a Civil Penalty
FROM: . Thomas L. Adams, Jr.
Assistant Adminstrator for
Enforcement and Compliance Monitoring^
TO: ' Assistant Administrators
Regional Administrators .
* i ' * ,
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 i.n 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).
» ,
IJ- 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. For-profit publicly or closely held entities; and
2. For-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.
FEB 2 5 13
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in: SCOPS
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. TEE 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;
i
2. Sell assets;
3. Increase debt by commercial borrowing;
« • t
4. Increase equity by selling stock;
5. Apply toward a civil penalty for a period of time
what would'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
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a proposed penalty amount and by how much, taking into acts
the gravity of the violation and other criteria in mediua-
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 eva
the violator's claim of extreme financial hardship. A vio
who raises the issue has•the burden of providing informati
to demonstrate extreme financial hardship.
Financial information to request from for-profit enti
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^pompustat, Dun and
Bradstreet, or Value Line.
Tax returns are the most complete and in the most co
tent form for analysis. Tax returns also provide financi
information in a format for direct'input into ABEL. Annu
reports are the most difficult to analyze and may require
the assistance of a financial analyst.
When requesting information informally or through ^
interrogatories or discovery, E?A should ask ***]»;•• *°
five vears of tax returns along with all other financial
information that a violator regularly maintains as *«"»•
records. If a violator refuses to give SPA the ;*-of*"
to evaluate the violator's ability to pay, EPA *ho"lf «ef
the full calculated penalty amount under the assuap-ion ..
the violator can pay.
000226
-------
-4-
VI. CONFIDENTIALITY OF FINANCIAL INFORMATION
A violator can claim confidentiality for financial
information submitted to SPA. 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 TEE 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 may affect a.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. A3EL uses financial
information on a violator to evaluate the overall financial
health of a violator (step 3 above). The program'uses standard
000221
-------
. -5-
financial ratios to evaluate a violator's ability to borrow
aoney and pay current and long-term operating expenses.
ABEL also 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.
1
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, liauid 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 • ,
000228
-------
cPIISlBW!
WASHINGTON, O.C. 20460 U ^ OCT 27 1392
- ' QCT 1
HEMORANBOH •
SUBJECT: Change in Hethodology forJDetsraining the BEN Hodel's
Discount Rate ^ '
FBOH: . Herbert H. Tate, Jr.
.Assistant Administrator for^nfarcement
•• •. . .o«« i i ••••'^
.
TO: Assistant Administrators • ,•
Regional Administrators
* *
•
Effective thirty days from the issuance of this memorandum,
the Office of Enforcement (OS) will employ a different
methodology for calculating the BEN computer model1 s discount" *
rate. . As a result of this, change, the discount rate will decline
from-the current 17.2% to 11.9%.. The purpose of this memorandum
is to notify you and your .respective staffs of the change and to
discuss some of its implications.
Background,
*
. The Office of Enforcement first developed an economic
benefit model in 1978. One qf the central theoretical issues in
the model's development was deciding on an appropriate discount
rate to evaluate pollution control- expenditures. • The-.discount
rate is an interest rate employed by the model -in performing
"benefit analyses. After extensive study of this issue, and
careful consideration of our corporate finance consultant's
views, OE decided on an "equity* based rate. The equity discount
rate approach was later, adopted in 1984 when the Agency- developed
the BEN computer model.1 The Agency based its decision on its
understanding of prevailing corporate financing of compliance
expenditures", which was that pollution control investments did
not contribute to a firm's profit-making activities. Thus it was
logical to assume that a firm raised the capital for this
1 The ABEL model, which calculates a violator's financial
ability to comply, clean up or pay a civil penalty, will soon
employ a WACC discount rate. The-.discount rate plays a dlf.erent
role in ABEL: ABEL is concerned with a firm's overall fir.anc.ng
as opposed to just the financing of pollution control equipment.
-EB ?. o
-------
investment by selling shares of stock (.i.e. equity financing),
one of the most expensive ways to finance investments. The more
expensive the financing of pollution control equipment 'is, the
larger the economic benefit of noncompliance.
• . * -
In choosing an equity-based, number, the Agency rejected the
main competing theory, known as the weighted average cost of
capital (WACC). WACC is an average of the cost of equity and the
cost of debt (i.e. borrowing from a bank or issuing corporate
bonds), each weighted by its proportion of the firm's overall ' .
financing. The WACC view of pollution control investment is that
while firms recognize that the pollution control investments will
not.by themselves produce .revenue, they are like the roof on the
factory. The roof does not prodTuce revenue, but it'enables".the
firm to make profits. -.Analogously, the WACC view is that "-a- firm
must make pollution control investments to stay in business.
Viewed in this context, pollution control is part of the cost of
doing business, is supported by the overall capital structure of
the firm, and has the same'financing as other projects the firm
undertakes. •.
•
The equity financing assumption remains a viable
methodology, and is supported by a segment -of expert opinion.
Taken in that-light, the equity financing assumption is not
wrong. Nevertheless, it is our view and the view of many top
corporate finance experts that the-WACC financing assumption is
the more convincing theory. In addition, the WACC assumption is
more progressive than the equity assumption in that it regards
pollution control expenditures as normal business expenses. This
is more consistent with the Agency's perspective in this area and
is more in the corporate finance mainstream than assuming only
equity financing. For these reasons, the Agency is now adopting
a WACC based discount rate for BEN model analyses* A new version
of the BEN model, BEN92, will be-available on the mainframe
computer in thirty days. Users will have a choice of which nodel
to use'until February 1, 1993. After that date, only BEN92 will
be available. New BEN User Manuals should be in- the mail (in
early January.
ftppaet of the Change on Economic'Benefit Calculations
Because WACC is a weighted average of both borrowing and
selling shares of stock, the cost for financing pollution control
investments, as calculated by BEN, is now substantially lover.
Since the cost of financing is a key assumption -Jin the BEN model,
lowering the discount rate from 17.2% to 11.9%.will result in
lower benefit .calculations for businesses. (It will have no
effect on not-for-profit entities.) In a typical case, the
000231
-------
benefit analysis will be 25% to 30%. lower.2
• The 11.9% standard value represents the average WACC rate
for a .business. The BEN model automatically defaults to this
value unless an- alternative WACC rate is substituted. If the
Agency's own expert witness feels a different WACC value is more
appropriate, then that value can be substituted. (In some cases,
the corporate-specific WACC rate will actually be higher than the
standard WACC value.) EPA enforcement professionals should not
make this determination on their own, or on the recommendation of
a violator's expert. Determining alternative WACC values is a
complex matter that'must be,left for the Agency's experts. At
the same time, it is important .to note that nothing in this
memorandum prohibits EPA'-litigation teams'from using an-1 equity-
based discount rate should*bur expert feel it is appropriate.'"
Application to Acreney Enforcement Actions
The need to recalculate benefit analyses will depend upon .
what stage the case is in. For. purposes of this memorandum, we •
will divide the cases into-three categories: 1) cases that are.
settled, 2) cases where no penalty analysis has been transmitted
to the defendant other than the figure in the complaint, and
3) cases where a figure has been transmitted to the defendant,
but the case has not settled.
1. Settled cases
If a case has settled or there is agreement as to the.
penalty figure even though there is no final settlement, there
should be no recalculation of the benefit. It is important to
emphasize that the equity theory is^not wrong, and those
settlements/agreements were arrived at through good-faith
•negotiations. .There is no reason to disturb those results.
2. Cases Where the Government Has Not Presented the BEN
Analysis to the Defendant
If a case is at the stage where the defendant has not yet
seen any BEN analysis, then the litigation team will use BEN92
even if that requires recalculating the benefit portion of the
penalty. "
? The actual change i!n the benefit figure may be less than
25% or more than 30%. The 25% to 30% range is for the typical
case. The extent of the change depends on :thecost and Jate
inputs used in the analysis. For example, a BEN^analysis for .
000232
-------
3. Cases Where the Government Has Presented the BEN
Analysis.to the Defendant, But There is No Final
Agreement as to the Penalty
The more complex situation- is where the defendant has seen
an Agency benefit analysis, but there is neither an agreement
over the penalty nor a settlement. In these cases, the ' '
litigation team may decide in its discretion whether to
recalculate the benefit component using BENS2. Each case is
unique, and it makes sense to allow this flexibility rather than
to impose one rule for all the cases in this category. While we
are allowing each litigation team in this situation the
flexibility to use either .version of BEN, the litigation 'team
should be cognizant of the implications of staying with'.BEN,90,
the previous version of .BElr;. There are two points to keep-in-
mind.' • . •
• * . , ••• •
First, the change in the discount rate will be public
information shortly. Many defendants, particularly those facing
substantial penalties based on economic benefit, are likely to
become aware of the change. The litigation teams that stay with
equity-based benefit analyses should carefully consider the
impact on negotiations if the defendant hears about the change
from sources other than the Agency's negotiators.
Second, if the litigation team negotiates over an equity-
based number but .starts' discovery, our expert witness would most
probably support the WACC view since it will be the official
Agency position. Thus, the litigation team might be faced with
the anomalous situation of seeking a larger economic benefit
amount at settlement than it would in discovery or at trial or
hearing. Depending on the amount- of economic benefit contained
in the proposed penalty, this could create an obvious incentive
for defendants to hold out for a trial or hearing rather, than
settle-the case. Litigation teams should carefully consider tht
impact on their cases in deciding whether to recalculate the
benefit using BEN 92. . ' •
• •
Litigation Practicalities
Because the WACC-equity dispute became a major issue in a
number of our enforcement actions, several litigation teams us«d
it as a reason to justify a lower bottom line settlement penalty.
While we entertained those considerations in the past, the change
in methodologies. will" remove this.issue from the "litigation
risk1* category. So while the bottom line settlement figures nay
drop due to the recalculation of the benefit number, the bottoa
line figures should not be affected henceforth by any litigation
risk over the discount rate.
000233
-------
Should you have any'questions about this memorandum, please
contact Jonathan Libber of -my staff. • He may be reached at
(202) 260-6777." . .
cc: Enforcement Counsels / .
John Cruden, Department of Justice
Regional Counsels
BEN Users' . '
000234
-------
ENVIRONMENTAL PROTECTION AGENCY
OFFrJSL2F,ENFORCEMENT A*10 COMPLIANCE ASSURANCE
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
BUILDING 53, BOX 25227, DENVER FEDERAL CENTER
DENVER, COLORADO 80225
DATE: Mai ill Si,
SUBJECT: Financial Analysis / General Synopsis
Electronic File Name is NEICFA01.GEN
FROM: Kimberly A. Zanier CPA
Senior Financial Analyst
Information Services Section
National Enforcement Investigations Center
TO: ORC Attorneys
OECA Attorneys . •
Enforcement Personnel Involved in Litigation Support
Financial Analysts
The Information Services Section (ISS) at the National
Enforcement Investigations Center (NEIC) has been providing
training for financial analysts charged with the responsibility
of making ability to pay determinations. To assist with this .
training the attached General Synopsis has been developed. The
attachment is intended to be used by financial analysts who have
experience with the financial transactipns being evaluated.
We are distributing this document to other enforcement
personnel in an attempt to: •
1. Provide insight into a complete ability-to-pay
analysis. The document outlines the various steps an
analyst will generally go through in performing such an
analysis. The reader must keep in mind that all steps
will not necessarily be performed for each case. For
example, if the ABEL run indicates an 80% probability
of payment, there is no need to perform additional
analysis. Also there are instances where, after havir.3
obtained the initial financial documents, a
determination can be easily made that the ability to
pay adjustment factor should not be made. Those steps
completed are determined on a case by case basis.
2. Provide the reader with some understanding as to the
potential time factors involved in an analysis to
facilitate .the planning process.
3. Assist the regions in gathering the appropriate
documentation for those situations where an analyst
will be needed.
000236
-------
4. Provide awareness to EPA personnel of the importance
of, acting as a team, and continuing communication
throughout the enforcement•process.
5. Provide awareness of the value of bringing in an
analyst early.
6. Inform personnel of the availability of sources of
financial information (ISS) and assistance (CIs).
The attached general synopsis is available in electronic.
form from the Information Services Section at NEIC. Please
contact Char Ressequie at (303) 236-3636 ext. 546.
If you have any suggestions, comments, or questions with
respect to the attached document, please contact Kimberly Zanier
at (303) 236-3636 ext. 555.
Attachment
000237
-------
CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
7/27/95 . .
GENERAL COMMENTS
i ,
This worksheet is provided as a guide and reflects only
general documentation to ' be obtained, to perform a financial
analysis. It provides only limited insight into potential issues.
»
An important point to keep in mind, while reviewing the below.
information, is the benefits associated with bringing an analyst in
early. . •
Early involvement in the qase will allow the analyst to:
, • Acquire historical knowledge of the case
• Provide assistance in on the spot reviews or discussions
• Provide assistance in other financial areas besides
ability to pay -
• Provide enough interjection to persuade the respondent
that raising the ability to pay issue would not be
prudent
• The case will be handled in a more timely fashion because
an ability to pay case can take anywhere from 2 to 12
months. Waiting to start this process, when the
liability issues are resolved, will add (potentially)
' another 2 to 12 months to the case.
So, consult with any analyst EARLY.
STEPS
I. INITIAL DOCUMENTATION TO BE PROVIDED BY ATTORNEY
A. Request memo detailing the following:
Synopsis of the case (complete history)
Inspection date
Program personnel involved - names and pnone
numbers
Violation details
Penalty amount
Current status of case
Description of business activity, type of entity
(individual or corporation)
'000238
-------
CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT. INVESTIGATIONS CENTER
• Details of ability to pay
What is Respondents position? - Respondent needs to
provide this in writing, not only their position
but also all documents substantiating their
position
• • Description of documents which have been provided
by Respondent and include copies
• Attorney's opinion as to ability to pay argument
settlement
• Hearing potential
B. Copies of the complaint, answer, rehearing exchanges,
motions, etc.
C. Respondents written position in re: Ability to Pay and
copies of all supporting documentation received
D. Provide ABEL results
• If 80%, attorney can rely on ABEL for negotiations.
No need to bring analyst in except for general
advice. If settlement fails then discuss with
analyst. ABEL is not to be used in trial.
»
E. Tax returns and financial statements (5 year)-copies only
F. Form 8821 Tax Information Authorization signed and dated
by the respondent. NOTE: 60-day expiration date. Must
have to the IRS within 60 days.
G. Depreciation schedule, all inclusive since date of
incorporation
H. Affiliation schedule,, detailing corporate affiliations
I. D&Bs and other data base searches
J. Other considerations
• Has an asset search been run?
• Has an executive search been run?
• Have the SEC filings been reviewed?
• Provide copies of all above output.
000239
-------
CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT .INVESTIGATIONS CENTER
II. WHEN TEE CASE IS RECEIVED
« ,
A. Review package, and pre-plan case.1
Make sure you have only £Q£IES; originals are to be
maintained by attorney.
• Make sure all requested information has beer.
received. .
• Review synopsis of case to get general idea of
status of case.
• Read through complaint, answer, rehearing
exchanges, etc.
B. Call program personnel involved in the. case to get
general history and additional details as to what he/she
knows about the entity, its officers, business dealings,
etc.
C. Discuss with attorney.
D. Begin set up of case file.
• Develop time line
* Organization chart
• Options available
E. Verify that all the appropriate (to date) searches have
been done. IF NOT, ORDER THOSE NECESSARY.
F. Review the return to determine other assets, locations,
officers, related entities, legal actions, new loans,
etc., for which additional data base searches should be
conducted. These services can be obtained through your
regional library or by contacting Irene Erhart,
Information Services, NEIC (303) 236-3636, ext. 558.
G. Review the ABEL output provided by the attorney.
H Consider civil investigator (CI) involvement in your
region (primarily Superfund) or Multi-Media CI Support
from NEIC. CIs can collect other financial information
which may help validate and/or supplement information
provided by the respondent and other sources. Some
services offered by the NEIC Civil Investigator program
include:
000240
-------
J.
K.
L.
M.
N.
0..
P.
Q.
CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
Asset information gathering
Corporate affiliation and structure identification
Witness location and interview services
Other information gathering services
For more information contact the Civil Investigator
Branch Chief, Jeff Lightner, at NEIC (303) 236-3636-
ext. 504. Telephonic discussion of proposed case
specifics and requirements prior to official
request is desirable '
*
If necessary, research counties which are not online, and
request assistance from them. Have them call the various
counties, etc., to request the needed information. (This
is performed if return information and data base searches
already conducted indicate the firm cannot pay the
penalty.)
If any lawsuits discovered, review synopsis and possibly
order copies of complaint and decision.
Identify issues. Research applicable laws (environmental
and tax, etc.), where necessary so that you will know
what elements need to be addressed in your write-up.
Review applicable penalty policies.
Develop organizational chart and time line.
/
Discuss up-to-date status with attorney. Outline
alternatives, etc.
Develop document request.
Develop initial interview questions.
Schedule initial interview through the attorney.
III. CONDUCT THE INITIAL INTERVIEW
IV. REQUEST ADDITIONAL DOCUMENTS
NOTE: EPA has the burden to prove the penalty is appropriate.
"Ability TO Pay" is one element to be considered in evaluating
the appropriateness of the penalty.
A. Voluntary document request submitted
000241
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CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT INVESTIGATIONS
B. Subpoenas - Where statute provides authority
• May be used in instances where they have provided
information which superficially indicates inability
to pay.
C. File a motion requesting the court to grant permission to
acquire the information needed [see 40 CFR 22.16 'and
40 CFR 22.19(f)]. Other discovery ..; will be permitted
only upon determination by the Presiding Officer:
That such discovery will not in any way
unreasonably delay the proceeding
• That the information to be obtained is not
otherwise obtainable
• That such information has significant probative
value
V. WHEN ADDITIONAL INFORMATION IS RECEIVED
A. Review the additional information and identify additional
sources of funds. Address issues which were identified
in step II, such as thinly capitalized, additional debt
capacity, loans to shareholders = capital, liquid assets,
unnecessary assets, unreported income, etc.
B. Third party contacts. The attorney should have already
discussed this with the respondent when ability to pay
was initially raised. Third party verification is a
necessary step in a financial analysis.
C. Go out to the field if necessary.
VI. DISCUSS WITH ATTORNEY CONCLUSIONS AND COURSES OF ACTION
TO DATE
VII. SCHEDULE CONFERENCE CALL OR SETTLEMENT MEETING
A. Discuss conclusion with respondent; ask additional
questions to further support our case and answer any
questions they may have.
B. Depending on the course of the case, this may be the time
to identify to whom we may need to issue subpoenas if
conflicting or missing information.
0002^2
-------
CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
nil. ISSUE SUBPOENAS FOR ANY ADDITIONAL INFORMATION
TO SUPPORT OUR CASE IN COURT
A. Make sure we have ALL the necessary evidence to support
our case/rebut their position. ...
IX. SETTLE THE CASE.
OX
X. GO TO COURT
000243
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ENVIRONMENTAL PROTECTION AGENCY
ESFORCEMENT A*0 COMPLIANCE ASSURANCE
ENFORCEMENT INVESTIGATIONS CENTER
BUILDING 53, BOX 25227, DENVER fEDERAL CENTER
DENVER, COLORADO 80225
DATE: August 2, 1995
SUBJECT: Financial Analysis Memorandum #2
Obtaining Financial Documentation/Discovery Motion
Electronic File Name is NEICFA02.DIS
FROM: Kimberly A. Zanier, CPA K.fo»M*
Senior Financial Analyst 0
Information Services Section
National Enforcement Investigations Center
TO: . ORC Attorneys
OECA Attorneys
Enforcement Personnel Involved in Litigation Support
Financial Analysts
Information Services Section (ISS) at NEIC has been
assisting in obtaining financial documentation, with respect to
ability to pay determinations, from various Respondents using a
number of different options. These options have included 3008
and 104(e) requests, voluntary submissions, subpoenas, and
discovery motions. Based on this experience, the attached
Complainants Motion for Issuance of a Discovery Order has been
developed to provide assistance with generating these types of
requests. This sample motion is a combination of a number of
motions and affidavits previously filed. ISS will be
continuously updating this document as new issues are identified
and raised.in cases.
BACKGRQPNP '
There were a number of instances where it appeared the
Respondent and/or the Judge was unaware of what and why we were
asking for certain financial documents and, therefore, we were
being denied access to them. To overcome this, we are including
an attachment with our motions, which includes two explanatory
paragraphs for each document being requested. One paragraph
explains what the document is, and one explains the relevance of
the document. We have had good results using this format.
Hence, the attached accumulation of explanatory paragraphs
pertaining to all documents pursued in this manner to date.
000244
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THE MOTION AND ATTACHMENT
As stated/ the attached Discovery Motion provides a
description of.the financial documentation being requested and
explains the necessity and relevance of the information being
requested. By providing this cumulative listing of financial
documentation we are not recommending the acquisition of all
documents included in the attachment. Which documents to request
are determined on a case-by-case basis. There are some instances
where copies of the Respondents tax returns may be sufficient to
conclude that the ability to pay adjustment factor should not be
applied.
PROCESS
The most effective process identified to.date is to first
request the following initial documents voluntarily.
1. Details of the Respondents position in writirig/ and any
substantiating documentation Respondent would like to
provide
2. Tax Returns and Financial Statements past 5 years (one
year prior to inspection)
3. Depreciation Schedule
4. Affiliations Schedule
5. Signed Form 8821 Tax Information Authorization. NOTE:
60-day expiration date; must have to the IRS within 60
days
6. Initial Questionnaire (depends on case/ ISS is
currently working on this)
We have found the Respondent will usually provide these
initial documents, although there are exceptions. After a review
of the initial documentation is completed, a subsequent document
request should be issued for additional financial information ,
needed to continue the analysis. At this point it may become
necessary to issue a subpoena or file a motion etc., to obtain
•the documentation/ in which case I hope the attached Discovery
Motion will be of use to you. A listing of documents included to
date is provided on the following page.
The described Motion and Attachment is available in
electronic form from Information Services Section at NEIC.
Please contact Char Resseguie at (303) 236-3636 ext. 546.
If you have any questions, comments, additions or
suggestions please call me at (303) 236-3636 ext. 555.
000245
-------
LISTING OP DOCUMENTS INCLUDED IN DISCOVERY MOTION/ATTACHMENT
DATED JUNE 19, 1995
1.
2.
3.
4.
5.
6.
Year-End Trial
Chart Of
General
Tax Returns
Financial
Depreciation
GENERAL DOCUMENTS
SPECIFIC DOCUMENTS
1- 1099s. 1098s. and
2.
3-
4 .
5.
6 .
7.
8 .
10
11
12
13.
1099-Div.
1099-B
1099-S
1Q99-MISC.
1098
Lease Agreements
Financial Institutions Identification and Disclosure
Authorization (see sample fqrm attached ^
Assets - sold or transferred
Assets - bought
Bank statements
Outstanding loans to
Shareholder loans to
Other investments
Liabilities
Interest income '•
Leases
f Underlined Items represent
updates 1
000246
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
In the Matter of: )
) Docket No.
)
) COMPLAINANT'S MOTION
) FOR ISSUANCE OF A
) DISCOVERY ORDER
Respondent. )
Pursuant to Section 22.19(f) of the Consolidated Rules of
Practice Governing the Administrative Assessment of Civil Penalties
and the Revocation and Suspension of Permits (Consolidated Rules),
40 C.F.R. § 22.19(f), Complainant United States Environmental
Protection Agency, Region 10 (EPA) moves for the issuance of a
discovery order to obtain financial information to evaluate
Respondent's ability to pay the proposed penalty.
BACKGROUND
EPA issued a Complaint in this matter on May 28, 1993, for the
assessment of a civil penalty for nine reporting violations under
Section 313 of the Emergency Planning Community Right to Know Act
(EPCRA), 42 U.S.C. 11023.
Consistent with EPA's Enforcement Response Policy, the
Complaint proposes a penalty of $150,800. . In its Answer,
alleges inter alia that "(t)he proposed penalty, and any penalty,
would exceed ' ability to pay." Paragraph 34.
000247
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ARGUMENT
THE DISCOVERY REQUEST MEETS THE REQUIREMENTS OF THE
CONSOLIDATED RULES.
Section 22.19(f) of the Consolidated Rules establish the
procedures for obtaining discovery beyond that provided by the
prehearing exchange. Specifically,. Section 22.19 permits the
Presiding Officer to issue a discovery order if the Officer finds
that (1) the discovery will not unreasonably delay proceedings,
(2) the information is not otherwise obtainable, and (3) the
information has significant probative value. EPA's discovery
request meets all three elements.
A. The discovery will not unreasonably delay the proceedings.
Currently the parties are scheduled to begin the formal
hearing on April . Provided Respondent provides the
requested documents by April , EPA will have adequate time
to complete preparations for the hearing.
B. The financial information requested is not otherwise
obtainable.
The information requested below is not otherwise obtainable.
The documents that are the subject of this request are in the
possession of Respondent (or its parent ^, which has
•
asserted is the appropriate entity to evaluate to determine whether
Respondent has the ability to pay), financial and auditing
i
companies, and the Internal Revenue Service. On March 7, 1995, EPA
requested to provide the documents listed below and other
documents. While on March , , did provide many of
the documents EPA requested, it did not produce the documents
listed below.
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000248
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C. The information has significant probative value,
The financial documents will permit -EPA to confirm the
appropriateness of the penalty or adjust it if necessary. While
the, information which Respondent has provided includes some
evidence regarding the ability to pay issue, it does not allow for
a complete assessment of Respondent's financial position and its
ability to pay the penalty. In most instances, the requested
documents should be easy to retrieve. For these reasons, EPA
requests production of the documents listed below. A detailed
explanation supporting each of the requests is attached hereto.
DOCUMENTS REOtJESTED
EPA requests the following financial documents:
PROVIDE A LISTING OF THE DOCUMENTS ONLY, EXPLANATIONS INCLUDED IN
ATTACHMENT
CONCLUSION
For the reasons discussed above, Complainant EPA respectfully
moves for the issuance of a discovery order.
Dated this day of March 1995.
Assistant Regional Counsel
Office of Regional
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ATTACHMENT
, •
EXPLANATION OF DOCUMENT REQUEST
The following is a description of the financial information
requested, its necessity, relevance, and an explanation as to how
the information requested will be used in determining Respondent's
ability to .pay the proposed penalty.
GENERAL DOCUMENTS
j ••
GENERAL FINANCIAL RECORDS - Please provide copies of fh»
following documents!
TAX RETURNS
1. 's tax return for the fiscal vear ending June 30. 1994. nr.
if this return has not yet been filed, a copy of the
preliminary draft
(decided an explanation was unnecessary/ however, in next issuance
will provide)
FINANCIAL STATEMENTS
' i
2. 's most current financial statements
These are centrally relevant documents and will provide the
most recent financial data available. Both documents are essential
to my general analysis. The documents will be analyzed to
determine whether there have been any recent changes in 's
financial status which should be incorporated into my ability to
pay analysis. .
YEAR END TRIAL BALANCES
3. year-gnd trial balances for the fiscal years ending
Jane 30. 1993 and June 30. 1994 (time period determined on
case-by-case basis)
A year-end trial balance is a listing of all the accounts
maintained by a company for accounting purposes and the respective
year-end balances in each of the accounts identified. A number of
these•accounts may be grouped together prior to transferring the
total dollar amount balances to the tax return and or financial
Qfflc* of Regional
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statements. For example, a company'may maintain numerous contract
. labor accounts,. including contractor, dollars paid ,to outside
ent~ties, contractor-dollars paid to ,'s corporate officers and
or snareholders, and year-end bonuses paid to corporate ,officers.
. .
. In the tax return, however, these four accounts may be combined;
. ,
totaled, and listed under the single heaqing ncost of labor" and
. included in 'scost of goods sold. . To analyze'. . 's ability to
pay ~heproposed penalty, knowledge of the components whi~h make up
. \., .
each of the specific accounts li~ted on the ,tax return is necessary
so that t,he relevant assets, expenses, and liabilities may be
eval ua t~d ,to determine the necessity. and appropriateness' of. each. .
,The trial balance must be reviewed first to identi'fy those~ccounts "
which are ,relevant to, . 's ability to pay the, proposed penalty.
In addition to containing relevant substantive data, the trial
balance is also a finding aid thereby reducing the amount of time
. . '. , -'
. ,
spent by both the Respondent ana EPA with respect to an ability to
pay analysis. .
, .
's year-end trial balances have been requested for its
fiscal years ending June 30, 1993 and June 30, 1994, since these
. ,
are the most recent trial balances and will provide me with the
most recent account data available.
CHART OF ACCOUNTS
4.
's chart of accounts for the fiscal years ending June 30,
1993'and June 30, 19.2..4,
A chart of accounts is a listing" by account number and
description, of each' account included in a company's' financial
:records. Certain company-generated documents (including entries in
the 'general ledger, and sometimes the trial balance) may identify
accounts' by account number only.. If the accou~t' description
associated with the a~coun~ number is unknown, a.proper analysis of
the accounts and substantiating documents cannot be performed"
~ince the analyst .will be unable to determine, wh~ch accounts are
. relevant. Thus,' 's chart of accounts will be used,to facilitat,e
. .
the financial analysis by making the process as quick and efficient
. .
as possible. .
Orne. of Regional Coun'" .
000251
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GENERAL LEDGER
5af - 'S general ledger for th* month ending June 30
5b- 's general j^qpr for th* HIM Mrihd .T*nuarv 1f IQ(
June 30. ' TT
The record used to record increases and decreases in a single
asset/ expense/ liability/ or equity amount is called an account.
All these separate accounts are usually kept in a loose-leaf
binder/ and the entire group of accounts is called a general
ledger. The general ledger documents requested will provide the
transactional detail pertaining to the specified time period. For
example, if account #201 reflects loans made by the company to
shareholders/ review of the general ledger .account #201 would
indicate all additional loans made to the shareholders, and any
payments made by the shareholders with respect to the outstanding
loans .
The general ledgers for the time periods identified represent
a sample/ which will be used in conjunction with the other
documentation requested to make numerous determinations including
the necessity of specific expenditures/ the accuracy of the
accounts being analyzed/ and the validity of the amounts
identified. .
DEPRECIATION SCHEDULE
6. Provide the depreciation schedule for _ . Inc. . and the
all inclusive since the date of incorporation
A depreciation schedule is a detailed schedule of a
' corporation's assets which have a useful life of one year or more.
It provides a description of each asset, date the asset was
purchased, cost of the asset, expected useful life, depreciation
expense currently taken, the accumulated depreciation to date, book
value of the asset and when and if the asset was disposed of. If
an asset has been sold or otherwise disposed of/ it would still
appear on the depreciation schedule as a previously owned asset.
The same holds true if an asset has been fully depreciated
(expensed) .
Office of Regional Counsel
000252'
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The depreciation' schedule'
analysis for a' number of
;
schedule: .
,(b)
(C)
has relevance in an abili ty to, pay
different reasons. The depreciat,ion,
(a)
Will show if any assets have recently been purchased and
the associated cost of the asset. If the corporation
paid cash for ,these asset~, the assets may be used to
secure a new loan. The proceeds from the loan could be
used to pay 'the penalty. .'
Will show if there are unnecessary or luxury items being
paid for by the corporation. (Please note, other areas of
. the financial statement o~ tax return may also indicate'
additional luxu~y items.).. If the corporation has
invested in real property, rental property" condominiums,
luxury automobiles, airplanes, boats, or any other assets
, .
' '.
which are not necessary for the.qontinued operation of
the business, these nonessential 'assets' could be sold to
generate additional cash which could be used to pay the
penalty. .
Will indicate assets which have been ,transferred by the
corporation either through a sale to an unrelated party
or a distribution to one of the shareholders or other
related party.l These transfers may not be reported on
the tax return or they may not be reported at the asset's
fair market value. Proceeds from the sale of an asset
which was not reported on the tax return would be a
source ,of additional income which could be used to pay a
penalty as would a distribution of assets from a
corporation to its shareholders at less than fair market
value. A share~older is required to pay ,fair market
value for any 'assets sold to him or her. If the assets'
, . .
were sold for less than fair ,market value" the difference
between the sale price and the fair market value ~ould at
Related parties are defined in Internal Revenue Code Section 267 and
include an individual and a corporation more than 501 in value of the
outstanding stock of which is owned, directly or indirectly, by or for
such individual, and two corporations which are members o~ the same
controlled group... among others. . Indirect ownership includes ownerShhP00253
through family members and oth,-- -""it-ip!;. Treasury Regulation 1.267. U
Orne. of Region.' Coun'"
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. a minimum represent a receivable to ,the corporation. The
receivable would provide the corporation with additional
funds to pay the penalty. ,
(d) Will show the actual amount that the company paid .for an
asset. This amount generally does not represent the
current fair market value of the asset. Fair market
value may be substantially higher than the asset's
historical cost to the corporation. If that is the case,
such assets listed on the depreciation schedule may be
used to obtain a new loan, the proceeds of which may be
used to pay the penalty. Or, the assets may be
liquidated, in which case there would be additional funds
for payment of a penalty.
SPECIFIC DOCUMENTS
1099s, 1098s, and W-2s
7. Provide copies of all completed 1099. 1098. and W-2 forms
issued to all officers and shareholders of Inc.. and
the Corporate Group for the years 1991, 1992, and 1993
, * '
Each of the forms identified above is required to be filed by
, Inc. and/or the Corporate Group with the Internal Revenue
Service and the recipient of the reported income (in this case the
officers and shareholders). The amount reported on each form
represents the total amount paid by the corporation to each
shareholder/officer for each of the income categories described
below.
(a) Form 1099-INT will show how much interest a shareholder
has received from the corporation. A determination must
be made as to the validity of the underlying loan and
whether the interest rate is competitive with rates of
outside lending institutions. If the interest paid to
the shareholder/officer is excessive in relationship to
interest paid to nonrelated parties, the excess interest
should be allocated back to the corporation providing
additional income to be used to pay the penalty.
(b) Form 1099-DIV will show how much each shareholder
received in dividends for the year. Corporations
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generally issue dividends: (1) in times of strong
financial health because the income is-not needed to meet
financial obligations, or (2) when corporate assets have
been liquidated and the proceeds received from such
liquidation are being distributed to the shareholders.
The issuance of dividends is, thus, a strong indication
that the firm will be able to meet its penalty
obligations. Also, dividends can be held back from being
distributed and used to pay a penalty.
(c) Form 1099-B identifies the value of any bartering
exchanges which have taken place; With regard to
bartering transactions which have taken place between the
corporation and the shareholder/officers (where goods or
services are exchanged for goods or services), the fair
value of these exchanges must be determined. If the
corporation has received less than fair market value for
what it exchanged, a receivable representing the
difference between the value received and the fair market
value of what it gave up would result. This receivable
would provide additional income to meet the penalty
obligation.
(d) Form 1099-S identifies the dollar amount a shareholder or
officer received from the corporation as a result of the
sale of real estate to the corporation. Sales and
exchanges between the corporation and related parties
must be reported as an arm's-length transaction. If the
reported sale price is above .fair market value, the
difference between the sale price and the fair value
would be'reclassified to the corporation as income. This
additional income would be available to pay the penalty.
(e) Form 1099-MISC shows how much a shareholder or officer
received for rent and/or other miscellaneous payments.
Here again, the fair value of these payments must be
determined. If the payment made to the shareholder/
officer is for property rental and the cash payments are
substantially higher in relationship to other rental fees
charged for similar type property, then the difference
Office of Regional Counsel
000255
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between the actual payments and the fair rental value of
the payments represents a receivable to the corporation.
This receivable would provide the corporation with
additional income to pay its penalty.
(f) Form 1098 will show if there is a mortgage between the
corporation and one of the officers or shareholders.
A determination would have to be made as to whether the
underlying loan is a valid loan with a competitive
interest rate, and whether the asset was transferred at
fair market value, if it is determined that the interest
rate is below the market rate or the asset changed hands
at less than fair market value/ then a receivable for the
additional interest or sales proceeds due would be
established. This receivable would provide the
corporation with additional income to pay the penalty.
(g) Form W-2 will show the amount of wages received by the
shareholders and officers as well as any fringe benefits
they have received. These forms are necessary to
determine if the officers and shareholders are being paid
reasonable salaries in light of the amount of time they
devote to the business. If it is determined that the
salary of an officer or shareholder is excessive or
unreasonable/ that portion which is determined to be
excessive should be allocated back to the corporation.
This reallocation would provide the corporation with
additional income to pay the penalty amount.
The 3 years of documentation requested for each of the above
categories is .necessary to determine any significant increases or
decreases in reportable amounts. A 3-year comparison will allow us
to determine if the corporation has authorized any such increases.
Salary increases, additional fringe benefits and dividend payments
are all indications of a financially secure corporation and provide
evidence that the corporation has the ability to meet its penalty
obligations. If the corporation is able to steadily increase an
officer's salary, provide for additional fringe benefits, and/or
Office of Regional Count*
] 000256
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. declare dividends, it isa clear indication that the corporation is
experiencing growth and is in. a strong financial position.
' . , . . .
"Please note, if th~' above scenarios do not pertain to this
, ,
corporation then the documents outlj,ned above will not exist and,
ther~fore, understandably'will no~ be provided.
LEASE AGREEMENTS
8.
Provide copies of lease aareements for all ~ro~ert~ rented b~
., Inc. since 1991. Include any amendments to such l;a;~
ag;reements
Lease agreements will show the parties to the lease
arrangement and identify related party transactions. The lease
agreements which invol ve related parties must be reviewed to
' .
determine if they are c~nsistent with fair,rental value. . If the
company's lease payments are in excess of fair rental value, the
. .
'difference between the payments and the fair rental value can be '
allocated back to the corporation and made available to pay the
, penal ty,. .
The leases may also show that the corporation is leasing
luxury automobiles or nonessential assets. In such circumstances,
the leases could be cancelled, freeing up additional cash which
. could be used to pay the penalty.
DISCLOSURE AumORIZATION FORMS
. ,
Please identify all financial institutions Wh;Ch . . ;n~.~
and the Corporate Group have done busine~ with ove h
past 5 years. and sign the attached disclosure a~tho~i~~ti~n
form for each' institution
9.
'.
, . The disc~osure authorization form allows the financial
insti tutions to release information concerning liabilities, credit,
and additional loans. The authorization form'will' allow EPA to:
(a) . Verify the accuracy of liabilities to financial
institutions included on the tax return. The tax return
may reflect greater'liabilities than actual~y exist.. If
the actual liabilities are less than the amount reported
on the tax return, it wOll..ld, indicate that the corporation
Orne. of Regional Cou~ 0 2 5 7
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is in a better financial position to pay the penalty
amount.
(b) Verify the amount of loans outstanding against corporate
assets and determine if additional funds could be
borrowed against these assets.
(c) Review financial statements provided to the bank which
may disclose additional assets not listed on the
depreciation . schedule. Th'ese assets may be sold or
leveraged to pay the penalty.
•
•
ASSETS SOLD OS TRANSFERRED
10. If any assets have been sold by . Inc. or the
Corporate Group within the past 5 years. provide copies of the
sales agreement, bill of sale, deeds transferred and any
information pertaining to such sale
The documents requested in paragraph 6 will describe the
assets sold/ the date the asset was sold/ the sales price/ the
parties to the transaction/ the date of transfer/ and the terms of
the sale.
This information/ in conjunction with the 1099-Ss issued and
the loan information requested is necessary to analyze asset
transfers which have taken place. In addition, this information
will provide the following information:
(a) If an asset was transferred to a related party at a sale
price which was below fair market value/ a receivable
would be due to the corporation for the difference
between the sale price and fair market value. This
receivable would provide the corporation with additional
income to pay its penalty obligation.
(b) If the corporation financed the sale of one of its assets
and is holding the note on the asset/ the payments the
corporation is receiving pertaining to this note would be
a source of cash available for payment of penalties.
Offlc* of Regional Count*
000258
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ASSETS BOUGIIT
, ,
11. If any assets, have been bouqbt by . Inc. or the, '
;~f~~r~~~;;':;t ~~ ~~!l t~; ~~~~ ,5 x::~:. f:~:!::1:~~~~~~n~~ ;~~
other information pertaining tos~~h 9u;~h~;e.
"
The analysis of these documents in conjunction with loan
information requested will provide:
, '(cq Verification of the accuracy o'f the cost of assets
reported on the balance sheet and depreciation schedule.
If an asset's purchase price is'higher than 'the amount
reported on the balance she~t and depreciation schedule, ,
it ,is an indica tiontha t , the" corpora tien 'is' in better'
, financial condition than appears because the val~e of the
corporation's assets would be higher ~han reported.
(b) Information as to whether the assets were purchased with
cash, in which caseth~ corporation may be able to obtain
, , ,
a new loan against the asset. The proceeds from this new
loan could ,be used to meet the corporation's penalty
obligation.
(c) Information as' to whether the' assets purchased are
essential to the business. If the assets are not
. . . .
essential to the business, they can ,be sold. The cash
generated from the sale could be used pay the penalty.'
, , BANK STATEMENTS
, ,
12. ~f~v~~~kc~~~~~~:s a;i bank st~t~~~~t:n~O~h~he past
Group' ,
3 l~:;~r;~~
. Bank statements detail all banking activity during a
particular month for each of the different types of accounts an
entity mai~tains including,,' but not limited to, deposits,
wi thdrawals, checks written, and balances. An analys is of the bank
records may:
(a) Uncover unreported income. Unreported income is
additional income available to the corporation to pay the
penalty.
Otfte. of Regional Cou'fX) 0 2 5 9
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(b) Disclose an installment sale which was reported in a
previous year for which payments are being received
currently. These payments provide an influx of cash to
the corporation which would be available to pay the
penalty. ,
. (c) Disclose large or unusual withdrawals or checks which
would,indicate further analysis is needed. This analysis
may lead to the discovery of luxury or unnecessary
purchases. Such purchases could be sold or withdrawals
reclassified, making additional funds available to the
corporation.
The provision of documentation on all bank accounts allows
review of any money market accounts, certificates of deposits, or
other investment accounts which may possess. These types of
accounts are liquid and represent a source of available funds to
pay a penalty.
OUTSTANDING LOANS TO (
13. For all outstanding loans to . Inc. or the Corporate
Group, provide copies of loan applications, loan documents.
notes. etc.
This information:
.(a) May disclose unrecorded assets. Such assets could be
used to secure new loans or could be sold to generate
additional income.
(b) May identify a loan to from a related party which
is not an arm's-length transaction. If the interest rate
on the loan is excessive, the difference between the
stated interest rate and the current market rate can be
reclassified to the corporation as income, thereby
providing additional income to pay the penalty.
Office of Regional Count*
000260
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SIlARE1IOLDER LOANS ~O.
14.
For any loans from a shareholder of " Inc'. or the
Corporate Group. provide copies of' the cance11~d chec1\
written to the corporation and loan documents'
~ This information:
(a)
. , .
Will allow verification that a reported loan was actually
made.
If the payment to
was not made,
the
corporation would not owe
the amount of the loan.
Therefore, the corporate liabilities would be reduced,
allowing
for additional' funds
to meet
the ,penalty
obligation..
'.
(b)
May show that the 'money infused into the corporation was
not a loan but rather a contribution of capital.
This
situation would reduce the liabilities of the corporation
and provide the corpo~ation with additional capital to
pay the penalty.
MANAGEMEN~ REPRESEN~A~ION LE~~ER
15.
Copies of documents and documentation of communication
addressing any information provided by . or to the
Independent Auditor with regard to th~ 1993 and 1994 Audi~s
regarding: la) any litigation involving the company w~i~~
could have a material impact on the company's. fi~an .
statements. and lb) the goina concern of . and
Professional auditing standards recommend that the Independent
Auditor. request, of a company's managementi ts representations
regarding many issues, including: loss contingencies; litigation,.
cl~ims, and assessments; violations or possible violations of laws
or regulations; and any other such matter that the Auditor deems
appropriate-:- :'all of which would then be addressed in the Audit
Report by accrual or disclosure. With respect to the litigation,
claims and assessments, the Auditor is advised to direct inquiries
to the corporation's legal cou~~cl>
omC8 01 Reglon.1 coun.~ 0 0 2 61
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and assert in the Affidavit that both
companies may have dif f idulty continuing as going concerns and that
is in litigation with the IRS and may have to make a payment
of more than $700,000. While the "going concern" issue was noted
in the 1990, 1991, and 1992 Audit Reports, no such statement was
made in the 1993 Audit Report. The responses to this request will
indicate whether and how the companies presented their concerns in
these regards to the Auditor.
OTHER INVESTMENTS
16. OTHER INVESTMENTS
*• With reference to the "Other investments" in the ammmt
of $103.259. listed til column D of the Balance Sheet at
page 4 of *s tax return for the fiscal year ending
June 30. 1993; please'list and identify each investment.
separately. including a description of the asset/
investment, the estimated fair market value of the asset/
investment, the purchase price, the purchase date, and
the name and address of the broker who initiated the
purchase.
t » • ' '
b. With reference to the other investments referred to in
paragraph 2. a. above, please provide copies of the
following documents:
(1) All brokerage statements from June 1. 1992 through
the present
(2) All IRS Forms 1099 reflecting dividend income
received by since January 1. 1993
C. . Tf there are any brokerage firms and/or individuals whom
has dealt with since June 1. 1992 which have not
provided statements, please identify all such firms
and/or individuals by name and address.
Other investments generally represent assets owned by an
entity such as stocks, bonds, and certificates of deposit, which
may be sold, or utilized as collateral to obtain a loan or loans.
The IRS Forms 1099 requested will provide current details with
regard to the rate of return (dividends) being generated by some of
the investments identified. The estimate of fair market value is
necessary since the historical cost basis (purchase price) of an
asset does not necessarily reflect its current fair market value.
The value of the asset may have- appreciated, depreciated, or
Office of Regional Count*
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"\
remained the same. In any event, it is necessary to estimate the
. .
fair market value of r sassets because the value of these assets
represents a source from which would ha:ve the abili~y to pay.
. .
the propo~ed penalty. . ' . . .
The brokerage statements and broker identification in'formation
req~ested will be 'used. to verify if, has provided a complete
list of its other inv~stments and to verify that assets owned by r
have remained in the corporation and have not been distributed
to shareholders or other related individuals.
. .
. .
. In general, the requested information will provide details as
to's other investments, including what investments
currently has (and therefore can be sold to pay the penal~y), which
have been sold recently' (thereby, already having generated
additional cash flow), and what type of return is getting with
regard to these investments on a 'continuing basis' (available for
payment of the penalty).
LIABILITIES
17. LIABILITIES" s tax return for the fiscal year ending
June 30. '. 1993. indicates outstanding loans as follows:
Mortgages. notes. bonds payable in less than 1 year - S4.324:
and Mortgages. notes. bonds payable in 1 year or more -
S1. 260. If any new loans have been initiated or are now
outstanding which are not reflected in the balance sheet of .
's tax return for the fiscal year ending June 30. 1993.
please provide copies of the following documents. and the
following information '
a.
All loan documents. settlement sheets. closing
statements. and other documents pertaining to each loan
An explanation as to why the loan was necessarv and what
the proceeds were used for .
b.
, These docum~nts and information will evidence and describe any
new loans initiated 'by after June '30, 1993. This data will
provide updated information with respect to 's total
liabilities, which must be taken into account in evaluating's
ability to pay the' proposed penalty.
Offtce 01 Reglona' Coun881
, 000263
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INTEREST INCOME.
18.. INTEREST INCOME - Please provide nonius n-F «n TRS
reflecting anv interest income earned bv in 1993 an^ IQQ
The Form 1099-lNTs received by will show reportable
interest received by during each year from a specific company
or individual. A determination must be made as to the validity of
the underlying loan and whether the interest rate is competitive
with outside lending institutions. If the interest is being
received from a related party, and is substantially less then the
market rate, the additional interest due would be a receivable from
the related party. Payment of the receivable would provide
additional cash flow to be used to pay a penalty. The Form 1099^
INTs will also provide information as to whether holds
substantial funds in a financial institution, which would be
available for payment of a penalty.
LEASES
19. LEASES - Please provide a copy of any lease agreement pursuant
to which rents property from the officers of _ u
including the original lease and any amendments thereto.
Lease agreements will show the . parties to the lease
arrangement and identify related party transactions.. The lease
agreements which, involve related parties must be reviewed to
determine if they are consistent with fair rental value. If 's
lease payments to related parties are in excess of fair rental
value, the difference between the payments and the fair rental
value can be allocated back to and made available to pay the
penalty. The leases may also show that is leasing luxury
automobiles or other nonessential assets. In these circumstances,
the leases could be cancelled, freeing up additional cash which
could be used to pay a penalty.
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lazy
i UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON; D.C. 20460
241990
. . '>"!'! '»•! \MIRt i VIM
'.•*•'•• * * AM.:(.MI».M\n
MEMORANDUM
SUBJECT: Use of Stipulated Penalties in EPA Settlement
Agreements
FROM: . James M. Stroc ^
, . ' Assistant Administrator
TO.: Addressees .
V
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. . .t . •
I. Types of Reouirenents to Which Stipulate Penalties
Should Apolv
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, ana
final demonstration of compliance. The government litiga-ion
team assigned to a case should carefully consider which
000266
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-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
aaount. 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
000267
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-3- •
*
* * * <
additional penalty. 'Sources nay make this argument even if "
the government has reserved all rights to. pursue various
enforcement responses for consent agreement violations.1
•
•- * • '. * .t . • .
II • Level of Stipulated Penaltie*
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 equipmenf as part of a compliance
schedule, the minimum stipulated penalty should be
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 ^or a
minimum initial penalty.
The source's ability to pav can be another important
criterion to consider. How much of a deterrent a stipule -e
penalty is will depend on how financially significant it is
to the source. .The same stipulated penalty may be
• '• in considering whether to attach penalties *>viol£L°™
' uncovered by. an environmental audit, the November 14, 19S6 F...al
EPA Policy oh the Inclusion of Environmental Auditing --OVi
in Enforcement Settlements (GM-52) should be consulted.
000268
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-4-
financially crippling to one source, while merely a routine
business expense for another. However, the burden.is always
' on the defendant to raise such issues during negotiations and
to justify lower stipulated penalties than the government has
proposed. Financial ability to pay a penalty can be . " •
. determined using the ABEL computer program for corporate
violators and the MABEL computer program- for municipal
.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 hunar.
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 nay
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 night
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.
WO 2 6^9
-------
-5-
III. Method of C
agreements should state the method by which
stipulated penalties will be collected. -Two options are for
the settlement agreement to provide that the penalty is -
automatically due upon the .occurrence or non-occurrence of a
specified event, or it may make the penalty, payable only on
demand by the government.
Automatic payment is the preferred approach. It saves
resources which would otherwise be.devoted to making demands
for payment, and may put the government in a more advantageous
position should the source declare bankruptcy. ' If payment is
-made on demand, the consent agreement should make it clear
that the legal liability, of the source for the stipulated
penalty attaches immediately upon violation, and i£ is only
payment of the penalty to the Agency which Is not due until
demand is made. .
Settlement' agreements should always state where and how
the penalty should be paid'and how the check should be draft-
ed. Sss SPA 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 equjLtable
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 prcblen.
The stipulated penalty would lose its deterrent value once^
the cap is reached. Also, the main goal of any «n*?rcl°*?-
action must be compliance with the law so that Publl= *?"«
and welfare is protected. If consent agreement provisions
000270
-------
. . . -6-.
are allowed to be violated long enough for a cap to'be reach-
ed, serious environmental• consequences may .have occurred.
* • • *
i
. .. Providing that stipulated .penalties only apply for a •
specific, reasonably,short period-of -tiiae 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, 1933
Guidance for Drafting Judicial Consent Decrees (GM-17).
,i
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 "specif ying
instances where it will be allowed, aside from a standard
force najeure 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 Bay also exercis*
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 thert
is significant environmental liana caused by the defendant
missing the interim deadlines. If such a provision is used.
000271
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-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 FKO 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 accouru
receivable is responsible for'-fceeping the FMO updated on the
status of enforcement penalty collection afforts. A nore
detailed account of these procedures is included in the
Manual on Monitoring and Enforcing Administrative and «udi-
cial Orders. •
Addressees:
Regional Administrators
Regions I-X
Deputy. Regional Administrators
Regions I-X
Regional Counsels
Regions I-X
000272
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-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 '. .-
000273
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01/11X1908 14:37 FROM
Al. PROTECTION
>. o.c. '
Guidance OR Certification of Comsliance
Enforcement Agreements
F?OM: Thomas L. Adams, Jr. «^\\«» .1. •* W- 3+V*. -.
t Assistant Administrator for Enforcement
and Compliance Monitoring
TO: ' Assistant Adainistrators
Regional Administrators
Regional Counsels
I. ' BACKGROUND
Over the past several years, s?A has initiated record
numbers of civil judicial and administrative enforcement actions.
The vast majority of such actions have been resolved by judicial
consent decree or administrative consent order.
The terms of many of these settlements require the violator
to oerforta specific casks necessary to return to or demonstrate
comoiiance, to accomplish specific environmental cleanup or other
renecial steps, and to take'prescrioed environmentally o«nefici*l
action.
Settlement agreements typically specify that the violator
perform certain recuired activities and thereafter report tneir
accomolishment to EPA. Verification that the required .activities
have actually been accomplished is an essential element"in.the
overall success of the Agency's enforcement program.
The focus pf this advisory Guidance is on verification of
compliance with settlement agreements *nicn require specific
performance to achieve or maintain compliance with a regulatory
standard. EPA has oncoinc responsibility-for ensuring that
settling parties are in compliance with the terms of their
negotiated acreeaents. To tnis end, the Agency nay require
that a responsible official Us that term is defined herein)
oersonally" attest to the accuracy of information contained in
comoliance documents made available to EPA pursuant to the
terras of a settlement agreement.
-------
,u
'. . -2- • • -
1 , •
V
The inspection programs /of EPA and other .federal regulatory
agencies are based off necessity on the concept that a limited
number of regulated facilities will be inspected *ach year.
Conversely, -this Beans that a large number off reculated parties
can operate for extended periods of tine without being the
subject of an on-site inspection by E?A state, ffence, it is
crucial |o ensure that all recuired compliance reports are
received"tr
-------
01X11X1900 14:33 FROM
.10 bi>b04201 P. 05
-3- . . ' - ' .
. *
*ey also expose the defendant (s) in judicial consent -decree
falsification incidents to both civil and ctirtMl *>n££! .
proceeding;* *gg^ r
This provision of law is a key sanction within th« federal
criamal.code foe dxscour*gina any person from intentional ly
deceiving or misleading the United states government.
••!. signatories to. Peborta
- 'settlement agreements should specify that all future reports
by the settling party to 't.tt Agency, which purport to document
compliance with the terms of any agreement, shall be sicned by
a responsible official. The term * responsible official" means
AS follows:,*'
• *
«• For a corporation: a responsible corporate
officer. A* responsible corporate officer means: (a) A president,
secretary, treasurer or vice-president of toe corporation in
charge of a principal business function, or any other person who
performs similar policy- or decision-making functions for the
corporation, or (b) the manager of one .or sore manufacturing,
production, or operating facilities employing acre than 250
persons or having gross annual sales or expenditures exceeding
S2S million (in 19.87 dollars when the consaaer Price Index was
345.3), if authority to sign documents has been assigned or
delegated to the manager in accordance with corporate procedures.
b. ror a partnership or sole proprietorship; a
General partner or the proprietor, respectively.
2. when to Require a Certification statement
The retirement for an attestation by a responsible
official is always useful as a matter of sound regulatory
manacewent practice. Such a requirement is eore urgent,
(Note 1, cont'd) •
•> fined not oore than '$10, 000 !or imprisoned not more than-
five y
-------
-4-
0"
f .
" " .
bow ever I v here a requlated pa~ty has a b1~tory"cf npnCOmp!1ance
or wh.re p:1~~ violations place on~.s veracity"iato quest1on. 31
. ~~ " '. -.
".. .
3.
Tenas of a CertifIcation Stateurent:
An~exam~le of an a9propcla~e c~rtification statement: foe
inclusion ~n reports suom1tteo. to tne Aqenc:y by requlat~d par:~es
vho ore ~iqnatoryto ,4 settlement aqreemen: is as-follows:
. ;
-
J
, ~I c:~rt\fy thac ~~e informaeion c:ontai~~d
in or acc:ompan~ing this (submission) (~ocument)
1s true, = .:c:urate, .and corcple:~ ~ "
~AS to (the) C:hose) identified portionCs)
, of ~hls ($~bm1ss1on) (doeu~ent) for which I
cannot ~e:sonal1yverify (its) (their) truth
"and accuracy, Icert1 fy as t.he' c:ozcpany offic1al
. havtnq sapetvisory responsibIlity for the
p4trson($) wno, ac:ttna under my d1reet 1n$truct-tons,
made th. verification, tha~.this information is
tt'\Ze, aecurate, and c:omplet=..~1 ." '.
. "
s.
Documen~at1on to Verify ~om~liance
Typ,ical ~ettle~~nt aqree~ents requ1r~ specific steps to
~e undertaken by the violator. As EPA s~a;f members en9!ge in
settlement neqo~iat1Qns and the ~~aftinc of settlement docu=en~s,
" they Shoul~ identify that4oc:~en~ation-whichconst1tutes tne
..1/ While p~rsonalliability1s desirable to promote complianc:e,
1t snould be noted that corporations may Ce convicted under 18
u.S.C; 51001 as well. A corporation ~ay be held c:l~inal1y
reSpon$l~le 'lor t.he criminal acts o:"i~s employees, even if tne
actions of the employees ver.. aq~inst-'t:orporate policy o~expre$s
instructions. S~. 0.$. Y. Automated Medic:al Laboratories, 770
F.2d 339 (4th Cir. 19S~): u.s. v. Richmond, 700 F.2d 1183 (8t~
ctr. 1983). Moreover"; both a c-orpcrat1on and its ac;_nts may'
be conv1cte6-for the sa~e offense. See u.s. Y. 9zsic Construc-
tion co., 711 r.2d 570 (~th C1r. 1983). "
...!f ,It 18 inev1tabl-.that ii'l negotiating consent a~reeftlents,
counsel for res?ondent$~11! see~to inser~ language in the
certifieation atatement as to the truth of the submissions to be
to tne -best Infor~tion. Ot to the .ful1es~,unde~stanalng. at
"belief- of the certifier. Such Qualifiers shoulanot be
Ineorporated, c1nce the provisioni of 18 O.S.C. 51001 proviae
~or prosecution for making false statem~nts ~now1n91y and
wtJltul1y--not for formIng erroneous ~11efs, etc:.
r<
'-
000278
-------
•
post usetul evidence that the actton required.nas actually been
undertaken. «ie most useful evidence would be that information
or docua«at*t*Dn tfttt best and aost easily allows tae A^Scy
to verify cowpliancc with the terms (including milestones) of
* settlement agreement. Examples of documentation 'to substantiate
compliance Include, but are not limited to, invoices, work
orders,*,d^posal records, an* receipts or manifests.
• *
Attachment A is a suggested type of checklist that can be
developed toe use within each procram area._S/ The checklist
include* examples oc specific documentary evidence waicn can De
required to substantiate that prescribed actions have, in fact,
been undertaken.
IV. SCKMASY
This.auidance is to orovide assistance to SPA employees
vtto negotiate and dratt settlement documents: It is appropriate
when circumstances so dictate that such documents contain
sufficient certification language for ensuring, to the maximum
extent possible, that all reports made to SPA/ pursuant to the
terns of any settleoent agreement, are-.true, accurate, and
complete, and that such, reports are attested to by a responsible'
official.
The Agency must incorporate within .its overall regulatory
framework all reasonable means for assuring compliance by the
regulated community. The inclusion of compliance certification
language, supported by precise documentation requirement*, in
neaotiated settlement agreements may, in appropriate instances,
mean tne difference between full compliance with both tne
letter and the spirit of the law, and something less than full
compliance. In the case of the latter, the violating party
is then sub-feet to the sanctions of the federal criminal cose.
Attachment A
$/ EPA or a State may be unable to confirm the accuracy of
certifications for an extended period of time. Therefore,
it is suggested that,, whenever certification by a respondent/
defendant is ceouir«d, the order/decree provide that "back-up
documentation—sucn as laboratory notes an« materials of the
tvpes listed in the examples in the text above—be retained for
an appropriate period of time, sucn « «>«« ??!£s:,f?t?^
example, the 3 year retention time in 40 CFR S122.41(i)(2).
000279
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CD
O
IN.)
MEAHS Of CRRTIPyiHC COMPLIANCE
HIHI CONSENT AGREGMQfrs
(examples)
Action Required By
Consent Aqretmfent
'Purchase pollution control
equipment.
'Installation
'Onnoina operation and main-
tenance
'Meet discharge levels
•Labeled transformers
'Do risk study
Violator^ official
Certifies That;
| Documents Accompanying
I certification^
•Squipment purchased
*it|uipment Installed and tested
•Operating as required
•Discharge levels have been net
•.Invoice
•Use conplying coatlnc?a
'Transformers have been labeled j'Photographs
•Study has been completed
•Employees have been hired
I
|*Invoice (or work with photograph
I • .
I *Cont i nuotts won i r.or I rx| tape
{•periodic sample results
|'Maintenance of records
I
(•Continuous monitoring tapes
{•Periodic sample results
I
•Study report and recommendations
(•Verifying complying coatings
are us
•Train employees Ce.g.» work
practices]
(•employee training has been
ted
'Personnel records
•position descriptions
•Entry on duty dates
{•Salary data
[•Documents to verify vtfc content
I I ' '
I'Educational materials and record
of employee attendance, at
session
•Sot up envirocmntal auditing |»Unlt hem been established
•*"•• *T l^M.^1 __L .k J M_ _^,l l««kV>ln^l;
unit
(•Orientation and instruction
| ^completed , •
•Same as above re: personnel
•Charter of audit group,
on ne«t
eo
»-*
fe
8
-------
WITH CONSfc....* AGRBBKEMTS
fcontinued from previous paqe)
P
T>
3
o
o
o
INJ
Action Required By
Consent Agreement
I
Vlplator*a Official
Certifies That: _
I Documents Acoonfwinylng
I Certification:1 '
•Dispose of PCRs t
•Replace PCB transformers
•Reaiater pesticide certifi-
cation of. applicator-
(•Remove cancelled product frcm
j tho market
I
|*PCOs disposed of in lawful
Ji manner
I
(•New transformers installed
I
I
(•Coples'bf manl feats
•Applicator certification has
| been accomplished .
{•Removal has been accomplished
(•Copies of purchase and instal-
j lation receipts
I
•Copies of certificates
•List of locations of all jobs
•Compl lance with asbestos removal
with asbestos removal
and disposal reflations
and disposal regulations on
| a -Job-by- job basis
| •Copies of ccrrespondance with
j customers and documufltatlon
j of removal
j*Copiea of customer lists for
independent verification by
_ EPA and states
I
•Monitor waste stream
*Sliidqe removal
•Conduct qfotindwatee monitoring
•Collect and analyze soil
samples
t
t
contaminated soils and
diopose of In compliance
with PCRA
•ttoate stream has been properly
monitored
•Sludge removed by milestone
j deadline
•Groundwater monitoring accom-
plished in appropriate manner
•soil aamplea collected and
analyzed In specified manner
•contaminated soils removed'and
I
diai
wit
of in compliance
•Discharge Honitoring Report
•Copies of Invoices on sludge
removal
*
•2/A (quality analysis) testa;
certification by laboratory
•Same as above
•Copies of contract- documents
and manifests
-------
000282
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON.D.C. 20450 •
-MAR 0 3 1995
/)
r.
'• CCMPLJANCSASSURANCS
SUBJECT: Processing Requfi^^for Use of Enforcement Discretion
FROM: Steven A. Hers
Assistant Administrator
TO: Assistant Administrators
Regional Administrators
'General Counsel . '
Inspector General
In light of the reorganization and consolidation of the
Agency's enforcement and compliance assurance resources
activities at Headquarters, I believe that it is useful to
..recirculate the attached memorandum regarding "no action"
assurances1 as a reminder of both this policy and the procedure
for handling such requests. The Agency has long adhered to a
policy against giving definitive assurances outside the. context
of a formal 'enforcement proceeding that the government will not
'proceed with an enforcement response for a specific individual
violation of an environmental protection statue, 'regulation, or
legal requirement. This policy, a necessary and critically
ianortant element of the wise exercise
of
the Agency's
enforcement discretion, and which has been- a consistent feature
of the enforcement program, was formalized in 1984 following
Agency-wide review and comment. Please note that OECA is
reviewing the applicability of this policy to the CERCLA
enforcement program, and will issue additional guidance on this
subject.
A "no action" assurance includes, but is not limited to:
specific or. general requests for the Agency to exercise ^ its ,
enforcement discretion "in a particular manner or in a given set
of circumstances (i..e., that it will or will not take-an. .
enforcement action)""; the development of policies- or.other
statements purporting to bind the Agency and which relate to or
would affect the Agency's enforcement of the Federal
environmental laws"an'd"regulations; and other similar requests
1 Courtnev M. Price, Assistant Administrator for Enforcement
and Compliance Monitoring, Policy Against "No Action" Assurances
(Nov. 15, 1SS4) (copy attached) .
000283
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t.jr forbearance or action involving enforcement-related
activities. The procedure established by this Policy i requires
that any such written or oral assurances have the advance written
concurrence of the Assistant Administrator for Enforcement and
Compliance Assurance, • ' . .
• ,
\The 19S4 reaffiraation of this policy articulated well the
dancers of providing wno action" assurances. Such- assurances -
erode" the credibility of the enforcement program 'by creating real
or'perceived inequities in the Agency's .treatment of the
regulated community. Given ' limited Agency resources, this
credibility is a vital incentive for the' regulated community to
comply with exist.ing requirements. In additior , a commitment not
to enforce a legal requirement may severely hanper 'later, '
necessary enforcement efforts to protect public health and the
environment, regardless of whether the action is against the
recipient tof the assurances or against others who claim to be • .
similarly situated.
Moreover, these principles are their most compelling-in the
context of rulemakings: good public policy counsels that blanket
statements of enforcement discretion are not always a
particularly appropriate alternative, to the public notice-and-
ccsment rulemaking process. Where the Agency determines that it
is appropriate to alter or modify its approach in specific, well-*
defined circumstances, in my view we .must consider carefully
whether the objective is best achieved through an open -and public
process (especially where the underlying requirement was
established by rule under the Administrative Procedures Act), or
through piecemeal expressions of our enforcement discretion.
We have recognized two general situations in which a, no
action assurance may be appropriate: where it is expressly
provided for by an applicable statute, and in extremely unusual
circumstances where an assurance is clearly necessary to serve
the public interest and which no other mechanism can address
adequately. In light of the profound policy implications of
granting no action assurances, .the 1984—Policy requires. the-
edvance concurrence of the Assistant Administrator ,f or this
•office. Over the years, this approach has resulted in the
reasonably consistent and appropriate exercise of EPA's ' '
enforcement discretion, and in a manner which both preserves the
integrity of the Agency-and meets the legitimate, needs 'served by
a mitigated enforcement response.
There may be situations where the general prohibition en no
action assurances should not apply under CZRCLA (or the
Underground Storage Tanks or RCRA corrective action programs) .
For example, at many Superfund sites .there is no violation of
law. ' OECA is evaluating the applicability of no. action
assurances under CZRCLA and RCRA and will" issue additional
guidance en the subject.
000284
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Lastly, an element, of the 1984 Policy which I want to
highlight is that it does not and should not oreclude the Agency
froa discussing fully and completely the merits of a particular^
action, policy, or other request to exercise the Agency's
•enforcement discretion in a particular manner ^ I welcome a free
and frank exchange of ideas on how best to respond to violations
nindful of the Agency's overarching goals, statutory directives/
and enforcement and compliance priorities. I do, however, want-
to ensure that all such requests are handled in a ^consistent and
coordinated iaanner. .
Attachment
cc: OECA.Office Directors
Regional Counsels
Regional Program Directors
000285
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^UNITED STATES .ENVIRONMENTAL PROTECTION AGENCY
/ WASHINGTON. D.C. 20460
of net Of
. . iw
HSMORAKDUM ; ' -. ""*"
SUBJECT: Policy Against. "No^ction" Assurances
/ i TT r\ ^/, •
Courtney M. Price v^Qx*i*~>. t O.'/c"4~'<—
• _ Assistant-Administrator for .Enforcement
and Compliance Monitoring
Assistant Administrators
Regional Administrators . • '
General Counsel
Snsoector General' •* '
'. Tais memorandum reaffirms E?A 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.
* • i * "
•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 cossaitaent not to enforce a legal
requirement against a particular regulated party may severely
haaper later enforcement efforts, against that party, who may
claim good-faith reliance on that assurance, or against otjjer
parties who claim to be similarly situated.
This policv against definitive no action promises to ^
parties outside" th& Agency applies in all contexts, including
assurances requested: •
• both prior' to and after a violation has been committed;
" on the basis that a State or local government is
responding to the violation;
000287
-------
:2
. ' .
.
, . .
on the. basis. that revisions to the underlying le;al
requirement are' being considered:
, .
0.
on the basis ~hat the Agency has determined tha~ the
party:is no~ liable or has a va~id defense:
o'
on the basis that the violation already has been
correctec C or that 'a.' party; has pro.rnise,d that it ...ill
correct the violation)~or .' .
.
'0:'1 the basis. that the violation is not: of
priority to merit A~ency action.. '. . ".' .'
.. . . .
.. ... .
SU~~lClent:
'. . .
The Agency particularly must avoid no action pr~mis:s
relating either to violations of judicial crcers, for whic~ a
court has independent enfoz::cement aut'hori ty, or to pot;.ent::;al
criminal violations, for which prosecutorial discretion rests
wit..'1 the Uni teQ. Sta'tes. .;ttorney General.
only
As a gener~l
r.:le,
exceptions to this policy are ~a==anted
. ,-.
o
whe:-e expressly ~::ovided by 'applicable s'tatute or
regulation (e..g., ce:tain upset c::- bypass situations)
. . .
,
o. . in. ext.remely u::usual cases in which a no action
assurance is clearly neccessarv to se~~e the pUblic
interest (e.~., to ~llow action to avoid extreme risks'
to public health or safety, or to obtaih i~pcrtant
infc:ma tion for research purposes)' and which no other
, rnecnanism can acdress adequatelY. . ,
. '". -........ -
-.:-
Of course, ~ny exception~ which EPA grants~ust be in an a~ea
. in which EPA has discretion net to act under applicable lawe,
This ~olicv~n no wavis intended to constrain the way in
which EPA ~iscu;ses ane c;ordinates enforcement plans vith-
state or. local enforce~ent authorities consistent with no~al
workina relationshi~s~ ,To the extent that a statement of !?A's
enforcement intent '15 necessa~y to help s'upport 0: concluce an
e!~e:::tive sta~e enforcement effort, E?A can employ language
~uch as ~he followin~: . .
W~~A enco~race~ State action to resolve violatic~s of
t~e. -Act anc SUDDorts the actions whic~ (State)
is .takinc ,to ad~=ess the vioi~tions at issue. To the ex:e~:
t~at the-State action does not satisfa6torilv.resolve ~~e
.. - ,
. ..".0. . - ~;-....s ~~, --',~ """"-..A _: ~_c: 0....,-, e"'~"""-6"e--- .:1"'- :.~~ I'
.W-. _c:~-...,.,.. , -rn ....:~' ::-...._~..- - ,_1___'-_..& ..- --.--'"""..
0002Sa
-------
" UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
MEMORANDUM
• >
SUBJECT: Procedures to Improve Coordination before the
Environmental Appeals B<
FROM: Ray Ludwiszewski •
. Acting General counsel
Office of General Couxisjel I
(LE-130) . ^ I
Herbert H. Tate, Jr.
Assistant Administrator
Office of Enforcement (LE-133)
TO: Environmental Appeals Judges Nancy B. Firestone,
Ronald L. McCallum and Edward E. Reich
Attached to this memorandum are procedures which we are
adopting to improve coordination among the Office of General
Counsel (OGC), Office of Enforcement (OE) and the Offices of
Regional Counsel (ORC) on positions-taken by each of these
'offices before .the Environmental Appeals Board (EAB). These
procedures were developed directly in response to a request from
the EAB and incorporate comments made by Ed Reich on behalf of
the EAB.
These procedures will be effective immediately. We are
requesting that the EAB continue its practice of sending copies
of all of its final decisions to the Regional Counsels, the
Associate General Counsels and the Enforcement Counsels. In
addition, we are requesting that, in addition to sending copU»
of notices to appeal permit decisions to the affected Regional
Counsel, the EAB send copies of these notices to the affectea
Associate General Counsel and Enforcement Counsel.
000290
-------
. --
. . . We believe that these procedures: will go a long way toward
improving coordination among our' offices on positi9ns taken,
before the EAS. These procedures commit our offices .to evaluate
our; success in implementing these procedures and accomplishing
our objectives in approximately six months. We welcome your
active participation in this process and hope that together we
can improve the Agency's administrative litigat;on practice.-
; . . .. .
Attachment
cc:
Regional Counsels
Associate General Counsels
. Enforcement Counsels
00025
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
JAN 25 1993
MEMORANDUM
SUBJECT: Procedures to Improve Coordination before the
Environmental Appeals Board
FROM: Ray LudwiszewskST \£
-------
These procedures will be effective immediately. Under the
procedures, each of you responsible for matters which go before
the EAB is requested to designate at least one person to serve as
a contact person to aide in the coordination process established
by the procedures. The option of whether to designate one or
more persons to fulfill all these functions is up to you. By
February 12. 1993. please identify the person(s) you are
designating to coordinate matters related.to permit appeals to
Susan Lepow (FAX 202-260-7702) and the person(s) you are
designating to coordinate matters related to enforcement appeals
to Fred Stiehl (FAX 202-260-4201). They will compile a complete
list of these contacts and distribute them to you.
We believe that these procedures will go a long way toward
improving coordination.among our offices on positions taken
before'the EAB. We appreciate the commitment each of you is
making to improve the Agency's administrative litigation
practice. These procedures commit our offices to evaluate our
success in implementing these procedures and accomplishing our
objectives in approximately six months. We encourage you and
your staff to actively participate in this process.
Attachment •
* *
cc: Environmental Appeals Board Judges Firestone, McCallum
and Reich
Regional Administrators
Assistant Administrator for Water
Assistant Administrator for.Air and Radiation
Assistant Administrator for Solid Waste and Emergency
Response
Assistant Administrator for Prevention, Pesticides and Toxic
Substances
000293
-------
OFFICE OF GENERAL COUNSEL, OFFICE OF ENFORCEMENT AND OFFICP nir
REGIONAL COUNSEL COORDINATION ON MATTERS BEFORE THE
, ENVIRONMENTAL APPEALS BOARD
Under the environmental statutes administered by the
Environmental Protection Agency, the Administrator has delegated
authority to decide appeals of permit decisions made by the
Agency's Regional Administrator's and administrative penalty "
decisions made by the Agency's Administrative Law Judges to an
Environmental Appeals Board (EAB). The specific matters
delegated to,the EAB are detailed in a final rule published in
the Federal Register on February 13, 1992, 57 Fed. Reer. 5320.
At the request of the EAB, the Office of General Counsel
(OGC), the Office of Enforcement (OE) and the Offices of Regional
Counsel' (ORC) have identified ways to improve coordination -:n
positions taken by each of these offices before the EAB. The
Office of General Counsel and the Offices of Regional Counsel
discussed this issue at the OGC-ORC Management Retreat held in
October 1992. The Office of Enforcement has had an existing
policy in this area. •
Unless and until modified, this memorandum outlines the
policies and procedures which will be followed to coordinate
positions taken with respect to permit appeals and appeals of
enforcement cases (including significant interlocutory appeals)
before the EAB. Each Regional Counsel, Associate General Counsel
and Enforcement Counsel responsible for matters which go before
the EAB will designate at least one individual to serve as a
contact person to aide in the coordination process established in
this memorandum.
A. Permit Appeals
The EAB sends notice to the Regional Counsel when a notice
of appeal of a permit is filed; the Region has 45 days to file a
response with the EAB. We will request the EAB to send a copy of
this notice to the affected Associate General Counsel and
Enforcement Counsel, as well.
After the notice of appeal is received by ORC/OGC, staff in
ORC will consult with OGC staff about each case. The discussions
will focus on any important issues raised by the case. Each case
will be handled in one of three ways: (1) OGC will sign the
response as co-counsel and will have written or participated in
writing the response; (2) OGC will appear as "of counsel" on the
response and OGC will have reviewed the response; or (3) OGC will
not be on the response and though ORC will have coordinated with
OGC, OGC will not necessarily review the response.
OGC and ORC will both need to consent to the appropriate
level of handling for each case. Staff in each office will
consult with their supervisors, as appropriate. Any
disagreements between the Regional Counsels and the Associate
000294
-------
General Counsels will be elevated to the appropriate Deputy
General Counsel.
»
It is important to coordinate positions taken in one case
with other Regions and with the .Headquarters program office.'
Significant enforcement issues may also be raised in -the context
of certain permit appeals. In appropriate cases OGC and ORC-
staff need to coordinate with OE, other Regions1 and their
respective program offices before a response is filed. Upon
receipt of a notice of appeal, the Enforcement Counsel or OE
Branch Chief will identify any enforcement issues that should be
addressed in the appeal. In most cases it may be adequate for OE
and other Regions to be informed of positions taken before the
EAB through the monthly OGC/OE/ORC branch chief conference calls.
This will be a standing agenda item for the monthly calls; the
ORC branch chief will generally be responsible for leading this
discussion.
It is important for the Regions to coordinate as early as
possible with all Headquarters offices on the issues raised in
permit appeals and requests for evidentiary hearings so that EPA
will be advancing consistent positions. Some of this
coordination needs, to be initiated by the program offices and
some by ORC. ' .
B. Enforcement Appeals
There is less time for the Agency to decide its position on
appeals of enforcement cases. Pursuant to 40 CFR section
22.29(a), enforcement appeals typically obtain as a matter of
right, and the Agency must file its notice of appeal and an
accompanying brief within 20 days after service of the* initial
decision or order of the Presiding Officer. See 40 CFR section
22.3O(a). 1
In a Hay 3, 1989 memorandum from then Acting Assistant
Administrator Edward Reich, a process was established to provide
for review of adverse decisions of'-ftiJs as well as favorable
decisions that are appealed by the respondent. (See attached
memorandum.) That process is still an appropriate method to
provide an efficient way to identify and address important issues
in a case that should be raised to the EAB. It should be noted
that important legal and policy issues warranting an appeal may
be raised in cases even though the Agency prevailed in the relief
sought. This memorandum reaffirms the procedures of the earlier
memorandum with the following modifications.
1 In appropriate circumstances, agency counsel, however,
may seek leave from the EAB for extensions of time in which to
file such appeals or briefs, if they can satisfy the requirements
of 40 CFR section 22.07(b). Depending on the circumstances, it
may be advisable to seek an extension only for the filing of the
brief, rather than the notice of appeal.
000295
-------
The ORC attorneys will consult directly with .the Regional
Counsel (or Deputy Regional Counsel if so directed by the
Regional Counsel) to discuss their recommendation as to whether
EPA should appeal each enforcement case. ' This view should be
included in the summary of the decision forwarded to the OE
Branch Chief, the OGC Branch Chief, and the ORC contacts. The
Regional Counsels will report on decisions to appeal enforcement
'cases, in their weekly report to Headquarters. Decisions in
Headquarters cases will be reported, in OE's Weekly Highlights
As with1 permit appeals, each case where a decision is made to
proceed with an appeal, will be handled in one of three ways: m
OE will sign the brief as co-counsel and will have written or
participated in writing the brief; (2) OE will appear as "of
counsel11, on the brief and OE will have reviewed the brief; or (3)
OE will not be on the brief and though ORC will have coordinated
with OE, OE will not necessarily review the brief.
The Regional Counsels and Enforcement Counsels will take
personal responsibility to decide what kind of coordination is
necessary with OGC before a decision is made to seek, or forego,
an appeal of an enforcement case. OGC agrees to identify any
generic areas where it needs to be consulted on a routine basis
before a decision to appeal or not to appeal is made.
C. Headquarters Assistance to EAB
*
Subject to the prohibition on ejg parte communications,
nothing in this memorandum is intended to derogate the ability of
OGC or OE to provide technical assistance to the EAB when the EAB
deems it appropriate.
As part of their participation in the review of appeals, OGC
and OE should assure that any relevant policies or new
regulations, are brought to the attention of the Board, since
Headquarters offices will often be more aware of such matters
than Regional offices.
D. Oral
The attorney best able to present the Agency's position
should present oral argument to the EAB. This will be decided on
a case by case basis. The Board has a _ strong preference in favor
of having a single attorney present the Agency's argument.
Nevertheless, the Board has allowed more than one attorney to
divide the argument where the Agency deemed it essential for the
effective presentation of its case. Accordingly, there should b«
an opportunity for Regional and Headquarters attorneys to argue
before the Board in appropriate cases.
Any disagreements between the Regional Counsel and the
Associate General Counsel or Enforcement Counsel regarding who
should present the oral argument to the EAB will, be elevated to
the appropriate Deputy General Counsel or Director of Civil
Enforcement.
000296
-------
The Agency attorney (s) presenting oral argument should be
able to represent to the fullest extent .possible that the
positions taken in argument have been coordinated with, and
approved by, ORC, O6C and OE, as appropriate.
E. Decisions
.The EAB sends copies of all final decisions -to the Regional
Counsels, the Associate General Counsels and the Enforcement
Counsels. .
F. Follov-up .
Our success in implementing these procedures and
accomplishing our objectives will be evaluated in an ORC/OGC/OE
conference'call in approximately six months.
•
Attachment
000297
-------
EC- ~
.UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JUL 11 1994 . .
. OFFCE OF ENFORCEMENT
MEMORANDUM
SUBJECT: Redelegation of Authority and Guidance on Headquarters
Involvement in Regulatory Enforcement Cases
FROM: Steven A. Henaai
' Assistant Administ/aior
TO: Assistant Administrators
Regional. Administrators
Deputy Assistant Administrators
Regional Counsels
OECA Office Directcrs and Division Directors
, *
On May 31, 1994, the Administrator commissioned an effort to
follow up on the issues raised by the Regional Impacts Task Force
(RITF) regarding the division of roles and responsibility between
the Regions and Headquarters .n the enforcement and compliance
assurance program. The principal area which needed further
discussion regarded the management of civil judicial and
administrative cases. The specific question to be addressed
concerned the nature and extent of Headquarters involvement in
case development and litigation.
A small work group, which included personnel' from_OECA, the
Regions, and OGC, was formed to undertake this follow-up effort.
The work group approached its assignment in two phases. Phase 1
has focussed on the*roles issue in the regulatory enforcement
context; Phase 2 will examine the issue in the Superfund context.
Phase l, on which the work group has completed its work, is the
subject of this memorandum; Phase 2 will be brought to closure in
the near term. •
The RITF provided a basic framework for the
Headquarters/Regional relationship in the case management arena,
concluding that Headquarters involvement was appropriate in a
number of contexts: a) cases or issues that rise to a level of
national attention; to) multi-regional cases against the same
company; c) national initiative cases. The RITF Report
encouraged redelegation of authority for matters that are not of
national import. The relevant portions of the RITF Report are
attached to this memorandum as Attachment A. Also attached to
000299
FEE i: £33
C"C 0 1
-------
this memorandum are 'supplemental guidance developed by the
follow-up work group (Attachment B), giving further definition to
the concept of "national 'significance,11 and a new redelegation of
authority to the Regions that builds on the work of the RITF and
reflects the views of the work group (Attachment C).
• • •
This memorandum and its attachments,, taken together,
establish the general' framework and guidance that the Agency will
hereafter follow in the processing and management of civi].
regulatory enforcement cases. The effective date for
implementation of this hew approach will be October 1, 1994. in
the meantime, we will be developing further the auditing concept
outlined .below and visiting the Regions to discuss expectations
regarding implementation.
•
•
A NEW APPROACH TO OVERSIGHT
As articulated by the RITF, the fundamental role of OECA is
to provide overall leadership in the enforcement and compliance
assurance arena. This leadership role ~*as a number of different
facets, including devising .the'national strategy for the program-,
addressing matters of national policy and concern, ensuring
national consistency,*ensuring the .development of regulations and
laws that are clear and enforceable, representing the Agency
before the Congress and with other agencies, and ensuring
effective implementation of the Agency'~ enforcement and
compliance assurance program.
Although, as discussed further below, there are significant
benefits associated with Headquarters involvement in cases, case
involvement has been historically used by Headquarters at least
in part as a means of overseeing Regional implementation of EFA's
enforcement -program. The principal vehicle for effecting this
oversight has been-the requirement that Headquarters formally
concur on all Regional settlements of civil judicial matters,
whether or not those matters raise issues of national'concern.
This concurrence process has been criticized for increasing •
transaction costs, causing processing delays, and diverting •
Headquarters and Regional staff attention from other, more
compelling work.
With this memorandum, and in keeping with the principles of
empowerment, reinvention, and accountability, we are
fundamentally reorienting our approach to Regional oversight.
The new approach has the following features:
*
o value-added approach to case involvement — Headquarters
involvement in cases will operate according to the "value
added" principle. Under this principle, Headquarters staff
will be involved in cases when the case or the program at
. large will benefit from such involvement (see below for
000300
-------
furthe? discussion). .
o Focus oa "nationally significant" natters and issues ~
The concurrence process will no longer be used for. purposes
of routine oversight. Instead, it will be reserved for
cases or issues which call for Headquarters sign-off because
of their national significance — i.e.. because they are
national in terms of their impact or attention, are
sensitive in nature, raise unresolved policy issues,
establish an important .precedent, arise in an area where
national consistency is of paramount importance fe.o.. ghell
oil, where an adverse legal decision raised major
programmatic concerns under RCRA), or otherwise affect the
overall program. •• The new approach eliminates the
distinctions between administrative and judicial cases, as
cases in either forum can be nationally significant and can
raise issues of national consequence. Attachment B .provides
specific examples of nationally significant matters.
Because of its unique national perspective and its role as
,policy-maker and national "voice" for the enforcement and
compliance assurance program, Headquarters staff involvement
during the pendency of the litigation and ultimately the
'AA/OECA's review and sign-off in these circumstances adds
value to program implementation and is essential to
effective program implementation and public accountability.
o'Redelegation of authority — Regional civ'.l judicial and
administrative cases which seek a bottom line penalty1 of
less than $500,000 will be presumed to not be nationally
significant. Accordingly, consistent with the attached
delegation, I am redelegating to the Regional Counsel the
AA's authority to concur on settlements undertaken by the
Regional Administrator (or Regional Division Director, where
the RA's authority has been redelegated), provided such
settlements adhere to national policy and guidance-and do
not raise issues of national significance. The Regional
Counsel will, in the first instance and in keeping with this,
guidance, make and document the determination whether snch a
matter raises an issue of national significance. Judicial
and administrative cases involving a bottom line penalty of
$500,000 or more assume a sufficient national profile so as
to be presumptively nationally significant and will be
'Under the Agency's penalty policies, this generally means
recovery of the economic benefit of noncompliance plus a gravity
component. Where the Region has not-prepared a bottom line
penalty before filing an administrative case, cases will be .
presumed to be nationally significant if the proposed penalty^
sought in the complaint to be fil«d is greater than or equal *o
$500,000. '
000301
-------
reserved for the AA/OECA's concurrence.2
o Flexible involvement — Flexibility is built into the
redelegation. If a nationally significant issue arises in a
case with a bottom line penalty under the $500,00(1.
threshold, the delegation will require the Region to consult
with the appropriate division in the Office of Regulatory
Enforcement (ORE) in OECA; OECA would, at the Division
Director level, then have the authority to opt in for
purposes of concurrence if appropriate.3 For the $500,000
and over cases, the redelegation would give OECA, at the
Office Director level, the authority to opt out for purposes
of concurrence if, for.example, there are no issues of
national significance and the case is not likely to assume a
'national profile. , . •
^ • •
o Differential oversight — The case-by-case approach to .*•
oversight will be replaced with a systematic approach to
accountability which will include, at a minimum, periodic
auditing of regional compliance with the reguiremexv* 5 of the
redelegation, regular docket reviews, and after-the-fact
review of regional decision documents. Regional Counsel
'The delegations that are currently in place for
administrative penalty action's under, e.g.. -the Clean Water Act'
(2-52-A), the Clean Air Act (7-6-A), RCRA Subtitle J (S-..3) , and
TSCA (12-2-A), reserve the OECA Assistant Administrator's
authority in "multi-Regional cases, cases of national
significance or nationally managed programs." Consequently, the
approach outlined in this memorandum for administrative cases is
consistent with delegations relating to these authorities.
Because the delegations that are currently.in place for RCRA
Subtitle C and the" Safe Drinking • Water Act_d.o .not include this^
explicit reservation, we will need to make conforming amendments
to the Administrator's delegation under these authorities. This
will be done as part of the third phase of delegations
adjustments associated with the reorganization. In the meantime,
as a function of their reporting relationship with the OECA AA,
the Regional Counsels will be expected to consult with OECA,
consistent with this memorandum, on nationally significant
administrative matters arising under these authorities.
'Where OECA opts in, the concurrence requirement will be
fashioned to reflect the character of the matter at hand. In
some circumstances, OECA's concurrence will be required only for
resolution of the nationally significant issue (as opposed to
requiring concurrence on the settlement); in others, such as
where the nationally significant issue is so fundamental to the
case that the resolution of the case inevitably speaks to the
issue in an important way, the Assistant Administrator's
roncurrence will be required for thp, settlement.
000302
-------
forth below: . .
o "National Program" eases — These are case's that arise in
programs that are not implemented at the Regional level
such as the Mobile Source, program and enforcement of the
adverse effects reporting requirements under :FIFRA, and *
cases which are Headquarters-driven because the data systems
necessary to identify noncompliance are maintained at
•Headquarters (e.g., CFC import and export cases, certain
acid rain cases, etc.)* In these cases. Headquarters has
the lead role, with little or no regional involvement.4
o "National Violator" cases — These are cases against a
single'entity involving violations at facilities in more
than.one Region fe.er.. the Louisiana Pacific multi-facility
case). In these cases, Headquarters will have the EPA lead
for overall case direction and coordination. Generally,
Regional personnel will be responsible for developing and
• supporting those components of the case that arise in their
Region. In national violator cases in which a
disproportionate number of violating facilities are located
. in a single region, OECA may determine that it is more
appropriate for personnel from that Region to play the lead
role, essentially reporting to OECA in this capacity.
o "National Initiatives" — These are clusters of cases
involving more than one Region centered around a sector of
the regulated community fe.o.. the pulp and paper
initiative), a geographic area (e.g.. the Mexican border), a
pollutant fe.g.. the lead initiative), or a particular kind
of regulatory requirement fe.o.. the RCRA non-notifier
initiative). In these circumstances, OECA.personnel will
have a lead role in coprdinating the overall project,
including developing initiative guidance, screening cases
for inclusion in the initiative;—and giving direction in
terms of timing of activities, communication strategy, etc.
Generally, Regional personnel will serve as the Agency lead
for the individual cases that are included in the
initiative.
o single Region cases — This category includes cases which
arise in the ordinary course of events within a Region as
well as self-contained regional initiatives. Regional
personnel will serve as the Agency lead for cases in this
category. Headquarters involvement will be determined
largely by the redelegation of authority. Thus, in
redelegated cases,. Headquarters personnel will ordinarily
4In the near term, I will be doing an additional delegation
°f>authority within OECA for settlements in cases falling into
this category.
000303
-------
not be involved; in non-redelegated cases, Headquarters
. personnel will be involved for the purpose of. providing
national perspective and expertise,, keeping the AA/OECA and
other critical Headquarters decision-makers advised, and
informing AA/OECA concurrence. Whether or not Headquarters
is involved, the Regional Counsels will, by providing copies
to ORE of referrals to the Department of Justice and through
regular reports and periodic consultation, be responsible
.for keeping the AA/OECA and ORE informed regarding program
activities. ' .
This guidance regarding Headquarters involvement should not
be viewed' rigidly. Rather, it should be viewed flexibly, with an
eye towards using the overall resources available to the program
to get the job done. Thus, where, for example, a national
initiative calls for work that is beyond a Region's resources,
OECA personnel may be deployed to the Region to work with,.
Regional management in leading .case developing efforts.
Similarly, apart from the redelegation, the need to provide
training opportunities that will leave Headquarters personnel
better able to perform their policy and regulatory role may
suggest involvement in circumstances not expressly contemplated
above. Additionally, OECA retains the authority to take action,
after consultation with the Regional Administrator, in the place
of a Region in the rare situation where the Region is unprepared
to respond to a problem of national concern or to assume the > lead
in a case which is of such paramount national interest as to
require daily involvement by the A? /OECA fe.q.. Love Canal).
CONCLUSION
. In sum, this guidance and redelegation should help the
Agency turn a corner in the Headquarters/Regional relationship in
the enforcement and compliance assuralfice arena. Our new Approach
not only will preserve, but reinforce OECA's leadership role for
the enforcement, and compliance assurance program, particularly as
it relates.to nationally significant cases and issues. . At the
same time, it will empower managers in the Regions to implement
the Regional enforcement program in a more efficient manner.
Moreover, the accountability mechanism contemplated here —
systematic audits, after-the-fact review of pertinent decision
documents, and differential oversight — should leave OECA better
able to identify problems and respond to them holistically than
is possible under the current system. Frequent and regular
contacts between Headquarters and Regional managers will be
essential to the success of the new system. At the one-year
anniversary of the effective date ©f this memorandum we will
review this guidance and redelegati&n to determine whether any
adjustments are needed.
Attachments ' • '
000304
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ATTACHMENT
REPORT OF THE EPA
REGIONAL ENFORCEMENT IMPACTS
TASK FORCE
MAY 1994
000305
-------
V. Rotes and Responsibilities
should have the lead, with participation from the other, depending on the nature of
the matter.
6. Case Development and Management • :
a. General Background ,
The area of case development and management presents the largest
challenge for setting out appropriate roles and responsibilities because there are so
many functions, so much work, and legitimate disagreements over dividing
responsibilities between the Regions and Headquarters. The Task Force spent a
great deal of its time and effort dealing with roles and responsibilities in this area.
,. " * * * *
The Task Force believes that a number of principles should guide the
Headquarters/Regions relationship in case development and management including:
Use resources efficiently and effectively; avoid duplication of effort and second
guessing; maximize delegations; use a team approach to problem solving based on
trust, cooperation, and respect; determine roles based on need for unique
perspectives and knowledge; provide clear and timely Headquarters guidance that
allows Regions a specified degree of flexibility and sets out a process for greater
flexibility based on the facts of a specific case.
' The Task Force's recommended roles and responsibilities between Regions
and Headquarters reflect the general and normal delineation of roles and
responsibilities that would take place for case development and management and
should not be viewed as an absolute. Overall, there needs to be a balance
between empowerment and consistency. Specific case facts relating to
precedentiaf'concerns, the need to deviate from established policies, or other
matters may warrant the need for greater Headquarters involvement!" However,
with the exception of nationally run enforcement programs, the presumption is that
Regions manage their cases.
Currently, responsibility for administrative cases is largely delegated to the
Regions with minimal Headquarters involvement. Headquarters involvement is
usually limited to administrative cases resulting from national programs that are
managed entirely out of Headquarters (&&» mobile sources) and administrative
actions brought under new statutory or regulatory authority, for which the Regions
typically have submitted their first three such actions for Headquarters approval.
However, there are also occasional circumstances when, because of the
000306
-------
V. Roles and Responsibilities
•' •
precedential nature of issues involved in administrative cases, Headquarters
becomes involved. ' . '
Under the reorganized enforcement program, the Task Force generally
believes that development, management, and settlement of the significant majority
of administrative cases should continue to be handled by the Regions. However,
for regional cases that (a) rise to a level of national attention, (b) are multi-regional
cases against a company, economic sector, or ecosystem, or (c) are part of
national enforcement initiatives, the Task Force generally believes that some .
.degree of Headquarters involvement (which can range from consultation to
concurrence) would be advisable and that in some cases a Headquarters lead
would be appropriate. The Task Force believes these three types of cases are
likely to be a relatively small percentage of all regional administrative cases.
Whether a Region or Headquarters should have the "lead* and the extent of the
other office's participation and/sr concurrence in these cases would depend on the
nature and facts of the case. There should be criteria and guidance to help guide
these decisions. The most important consideration, however, is that the decision
on the ead responsibility for such administrative cases must be made as early in
the process as possible.
Currently, Regions have been delegated less authority for initiating,
conducting, and settling judicial cases than for administrative cases. Headquarters
involve nent is significant. Under the reorganized enforcement program, the Task
Force generally believes that development, management, and settlement of the
majority of judicial cases should be delegated to Regions. However, the Task
Force believes that cases that (a) rise to a level of national attention, (b) are multi-
regional cases against the same company, or (c) are part of national enforcement
initiatives, could be either Regional lead with Headquarters
concurrence/participation or Headquarters lead with Regional
concurrence/participation/ depending on the nature and facts of each case". As
with administrative cases, there should be criteria and guidance to help guide these
decisions. The most important consideration, however, is that the decision onrthe
lead responsibility for such judicial cases must be made as early in the process as
possible.
b. Delegations Proposal
In light of these considerations, the Task Force.recommends that the
Assistant Administrator for OECA consider a number of delegations in the context
of overall environmental enforcement case management. These delegations are
00030';
-------
V. Roies and Responsibilities
appropriate in light of the Administrator's commitment to streamlining, ensuring
national consistency, and implementing the recommendations of the National
Performance Review; These delegation principles are not intended to substitute for
the principle that good communication between Headquarters and the Regions is •
essential for consistent and efficient Agency enforcement.
*t *
The Task Force suggests consideration of the. following principles:
(i) It is appropriate to further delegate civil judicial case initiation,
management, and settlement authorities to Regional Administrators/Regional
Counsels. The Task Force expects that authority for initiation, management, and
settlement of the majority of cases will be delegated to the Regions, and Regions
will be held accountable for appropriate exercise of that authority. These include
all cases hot falling within the exceptions to be set forth in guidelines, as noted in
{ii} below.
s *
Adr .nistrative enforcement authorities have largely been delegated to
regional offices. The Task Force expects that the authorities for initiation,
management, and settlement of these cases will be maintained in the Regions,
with exceptions limited to those set forth in guidelines,'as noted in (ii) below.
(ii) Consistent with the Administrator's .desire that EPA speak with one
enforcement voice, the Assistant Administrator for OECA should be included in the
decision-making process at any time that it becomes apparent that a civil judicial or
administrative case will raise issues of national precedence or national significance.
Depending upon the level of national precedence or significance, inclusion and
participation of the. Assistant Administrator for OECA will vary from consultation to
concurrence in regionally-managed cases to actual Headquarters lead in case
development and management. <-"* --
The Task Force believes that a number of factors should be considered in
ascertaining whether a case is of national significance or nationally-precedential,
and what level of delegation is therefore appropriate. These factors include the
dollar value of assessed penalties, the precedential character of the case or specific
issues involved, the degree of national importance and public interest in the cast,
whether a case covers facilities or environmental contamination problems in
multiple Regions, whether a proposed settlement is within national norms, whether
a case is initiated within the context of a national initiative, and whether a cast is
consistent with legislative proposals under consideration.
7m
-------
V. Roles and Responsibilities
(Hi) Assuring that the Administrator's goals of national consistency and
streamlining are met will require that the Assistant Administrator for OECA
Introduce and implement a system of accountability. In accordance with the
delegations outlined in (b) above, the system must include some contemporaneous
review of the case initiation, management, and settlement in nationally significant
cases, as well as -in cases in which national settlement criteria have not been met
(gjk recovery of economic benefit of non-compliance). In addition, the Task
Force recommends institution of systematic post hoc reviews of regional
enforcement program performance, and consistency with national enforcement
policies. The Task Force recommends that this review yield sanctions for non
conformance with national policy, a recognition of superior performance, and
consideration of differential delegations if appropriate.
•
c. Recommended Roles and Responsibilities
t, • —
Based on the above discussion, a number of functions should fail into the
category of Headquarters in the lead with .Regional participation. These include
.national priority setting and targeting, technical and legal support on national
issues, clearinghouse/coordination, development of information systems,
Headquarters providing technical and legal support on Regional cases, providing .
technical experts on key cases, DOJ interface, policy and guidance on case
management, coordination with OGC, communication and coordination among
Regions, criminal case development, and citizen suit matters.
Regions should have the lead on regional targeting and screening, and
communicating and coordinating with Headquarters and States.
The Regions and Headquarters should share the responsibility for ensuring
^consistency with national policy guidance, but the Task Force recognizes that
'Headquarters should have an audit function witrf respect to the Regions."'On
administrative appeals,'the Regions should have the lead with Headquarters
concurrence on both the decision to appeal and the conduct of the case. For f '
judicial appeals, Headquarters should have the lead with Regional concurrence.
The same is true for contractor listing. In defensive litigation, in both pre-
enforcement review and counterclaims, Headquarters or the Regions should have
the lead, with the other participating, depending on the case. .
On most administrative cases, the Regions should have the lead in
developing, managing, litigating, and resolving'the matters.. In several categories
of administrative cases, Headquarters should be involved, and on rar| occasions
000309
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ATTACHMENT 3
Guidelines for Identification of
Nationally Significant Cases or Issues
The following guidelines and examples- set forth indicators
of national significance for purposes of determining the
involvement of the Office of Enforcement and Compliance Assurance
in Regional enforcement cases, and the exercise of any case
settlement authorities delegated to Regional Counsels. These
guidelines should not, however, be the sole basis for any
determination regarding the presence of nationally significant
issues in an enforcement action; indeed, what is "nationally
significant" will necessarily reflect the current climate in
which the' Agency carries out its mission. For example, matters
which would not ordinarily be nationally significant may become
such when they relate to statutory reauthorization or other
legislative developments. Regional Counsels are expected to
consult with the appropriate Office of Regulatory Enforcement-
Division Director-on any issr^s of national significance which
have been identified, yet do not otherwise fall within any of the
guidelines set forth below. These guidelines may be periodically
supplemented or revised to reflect additional indicia of national
significance, or to remove any indicia listed below for which
Headquarters attention is no longer required.
Examples of case or issues which raise indicia of national
significance:
1) Cases or issues that have precedential character.
o Initial use of new authorities
o New use of existing authority
o Issue of first impression
o Unresolved policy, legal or technical issue
o Change in national policy or legal interpretation ,
o Applications of new technology
2) Cases or issues that rise to a level of national attention
or significant public interest
' . *
o Significant citizen concern (especially significant
environmental justice issues)
o significant political attention
o Major state/local government relationship issues
o Cases against municipalities
• o Major environmental or public health threat
o shut down of a facility
000310
-------
o International implications (e.g. trade, import
violations, Basel convention)
o* Major inter-agency implications, including federal
facilities - . ; ' • '
o • Settlements involving cutting edge Supplemental
Environmental, Projects
• ' • **
*
3) Cases or issues that are potentially affected by legislative
proposals under consideration, emerging regulatory
proposals, or evolving policy changes
(e.g. Clean Water Act reauthorization, municipal
incineration)
j • '
4) Cases that are multi-Regional
, * *
o Multi-Regional case against one company
o Multi-Regional initiative (e.g. geographic, sector,
pollutant, regulation)
* • '
5) Cases or issues that deviate 'from the national norm
o Deviation from established policy
o ' Deviation from established guidance
o Deviation from previous legal positions
000311
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
JUL 8 894
; OFFCE OF ENFORCEMENT
MEMORANDUM
SUBJECT: Redelegation of the Assistant Administrator for OECA's
Concurrence Authority in Settlement of Certain Civil
t Judicial and Administrative Enforcement Actions
FROM: t Steven A.. Herman
Assistant. Administrated
TO: ' Assistant Administrators ' —
Regional Administrators •
Deputy Regional Administrators
Regional Counsel
OECA Office 'Directors
OECA Division Directors
This memorandum constitutes the formal redelegation of
certain settlement concurrence authorities currently reserved for
the Assistant Administrator for Enforcement ana Compliance
Assurance, and serves as an attachment to the July 8, 1994 OECA
memorandum entitled, "Redelegation of Authority and Guidance on
Headquarters Involvement In Regulatory Enforcement Cases." The
authorities which are hereby redelegated are listed below, as
well as.the procedure, conditions, and limitations that apply
when such redelegated authorities are exercised by either'the
Regional Counsels or the Director of~t>he Office of Regulatory
Enforcement of OECA. The July 8, 1994 memorancutn mentioned above
should be consulted for additional clarification on the
procedures to be used to implement these redelegations, as well
as the expectations and responsibilities that follow these
settlement authorities.
Authorities
To settle* or exercise the Assistant Administrator's
concurrence in the settlement of civil -judicial arid
administrative enforcement actions which involve a bottom-line
penalty of less than $500,000 under the Clean Water'Act, the Safe
Drinking Water Act, the ciean Air Act, the Resource Conservation
and Recovery Act, the Federal Insecticide* Fungicide and
Rodenticide Act, and the Toxic Substances Control Act.
Printedof>
-------
To .settle or exercise the Assistant Administrator's
concurrence in the settlement of civil judicial and
administrative enforcement actions which involve a bottom-line
penalty of $500,000 or above, in actions under the above-
mentioned statutes for which the Director, for the. Office of
Regulatory Enforcement of OECA determines that, in light of the
issues presented, the concurrence of the Assistant Administrator
is not necessary.
•
To Whom Redslseated
The Regional Counsels. This authority may not be
fedelegated. ,
Process and Limitations
The Regional Counsels must consult with the Assistant
Administrator for Enforcement and Compliance Assurance or his
designee prior to exercising this redelegated authority under the
following circumstances: (1) a proposed settlement wor'.d not
comport with applicable penalty policies or recover, the full
amount of economic benefit of noncompliance from a violator not *
in bankruptcy; or (2) the case raises issues of national
significance or otherwise rises to a level of national attention.
The Regional Counsels are responsible in the first instance
for identifying such cases and/or issues as they arise, and are
expected to inform the Director of the Office of Regulatory
Enforcement of the Office of Enforcement and Compliance Assurance
as soon as they are identified. Criteria .for determining whether
a case or issue are nationally significant, or have risen to a
level of national attention, are set forth in the July 8, 1994
OSCA memorandum entitled "Redelegation of Authority and Guidance
on Headquarters Involvement in Regulatpry Enforcement Cases."
Particular issues of national interest" or concern may alYo be
identified by the'Division Directors in the Office of Regulatory
.Enforcement. Regional Counsels should use discretion in
identifying other issues which are nationally significant, yet do
not otherwise fall within the guidelines or examples contained
therein.
Following the appropriate consultation between the Regional
Counsel and the Director of the Office of Regulatory Enforcement
of OECA, or the appropriate ORE Division Director, regarding the
above-referenced* issues, OECA may, at the Division Director
level, determine that concurrence of the Assistant Administrator
is appropriate for the matter at hand, in which case concurrence
will be required.
This redelegation does not extend to Headquarters-initiated
cases.
000313
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. Q.C. 20460 /
NOV 3 £34
ORTCECF
ENPORCEMSN7ANO
COMPLIANCE ASSURANCE
M3MORAKDUH
SUBJECT: OECARegional Procedures for Civil Judicial and
listrative Enforcement Case Redelegation
FROM: ' Roftn, Director
Office of Regulatory Enforcement
TO: Deputy Regional' Administrators , Regions I - X
Regional Counsel, Regions I --X
Regional Program Division Directors, Regions I - X
I. * INTRODUCTION . "
Attached for your reference and use are 'the procedures for
implementing Steven Herman's July 11, 1994 memorandum on
"Redelegation of Authority and Guidance* on Headquarters
Involvement in Regulatory Enforcement Cases" ("Redelegations
Memorandum") . The attached materials also include media-specific
examples of nationally significant enforcement issues, a key
concept in the rede legations. We expect that the redelegations
will result in a substantial net reduction of single Region cases
in which OECA's Office of Regulatory Enforcement (ORE) 'will be
significantly involved, including a substantial decrease in the
number of settlements requiring OECA/0RE concurrence. "As, a
result, we will be able to focus our involvement on. a far smaller
number of truly nationally significant cases.'
The attached materials result from extensive discussions
aaong the various ORE Divisions and regional program divisions
and counsel offices. We would like to take this opportunity to
thank all of the regional personnel who worked so cooperatively
with us over the last two months to develop ^ both the general
cross-program orocedures and the media-specific lists and
criteria for defining nationally significant issues and cases.
We exoect these procedures to evolve based on our mutual
experience with them, and plan to regularly re-examine and revise
them as necessary.
Our intent through these procedures is to lay out a
consistent process for identifying to OECA those
regionally-Initiated judicial and administrative cases t~ai:
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- 2 -
present issues of national significance. . Specifically, the
procedures require regional staff to work with the ORE Divisions
and reach agreement oh the appropriate level and extent of
ORE/OECA's formal role in enforcement case management. In
developing these procedures, we have been guided by the following
principles set out in the Redelegations Memorandum:
(1) that OECA will focus its efforts and resources on those
cases where OECA can add value,
(2) that OECA's involvement will be reserved for cases and
issues of natjonal-significansej ' .
(3) that for judicial and administrative cases" that seek a
' bottom line penalty of less than $500,000, the Regional
' Counsel will be delegated the Assistant Administrator's
authority, to concur on -settlements^ undertaken Jby the
Regional Administrator (or the Regional Division
Director,- where the Regional Administrator's authority
has been redelegated), provided that the settlements
adhere to national policy and do not otherwise raise
issues of national significance;
(4) thgt p£gA will be flexible In determining the.
appropriate -level of involvement (e.g., ORE has the
flexibility to opt out of a case with a bottom line
penalty greater than or equal to $500,000 where there
are no issues of national significance and the case is
not likely to assume a national profile); and
(5) that OECA will be conducting systematic oversight of
. the Regions through Regional evaluations rather than
focusing exclusively on a case-by-case "real time"
.review approach to determine the extent to which
Regions are complying with^national policy and the
requirements of the redelegations.
Finally, in keeping with the spirit of the redelegations, w«
want to ensure that ORE'S .involvement in specific cases makes
sense, and that we facilitate effective and efficient resolution
of any issues. Regional comments have greatly assisted in
designing a cross-program process which provides an opportunity
for ORE involvement where appropriate. We appreciate the
significant input received from-you and your staff, and hope that
this constructive dialogue will continue.
II. SUKKARY CHART
The first attachment ("Attachment A") is a chart that
summarizes the general ORE/Regional procedures for determining
ORE'S formal involvement in individual Region cases. The chart
provides a quick overview of the general cross-program
0003
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- 3 -
procedures, but -necessarily leaves out many important details
Accordingly, Attachment B (below) must be consulted to ensure*
•satisfaction of all requirements.
III. GEHERAL PROCEDURES
The next attachment ("Attachment B"), entitled-"Outline of
General Procedures for Regional Enforcement Case Delegation "
contains a,full description of the general ORE/Regional
procedures for determining ORE'S formal .involvement in Regional
civil judicial and administrative enforcement cases. These
procedures were thoroughly vetted in an ORE/Regional workgroup
that included representatives from all ten Regions, from both the
Office of.'Regional Counsel and from various program divisions.1
In accordance with Steve Herman's Redelegations Memorandum, the
• procedures emphasize trust, common sense and streamlining, while
at the same time ensuring that decisions regarding OHS's case
involvement are adequately documented.
For example, in judicial cases Regions will use an already-
existing section in the referral's litigation report to both
document and notify ORE of nationally significant issues in the .
cases. For administrative cases, a simple one-page form will
serve as documentation and notice. (For federal facilities
cases, Regions should forward the one-page form to the Director
of-OECA's Federal Facilities Enforcement Office.) Moreover, for
judicial and administrative cases with bottom line penalties
below $500,000, ORE will require notice only if the cases present
nationally significant issues. Of course, because ORE will not
otherwise receive formal notice regarding these cases, the Office
of Regional Counsel (ORC) must provide adequate advance notice of
subsequent significant developments in the litigation (e.g.,
trial or settlement) and of significant press or other public
attention.._
Regarding administrative. cases "with nationally significant
issues, the procedures offer some flexibility regarding the
•timing of coordination with ORE by requiring Regions to notify
ORE of such issues before filing the administrative complaint if
at all possible, but no later than concurrent with filing.
Again, this accords with the Redelegations Memorandum's emphasis
on early warning, trust and common sense: we expect that in most
situations pre-filing notice will be achievable, but where not,
1 With regard to the procedures, I want to thank Tom Olivier
of Region I, Wilkie Sawyer-of Region II, John Ruggero and Mary Co«
of Region III, Nancy Tommelle.o and Truly Bracken of Regioni IV, Jo«
Boyle of Region V, Pam Phillips of Region VI, Chuck Figur from
Region vxn, Ann Nutt of' Region IX and Meg. Silver of ^gion X.
These Regional representatives were critical in developing a
unWav.1 - _..__ f._ ^_^ij&mAift-'inrr •t-hA Tedeledations.
e egona represena
workable process for implementing the redelegations.
000317
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- 4 -
concurrent notice will be sufficient., (There may be very rare
occasions where even concurrent notice is not achievable; in such
circumstances, notice as close as possible to concurrent with
filing will be adequate.)
In almost all circumstances, the five ORE Divisions^will use
these general cross-program procedures in order to simplify
implementation as much as possible. In a few narrow
circumstances, media-specific procedures have been established
(see Attachment C below). These variations are noted in the
attached media-specific guidances,"which also identify
appropriate individuals to contact within each Division.
Moreover, to further streamline these procedures, the Air
Enforcement Division is experimenting with "categoric opt outs"
for certain classes of long-established, familiar cases such as
Clean Air Act Asbestos NESHAP demolition/renovation actions.
These cases will be presumed not to be nationally significant
even if their bottom line penalties are above $500,000.
Accordingly, Regions will not be required to seek ORE concurrence
unless the cases present some other, separate nationally
significant issue. (This approach is described in detail in the
cross-program procedures.-) As with other cases for which OECA is
receiving no formal notice, ORC must, provide adequate advance
notice through other avenues of communication, including the
weekly Regional Counsel reports to the.Assistant Administrator,
of major litigation milestones (e.g., settlement, trial) and of
significant press or other public attention. Based on our
experience with these categoric opt outs, we may expand them to
cover other selected categories of cases in Air or other media.
IV. MEDIA-SPECIFIC GUIDANCE AMD NATIONALLY SIGNIFICANT
ISSUES LISTS
Also attached, are memoranda frog each of ORE'S Divisions
that outline media-specific contacts and procedures' where
appropriate, as well as media-specific examples of nationally
significant issues ("Attachment C"). Please note .that the ,
Redelegations Memorandum itself contains an attachment with
general guidelines for identifying nationally significant issues
("Attachment D") . The media-specific examples are intended to b«
used together with the general guidelines; some of the lists of
examples include, a listing of the general guidelines for
convenience. The media-specific .examples will be updated
periodically to remove or add issues as appropriate.
V. MULTI-MEDIA CASES ...
In the interests of streamlining, OECA is seeking to
establish a system whereby, absent extenuating circumstances.
Regions would need to coordinate with a single office or division
that would serve as the lead on a particular case. For cases
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- 5 -
brought under multiple statutes (except those brought against
federal facilities), the Regions should contact ORE's Multi-Media
Enforcement Division, which will coordinate with other OECA
offices and divisions as appropriate.
VI. FEDERAL FACILITIES CASES -•
As listed in Attachment B to the Redelegations Memorandum.
federal facilities matters raise indicia of national
" significance. OECA's contact in federal facilities cases is
through the Federal Facilities Enforcement Office (FFEO) rather
than the office of Regulatory Enforcement, otherwise, procedures
in federal facilities cases match those in other nationally
significant cases. Thus, Regional Counsels should consult with
.FFEO regarding federal facilities enforcement cases. Where the
Region is assessing a bottom line penalty of less than $500,000
the Director of FFEO or a Division Director level designee may
opt in for'purposes of concurrence. Where the bottom line
penalty is $500,000 or more, the Director, of FFEO, at the Office
Director level, may opt put of the case for purposes of
concurrence. In federal facility cases that present issues of
.national significance in other program areas, FFEO will take the'
lead and will work with other OECA offices and divisions, as
appropriate, to address the .issues.
The above-described process does not alter the procedures in
'the "Guidance on Coordination of Federal Facility Enforcement
Actions with the Office of Enforcement" dated October 20, 1992,
which continue as before, and provide for notice to the Director
of FFEO as early a possible before certain actions are taken or
announced against either federal agencies or their contractor-
operators.
VII. CURRENT ENFORCEMENT DOCKETS
* j^^^i ^^ ^MI
Because the Redelegations Memorandum applies to all
enforcement cases, the. attached procedures and guidance apply to
both pending and new cases as of November 1, 1994. Accordingly,
for newly-initiated cases, we ask .that you implement the
procedures immediately. For all existing judicial and
.administrative cases, Regions should, focus their initial efforts
on evaluating cases with"near-term, action-forcing events, such
as hearings, trials, filing of dispositive pleadings or
settlements, that will occur within the next 60 days. For other
existing judicial cases, the ORE Divisions will be working with
000319
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- 6 -
the Regions to review the judicial dockets and identify those
cases in which ORE will continue to be involved; this should be
completed no later than January 3, 1995.2 .
With regard to all "existing administrative cases that do not
have near-term, action-forcing events, we ask that by January 3,
1995, the Regions evaluate each case, complete the "Standard Fora
to Specify office of Regulatory Enforcement Involvement in
Cases"3, and submit the completed form to the' appropriate ORE
Division if required by the cross-media procedures. Because ORE
may receive a very large number of forms all at once, each of
which will require discussions between ORE and Regional staff, we
will process these forms within 30 days rather than 10 days
(sooner if possible).- Future administrative case forms will be
processed within 10 days in accordance with the cross-program
procedures. '
In closing, we want to emphasize that each ORE Division will
work closely with their colleagues in the Regions to help ensure
that implementation of the attached procedures is as smooth as
possible. We want to facilitate issuance of strong enforcement
cases within each Region — that's our bottom line. .We intend to
approach the implementation of the procedures in that spirit.
Again, thank .you for your assistance and we look forward to
working with you on this.
Attachments ' •
cc: Steven Herman
Scott Fulton
Michael Stahl
OECA Office Directors
John Cruden, DOJ
Bruce.Gelber, DOJ
Joel Gross, DOJ
2 In some programs (e.g., Air- and Water), much of the work to
evaluate the existing judicial docket has already been done. For
such programs, we anticipate that the reviews will be completed
well before January 3, 1995c
3 See the cross-prograi ... . sedures (Attachment C) at page 8.
'" " ' 000320
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Summary of .EPA Enforcement Cnsc Rcdclcgntion Procedures
CNJ
K->
O
O
O
xVxA
" VA
V/Types
plSbf"
Peases'
Judicial
Cases
$500,000
and over
\ \ **• * f ' -
; Judicial Referral or Adiiiinisfrntivc Complaint Stage -i
-------
OUTLINE OF GENERAL PROCEDURES FOR
REGIONAL ENFORCEMENT CASE REDELEGATION
*
, ' November 1, 1994 . .
I. JUDICIAL CASES W/ BOTTOM LINE PENALTY 'Of S500.000 OR
A. Referral Stage . ' . .
1. Region identifies ease with nationally significant
issues.1 . . ' • .
» - *
Timing: At same time Region sends referral (i.e., a
direct/indirect referral/ pre-referral negotiation package,
or consent decree enforcement package) to Department of
Justice (DOJ), Region will send referral to Office of
Enforcement and Compliance Assurance (OECA) as notification
of nationally significant issues in case.
' ' * * • '
• Method: Office of Regional Counsel (ORC). will describe and
discuss nationally significant issues,in referral's
litigation report, 'in a separate section that already exists
for this purpose. Region will provide OECA will full •
' referral package, including attachments.
Decision on Extent of Involvement: Appropriate .Office of
Regulatory Enforcement (ORE) Division within OECA will have
30 days after receipt of notice for 'ORE review. Within this
timeframe, ORE staff or branch chiefs, as appropriate, will
discuss case with Regional counterparts and seek agreement
on the extent and duration of OECA involvement, e.g.,
concurrence or consultation, to be followed by letter from
ORE pivision Director to Regional Counsel (RC), memorializing
agreement.2 ORE pivision Director can also opt out of case
entirely where appropriate. "tl Division DirectozT'and. RC
cannot agree, elevation to ORE Office Director.
1 "Case with nationally significant issues" includes all
nationally significant cases or issues as defined in the
.guidelines attached to Steve Herman's July 11, 1994 Redelegations
Memorandum and in the various media-specific issues lists
prepared by the Office of•Regulatory Enforcement.
2 "OECA.involvement" refers only to OECA's formal role in
enforcement case management, not.to informal ORE/Regional
communications or activities of other OECA offices (e.g., Office
of Compliance). • • ,
000322
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- 2 -' '
2. No nationally significant- issues. .
• *
Timing: At same time Region sends referral to DOJ; Region
sends referral to OECA as notification that there are no
nationally significant issues in case.
• . «•
Method: In already-existing section of litigation report,
ORC will state that there are no nationally significant
issues in case, and recommend that OECA opt out. Regions
.will provide OECA with data sheet and litigation report, but
no referral attachments. OECA will request attachments as
' •' necessary.
* •
Review of determination: Appropriate ORE Division will have
30 days, after receipt of notice to review the ORC
recommendation and decide whether OECA will opt out. If ORE
agrees, the ORE Division Director will inform the RC via a
form letter and' opt out of the case.3 if ORE id&ntifies
• nationally significant issues, the ORE staff or branch
chiefs, as appropriate, will discuss them with Regional
counterparts and seek agreement on the extent and duration
of OECA involvement, to be followed by letter from the ORE
Division Director to RC memorializing agreement. .If
Division Director and RC cannot agree, elevation to ORE
Office Director. ' . . •
3. No nationally significant .issue, and a categoric opt out
case (for example/ Clean Air Act Asbestos MESEAP
demolition/renovation cases). •
Timing: At same -time Region sends referral to DOJ, Region
will make and document determination that the case contains
no .nationally significant issues and that it falls within a
pre-approved category of opt outs, but no requirement to
send referral to OECA as notification.
Method: In already-existing section of litigation report,
ORC will make and document determination that the case
contains no nationally significant issues and that it falls
within a.pre-approved category of Opt outs. Regions not
required to provide litigation report or other portions of
referral. Because OECA is receiving no formal notice of
these cases, ORC must provide adequate advance notice
arises
as
3 Since after this point ORE will no. longer be formally
involved in the. case unless, a nationally significant issue ax
later in the proceedings, ORC will need to provide OECA with
early notice as possible regarding subsequent significant
developments in the litigation (e.g., trial or settlement) and
significant press or other public attention. .This applies to all
instances where ORE opts out of a case.
000323
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- 3 -
••> f
• •
through other avenues of communication, including the weekly
RC reports to the Assistant Administrator/ of major .
r litigation milestones (e.g., settlement, trial) and
significant press or other public attention..
Review of Determination: • ORE will review categoric opt out
determinations during Regional audits.
B. Post-Referral stages (in cases where OECA originally
opted out)
Note: The redelegation itself states that the Regional
Counsel are responsible for identifying nationally
significant issues "as they arise", and* for informing OECA
"as soon as they are identified." Accordingly, even where
OECA has originally opted ouc of a case, there is a
continuing obligation for the RCs to inform OECA of any
nationally significant issues that emerge during the course
of litigation. This approach accords with the. Redelegations
. Memorandum's overall insistence on flexibility and common
sense.
, *
Timing: As soon as issues identified.
- f
Method: As informally as possible, with emphasis on trust,
common sense, and providing the earliest possible warning of
new issues, rather than .on written notice. For example, a
phonecall from ORC to ORE branch chief • could serve as
notice. .
Decision on Extent of Involvement: ORE staff, or branch
chiefs, as appropriate, will discuss case with. Regional
counterparts and seek agreement on the extent and duration
of OECA involvement, e.g., concurrence or consultation.
Agreement will be memorialized by letter from ORE Division
Director to RC as soon as possiEle, generally within-30 days
af ;er notice; however, first priority will be quick response
to new substantive issue. ORE Division Director can al,so
decide where appropriate that ORE will have no involvement.
If Division Director and RC cannot agree on approach,
elevation to ORE Office Director.
00032^
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-.4 -
II. MHINISTR&TIVE *™ PROPOSED-OR BOTTOH LINE
Note: Only Toxics and RCRA cases presently fall into this '
category. - • .
A. Filing Stage
1. Region identifies nationally significant issues. .
^ » ~ *
.Timing: As soon as Region becomes aware of issue. The
preference is that the issue be raised prior to filing the •
complaint, but no later than concurrent with filing.5
Ketbod: One page form signed by the Regional Counsel or
designee identifying issues and proposing level of ORE
involvement, sent to appropriate ORE Division. Region will
also provide proposed or 'filed complaint, decision "memo
and/ or other existing information to parallel information
provided in judicial referral.
•
Decision on Extent of Involvement: within 10 days of
receipt of notice, ORE staff or branch chiefs, as
appropriate, will discuss case with Regional counterparts
and seek agreement on the extent and duration of OECA
involvement, e.g., concurrence or consultation, to be
followed by ORE Division Director or designee, as
appropriate, countersigning and returning one page form
.- rather than sending separate letter. (If after discussions
ORE decides to opt out, the ORE Division Director must
countersign.) Note that the administrative complaint can be
filed before ORE countersigns form. Countersigned form will
be kept in Regional files. Disputes would be elevated to
ORE Office Director.
2. Ho Nationally significant 'Issues
Timing: Same timing as above. Region will notify ORE, that
no such issues appear in case.
.* If the Region has proposed a penalty in the .,.__
administrative complaint without calculating a separate Bottom
line penalty, the proposed penalty should be used. If a separate
bottom line penalty has been calculated, it should be used
instead. See Redelegations Memorandum, p.3.
For a few small classes of RCRA cases specified in the
000325
-------
- 5 -
Method: Sane form as above, but will state that there are
no nationally significant issues and recommend that ORE opt
out of the case. Regional Counsel, not designee, must sign
form because ORC is recommending that ORE opt out.
Decision on Extent of Involvement: Same as :abqve, except
that ORE Division Director, not designee, must countersign
form if ORE opts out. This parallels the procedure for
opting'out in judicial cases over $500,000 (I.A.2. above).)
B. Post-Filing stages (in cases where OECA originally
opted out ' ; • .
Timing: As soon as issues identified;
Method: One page form signed by the Regional Counsel or
designee, sent to appropriate ORE Division. (Note that
using this form, the same as for other stages of the
administrative program, will eliminate the need for a
separate return letter from ORE to ORC.)
Decision on Extent of Involvement: Within 10 days of
receipt, of notice, ORE staff, or branch chiefs, .as
appropriate, will discuss case with Regional counterparts
and seek agreement on the extent and duration of OECA
involvement, e.g., concurrence or consultation, to be
followed by ORE Division Director or designee, as
appropriate, countersigning and returning one page form.
(If ORE decides to have no involvement, the ORE Division
Director must countersign.) Countersigned form will be kept
in Regional files. Disputes would be elevated to ORE Office
Director. " •
JUDICIAL CASES WITH BOTTOM LIKEJPEKALTY UNDER $500.000
Note: Both the Redelegations Memorandum and the
redelegation itself make clear that it is the Regional
Counsel's responsibility to identify nationally significant
issues in all single Region judicial and administrative
enforcement cases below $500,000. VThe Regional Counsel
will, in the first instance and in keeping with this
guidance, make and document the determination whether such a
matter raises an issue of national significance."
Redelegations Memorandum, p.3. "The Regional Counsel are
.responsible in the first instance for identifying such cases
and/or issues as they arise ...." Redelegation, p.2.
The proposed implementation plan for these cases (described
in detail below) would require ORC to formally notify ORE
only if the case contained a nationally significant issue.
For a case with no such issues, RC would still need to make,
000326
-------
- 6 -
document "and file.its determination, but would not have to
notify ORE of the case. ' ORE and the Regions would continue
to develop informal avenues of communication.' ' '
A. Referral Stage
1. .Region identifies nationally significant issues.
Timing: At same time Region sends referral-to DOJ, Region
will send referral to OECA as notification, but only if
there are nationally significant issues in the case.
*
Method: Office of Regional Counsel (ORC) will describe and
discuss nationally significant issues in referral's
. . litigation report, in a separate section that already exists
for- this purpose. Region will provide OECA will full
referral package, including attachments.
Decision on Extent of Involvement:. Same as for. judicial
cases over $500,000. Within 30 days of receipt of notice,
ORE staff or branch chiefs, as appropriate, will discuss
case with Regional counterparts and seek agreement on the
extent and duration of OECA involvement, e.g., concurrence
or consultation, -to be followed' by letter from ORE Division
Director to RC memorializing agreement. ORE Division
Director can also opt out of case entirely where
appropriate. If Division Director and RC cannot agree,
elevation to ORE Office Director.
2. No nationally significant issues. •
Timing: At same time Region sends referral to DOJ, Region
will make and document determination, that the case contains
no nationally significant issues, but no requirement to send
referral to OECA as "notification. ...
Method: in already-existing section of litigation .report,
ORC will make and document determination' that the case f
contains no nationally significant issues. Region not
required to provide litigation report or other portions of
referral. Because OECA is receiving no formal notice of
these cases, ORC must provide adequate advance notice
through other avenues of communication, including the weekly
RC reports to the Assistant Administrator, of major
litigation milestones (e.g., settlement, trial) • and
significant press or other public attention.
*
Review of determination: ORE Divisions will review
determinations during Regional audits.
000317
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- 7 - '
".
B. Post-rilina Stages feases v/ no prior OECA involvement)
Timing, method and decision on extent of involvement will be
same as for judicial cases above $500,000 (I.B. above),
except that letters memorializing 'agreements could be from
ORE to ORC Branch Chief rather than from ORE Division
Director to RC: ORE DD must still sign letter if ORE
decides to have no involvement .in case.
V. ADMINISTRATIVE CASES WITH PROPOSED OR BOTTOM LINE PENALTY
OF UNDER S500.000
" • \ ,
A.- Piling Stage : ' ' .''"
1. " Region identifies nationally significant issues.
Timing, method and decision on extent of involvement same as
for administrative cases over $500,000 (II.A.I. above).
• i
2. No nationally significant issues.
Timing: In same timeframe as for administrative cases over
$500,000, ORC will use one page form to make and document
determination that there are no such issues in case, but no
requirement to provide OECA with form as notification.
Method: ' Same one page form as above, but will state that
there are no nationally significant issues. Regional
Counsel or designee will sign form, which will be kept in
Regional files. Because OECA is receiving no formal notice
of these cases, ORC must provide adequate, advance notice
through other avenues of communication, including the weekly
RC reports to the Assistant Administrator, of major
litigation milestones' (e.g., settlement, trial) and
significant press or other public attention. <"!~"
* * ~"'.
Review of Determination. ORE Divisions will review
determinations during Regional audits. . •
B. Post-Filing Stages feases v/ no prior OECA involvement)
. Timing, method, and decision on extent of.involvement could
be same as for administrative cases over $500,000 (II.B.
above), except that ORE DD or designee can countersign fora
if ORE decides to have ho involvement.
000328
-------
* * * HOVIt£GED/CONEmEKtlALaX) NOT RELEASE TINDER FOIA * * *
Standard Form to Specify Office of Regulatory Enforcement
Involvement in Cases i
Case name:
Location of facility: City___ . State , "Region
Forum (cheek one): ' - ' :
ALJ'(or other presiding officer) EAB
District or Circuit Court (specify District/Circuit:._. _. )
Status of case (check all that apply): v
Profiling, in development Dispositive pleadings imminent
Filed and pending Trial or hearing imminent
Filed and stayed Settlement negotiations ongoing '....
Filed and active
Primary Violations (narrative or listing of sections):
Nationally significant issue(s): • . . •
• •
Regional legal and program staff contacts (names, phone numbers, FAX numbers):
" . •
Nature of Office of Regulatory Enforcement involvement/assistance proposed bv Region:
Signature:
Appropriate Regional. Manager Date Signed
' ' » * .
*
Concur
Appropriate ORE Manager Date Signed
-------
000330
-------
UN1TB> WA™
AUG 9
MORANDUM
SUBJECT: Documenting Penalty Calculations and Justifications in
EPA Enforcement
FROM: Janes M. S1
Assistant Administrator
.TO: • Addressees . .
This, memorandum institutes a uniform system for documenting
penalty calculations and explaining how they are consistent with
the applicable penalty policy in all EPA enforcement actions. It
expands on the September 14, 1987 Guidance on Processing of
Consent Decrees (GM-64) and requirements .in several media
specific penalty policies. The system will allow regional and OE
management "to assure that EPA settlement agreements comply with
applicable penalty policies, and will provide documentation for
our actions for.purposes of oversight review. The memorandum
sets out the information regarding the penalty which must be
discussed at each stage of litigation. The exact format of the
.discussion is left to the discretion of each program. All
discussions of. the .agency's settlement position regarding
penalties are, of course, strictly enforcement confidential
workproduct, should be clearly labeled as such and should not be
released. .
• Effective immediately, every settlement package transmitted
from the Regional Administrator or^Begional Counsel to
Headouarters for'concurrence must include, a written "Feinalty
Justification-" This should include an explanation of how the
penalty, including the economic benefit and gravity component,
was calculated. The Region should then discuss in detail the
justification for any mitigation of either component. In
particular,'reference should be made to the'factor or language in
the penalty policy that is relied upon to justify the mitigation,
and a discussion must be included detailing why mitigation is
warranted in the particular case. • For administrative cases, a
Penalty Justification should be prepared for circulation within
the Office of Regional Counsel with a final consent agreement or
order. It may not be circulated to the agency official who signs
the final order as the presiding agency official, usually the
Regional Administrator, because it could constitute/* Mrtl
communication'which would have to be shared with defendants under
40 C.F.R. Part 22.
FES 2 5 1393
000331
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- 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
required discussion of the penalty is contained in the litigation
report or subsequent correspondence between the ORC and OE, the
settlement package from the Region may reference this discussion
along with an attachment of the previous documentation.
A similar discussion of. Penalty Justification should also be
included in every settlement package transmitted from the
Associate Enforcement Counsels for the signature of the Assistant
Administrator. The Headquarters staff may, however, reference
the discussion in the regional memorandum when it is sufficient.
Seriously deficient Penalty Justifications will be returned to
the Region to allow a proper analysis to be prepared, be fore 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 OS 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 vill begin with the litigation report, which
should include the penalty proposed by the Region initially. The
litigation report should clearly indicate hov 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 vill then determine if
OS concurs vita the. penalty proposed by the Region in reviewing
the referral* OK.concurrence vill be documented in writing,
placed;la* the OB case file and provided to the Region. If oi
does imj* .concur with the penalty proposed by the Region in the
referrmJS the) assigned OB attorney vill prepare a memorandum to
the Region stating with specificity the basis (as) of the
nonconcurrence. . • • .
Once the enforcement action is initiated or pre-filing
negotiations begin, the). litigation team should document any
agreed upon changes to the bottom line penalty based upon new
information'or circumstances which arise during the course of the
enforcement action. This documentation must, at a minimum.
000332
-------
.. ' ' - 3 -
Include a memorandum to the file recording how both the gravity
and economic benfefit 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
will 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 enfgrcement programs. overall. It also
will ensure that every regional case file and all OE files in ,
cases in which OE is .involved have written documentation of how
the penalty obtained was calculated and justified in terms of the
penalty policy. This 'is essential for reviews or audits "of our
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. Stewart
Ass istant Attorney General w•, 4.«--
Environment and Natural Resources Division
U.S. Department of Justice
00033
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000334
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
yfMORANDUM OFFiCeOFENFOHCEMENT
SUBJECT: Credentials Certification-policy
FROM: Raymond B. Ludwiszewsici
Acting Assistant Administrators*
TO: Regional Administrators, Regions I - X
This policy establishes minimum requirements for a
credentials certification program for EPA technical enforcement
staff prior to their designation or use as Agency witnesses.
packaround
In August 1990, this office developed an options paper for •
establishing a credentials certification program for EPA
technical enforcement staff. We distributed this options paper
to the Regional Counsels for their initial reactions. The paper
reviewed issues and options for establishing an EPA policy to
require our technical enforcement personnel to certify the
accuracy of their credentials. The need for this policy was
underscored this past summer when we discovered that our main
factual and expert witness on two water cases in one Region had
misrepresented her academic credentials in a deposition and in an
affidavit.1
The comments we received on the options paper raised a
number of concerns, primarily related to resource investment. In
accordance with these comments, we modified the initial program
to reduce resource costs by allowing for greater regional
flexibility in implementation. We distributed a draft of a
revised credentials certification policy on February 15, 1991,
for review to all Regional Counsels and Deputy Regional
Administrators. Seven Regions responded to this modified policy,
two of which were pleased with the revised policy and had no
substantive comments. Two Regions continued to express some
concerns about the resources needed to implement these
certification requirements.
1 The employee has since resigned from the agency, been
indicted by a federal grand jury, and pled guilty to one count of
perjury. She was sentenced on May 17, 1991 to six months home
detention, five years probation, and a $2,000 fine.
-.-.v, "• fnc:cie-j Pjptr
000335
-------
- 2 -
In contrast, another Region was concerned that the revised
policy's reliance on a visual examination of a framed degree
would not be adequate to determine if the degree was authentic
and from an accredited institution. While this may be a valid
concern, given our limited resources and the fact that we have
not to date encountered any instances in which an employee has
secured a degree through fraudalent means, we are prepared at
this juncture to rely upon visual examination of degrees as a
minimum certification. ""
Another Region pointed out that even if personnel offices
are performing an appropriate credentials review at the time of
hiring, a problem may arise when an employee obtains additional
credentials during his or her tenure at EPA. Since these new
credentials would not have been subject to the initial hiring
scrutiny, this Region suggested each Region require a periodic
(e.g., yearly) sworn credentials update by each employee. We
agree that keeping track of changes in credentials is a problem
area.' The suggested annual update to address the problem
appears to be a reasonable approach. It should work best if
employees are required to provide official copies of the
supplemental credentials to the personnel office or another
central office. Regions are free to use this approach or they
may rely on the ORC attorney initiated certification checks
conducted before an EPA employee is identified as a witness.
Several Regions expressed support for working with personnel
offices to ensure that adequate procedures are in place for
verifying credentials at the time of hiring. Further, one Region
pointed out the need to apply the policy to headquarters
witnesses and to OE attorneys when OE attorneys are the lead
attorney on the case. We found these and other comments helpful,
and the final policy has been revised accordingly.
In summary, as we all recognize, there is a trade-off
between resources that may be devoted to implementing a
certification program and the risk of a potential credentials
falsification incident. We believe that we could not design and
implement a certification program that would completely eliminate
the risk of falsification. Thus, we have tried to structure a
policy that will significantly reduce the risk of future
credentials falsification problems without unduly straining
limited enforcement resources. The policy should be flexible
enough to allow each Region to develop an appropriate credentials
certification program.
* Indeed, this was the situation which caused the recent
perjury incident.
000336
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- 3 -
We are now asking each Region to estat^ish a program thai-
afr. a minimum, satisfies three basic requirements7 —"*—'
L». Certification Check
Each Office of Regional Counsel must establish procedures by
which the ORC staff attorneys perform a credentials check of all
EPA witnesses in our enforcement cases ^ before an EPA employee or
contractor is allowed to sign an affidavit/declaration, be
deposed, or testify on behalf of EPA. Similarly, we would not
submit a list of witnesses to the opposing side (for a judicial
trial or e.n administrative hearing) until the litigation team had
verified the accuracy of the credentials of all of our witnesses.
Each ORC attorney may ask the immediate EPA supervisor of,
or the contracting officer for, each witness to perform an
appropriate check of the credentials of his or her employee, or
contractor, who will be a witness. The verifying official may
perform this credentials check either by asking to see the
person's credentials (e.g., degree) or by calling the awarding
institution. If the degree or professional accreditation is on •
display in our witness's office, the credentials check may be as
simple as reviewing the displayed credentials. If the verifying
official has previously verified the employees's credentials,
there will be no need to perform another check (assuming the
employee's credentials have not changed). Alternatively, the
Region may establish a central point (such as in the Region's
personnel or administrative office) to conduct such verifica-
tions , or the Region may decide to have ORC attorneys conduct the
credentials check themselves.1 The verifying official, if not
the ORC attorney, should document in a memorandum to the ORC
attorney, that this verification has been completed and how the
verification was accomplished. A standard form for this purpose
can be developed. If the ORC attorney does the verification, the
attorney should document this information in a memorandum to the
file.
This verification process applies to all persons who may
testify on behalf of EPA, including EPA employees in the Regions,
at EPA laboratories, or at Headquarters, and all contractors or
consultants retained by EPA or the Department of Justice. If the
ORC attorney has difficulty performing a credentials check of an
EPA witness located at EPA Headquarters, the ORC attorney should
solicit the assistance of the appropriate OE staff attorney. In
5 Since witness lists and affidavits are often prepared
during the press-of litigation, Regions should ensure that the
verifying procedures they establish can be implemented simply and
quickly.
000337
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- 4 -
cases where OE is the lead Agency attorney, the OE attorney is
responsible for performing the certification checks (with the
assistance of an ORC attorney for witnesses located in a Regional
office).
One option a Region may wish to explore is to have the
Region's personnel office do a one-time independent verification
check of the credentials of all Regional employees. If this was
done for all existing employees and new^.employees were properly
screened at the time of hiring, then ORC attorneys would only
need to verify any new or additional credentials that an EPA
Regional employee may have obtained during his or her tenure at
EPA. While this option may entail the expenditure of
considerable resources initially, in the long run it may save
resources and will minimize the need to do full credentials
checks during the rush of litigation.
2. Education and Training
Each Region should educate their enforcement staff on the
importance of truthfully representing their credentials in all
dealings with the public, including enforcement cases. All
employees should be informed of the negative consequences of
falsification of credentials, both to the Agency and to the
individual. Specifically, employees should be reminded what
constitutes perjury, that it is a felony to lie under oath, and
that falsification or even exaggeration of credentials may be
grounds for immediate removal from their jobs and referral for
criminal prosecution. In addition, employees should be reminded
of the importance of truthfully stating their professional
opinions. This information could be communicated via a
memorandum to all Regional employees and should be integrated
into Regional training programs. The Office of Enforcement will
be stressing these same points in our basic inspector training
manual.
3. Personnel Procedures
Each Region should set up a meeting to review how its
personnel office verifies that EPA Regional employees have the
credentials they claim they have at the time of hiring. Please
emphasize to your personnel offices the importance of their role
in independently verifying credentials.
These three requirements must be institutionalized as part
of each Region's standard operations and should be reviewed
periodically to ensure that the procedures are being implemented.
Please keep in mind that these three requirements are only a
minimum and by themselves may not be a perfect system for
eliminating the risk that the Agency will be hurt by a
misrepresentation.
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- 5 -
Required Action
Each Region should complete implementation of these
procedures by August 15, 1991. Please advise me by no later than
August 30, 1991, of the actions you have taken to implement this
policy. If you have any questions regarding this policy, you may
call Scott Fulton, Director of Civil Enforcement, at 382-4540.
David Hindin is the OE staff attorney "contact, 475-8547.
Thank you for your cooperation and assistance.
Attachment
cc: Regional Counsels, Regions I - X
Charlie Grizzle, OARK
Associate Enforcement Counsels, OE
Robert Heiss, OE
Frank Covington, OE (NEIC)
John Cruden, DOJ
000359
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From In the Matter of Celltech Media. Inc.. aka Health Care
Products. Inc..Docket Nos. FIFRA 95-H-04, FIFRA 93-H-02F, and
I.F.& R. VIII-90-279C, Complainant's Prehearinq Exchange (Feb.
26, 1996) ,
IV.PENALTIES
Although Complainant will present at hearing factual
evidence relevant to the determination of a proper penalty for
the violations charged, Complainant does not intend to have a
witness testify to the appropriateness of the proposed penalty
unless directed to do so by the Presiding Officer. The
appropriateness of the penalty is more an issue of statutory
interpretation than of fact. Interpretation of statutory
language is an issue of law and policy, not an issue of fact.
See generally Stissi v. Interstate and Ocean Transport. 765 F.2d
370, 374 (2d Cir. 1985), and International Society for Krishna
Consciousness v. Rochford. 425 F.Supp. 734, 739 (N.D. 111. 1977).
It is improper for a witness to present "evidence" on legal
issues in an evidentiary hearing. See Adalman v. Baker. Watts &
Co. 807 F.2d 359, 368 (4th cir. 1986); Marx & Co.. Inc. v.
Diners' Club. Inc.. 550 F.2d 505, 510 (2d Cir. 1977) (_expert
testimony on law is excluded because _the tribunal does not need
the witnesses' judgment...the judge (or the jury as instructed by
the judge) can determine equally well...._ The special legal
knowledge of the judge makes the witness1 testimony
superfluous._); McCormick on Evidence. § 12 at 26-27 (Such
testimony "amounts to no more than an expression of the
[witness1] general belief as to how the case should be
000340
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decided."). Any challenges to Complainant_s interpretation and
application of the statutory factors in penalty assessment should
%
be made through legal and policy arguments rather than through
argument with a fact witness. Arguments as to the merits of the
Agency's assumptions and statutory interpretations are properly
presented in briefs and oral argument.
Complainant_s argument for the appropriateness of the
proposed penalties in these consolidated cases is presented
below.
A. The Statutory Factors
FIFRA strictly regulates the sale, distribution and use of
the one category of toxic chemicals whose specific, intended
purpose is to cause harm to living things. Section 14(a)(1) of
FIFRA, 7 U.S.C. § 1361, states that a registrant, commercial
applicator, wholesaler, dealer, or distributor of pesticides may
be assessed a civil penalty of up to $5,000 for each violation of
FIFRA. In determining the amount of the penalty, FIFRA requires
that the EPA consider the appropriateness of the penalty to the
size of the business of the person charged, the effect of the
penalty on the person's ability to continue in business, and the
gravity of the violation. (FIFRA section 14(a)(4), 7 U.S.C. §
1361(a)(4))
1. Gravity
FIFRA does not define _gravity of the violation^ but it is
reasonable and appropriate to interpret this expression as
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encompassing the concepts of risk, harm, and culpability. Risk
is commonly defined as the combination of the probability of an
adverse outcome occurring and the severity of that adverse
outcome. The possible violations of FIFRA may be roughly ranked
in terms of their inherent risk, so that, for example, a misuse
violation would generally pose a greater risk than would a minor
error on an annual production volume report. The former example
would directly increase risk to health and the environment as it
pertains to the actual use of a pesticide in a manner that EPA
has in essence prohibited, while in the latter example the only
direct consequence of the violation is that EPA does not have the
complete and accurate information it needs to consider the risks
posed by the pesticide or to monitor compliance with FIFRA. It
would not be reasonable to construe _gravity of the violation_ in
a manner that did not give considerable weight to this sort of
ranking of the risks resulting from violations.
All violations pose some increase in risk to health or the
environment, but not all violations result in actual harm.
Although the regulatory provisions of FIFRA generally direct the
Administrator to act in such a manner as to minimize
_unreasonable adverse effects_ that expression is defined at
FIFRA section 2(bb) to mean unreasonable risk. It is appropriate
to give greater weight to risk than to harm in assessing
penalties for violations of FIFRA, in part because whether such
harms occur at all often depends on factors wholly outside the
violator_s control. For example, if two persons commit exactly
the same violation, one may result in greater harm than the other
00034:
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for no reason other than the direction the wind blows, differing
sensitivities among the exposed persons, or geese choosing to
feed in one field rather than another. Accordingly, while some
consideration should be given to actual harm, risk is a better
measure of the gravity of a violation and should be given greater
weight in assessing penalties.
It is also appropriate to give greater weight to risk than
to harm because harm is often difficult to assess. For example,
many human health harms from pesticide exposure are transient and
mistaken for something else, or else cause long-term effects that
are not manifest for years. Environmental harms such as wildlife
kills and ecosystem degradation are typically difficult to
discern and difficult to attribute to a particular event. As EPA
observed in the diazinon cancellation proceeding, the number and
frequency of adverse effects on wildlife cannot be precisely
quantified. _Due to the widespread failure to observe, report,
investigate, and diagnose bird kills, reported kills represent
only _the tip of the iceberg_ of total actual kills._ In the
Matter of Ciba-Geiqy Corp.. Remand Decision , 55 Fed. Reg. 31133,
31140 (July 31, 1990).
The toxicity of the pesticide involved in a violation also
influences the risk associated with the violation, and therefore
the gravity of the violation. Plainly, the misuse of a highly
toxic pesticide poses a greater risk than the misuse of a less
toxic pesticide.
Culpability, in its broadest sense, involves elements of
scienter, malice, recklessness, negligence, good faith, control
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over the circumstances and persons involved in the violation, and
history of compliance or noncompliance. Where culpability is
greatest, violations are treated as criminal violations. Civil
enforcement is appropriate for unintentional violations,
including violations that occur despite a person_s best efforts
to comply with the law, despite poor judgment by a person_s
agent, and despite otherwise unblemished records of compliance.
While each of these factors is relevant to the gravity of the
violation, they must be subordinate to considerations of the
risks associated with the violation. Consideration of the
purposes of FIFRA reveal why this must be so.
The overriding purpose of FIFRA is to prevent pesticides
from causing unreasonable risks. FIFRA generally prohibits sale
and distribution of pesticides unless registered by EPA, and
conditions EPA approval of registration upon an EPA determination
that:
[W]hen considered with any restrictions imposed [by EPA as
conditions of registration] ... it will perform its intended
function without unreasonable adverse effects on the
environment[, and] when used in accordance with widespread and
commonly recognized practice it will not generally cause
unreasonable adverse effects on the environment.
FIFRA section 3(b)(5).
Where Congress includes penalty and enforcement provisions
in a statute, those provisions are presumably intended to further
the purposes of the statute. As the primary purpose of FIFRA is
to reduce risk and prevent unreasonable risk, it follows that
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implementation of the civil penalty provisions of FIFRA section
14(a) should be harmonious with that primary purpose. A degree
of a violator_s culpability does not alter the risk that results
from a failure to comply with FIFRA or the regulations
promulgated thereunder. Culpability, therefore, is not relevant
to the main purpose of FIFRA. Accordingly, Congress_ goal of
reducing risks of pesticides is best furthered in penalty
assessment by making the risk of harm inherent in a violation the
predominate factor in assessing a civil penalty, while making
culpability and other factors subordinate.
2. Size of Business
FIFRA section 14(a)(4) requires that EPA consider the
appropriateness of the penalty to the size of the business of the
person charged. Size of business is not defined in FIFRA, but
could reasonably be measured in terms of assets, number of
employees, quantities of pesticides used and/or produced, number
of pesticides used and/or produced, etc. A financial measure
seems the most appropriate choice in light of the financial
nature of civil penalties, and gross revenue is the best-defined
and most easily accessible financial measure of the size of
businesses.
Once a method of determining the size of a business is
selected, one must decide how to take it into account. One way
to take the size of a business into account would be to make
penalties directly proportional to the size of the business, but
this would make precise quantification of the size of business a
00034
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key issue in every case. An alternative approach of establishing
certain thresholds would avoid this burden in the majority of
cases. It is less important to distinguish between companies
with gross sales of $500,000 and $600,000 than it is to
distinguish large companies which have (or reasonably should
have) sophisticated regulatory compliance programs and smaller
companies that may not be able to afford them. A three-tier
system which distinguishes between true small businesses,
mid-size businesses with substantial resource limitations, and
larger businesses is an efficient and meaningful method of
implementing the statutory requirement to consider the
appropriateness of the penalty to the size of the business.
3. Ability to Continue in Business
FIFRA section 14(a)(4) requires EPA to consider the effect
of a penalty on the person's ability to continue in business.
The Tenth Circuit has interpreted this as placing on the Agency
an affirmative duty to include in the record evidence concerning
the effect of a penalty on the person's ability to continue in
business, even where the respondent does not contest the penalty.
Katzson Bros.. Inc. v. EPA. 839 F.2d 1396, 1400-01 (10th Cir.
1988). Section 14(a)(4), however, does not prohibit the
assessment of a penalty that would force a company out of
business, as the statute only requires that EPA "consider the
effect on the person's ability to continue in business...."
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B. Application of the Statutory Factors
Following interpretation of the penalty factors mandated
under FIFRA section 14, the next step is to consider how these
statutory factors apply to the facts of the present cases.
I. Gravity
All of the violations at issue pertain to a pesticide
registered for uses such as sterilizing surgical instruments and
disinfecting hard surfaces such as countertops, operating tables,
and medical equipment in hospitals. The risks associated with
sterilants are two-fold: There is the risk of adverse effects to
health or the environment as a result of exposure to the
pesticide, and the risks of infection when the sterilant does not
perform as expected.
EPA has established four categories based on acute toxicity,
each requiring a different signal word on the pesticide label to
alert users to the risk of acute toxicity associated with the
product. See 40 C.F.R. § 156.10(1). From lowest acute toxicity
to highest acute toxicity, the required signal words are
_Caution_, _Warning_, _Danger_, and _Poison_. WipeOut meets the
criteria of Toxicity Category I, and requires the signal word
_Danger_. WipeOut is thus among the more acutely toxic
pesticides registered by EPA, indicating that the gravity of
violations involving WipeOut should generally be considered
higher than average based on acute toxicity alone.
In the case of a sterilant, however, risks of infection
resulting from inefficacy probably exceed those associated with
000347
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WipeOut_s substantial acute toxicity. The single registered
product at issue in these actions is used for sterilization of
medical equipment used in invasive medical and veterinary
procedures. Such instruments include, for example, dental
instruments and endoscopes. These instruments, if not properly
sterilized, may transmit pathogenic microorganisms between
patients. For this reason, the efficacy of the sterilizing
solutions used on the instruments is crucial, and the gravity of
inefficacy is severe.
In addition, the multiple unregistered products are used for
many different antimicrobial purposes to protect the public from
infectious risks posed by microorganisms. None of these
unregistered products ever completed the EPA review procedure for
sterilant or disinfectant products. Moreover, no registered
glutaraldehyde based sterilant product has glutaraldehyde levels
as low as Respondent's unregistered products. Therefore, persons
relying on these products were without the expected assurance
that such products work as claimed, and consequently experienced
an unreasonable risk of infection.
In this case, as in most, it is easier to identify the risk
associated with violation than it is to identify actual harms.
It has not been possible to count or to identify the persons who
contracted diseases as a consequence of misplaced reliance on the
ineffective sterilant WipeOut. It is fortunate that WipeOut_s
inefficacy was identified through EPA_s own testing, rather by
epidemiologists investigating a disease outbreak. As discussed
above, it is appropriate in assessing penalties to give greater
000348
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weight to the risk of the violation than to actual harm.
Turning to the relative risks inherent in the specific
violations at issue, most present substantial risk. The majority
of the counts allege sale of sterilants that are misbranded owing
to their inefficacy, specifically, sale of sterilants that do not
kill pathogens as claimed. The pesticide is intended for use in
hospitals, under circumstances where risk of infection is high
owing to the routine presence of pathogens, the likelihood of
surgery and other invasive procedures, and the likelihood that
the persons and domestic animals exposed already have stressed
immune systems. Compared to the entire range of risks that FIFRA
is intended to regulate, the sale of sterilants that do not kill
pathogens as claimed poses risks that are clearly at the high end
of the spectrum.
The second largest group of counts allege sale of
unregistered products. FIFRA is at its heart a licensing law,
prohibiting the sale and distribution of pesticides unless the
pesticides satisfy the requirements for registration. In the
registration process, EPA performs risk assessments on each
pesticide, and determines the particular uses and conditions of
use, if any, that will allow the pesticide to be used without
unreasonable risk. The introduction into commerce of an
unregistered pesticide plainly circumvents the entire regulatory
and risk management system intended under FIFRA, and is therefore
a violation of considerable gravity.
Several other counts charge Respondent with misbranding by
making on behalf of the product pesticidal claims that differ
000349
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from those approved by EPA in registration. Like the sale of an
unregistered product, this violation thwarts the registration
system established by FIFRA. EPA manages the risks inherent in
pesticides by approving each pesticide for certain uses and
disallowing others, based upon a weighing of the risks and
benefits posed by each use. For each permitted use, EPA
specifies the amount of pesticide to be used, the timing of the
application, and other precautions to assure that the use does
not pose unreasonable risks.
Registrant's WipeOut Cold Sterilizing Solution bears the
following claims, among others: "May be reused as a high level
disinfecting solution and will maintain 100% efficacy for 45
days..."; "Safe for Scopes..."; "Disinfection was achieved in 15
minutes at 68 degrees fahrenheit against M. Tuberculosis and M.
bovis..."; "WipeOut activated solution may be diluted 1:1 with
water...After activation, the WipeOut solution will maintain 100%
efficacy for 45 days..."; and "For use on all hard non-porous
surfaces....11 All these claims are substantially different from
the accepted labeling for the product, and all relate to use of
the product to protect humans from infectious pathogens. The
risks associated with these differing claims is identical to the
risks posed by an unregistered pesticide product, namely that
there has been no Agency review of whether the particular use of
the product poses an unreasonable risk. This is a grave and
substantial risk, implicating concerns for public health.
Respondent is charged with failure to submit to EPA
information concerning unreasonable adverse effects of a
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pesticide, as required under section 6(a)(2) of FIFRA. _Congress
recognized that the risk-benefit balance initially performed at
the time of registration could change upon reevaluation of the
existing information or as new information concerning the risks
or benefits of a pasticide became available._ Chemical
Specialties Manufacturers Ass'n v. EPA. 484 F. Supp. 513, 516
(1980). Section 6(a)(2) assures that if, after EPA has
registered a pesticide, a registrant becomes aware of new
information which indicates that the pesticide might pose greater
or different risks than were evaluated during registration, the
registrant is obligated to submit such information to EPA for its
consideration. Depending upon the significance of such
information, EPA might seek to cancel or suspend the pesticide
registration, modify label precautions, require additional
testing, or simply wait and watch to see if the adverse effect is
confirmed elsewhere. The specific information Respondent failed
to submit to EPA was that a batch of its pesticide product did
not work when ..sed in accordance with its label instructions.
This information, withheld from EPA for more than a year, would
have allowed the Agency to take action to prevent needless risks
to the public relying on the batch of sterilant Respondent knew
to be ineffective. Moreover, by depriving EPA of this new
information concerning the adverse effects of the pesticide,
Respondent delayed EPA_s general reevaluation of the risks and
benefits posed by the pesticide,, and prevented EPA from taking
timely actions appropriate to protect health and the environment.
Respondent is charged with failure to maintain the
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underlying raw data from studies submitted to EPA in support its
registration application for WipeOut Cold Sterilizing Solution,
EPA Reg. No. 58994-1.
With respect to retention of documentary raw data and other
similar records connected with registration support data, the
Agency has concluded that such data should be retained for the
life of the registration of the pesticide. Such retention
affords both the applicant and the Agency the opportunity to
conduct further studies and investigations at any time during
which the pesticide is being used and entering the environment.
Pesticide Programs; Good Laboratory Practice Standards; Final
Rule. 48 Fed. Reg. 53946, 53961-62 (Nov. ,29, 1983).
In the absence of the underlying raw data, it is impossible
for EPA to assess the accuracy or reliability of studies upon
which EPA relies in assessing the risks and benefits of a
pesticide. Without recourse to the raw data, EPA may not be able
to determine whether a single batch failure, such as described in
connection with Count XXXVI, is an isolated, batch-specific
failure or whether failures are likely to occur routinely.
Respondent is charged with failure to label its product with
either an EPA Registration.Number or an EPA Establishment Number.
FIFRA prescribes regulatory scheme of cradle to grave labeling of
pesticides to protect man and the environment from unreasonable
risks. One of the major functions of EPA Registration Numbers
and EPA Establishment Numbers is to provide a ready method for
identifying and responding to product which have problems. These
problems can include matters such as contamination,
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misformulation or, particularly for sterilants such as the
registered product at issue in this matter, inefficacy. A
pesticide label without the required identifying information can
make it more difficult for the Agency and.the registrant to
appropriately respond to any unreasonable risk to human health or
the environment posed by a pesticide. Th*Ls inability to manage
risk effectively creates a significant risk in and of itself.
As discussed above, evaluating the gravity of a violation
reasonably includes consideration of the violator_s culpability.
In the present case, Respondents violations apparently have
resulted from negligence. All of the violations charged could .
have been prevented by Respondent had it exercised due diligence.
Respondent has no history of prior violations, however, the fact
that EPA has identified so many different violations of different
requirements of FIFRA indicates that Respondents overall
compliance program is substantially deficient. This suggests a
non-trivial level of negligence and a moderately high level of
culpability.
In summary of the gravity component of the violations in
this case, it is demonstrated that the violations pose an
unreasonable risk to health and the environment, that they may
well have resulted in actual harm, and that Respondents
culpability is moderately high. Consideration of the facts of
this case supports a finding that the gravity of the violations
at issue is great, suggesting that penalties at the high end of
the range would be appropriate.
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Size of Business
The size of a business may reasonably be determined by a
company's gross revenues from all revenue sources during the
prior calendar year, as this figure is readily accessible for
publicly held corporations and provides a meaningful
characterization of the relative sizes of businesses. Respondent
and its subsidiary Meditox had total annual sales of
approximately 3.8 million in 1992. Respondent is a major
manufacturer and one of the leading companies in the sterilant
industry. Respondent_s business is clearly a substantial one,
and is of a size that should properly be held accountable for
strict compliance with laws that protect health and the
environment. Accordingly, the penalty assessed should be at the
high end of the scale in consideration of size of business.
3. Ability to Continue in Business
Respondent and its Meditox Subsidiary had total annual sales
of approximately $3.8 million in 1992. Respondent has asserted
that paying the proposed penalty would compromise its ability to
continue in business, but has made minor effort to substantiate
this assertion.
c. The FIFRA Enforcement Response Policy
l.The Role of the FIFRA ERP in
Administrative Penalty Proceedings
The discussion above presents interpretations of the
statutory factors that must be considered in the assessment of a
000354
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civil penalty, and application of those factors to the specific
facts of the present case. While this analysis is essential in
broadly evaluating the appropriateness of the proposed penalty,
when it comes time to choose for each violation a specific dollar
figure, an element of subjectivity inevitably enters in. In
order to avoid purely ad hoc penalty assessments, with their
attendant risks of arbitrary and capricious decision making, the
Agency employs a collection of penalty policies.
The FIFRA Enforcement Response Policy (_FIFRA ERP_) sets
forth a comprehensive, rational and reasonable framework for
applying each of the statutorily-mandated factors to the facts of
a case and places each type of FIFRA violation in context with
the other types of FIFRA violations. The FIFRA ERP, like EPA_s
other penalty policies, is designed to promote three specific
goals — deterrence, fair and equitable treatment of the
regulated community, and swift resolution of environmental
problems. See EPA General Enforcement Policy # GM-21; Policy on
Civil Penalties, at 1 (Feb. 16, 1984).
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
000355
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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 resolutions of
environmental problems.
Id. at 4.
Any assessment of a civil penalty must explain how the
penalty assessed reflects the facts of the case and the
statutorily-mandated factors in order to make a record of the
agency action for purposes of judicial review. This record must
show that the Agency interpreted and applied the
statutorily-mandated penalty factors to the facts of the case
when assessing a penalty. The Presiding Officer may adopt the
interpretations of those statutory factors advocated by either
party, or may adopt a completely different interpretation,
provided that it is consistent with the statute and prior
decisions of the Environmental Appeals Board. Regardless of what
interpretation of the statutory factors a Presiding Officer
relies upon in assessing a penalty, the decision is subject to
reversal pursuant to section 706(2) (A) of the Administrative
Procedure Act if arbitrary or capricious. Accordingly, the
interpretation and application of the statutory factors must be
rational and consistent, and must be clearly articulated in order
to allow for meaningful review by the EAB or the Federal Courts
of Appeals. The D.c. Circuit has made it clear that
administrative adjudications must be supported by findings and
reasons that appear in the record:
One basic procedural safeguard requires the administrative
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adjudicator, by written opinion, to state findings of fact and
reason that support its decision. These findings and reasons must
be sufficient to reflect a considered response to the evidence •
and contentions of the losing party and to allow for a thoughtful
judicial review if one is sought.... Moreover, a court "cannot
'accept appellate counsel's post hoc rationalizations for agency
action1; for an agency's order must be upheld, if at all, 'on the
same basis articulated in the order by the agency itself.'"
Harborlite Corp. v. ICC. 613 F.2d 1088, 1092 (D.C. Cir. 1979)
(quoting FPC v. Texaco. Inc.. 417 U.S. 380, 397, 41 L. Ed. 2d
141, 94 S. Ct. 2315 (1974)) (quoting Burlington Truck Lines. Inc.
v. United States. 371 U.S. 156, 168-69, 9 L. Ed. 2d 207, 83 S.
Ct. 239 (1962)). See also Morton v. Dow. 525 F.2d 1302 (10th Cir.
1975) (agency's decision upheld because the Administrative Law
Judge made the necessary findings on the ultimate issues, clearly
indicated his reasoning, and gave evidence to support his
conclusions).
A Presiding Officer must employ some consistent methodology
for interpreting the statutory factors and applying them to the
facts of the cases, or else resort to ad hoc penalty assessment,
where the necessary policy judgments and assumptions are made
anew in each case. Through ah ad hoc penalty assessment, the
penalty for any violation could fall anywhere between zero and
the statutory maximum, depending on how the statutory factors are
interpreted and how the facts are weighed iii that case. An ad
hoc approach would not meet minimum standards of fairness and
rationality, and would be more subject to challenge as arbitrary
00035;
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and capricious. Although the FIFRA ERP does not represent the
only rational or reasonable methodology for interpreting and
applying the requirements of FIFRA section 14, the Presiding
Officer must apply some penalty assessment methodology that is at
least as rational and reasonable as that in the FIFRA ERP.
Where the Presiding Officer finds that the rationale and
approach of a penalty policy, in whole or in part, is appropriate.
in a particular case, it is permissible for the Presiding Officer
to set forth the specific reasons for the penalty assessment by
reference to the reasoning and approach of the applicable penalty
policy. As the Board observed in PIC Americas;
By referring to the penalty policy as a basis for assessing a
particular penalty, the presiding officer is incorporating the
underlying rationale of the policy into her decision. The
reference to the policy becomes, in effect, a form of "shorthand"
for explaining the rationale underlying the penalty assessment.
PIC Americas at 7. Regardless, though, of whether the Presiding
Officer agrees with the statutory interpretations or follows the
penalty rationale advocated by one party, the Presiding Officer
must in each case explain how the statutory factors were applied
to the facts of the case to reach the penalty assessed. The
Consolidated Rules of Agency Practice require that "the Presiding
Officer shall set forth the specific reasons for the increase or
decrease" from the penalty proposed in the complaint. 40 C.F.R. §
22.27(b) .
The FIFRA ERP describes a comprehensive five step process to
determine administrative civil oenalties consistent with the
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criteria of FIFRA section 14 (a)(4) and appropriate to the facts
and circumstances of the particular case:
These steps are: (1) determination of gravity or "level" of the
violation using Appendix A of this ERP; (2) determination of the
size of business category for the violator, found in Table 2; (3)
use of the FIFRA civil penalty matrices found in Table I to
determine the dollar amount associated with the gravity level of
violation and the size of business category of the violator; (4)
further gravity adjustments of the base penalty in consideration
of the specific characteristics of the pesticide involved, the
actual or potential harm to human health and/or the environment,
the compliance history of the violator, and the culpability of
the violator, using the 'Gravity Adjustment Criteria1 found in
Appendix B; and (5) consideration of the effect that payment of
the total civil penalty will have on the violator's ability to
continue in business, in accordance with the criteria established
in this ERP.
(FIFRA ERP, p. 18, CX 83)
This five step process addresses factors specific to the
violator_s conduct and the consequences of the specific
violations. Each of the five steps outlined above is discussed
below in regard to the violations charged in each complaint.
2. FIFRA 93-H-02
The Complaint in FIFRA 93-H-02 proposes a civil penalty of
$200,000. This proposed penalty was calculated in accordance
with the statutory factors articulated in FIFRA as captured by
the July 2, 1990 FIFRA ERP (CX 83).
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Step 1; Determination of gravity or level of violation
The first step is to determine the intrinsic gravity level
of the violation. Appendix A of the FIFRA ERP contains a listing
of anticipate violations of FIFRA and assigns to each a gravity
level. Violations with the highest intrinsic gravity are
assigned to level 1, and those of the lowest gravity are assigned
to level 4. According to Appendix A of the ERP, the sale or
distribution of a pesticide which is misbranded, in that the
label has a statement, design, or graphic representation which is
false or misleading, as alleged in Counts I-XXXIV, is a level 2
violation. (FIFRA ERP, p. A-l, CX 83; Penalty Worksheet, CX 82)
The sale or distribution of a registered pesticide if any claims
made for it as a part of its sale or distribution substantially
differ from any claims made for it in registration under FIFRA
section 3, as alleged in Count XXXV, is a level 2 violation.
(FIFRA ERP, p. A-l, CX 83; Penalty Worksheet, CX 82) The failure
of a registrant, wholesaler, dealer, retailer, or other
distributor to file reports required by FIFRA, 'as alleged in
Count XXXVI, is a level 2 violation. (FIFRA ERP, p. A-6, CX 83;
Penalty Worksheet, CX 82) The failure to submit any records
required by or under FIFRA section 8, as alleged in Counts
XXXVII-XL, is a level 2 violation.- (FIFRA ERP, p. A-3, CX 83;
Penalty Worksheet, CX 82)
Step 2: Determination of Size of Business
The second step is to consider the appropriateness of the
penalty relative to the size of the business. Penalties under
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the FIFRA ERP can vary depending on the size of the business, as
determined by the violator_s gross revenues from all revenue
'sources during the prior calendar year (FIFRA ERP, p. 20, CX 83).
Business are grouped into three tiers, large (gross revenues in
excess of $1,000,00), medium (gross revenues between $300,001 and
$1,000,000) and small (gross revenues $300,000 or less).
Respondent and its Meditox Subsidiary has total annual sales
of approximately $3.8 million in 1992. (Dun and Bradstreet
Reports, CX 82C and 82D). Respondent is therefore in size of
business category I, for section 14(a)(l) violators whose gross
revenues exceed $1,000,000 annually. (FIFRA ERP, p. 20, CX 83;
Penalty Worksheet, CX 82)
Step 3: Determination of Dollar Amount
Third, the gravity level and size of business are applied to
the FIFRA Civil Penalty Matrix to determine a penalty appropriate
for the nature of the violation and the size of business. The
matrix is designed so that small businesses that commit less
serious violations are penalized much less severely than large
businesses that commit more serious violations. For FIFRA
section 14 (a) (1) violators in size of business category I who
have committed gravity level 2 violations, the FIFRA Civil
Penalty Matrix indicates a base penalty of $5,000. (FIFRA ERP, p.
19, CX 83; Penalty Worksheet, CX 82)
Step 4; Gravity Adjustments to Base Penalty
The fourth step is to adjust the base penalty for the
r> f, (••> — f t
U U U J b I
-------
toxicity of the specific pesticide involved, the actual or
potential harm to human health or the environment, and the
compliance history and culpability of the violator using a set of
five "Gravity Adjustment Criteria" described in Appendix B of the
FIFRA ERP. This process, which assigns a numeric value to each
of the Gravity Adjustment Criteria, provides additional
flexibility allowing EPA to carefully tailor the penalty to the
facts of and circumstances of the instant case. The separate
values are summed as aggravating or mitigating factors to adjust
the penalty upwards or downwards. Accordingly, culpable conduct
by violators with a poor compliance history creating a great risk
to human health or the environment will be penalized more
severely that a merely negligent first time violator who does not
create a major human health or environmental risk.
For the first criteria, _pesticide_, Respondent was given a
value of 2, because its product labels contain the signal word
"danger" based on its acute toxicity. (FIFRA ERP, p. B-l, CX 83;
Penalty Worksheet, CX 82)
For the second criteria, _harm to human health_, Respondent
was given the value 5 because of actual serious or widespread
harm to human health. (FIFRA ERP, p. B-l, CX 83; Enforcement Case
Reviews, CX 12B, SOB, 49C, 51C; Penalty Worksheet, CX 82)
For the third criteria, _environmental harm_, Respondent was
given a value of 5 because of actual serious or widespread harm
to human health. (FIFRA ERP, p. B-l, CX 83; Enforcement Case
Reviews, CX 12B, 30B, 49C, 51C; Penalty Worksheet, CX 82)
For the fourth criteria, _compliance history_, Respondent
000362
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was given a value of 0 for having no prior violation. (Penalty
Worksheet, CX 82)
For the fifth criteria, _culpability_, Respondent was given
a value of 2 because its culpability is unknown but presumed to
be negligent. (Penalty Worksheet, CX 82) The sum of the gravity
adjustment factors is 14.
According to Table 3 of the FIFRA ERP, a gravity adjustment
value of 18 requires a 15 percent upwards adjustment of the
penalty (FIFRA ERP, p. 22, CX 83). However, the base penalty of
$5,000 per violation determined in Steps 1 through 3 above can
not be increased for Respondent because it is already at the
statutory maximum for FIFRA section 14(a)(1) violators. (FIFRA
ERP, p. 22, Table 3, footnote **, CX 83; Penalty Worksheet, CX
82)
Step 5; Ability to Continue in Business
The fifth step is to consider the impact of the penalty on
the violator_s ability to remain in business. Based on the Dun
and Bradstreet Report for Health Care Products (CX 82C) and the
Dun and Bradstreet Report for Health Care Products Meditox
Subsidiary (CX 82D), Complainant believes that Respondent can pay
the proposed penalty without significant impact on its ability to
continue in business.
3. FIFRA 95-H-04
The analysis above for the misbranding counts in FIFRA
93-H-02 applies without alteration to the misbranding counts in
FIFRA 95-H-04. Respondent is also charged with 40 counts for
000363
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sale or distribution of an unregistered pesticide, which is a
Gravity Level 2 violation. (FIFRA ERP, p. A-l, CX 83; Penalty
Worksheet, CX 82A) Size of business is Category 1, as in FIFRA
93-H-02, which yields a base penalty of $5,000 according to the
Civil Penalty Matrix (FIFRA ERP, p. 19, CX 83; Penalty Worksheet,
CX 82A) Gravity adjustment factors are the same as used in FIFRA
93-H-02, with one qualification. The pesticide toxicity for the
unregistered pesticides has not been determined and so, is not
available for use as an adjustment factor. In its absence,
Complainant has used the same gravity adjustment factor as in
FIFRA 93-H-02 given that the greatest risk is the risk of
infection owing to inefficacy and given that the unregistered
products contain the same active ingredient as the registered
product.
4. I. F. & R. VIII-90-279C
The current FIFRA Enforcement Response Policy was issued on
July 2, 1990, superseding the prior EPA policy, the FIFRA Civil
Penalty Assessment Guideline, issued July 31, 1974. The
complaint in I. F. & R. VIII-90-279C predates the 1990 FIFRA ERP
and reflects penalty calculations under the 1974 penalty policy.
The above discussion of the penalty calculations in FIFRA 93-H-02
and FIFRA 95-H-04 are based on the 1990 FIFRA ERP and reflects
the Agency_s current interpretation and implementation of the
statutory factors for these violations. Complainant has not
sought to amend the complaint in I. F. & R. VIII-90-279C to seek
the higher penalties called for under current policy.
Accordingly, rather than discuss in detail the mechanics of the
000364
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1974 penalty policy, Complainant merely notes that the current
FIFRA ERP calls for higher penalties than proposed in the I. F. &
R. VIII-90-279C complaint and refers to the above discussion as
fully supportive of penalties at least as high as those sought in
I. '. & R. VIII-90-279C.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
. c/cr &» 1994 •
REGION VII \ En ..rr,..«.u; nctsttion fcwcy /
726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
BEFORE THE ADMINISTRATOR
IN THE MATTER OF ) EPCRA Docket No. VII-94-T-381-E
GEC Precision Corporation ) COMPLAINT AND NOTICE OF
Wellington, Kansas ) OPPORTUNITY FOR HEARING
Respondent )
COMPLAINT
Jurisdiction
1. This is an administrative action for the assessment of civil
penalties instituted pursuant to Section 325 of the Emergency
Planning and Community Right-to-Know Act of 1986 (hereinafter
"EPCRA"), 42 U.S.C. § 11045."
2. This Complaint serves as notice that the United States
Environmental Protection Agency (hereinafter "EPA") has reason
to believe that Respondent has violated EPCRA, 42 U.S.C. § 11001
et. seq. and the regulations promulgated thereunder and codified
at 40 C.F.R. Part 372, governing the submission of toxic chemical
release inventories by owners and operators of covered
facilities.
Parties
3. The Complainant, by delegation from the Administrator
of the EPA, and the Regional Administrator, EPA, Region VII,
is the Director, Air and Toxics Division, EPA, Region VII.
4. The Respondent is GEC Precision Corporation, an aircraft
parts and equipment company, incorporated and registered to
do business in the State of Kansas, located at 1515 Highway 81
North, Wellington, Kansas 67152.
Statutory and Regulatory Requirements
5. Section 313 of EPCRA and 40 C.F.R. §§ 372.22 and 372.30
require the owner or operator of a facility that: (a) has
10 or more full time employees; (b) has a Standard Industrial
Classification (SIC) code of 20 through 39; and (c) that
manufactured, processed or otherwise used a toxic chemical listed
under Section 313 (c) of EPCRA and 40 C.F.R. '§-372.65, in excess
of the threshold quantity established under Section 313(f)
of EPCRA and 40 C.F.R. § 372.25 during the calendar year, to
EXHIBIT
Q.-\
JUUD36?
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 2 of 8
complete and submit a toxic chemical release inventory form
(hereinafter "Form R") to the Administrator of EPA and to the
State in which the subject facility is located by July 1 for
the preceding calendar year for each toxic chemical known by
the owner or operator to be manufactured, processed, or otherwise
used in quantities exceeding the established threshold quantity
during that preceding calendar year.
6. As set forth at Section 313(f) of EPCRA and 40 C.F.R.
§ 372.25, the reporting threshold amount for calendar year
1987 for chemicals manufactured or processed at a facility
is 75,000 pounds, 50,000 pounds for calendar year 1988, and
25,000 pounds for calendar years subsequent to and including
1989. The reporting threshold for a toxic chemical otherwise
used at a facility is 10,000 pounds for calendar years subsequent
to and including 1987.
VIOLATIONS
The Complainant hereby "states and alleges that Respondent
has violated EPCRA and regulations thereunder as follows:
Count I
7. On or about May 17, 1994, an authorized EPA representative
conducted an inspection pursuant to EPCRA § 313 at Respondent's
facility located at 1515 Highway 81 North, Wellington, Kansas
67152.
8. Respondent has 10 or more full-time employees, as defined at
40 C.F.R. § 372.3, at said facility.
9. Respondent's facility is in SIC Codes 20 through 39.
10. Respondent is a person as defined at Section 329(7) of EPCRA
and is the owner or operator of a facility as defined at
Section 329(4) of EPCRA.
\ '
11. The May 17, 1994, inspection of Respondent's facility
revealed that in calendar year 1992, Respondent otherwise used
1,1,1 Trichloroethane in excess of 10,000 pounds.
12. 1,1,1 Trichloroethane is a toxic chemical listed under
Section 313(c) of EPCRA and 40 C.F.R. § 372.65.
13. Respondent failed to submit a Form R for 1,1,1,
Trichloroethane to the Administrator of EPA and to the State of
Kansas by July 1, 1993.
00036r
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 3 of 8
14. Respondent's failure to submit a Form R for 1,1,1
Trichloroethane by July 1, 1993, is a violation of EPCRA § 313,
42 U.S.C. § 11023, and of the requirements of 40 C.F.R. Part 372.
15. Pursuant to Section 325 of EPCRA, 42 U.S.C. § 11045, and
based upon the facts stated in paragraphs 7 through 14 above, it
is proposed that a civil penalty of $17,000 be assessed against
Respondent.
Count II
16. The facts stated in paragraphs 7 through 10, are herein
restated and incorporated,
17. The May 17, 1994, inspection of Respondent's facility
revealed that in calendar year 1992, Respondent otherwise used
methyl ethyl ketone (MEK) in excess of 10,000 pounds.
18. Methyl ethyl ketone (MEK) is a toxic chemical listed under
Section 313 (c) of EPCRA an_d "40 C.F.R. § 372.65.
19. Respondent failed to submit a Form R for methyl ethyl ketone
(MEK) to the Administrator of EPA and to the State of Kansas by
July 1, 1993.
20. Respondent's failure to submit a Form R for methyl ethyl
ketone (MEK) by July l, 1993, is a violation of EPCRA § 313,
42 U.S.C. § 11023, and of the requirements of 40 C.F.R. Part 372.
21. Pursuant to Section 325 of EPCRA, 42 U.S.C. § 11045, and
based upon the facts stated in paragraphs 16 through 20 above, it
is proposed that a civil penalty of $17,000 be assessed against
Respondent.
Count III
22. The facts stated in paragraphs 7 through 10, are herein
restated and incorporated.
23. The May 17, 1994, inspection of Respondent's facility
revealed that in calendar year 1991, Respondent otherwise used
methyl ethyl ketone (MEK) in excess of 10,000 pounds.
24. Methyl ethyl ketone (MEK) is a toxic chemical listed under
Section 313(c) of EPCRA and 40 C.F.R. § 372.65.
25. Respondent failed to submit a Form R for methyl ethyl ketone
(MEK) to the Administrator of EPA and to the' -State, of Kansas by
July l, 1992. " '
00036"
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 4 of 8
26. Respondent's failure to submit a Form R for methyl ethyl
ketone (MEK) by July 1, 1992, is a violation of EPCRA § 313,
42 U.S.C. § 11023, and of the requirements of 40 C.F.R. Part 372.
27. Pursuant to Section 325 of EPCRA, 42 U.S.C. § 11045, and
based upon the facts stated in paragraphs 22 through 26 above, it
is proposed that a civil penalty of $17,000 be assessed against
Respondent.
Count IV
28. The facts stated in paragraphs 7 through 10, are herein
restated and incorporated.
29. The May 17, 1994, inspection of Respondent's facility
revealed that in calendar year 1990, Respondent otherwise used
methyl ethyl ketone (MEK) in excess of 10,000 pounds.
30. Methyl ethyl ketone (MEK) is a toxic chemical listed under
Section 313(c) of EPCRA and 40 C.F.R. § 372.65.
31. Respondent failed to submit a Form R for methyl ethyl ketone
(MEK) to the Administrator of EPA and to the State of Kansas by
July 1, 1991.
32. Respondent's failure to submit a Form R for methyl ethyl
ketone (MEK) by July 1, 1991, is a violation of EPCRA § 313,
42 U.S.C. § 11023, and of the requirements of 40 C.F.R. Part 372.
33. Pursuant to Section 325 of EPCRA, 42 U.S.C. § 11045, and
based upon the facts stated in paragraphs 28 through 32 above, it
is proposed that a civil penalty of $17,000 be assessed against
Respondent.
Relief
34. Section 325(c) of EPCRA, authorizes a civil penalty of up
to $25,000 per day for each violation of the Act. The penalties
proposed in paragraphs 15, 21, 27, and 33 above are based upon
the facts stated in this Complaint, and on the nature,
circumstances, extent, and gravity of the above-cited violations,
as well as the Respondent's history of prior violations and
degree of culpability, in accordance with EPCRA and the
Enforcement Response Policy for Section 313 of EPCRA.
35. A Summary of the Proposed Penalties is contained in the
enclosed Penalty Calculation Summary attached hereto and
incorporated herein by reference. _-/v
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 5 of 8
36. Payment of the total penalty - $68,000 - may be made by
certified or cashier's check payable to the Treasurer, United
States of America, and remitted to:
Mellon Bank
EPA - Region VII
Regional Hearing Clerk
P.O. Box 360748M
Pittsburgh, Pennsylvania 15251
Note that payment of the proposed penalty alone does not satisfy
Respondent's legal obligation to file a complete and accurate
Form R as required by Section 313 of EPCRA and 40 C.F.R.
Part 372. Failure or refusal to file Form R may subject
Respondent to additional civil penalties of up to $25,000 per day
of violation.
NOTICE OF OPPORTUNITY TO REQUEST A HEARING
Answer and Request for Hearing
37. In accordance with 5 U.S.C. Section 554, Respondent has the
right to request a hearing to contest any material fact contained
in this Complaint above or to contest the appropriateness of the
proposed penalty set forth herein. Such a hearing will be held
and conducted in accordance with the Consolidated Rules of
Practice Governing the Administrative Assessment of Civil
Penalties and the Revocation or Suspension of Permits, 40 C.F.R.
Part 22, one copy of which is enclosed herein.
38. To avoid being found in default, which constitutes an
admission of all facts alleged in this Complaint and a waiver
of the right to hearing, Respondent must file a written answer
and request for hearing within twenty (20) days of service of
this Complaint and Notice of Opportunity for Hearing. Said
answer shall clearly and directly admit, deny, or explain each
of the factual allegations contained in this Complaint with
respect to which Respondent has any knowledge, or shall clearly
state that Respondent has no knowledge as to particular factual
allegations in this Complaint. The answer shall also state
(a) the circumstances or arguments which are alleged to
constitute the grounds of defense; (b) the facts that Respondent
intends to place at issue; and (c) whether a hearing is
requested.
39. The denial of any material fact or the raising of any
affirmative defense shall be construed as a request for hearing.
Failure to deny any of the factual allegations in the Complaint
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 6 of 8
constitutes an admission of the undenied allegations. Said
answer shall be filed with the following:
Regional Hearing Clerk
United States Environmental Protection Agency
Region VII
726 Minnesota Avenue
Kansas City, Kansas 66101
40. If Respondent fails to file a written answer and request
for a hearing within twenty (20) days of service of this
Complaint and Notice of Opportunity for Hearing, such failure
will constitute a binding admission of all allegations made in
this Complaint and a waiver of Respondent's right to a hearing
under EPCRA. A Default Order may thereafter be issued by the
Regional Administrator and the civil penalties proposed herein
shall become due and payable without further proceedings.
Informal Settlement Conference
41. Whether or not Respondent requests a hearing, an informal
conference may be requested in order to discuss the facts of this
case, the proposed penalty, and the possibility of settlement.
To request a settlement conference, please contact:
Anne E. Rauch
Attorney
United States Environmental Protection Agency
Region VII
726 Minnesota Avenue
Kansas City, Kansas 66101
Telephone 913/551-7010
42. Please note that a request for an informal settlement
conference does not extend the twenty (20) day period during
which a written answer and request for a hearing must be
submitted.
43. EPA encourages all parties against whom a civil penalty
is proposed to pursue the possibilities of settlement as a result
of informal conference. Any settlement which may be reached
as a result of such a conference shall be embodied in a written
Consent Agreement and Consent Order issued by the Regional
Judicial Officer, EPA Region VII. The issuance of such a Consent
Agreement and Consent Order shall constitute a waiver of
Respondent's right to request a hearing on any matter stipulated
therein.
00037
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 8 of 8
CERTIFICATE OF SERVICE
I certify that on the date noted below I hand delivered
the original and one true and correct copy of this Complaint
and Notice of Opportunity for Hearing to the Regional Hearing
Clerk, United States Environmental Protection Agency,
726 Minnesota Avenue, Kansas City, Kansas 66101.
I further certify that on the date noted below I sent
by certified mail, return receipt requested, a true and correct
copy of the signed original Complaint and Notice of Opportunity
for Hearing; a copy of the Penalty Calculation Summary; a copy of
the Consolidated Rules of Practice Governing the Administrative
Assessment of Civil Penalties and the Revocation or Suspension of
Permits, 40 C.F.R. Part 22; and a copy of the August 10, 1992,
Enforcement Response Policy for Section 313 of EPCRA to the
following registered agent for GEC Precision Corporation:
The Corporation Company, Inc.
515 South Kansas Avenue
Topeka, Kansas 66603
31.
Date Bonnie Andrews
000372
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GEC Precision Corporation
EPCRA Docket No. VII-94-T-381-E
Page 7 of 8
44. If Respondent has neither achieved a settlement by informal
conference nor filed an answer within the twenty (20) day time
period allowed by this Notice, the penalties proposed above may
be assessed by the entry of a Default Order.
Date 't/ ^cx/^/n [/JjjJ^Q^^ ^Ml&iVv
William A. SpratlJLn, Director
Air and Toxics Division
Anne E. Rauch
Attorney
Office of Regional Counsel.
Enclosures: Penalty Calculation Summary
Consolidated Rules of Practice Governing the
Administrative Assessment of Civil Penalties and
the Revocation or Suspension of Permits, 40 C.F.R.
Part 22
Enforcement Response Policy for Section 313 of EPCRA
000373
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PENALTY CALCULATION FOR
GEC Precision Corporation
Wellington, Kansas
EPCRA Docket No. VII-94-T-381-E
COUNT I
VIOLATION;
EXTENTt
CIRCUMSTANCE;
GRAVITY BASED
PENALTY:
PROPOSED
PENALTY;
Failure to report toxic chemical release
inventory emissions for 1,1,1 Trichloroethane
in a timely manner during reporting year
1992.
LEVEL B - Description: Less than 10 times
reporting threshold; greater than $10 million
annual sales; greater than 50 employees
LEVEL 1 - Description: Failure to submit
1992 Form R report for 1,1,1 Trichloroethane
by July l, 1993
$17,OOO + Adjustments: None
$17,000
COUNT II
VIOLATION;
EXTENT;
CIRCUMSTANCE:
GRAVITY BASED
PENALTY;
PROPOSED
PENALTY:
Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1992.
LEVEL B - Description: Less than 10 times
reporting threshold; greater than $10 million
annual sales; greater than 50 employees
LEVEL 1 - Description: Failure to submit
1992 Form R report for methyl ethyl ketone
(MEK) by July 1, 1993
$17,000 + Adjustments: None
$17,000
000374
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION VII
726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
14 1935
MEMORANDUM
SUBJECT: Penalty Calculation for GEC Precision Corporation,
Wellington, Kansas, EPCRA Docket No. VII-94-T-381-E
\ f
FROM: Mark A. Smith v"^RLi'L~-
Environmental Sciermost
Toxic Substances Control Section
TO: Anne Rauch
Office of Regional Counsel
The following information supports the appropriateness of
the U.S. Environmental Protection Agency, Region VII's assessment
of civil penalties in regard to the subject administrative
action. The proposed penalties were calculated pursuant to the
August 10, 1992, Enforcement Response Policy for Section 313 of
the Emergency Planning and Community Right-To-Know Act (EPCRA).
The purpose of the above-mentioned Enforcement Response
Policy (ERP) is to assure that enforcement actions for violations
of EPCRA Section 313 are arrived at in a fair, uniform, and
consistent manner. Furthermore, the ERP aims to provide
appropriate enforcement responses for violations committed, as
well as, providing deterrent from the violation of Section 313.
The ERP states that the determination of the gravity-based
penalty is made according to two factors, which are the
circumstance and the extent of the violation. These two factors
are incorporated into a matrix which allows the determination of
an appropriate base penalty amount. After the base penalty has
been determined, upward or downward adjustments may be made to
the base penalty in consideration of the following factors:
voluntary disclosure; history of prior violations; delisted
chemicals; attitude; other such matters as justice may require;
supplemental environmental projects; and, ability to pay.
According to the ERP, the first three of the above adjustment
factors may be made prior to issuing the civil complaint. The
total proposed penalty is determined by calculating the penalty
for each violation on a per chemical, per facility basis, and
then applying any appropriate penalty adjustment factors.
000376
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Facility Information
GEC Precision Corporation is listed in the Dun & Bradstreet
Database (D&B) with a Standard Industrial Classification (SIC)
code of 3728 - principally involved in the manufacture of
aircraft parts and equipment. GEC Precision Corporation
otherwise used chemicals listed under EPCRA Section 313 above
thresholds required for reporting during calendar years 1990,
1991, and 1992. According to D&B, annual sales at GEC Precision
were greater than $10 Million, and GEC Precision employed more
than 50 employees.
Summary of Alleged Violations
GEC Precision Corporation failed to report the otherwise use
of methyl ethyl ketone (MEK), a listed chemical under EPCRA
Section 313, for calendar years 1990, 1991, and 1992. GEC
Precision Corporation also failed to report the otherwise use of
1,1,1-Trichloroethane (TCA), a listed chemical under EPCRA
Section 313, for calendar year 1992.
Penalty Calculations
Circumstance Level: According to the ERP, the circumstance
of the violation is determined by the seriousness of the
violation as it relates to the availability and accuracy of the
information to the community, to states, and to the government.
The ERP states that failure to report in a timely manner
(Category I - failure to submit report one year or more after the
July 1 due date) the otherwise use of a listed EPCRA Section 313
chemical is a "Level 1" circumstance.
Extent Level: The extent factor for a violation is based on
the quantity of EPCRA Section 313 chemical otherwise used by the
facility in violation, and the size of the total corporate entity
in violation. The size of the total corporate entity is defined
by the amount of sales or number of employees of all sites taken
together owned or controlled by the domestic or foreign parent
company. According to the ERP, a facility with total corporate
entity sales of $10 million or more and 50 employees or more,
which uses a Section 313 chemical less than 10 times the
threshold level is a "Level B" extent.
Summary of Proposed Penalties
COUNT I
VIOLATION: Failure to report toxic chemical release
inventory emissions for 1^.1,1 Trichloroethane
in a timely manner during- reporting year
1992.
000377
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EXTENT:
CIRCUMSTANCE:
GRAVITY BASED
PENALTY;
PROPOSED
PENALTY;
LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
LEVEL 1 - Description: Failure to submit'
1992 Form R report for 1,1,1 Trichloroethane
by July l, 1993
$17,000 + Adjustments: None
$17,000
COUNT II
VIOLATION;
EXTENT;
CIRCUMSTANCE:
GRAVITY BASED
PENALTY:
PROPOSED
PENALTY;
Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in- a timely manner during reporting
year 1992.
LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
LEVEL 1 - Description: Failure to submit
1992 Form R report for MEK by July 1, 1993
$17,000 + Adjustments: None
$17,000
COUNT III
VIOLATION:
EXTENT:
CIRCUMSTANCE;
Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1991.
LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
LEVEL 1 - Description; Failure to submit
1991 Form R report for MEK by jluly 1, 1992
000378
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GRAVITY BASED
PENALTY;
PROPOSED
PENALTY;
$17,000 + Adjustments: None
$17,000
COUNT IV
VIOLATION;
EXTENT:
CIRCUMSTANCE;
GRAVITY BASED
PENALTY:
PROPOSED
PENALTY;
Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1990.
LEVEL B - Description: Less than 1.0 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
LEVEL l - Description: Failure to submit
1990 Form R report for MEK by July 1, 1991
$17,000 + Adjustments: None
$17,000
TOTAL PROPOSED PENALTY: $68,000
000379
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\
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION VII
726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
JUN I 6 1995
MEMORANDUM
SUBJECT: Addendum to the Penalty Calculation for GEC Precision
Corporation, Wellington, Kansas, EPCRA Docket No.
VII-94-T-381-E
FROM: Mark A. Smith
Environmental Sell
Toxic Substances Control Section
TO: Anne Rauch
Office of Regional Counsel
In response to Administrative Law Judge Vanderhayden's
request, the following information represents the views of the
U.S. Environmental Protection Agency, Region VII, concerning the
gravity of the alleged violations, including the actual or
potential harm to man and the environment resulting from
Respondent's illegal conduct. The following includes
Respondent's history, if any, of compliance with the Emergency
Planning and Community Right-to-Know Act (EPCRA).
Under Section 313 of EPCRA, facilities that meet certain
criteria are required to report their releases, transfers, and
other activities as required under the Pollution Prevention Act
of 1990 for toxic chemicals. The report in which this
information is submitted is known as the Form R. The information
on the Form R is required to be submitted to the U.S. EPA and the
designated State agency in which the facility is located.
Reports are due by July 1 of each year for activities that
occurred at the facility during the previous calendar year. A
facility must submit a separate Form R for each chemical that
meets the reporting requirements. Respondent met the pertinent
reporting criteria under Section 313 of EPCRA, but failed to
submit Form R's to the EPA and to the State of Kansas.
By not submitting Form R information to the State and to
EPA, Respondent's releases, transfers, and pollution prevention
activities were not included in the Toxics Release Inventory
(TRI) database. The TRI database gives the public direct access
to information about environmental releases of toxic chemicals
for more than 23,000 industrial facilities located in communities
around the nation. TRI data have been used by industry, public
interest groups, state and local governments, the U.S. Congress
and EPA to assess major opportunities for reducing risks to
public health and the environment. TRI data have helped industry
identify and analyze areas where source substitution may be
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possible and wastes minimized. Finally, TRI data have aided in
the identification of pollution prevention activities and
projects. Lacking this information, the public is deprived of
its "Right-To-Know" the magnitude of potential harm associated
with living in the community near facilities which release toxic
chemicals.
In this instance, the Respondent has since reported releases
of methyl ethyl ketone (MEK) and 1,1,1-Trichloroethane, which is
an ozone depleter, into the environment. Because of the basic
nature of toxic chemicals, i.e. health effects are often not
apparent until several years after exposure, actual harm to
humans is not immediately identifiable. That fact, however,
underpins the importance of the community having the opportunity
to know its potential harm and make long-term plans to minimize
its exposure. The local community in Respondent's facility area
has not had the necessary information provided to it via Form R
reporting thereby frustrating any desire that may have been
prompted to perform such planning.
Regarding other information that may have been available
from the company, many companies report data on chemical
emissions to EPA and to the' States under other environmental
laws, such as the Clean Air Act, the Resource Conservation and
Recovery Act, and the Clean Water Act. Specifically, some of the
information reported under the CAA is reported as a class or
compound of chemicals to one medium, such as volatile organic
compounds (VOC's) emissions to the air. The scope of TRI
reporting is much broader. The EPCRA Section 313 TRI data
provide information regarding releases of specific toxic
chemicals to the air, water, and to the land; source reduction,
recycling, treatment, and pollution prevention activities are
reported; and, the public has direct access to the information.
Enforcement of EPCRA Section 313 ensures that the public has
access to timely and accurate chemical release information.
Respondent's violations of EPCRA Section 313 were identified as
the result of an on-site inspection conducted by EPA.
Respondent's violations were not identified as the result of
Respondent seeking compliance assistance. In fact, Respondent
was on the mailing list of companies sent an invitation to EPA,
Region VII's regularly scheduled compliance assistance workshops
in Respondent's area. Furthermore, a compliance history of
Respondent with EPCRA does not exist since Respondent had not
submitted a Form R until after the time of the inspection by EPA.
In summary, by not reporting under EPCRA Section 313,
Respondent's toxic chemical emissions were not included in the
TRI database. Respondent's violations prevented the public,
industry, state and local governments from having a basic tool
for understanding the management and control of to^ic chemicals
in their community.
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mandatory road map rather than a guideline. It
again goes back to the purpose of the document
which is to ensure that EPA has broken it out
into ten different regions and all ten regions as
well as the headquarters office are complying in
assessing penalties in the same manner.
THE COURT: Ms. Rauch, do you have any
follow-up in light of my few questions to
the witness?
MS. RAUCH: No.
THE COURT: Ms. Hoffman?
MS. HOFFMAN: No.
THE COURT: Mr. Smith, thank you.
MS. RAUCH: We have one more witness.
If there's no objection, Ms. Fain will do
the direct questioning of this witness.
THE COURT: Good morning, Ms. Fain.
MS. FAIN: Good morning. On behalf of
EPA this morning, Your Honor, I would like
to call Mr. James Hirtz, please.
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JAMES F. HIRTZ,
having been first duly sworn, was
examined and testified as follows:
DIRECT EXAMINATION
BY MS. FAIN:
Q Mr. Hirtz, will you please state your full name
for the reporter, please.
A My name is James Francis Hirtz.
Q Would you please state your place of employment '
and the address.
A I'm employed with United States Environmental
Protection Agency, Region VII, at 726 Minnesota
Avenue, Kansas City, Kansas, 66101.
Q Mr. Hirtz, what is your position at the
Environmental Protection Agency?
A I'm an Environmental Engineer.
Q How long have you been in that position?
A I've been employed with the Agency for nine years
in that position.
Q Do you have any formal education?
A I received a Bachelor of Sciences Degree from the
University of Missouri-Rolla with a degree in
Chemical Engineering.
Do you have any training beyond your degree in
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relation to what you do at the Environmental
Protection agency?
A Yes, I have.
Q Can you tell us what that is, sir?
A I received training at the Federal Law
Enforcement Training Center in Lit'igow, Georgia,
as well as training in estimating techniques as
well as training in negotiation skills.
| Can you tell us what your duties and
responsibilities are as an environmental engineer
at the EPA?
L I'm the TRI Coordinator, Toxic Release Inventory
••*
Coordinator for Region VII as well as the TSCA 5
and 8 Coordinator in the Toxic Substances Control
Act. I also perform inspections and case review.
for both Acts.
Q Are there any other duties and responsibilities
that you have?
L I'm also a member of several national work
groups.
! Sir, can you tell us some things about national
work groups as they apply to your duties at the
Environmental Protection Agency?
I'm a member of the National EPCRA 313
Enforcement Response Policy work group as well as
our
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1 the 313 Interpretive Guidance work group.
2 Q What was your role -- you mentioned that you
3 participated in the work group pertaining to the
4 Enforcement Response Policy for EPCRA 313. What
5 was your role in that work group, sir?
6 A As a regional representative we were asked to
7 help develop an Enforcement Response Policy or
8 make amendments to the existing Enforcement
9 Response Policy that was in place. As part of
10 the requirements of going through it, we looked
11 at existing Enforcement Response Policies under
12 the statutes as well as the new requirements that
*•*
13 were required under EPCRA for purposes of 313
14 reporting to make modifications to the
15 present-day Enforcement Response Policy.
16 Q How long did the work group exist?
17 A The work shop — excuse me, the work group
18 started in April of 1991 and we concluded with
19 our final product around July of '92.
20 Q Now, when the work group formulated the
21 Enforcement Response Policy, were there statutory
22 factors such as the ones that Mr. Smith just
23 discussed and the ones that are found in the
24 statute? Were those taken into account?
25 A Yes, they were.
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Can you tell us why you would take those factors
into account?
The first responsibility as far as the
Enforcement Response Policy is actually to
determine if a violation exists. It's basically
broken down into three considerations whether or
not the company is in compliance with the
existing Act, whether or not the violations
warrants a notice of non-compliance for minor
deviations of the rule, and the third one is a
policy to establish an administrative action in
which the heart of the Enforcement Response
^*
Policy is about.
Now, Mr. Hirtz, I would like to go through the
statutory factors and just would like for you to
explain how was the nature of the violation
considered when the work group assessed the
penalty?
The nature was basically setting up that an
administrative action or civil penalty is
warranted, and then we developed the use of the
circumstance levels and the extent levels to
develop the gravity penalty matrix for the final
establishment of determining a penalty for the
appropriate violations of the Act.
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How was circumstances of the violation
considered?
THE WITNESS: Do you mind if I stand?
THE COURT: Please.
For the circumstances we basically broke it down
into six different levels, and these were the
levels that we were looking at. As far as
Level 1 is a failure to report in a timely manner
which is a Category 1. It's principally that
companies fail to submit a TRI report or a Form R
as required under EPCRA. And the reason that
this is the most significant of the violations is
»»
that this is a chemical specific reporting
requirement if they meet the conditions of the
law.
This information is used by both EPA in
the local communities for purposes of emergency
planning and right-to-know. And emergency
planning at least on the federal side we use it
for initiatives like the environmental justice,
we use it for purposes of pollution prevention
planning, and the community has the opportunity
to gather chemical specific information on the
chemicals themselves as well as the emissions for
their community so they themselves can take an
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active role in exercising change or identifying a
dialogue with industry itself to make hopefully
useful changes that are occurring in the
community.
Level 2 is failure to supply
notification. And this is the primary avenue
that we use to help the manufacturers who use
toxic chemicals in a process to know that they're
required to report under EPCRA 313.
It requires that if you receive a
product from a manufacturer as far as a raw
material that you're using in your process that
identifies that chemical that's within that
product as subject to reporting under the
EPCRA 313 provisions. So we have requirements in
which we can enforce the manufacturers to notify
their customers that these chemicals are indeed
regulated by law.
Level 3 deals with data quality
violations. It is the responsibility of EPA as
well as for the industry to submit a Form R and
take a look at making sure that the emission
estimates are performed correctly. If emission
estimates are done incorrectly, basically you're
making a faulty data base with information that
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may be skewed. So we also perform data quality
inspections at sites to ensure that the
information submitted by industries are correct.
And the last one is a Level 4, failure
to report in a timely manner, and this is a
Category 2. Category 2 is basically when the
information, which is the Form R, is submitted
within the course of a year to EPA. It is still
late after the deadline reporting date of
July 1st.
The relevance for a Level 4 versus a
Level 1, if the information is submitted after a
»•*
year, EPA is not able to put this information
into the toxic release inventory which is the
computer system. This computer system is used to
help organize and identify information associated
with the submissions from industry. Now, this
organization is used to help develop national
reports as well as state diskettes which the
communities as well as the general community use
to help identify the emissions in their
geographical location.
Now if the information is submitted
within the year, EPA has the ability to help
speed along getting this information into the
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national report, so the harm is much less if we
receive it shortly after the deadline reporting
date, but as the days extend getting closer to a
year it impedes the EPA by trying to get that
information into the system. So that's why
that's set up as a Level 4.
Level 5 and Level 6 are pretty much
voluntary disclosure violations in which EPA has
been notified by the facilities that they should
have submitted Form R's and they are making the
step forward by giving the information to the
EPA.
•> ,
Okay. Thank you. Mr. Hirtz, can you also
explain to us how the extent of the violation was
taken into consideration by the work group?
For the extent, we're looking at three primary
issues as far as the amount of chemicals that are
otherwise used or processed at the facility for
setting up thresholds. For otherwise used
there's a 10,000-pound threshold and for
manufacturing and processing it's a 25,000-pound
threshold. So we're looking at whether or not
ten times or more of that threshold of that 313
chemical substance was handled by the facility.
This was set up in order to help
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1 identify what the potential for exposure could be
2 at the plant due to material handling operations.
3 If it increases by greater than ten times the
4 amount, the potential for exposure to the general
5 employees is much more. Also, it helps identify
6 that they were significantly over the threshold
7 requirements as required by the rule. We also
8 look at 50 employees or more to help identify
9 that quite a few employees had the potential to
10 be exposed to this chemical substance during th.e
11 handling practices.
12 The other requirement that we deal with
^•*
13 is the identification of $10 million in corporate
14 sales. This is the opportunity to help identify
15 large corporations from small corporations
16 because we did not want to have economic
17 considerations used against small businesses. We
18 wanted to identify larger businesses from small
19 businesses. And those were the three conditions
20 that we looked at.
21 Q What about the gravity of the violation?
22 A The gravity of the violation is used to take a
23 look at the circumstance levels as well as the
24 extent levels to develop a matrix to help
25 determine the appropriate penalty for those two.
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Now, you heard the testimony provided by
Mr. Smith concerning other factors that is part
of the statute. Did the work group consider
those other factors, adjustment factors?
Yes, they did. Those factors were put into place
to help the EPA look at the conditions associated
with those factors to aid the EPA in settling
cases.
Do you mind just going through each one of the
factors we're talking about, culpability, ability
to pay.
Factors that we looked at were primarily the
»•*
attitude. As far as other adjustments, we also
looked at the culpability, whether or not the
chemical involved was a de-listed chemical.
Also, the other adjustment factors included SEPs
as far as supplemental and environmental
projects .
MS. FAIN: Your Honor, I have no other
questions.
THE COURT: Ms. Hoffman?
MS. HOFFMAN: I have two questions,
Mr. Hirtz.
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1 CROSS EXAMINATION
2 BY MS. HOFFMAN:
3 Q First of all, I wanted to ask you, are you
4 familiar with the National Emission Data System
5 maintained by the USEPA?
6 A As required under the Clean Air Act? Is that the
7 one you're referring to?
8 Q I'm referring to the data system referred to in
9 correspondence from the State of Kansas received
10 by the respondent.
11 A I have a general familiarity with that data base.
12 Q Assuming that the chemical reported to the State
13 of Kansas were in fact the same chemicals
14 subsequently reported on Form R, is the
15 information available -- or the information in
16 both systems that's available to the community,
17 is it fair to say that that information is
18 identical?
19 A No.
20 Q Is it fair to say that the information is
21 summarized in such a way so that the community in
22 which the business is located has an indication
23 of the chemicals that are being used by the
24 facility?
25 A No.
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1 A Yes, I was.
2 Q And also of the amending complaints that are
3 before the Court today, is that correct?
4 A Yes, that's correct.
5 Q In the course of preparing those complaints, did
6 you have an occasion to calculate a penalty for both
7 Respondent Group Eight and Respondent Wausau?
8 A Yes, I did.
9 Q . And did you consult any guidance or the
10 assistance of any internal EPA document with regard to
11 calculating that penalty?
12 A Yes, I used the Polychlorinated Biphenyls
13 Penalty Policy of April 9, 1990.
14 MR. WAGNER: Your Honor, I would tender to the
15 Court Complainant's Trial Exhibit #20. Provide a copy to
16 the court reporter, to each Counsel. I would identify
17 this document as Polychlorinated Biphenyl Penalty Policy
18 of the United States Environmenta> Protection Agency dated
19 April 9, 1990.
20 JUDGE LOTIS: The document will be so
21 identified.
22 (Whereupon, Complainant's Exhibit
23 #20 was marked for
24 identification.)
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1 BY MR. WAGNER:
2 Q Mr. Bonace, could you tell us what the
3 Polychlorinated Biphenyl PCB Penalty Policy of U.S. EPA
4 is, this Exhibit 20?
5 A Pardon me?
6 Q What is Complainant's Trial Exhibit 20?
7 A That is the Polychlorinated Biphenyl Penalty
8 Policy.
9 Q What is the significance of this document to the
10 work you've been doing in the PCB unit?-
11 A This is the document I would use for developing
12 penalties for PCB complaints.
13 Q Could you give us a brief description of the
14 breakdown of the PCB Penalty Policy?
15 A The Penalty Policy has two basic sections; the
16 Gravity Based Penalty and adjustment factors to the
17 Gravity Based Penalty. t
18 Q What is the standard procedure in the PCB unit
19 of using that Penalty Policy to calculate penalties of
20 enforcement actions?
21 A The procedure is the review the inspection
22 reports involved in the case and to apply the Penalty
23 Policy to problems described in the inspection reports.
24 Q Did you have an occasion to determine, with
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1 regard to the complaint you were preparing against
2 Respondent Wausau, what violation to allege in the
3 complaint?
4 A Yes, I did.
5 Q What violation did you determine to allege in
6 the complaint?
7 A Improper disposal.
8 Q Is that the only violation in your preparation
9 of the complaint against Respondent Wausau?
10 A Yes, it is.
11 Q Did you have an occasion to assess a penalty for
12 that complaint or that violation also?
13 A Yes, I did.
14 Q And could you tell us how you did that using the
15 Penalty Policy?
16 A Okay. The first thing to do is to develop the
17 Gravity Based Penalty using the penalty matrix and extent
18 and circumstances. The circumstances which are found on
19 Page 10 and 11 describe major disposal as a Level 1
20 violation. Extent, which involves the amount of material
21 in a particular violation for disposal violations is found
22 on Page 6 and 7. Since the situation with Wausau involved
23 greater than 25 gallons, quite, a bit more than 25 gallons
24 of PCB fluid, that violation is of major extent. When you
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1 refer to the matrix on Page 9 you see that major extent,
2 level 1 is a $25,000 penalty.
3 JUDGE LOTIS: What about the one you previously
4 referred to, this major disposal is that also in the
5 matrix?
6 THE WITNESS: In the matrix it says level 1, if
7 ' you look there on Page 10. Level 1 lists a number of
8 types of violations.
9 JUDGE LOTIS: Level 1 relates to — I see. You
10 viewed this as a major disposal.
11 THE WITNESS: Yes.
12 JUDGE LOTIS: That was because why?
13 THE WITNESS: All PCB violations are considered
14 to be the most serious violations at level 1 and there is
15 really no alternative .for disposal. There is a minor
16 disposal in which a PCB article has a small leak on the
17 surface.
18 JUDGE LOTIS: This was a level 1 for what
19 reason?
20 THE WITNESS: Because PCB oil was taken out of a
21 transformer and shipped for disposal to a facility that
22 was not designed to handle PCB disposal.
23 JUDGE LOTIS: It would be level 2 if what had
24 happened?
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1 THE WITNESS: Okay, there would be no instance
2 of disposal that would fall in level 2, but there are
3 examples of level 2 violations involving failure to
4 register a PCB transformer with the local department and
5 such.
6 JUDGE LOTIS: I see. Please proceed. Thank
7 you.
8 BY MR. WAGNER:
9 Q Mr. Bonace, with regard to the nature of the
10 violation, what would be the nature of the violation?
11 A Al1 PCB violations are considered chemical
12 control in nature.
13 Q Did you have an occasion to review the
14 adjustment factors set forth in the Penalty Policy?
15 A Yes, I did.
16 Q On what page are those found?
17 A Adjustment factors begin on Page 14, the bottom
18 of Page 14.
19 Q What is the first adjustment factor?
20 A Culpability.
21 Q And where is that found?
22 A On Page 15.
23 Q What were your considerations with regard to
24 culpability as an adjustment factor?
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1 A Culpability did not change the Gravity Base
2 Penalty of $25,000.
3 Q Did you consider any —
4 JUDGE LOTIS: (interrupting) Excuse me, what
i
5 does that mean? What you just said I just don't
6 understand.
7 THE WITNESS: When you calculate the $25,000
8 penalty, then you look at these other factors to see if it
9 should be increased or decreased.
10 JUDGE LOTIS: Or stay the same.
11 THE WITNESS: Or stay the same.
12 JUDGE LOTIS: And what did you say as to
13 culpabi1ity?
14 THE WITNESS: It did not change the penalty.
15 JUDGE LOTIS: What does that mean in terms of
16 their culpability?
17 THE WITNESS: Well, okay, I can explain that.
18 If you look on Page 14 there are three levels of
19 culpability. Level 1 is a willful violation and level 2
20 is the violator had knowledge or control and that's where
21 the penalty stays the same. Level 3 is, lack knowledge,
22 lack control and still the violator was reasonably prudent
23 and responsible. Then there's an opportunity for lowering
24 the penalty as much as 25%.
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1 JUDGE LOTIS: Alright, please proceed.
2 BY MR. WAGNER:
3 Q Now, $25,000 is the maximum penalty permitted on
4 the TSCA 4 violation, is that correct?
5 A That's correct.
6 Q So it was impossible for you to consider
7 increasing this penalty.
8 A That's correct.
9 Q Why did you decide not to decrease the penalty
10 because of the culpability factor?
11 A Because it appeared that the violator had
12 knowledge that PCB's were on site.
13 Q What did you base that determination on?
14 A I had received a letter from Wausau responding
15 to my letter to Mr. Schrott in which I informed him of the
16 PCS transformer on his property.
17 Q Would those be the two letters you just earlier
18 identified in your testimony?
19 A Yes.
20 Q That would be Complainant's Trial Exhibit #14
21 and Complainant's Trial Exhibit #19?
22 A I see 14 on the letter to Mr. Schrott. I don't
23 see a number on the Wausau letter.
24 Q The Wausau letter of —
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1 A (interrupting) Of April 10, 1989.
2 Q With regard to the next adjustment factor, can
3 you identify that for us under the Penalty Policy?
4 A That is history of prior violations.
5 Q How are you to consider the' history of prior
6 violations in regard to penalty?
7 A This considers whether the company had a history
8 of a prior TSCA or particularly a PCS violation.
9 Q What happens if they did have a prior violation?
10 A In certain circumstances, the penalty would go
11 up 25, 50 or 100*.
12 Q What if they did not have a history of a prior
13 violation?
14 A The penalty would remain unchanged,
15 Q Did you have knowledge of any prior violation of
.16 Wausau?
17 A No, I did not.
18 Q with regard to the next adjustment factor, would
19 you identify that for us, please?
2o A That's ability to continue in business.
21 Q What page is that on?
22 A That's on the bottom of Page 16.
23 Q Did you consider that adjustment factor in
24 Wausau's penalty?
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1 A Yes, I did.
2 Q What was your determination there?
3 A This section refers to whether the payment
4 penalty would cause a business to have to close. I saw no
5 evidence that Wausau could not afford to pay this penalty.
6 Q When did you calculate this penalty,
7 approximately?
8 A I don't recall the date. I imagine it was in
9 late '89 or early '90.
10 Q It would be shortly before the filing of the
11 initial complaint, is that correct?
12 A Yes, that's correct.
13 Q Subsequent to the time that you initially
14 determined this penalty and particularly this adjustment
15 factor, had you come into any information through pre-
15 hearing exchanges or any other exchange of information
17 during the course of these cases that would cause you to
18 change your determination as to this adjustment factor,
19 the ability to pay?
20 A No, I did not.
21 Q Mr. Bonace, are there any other adjustment
22 factors that you considered?
23 A No other adjustment factors appeared
24 appropriate.
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1 Q With regard to your penalty calculations —
2 JUDGE LOTIS: (interrupting) Excuse me. On
3 that last question and answer, on Page 17 of the policy
4 statement, it has the heading, other factors. Are you
5 saying you considered them and found no adjustment was
6 appropriate based on these factors?
1 7 THE WITNESS: Yes, that's correct.
8 JUDGE LOTIS: Alright.
9 BY MR. WAGNER:
10 Q Mr. Bonace, let me ask you to just be a little
11 bit more specific, there are some specific factors set
12 forth here with regard to attitude at the bottom of Page
13 17.
14 A Yes.
15 Q Did you consider that specifically with regard
16 to the Wausau penalty?
17 A Yes, I did.
18 Q Why did you determine not to make any reduction
19 for attitude?
2o A Because it did not appear that the violator was
21 making good faith efforts to comply with the PCB
22 regulations.
23 Q with regard to voluntary disclosure at the top
24 of Page 18.
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1 A Wausau, as I recall, did not voluntarily
2 disclose the problems that occurred.
3 Q With regard to the cost of the violations to. the
4 government.
5 A This refers to cost expended in an
6 administrative proceeding under Section 16 of TSCA and I-
7 knew of no such cost.
8 Q With regard to economic benefit of non
9 compliance.
10 A I knew of — I did not know of any economic
11 benefit of non compliance.
12 Q With regard to Group Eight, the complaint
13 against Group Eight, did you have an occasion to develop
14 that complaint also and determine the violations to be
15 alleged in that complaint?
16 A Yes, I did.
17 Q How many violations did you include in Group
18 Eight's complaint?
19 A Six, I believe.
20 Q And were any of those six violations the same '
21 violation as was alleged in Wausau's complaint?
22 A Yes, Count 6 was the same, improper disposal.
23 Q With regard to the Gravity Base of- the penalty
24 for that particular violation. For the record, I would
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1 just that would be Count 6 of the complaint, violation for
2 unlawful disposal. With regard to that violation, was
3 your calculation of the Gravity Base component of the
4 penalty the same as you testified to in Wausau?
5 A Yes, it is.
6 MR. WAGNER: Your Honor, I would ask the Court
7 and Mr. Christensen if they would want him to restate that
8 Gravity Base component?
9 JUDGE LOTIS: No.
10 " BY MR. WAGNER:
11 Q Mr. Bonace, with regard to the other five
12 violations that were alleged in the Group Eight complaint,
13 Count 1,2, 3, 4, and 5, could you indicate how you
14 calculated the penalty pursuant to the Penalty Policy with
15 regard to those violations?
16 A Yes, I will. Count 1, was there a Count 1?
17 Q Yes. Count 1 was the failure to dispose of one
18 PCB transformer and two PCS contaminated transformers
19 within one year of placement in storage. Violation of 40
20 CFR 761.65-A.
21 A The transformers on the Group Eight property
22 were in storage at least since the fire in 1987 and from
23 that date to the date of our first inspection exceeds one
24 year, the maximum time allowed for storage for disposal of
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1 a PCB article. That type of violation, the circumstance
2 for that type of violation is found on Page 12. It's a
3 level 4 violation. It's the first number 3 you come to on
4 Page 12 — excuse me, the first number 2,' storage.
5 Q Toward the top of the page?.
6 A That's right. Storage of PCB in excess of one
7 year is the level 4 violation.
8 Q The circumstances of that violation?
9 A That is the circumstance. Level 4, the extent.
10 Q The extent, yeah.
11 A Okay. The extent for the storage violation was
12 significant because, as you see on Page 4 of the Penalty
13 Policy, the gallonage of PCB fluid in the transformers
14 exceeded 220 gallons but was less than 1100 gallons.
15 From that, looking at the matrix for a level 4 significant
16 extent violation you have a $6000 penalty.
17 Q With regard to Count 2 of the complaint against
18 Group Eight, it alleges that Group Eight stored one PCB
19 transformer and two PCB contaminated transformers in a
20 facility lacking a roof, walls, and an impervious floor
21 with 6 inch continuous curbing in violation of 40 CFR
22 761.65 B-1. Can you indicate how you calculated the
23 gravity base of that violation?
24 A Certainly. Storing PCB articles in a storage
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1 area that lacks a roof, walls, and 6 inch curbing of
2 impervious floors is a level 2 violation. These
3 transformers were stored out of doors without any roof,
4 walls or curbing.
5 Q Where on the policy do you find it's a level 2?
6 A On Page 11, the first number 5 you come to it
7 says, major storage.
8 Q And further components?
9 A The extent is the same as the previous
10 violation, the same equipment was involved. Greater than
11 220 gallons, less than 1100. If you look on the matrix
12 then you see that a level 2 significant extent violations
13 has a $13,000 penalty.
14 Q With regard to Count 3 of the complaint which
15 alleged that Group Eight did not mark its PCB transformer
16 or PCB contaminated transfo-mers with the date they were
17 placed in storage for disposal in violation of 40 CFR
18 Section 761.65 C-8. Can you indicate to the Court how you
19 calculated the gravity component of that?
20 A Yes. Like Count 1, this is considered a minor
21 -storage, as you see on Page 12, #2, minor storage and the
22 extent is the same as the previous two violations;
23 significant because the same equipment is involved and you
24 have a $6000 penalty for a level 4 significant extent.
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\
1 Q With regard to Count 4 of the complaint against
2 Group Eight it alleged that Group Eight failed to marked
3 its PCB transformer with a PCB label, a violation of 40
4 CFR Section 761.48 2. Could you indicate'how you
5 calculated that penalty?
6 A Yes, I can. The transformers on the Group Eight
7 property had no PCB labels, no official PCB label or any
8 PCB label of any kind. That is considered major marking
9 where someone unfamiliar with the equipment might not be
10 aware there were PCB's. That's found on Page 11, the
11 first number 4, major marking. It's a level 2 violation.
12 Q The extent?
13 A The extent is significant because the PCB
14 transformer contained 236 gallons and the range for
15 significant extent is 220 to 1100 and therefore, you have
16 a level 2 significant extent. $13,000 penalty for that
17 violation.
18 Q With regard to Count 5 of the complaint against
19 Group Eight which alleged that Group Eight did not mark
20 the PCB storage area with the PCB label in violation of 40
21 CFR .Section 761.4810. Would you indicate to His Honor how
22 you calculated that gravity component?
23 A Yes, I can. That also is considered major
24 marking like the previous violation, level 2, and that's
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1 found on Page 11. The extent is the same as the previous
2 several violations because the same gallonage for the
3 transformers involved is of significant extent and in the
4 matrix you see level 2 significant extent'has a $13,000
5 penalty.
6 JUDGE LOTIS: Counsel, are these all involved
7 with the same equipment, the same 3? Are all counts
8 directed toward the same 3 transformers?
9 MR. WAGNER: Yes, Your Honor.
10 THE WITNESS: If I may?
11 JUDGE LOTIS: Please explain, yes.
12 THE WITNESS: The one count for the failure to
13 mark the PCS transformer involves the one transformer.
U JUDGE LOTIS: Which count was that?
15 THE WITNESS: Count 4, I believe. Because
16 transformers that contain less than 500 parts per million
17 do not require that label.
18 JUDGE LOTIS: Thank you very much.
19 BY MR. WAGNER:
20 Q Mr. Bonace, in connection with your work with
21 the PCB unit you have worked with PCS rule on numerous
22 occasions I take it, is that correct?
23 A Yes, that's correct.
24 Q Are there are any presumptions that are provided
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1 for under the PCB rule?
2 A Yes, there is a — one of the presumptions
3 involving transformers?
4 Q Yes.
5 A A mineral oil transformer that has not been
6 tested for RGB's is assumed to be PCB contaminated and
7 contain a level of PCB concentration ranging between 50
8 and 500 parts per million.
9 Q With regard to nameplated PCB transformers such
10 as Askarel, are there any presumptions there?
11 A Yes, a nameplated transformer is always
12 considered to be greater than 500, usually quite a bit
13 greater than 500 parts per million and therefore a PCB
14 transformer by definition.
15 Q Did you utilize any of these presumptions with
16 regard to any of the 7 transformers on the Great Eight
17 property as with regard to any of these penalties?
18 A I did utilize those presumptions in addition to
19 some other information.
20 Q And what was the other information you had?
21 A There were some tests, some PCB samples that
22 were run at the expense of CIW Company of the equipment on
23 Group Eight property.
24 Q How did you come to have those results?
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i A Those results came to us through an inspection
2 at CIW Company.
3 Q Do you know who conducted the inspection?
4 A I believe that was Patricia Spitzley.
5 Q Do you recall who did the analysis that was
6 provided in those inspection reports?
7 A The company was called, I believe, Dihydro — I
8 can't remember the second part.
9 Q In any event, the results were part of the
10 inspection report you prepared.
11 A Yes, they were.
12 Q And that you reviewed.
13 A Yes.
14 Q I'd now 1 i.ke to move, Mr. Bonace, to the
15 adjustment factors with regard to the penalty calculated
16 for Group Eight. When you considered adjustment factors
17 for Group Eight did you consider adjustment factors in the
18 same fashion, taking all six counts in the complaint into
19 consideration?
20 A Yes. They all were considered to have the same
21 adjustment factor.
22 Q Could you run us through your consideration of
23 the adjustments factors?
24 A As you see in the complaint, the gravity base
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1 penalties did remain in the complaint so no adjustment
2 factors were applied. Culpability, the penalty was not
3 lowered because I felt the violator had knowledge or
4 control. I had spoken to the owner myself and written him
5 a letter about the PCB equipment on his site.
6 Q With regard to history of prior violations.
7 A I knew of no history of prior violations by
8 Group Eight.
9 Q So no adjustment was made.
10 A So no adjustment was made for history.
11 Q With regard to ability to continue in business.
12 A I was never given any information that Group
13 Eight could not continue in business after paying the
14 penalty.
15 Q Subsequent to the preparation of the complaint
16 against Group Eight and the filing of the complaint
17 against Group Eight, have you ever been provided any other
18 information or has U.S. EPA been provided any other
19 information, to your knowledge, concerning Group Eight's
20 financial status that would cause you to change your
21 determination with regard to this factor?
22 A No. To my knowledge, U.S. EPA has received no
23 other information to change the ability to pay.
24 Q Are you familiar with the documents provided in
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1 Group Eight's pre-hearing exchange?
2 A Yes, I am.
3 Q So your statement includes those documents.
4 A Yes.
5 Q With regard to other factors as justice may
6 require did you consider those with regard to Group Eight?
7 A Yes, I did.
8 Q Specifically with regard to attitude at the
9 bottom of Page 17?
10 A The penalty was not changed for attitude.
11 Q And why is that?
12 A It did not seem appropriate to lower the penalty
13 for good faith efforts to comply with the appropriate
14 regulations. As to raising them, I did not choose to do
15 that.
16 Q And with regard to voluntary disclosure?
17 A To my recollection, Group Eight did not disclose
18 these violations to the EPA.
19 Q With regard to cost of violation to the
20 government?
21 A This does not appear to apply to Group Eight.
22 Q And with regard to economic benefit of non
23 compliance?
24 A Once again it does not appear to apply.
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1 Q Were there any other considerations you made
2 with regard to Group Eight's penalty?
3 A Not that I recall.
4 Q With regard to the penalty against Wausau
5 Insurance Company, you prepared the amended complaint or
6 were involved in the preparation of the amended complaint?
7 A Yes, I was.
8 Q Is the penalty proposed in that complaint the
9 same as in the original complaint?
10 A Yes, I believe so.
11 Q $25,000?
12 A Yes, to my recollection, yes.
13 Q And with regard to the various penalties for the
14 six counts in Group Eights' amended complaint, did those
15 proposed penalties remain the same as in the original
16 complaint?
17 A I believe they remained the same.
18 MR. WAGNER: May I just have on brief moment,
19 Your Honor.
20 Your Honor, I have no further questions of this
21 witness.
22 JUDGE LOTIS: Before cross examination, let's
23 take a recess. My.watch says it's about 5 after 10:00,
24 let's come back at 20 after 10:00.
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\ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\ M/Z ° WASHINGTON. D.C. 20460
MAY 28 i
. OFFICE OF
ENFORCEMENT AND
COMPLIANCE ASSURANCE.
MEMORANDUM . '. ', , .'.'....
• ' * . ...,". ,
SUBJECT: Interim Guidance on Administrative and Civil Judicial Enforcement Following
Recjjnt Amendments to the Equal Access to Justice Act ' ' .
FROM: RobertVan He^ejenrDirector
Office of Regulatory Enforcement • •
TO: Regional Counsels, Regions I - X - - '
Director, Office of Environmental Stewardship, Region I
- Director, Division of Enforcement and Compliance Assurance, Region
Director, Compliance Assurance & Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice,
Region VIII
Regional Enforcement Coordinators, Regions I-X
A. INTRODUCTION
On March 29, 1996, President Clinton signed into law H.R. 3136, the Small Business
Regulatory Enforcement Fairness Act ("SBREFA"), P.L. 104-121, which had been added as an
amendment to legislation raising the federal debt limit. ORE has been working closely with
representatives of other OECA offices, a number of EPA regional offices, as well as the
Department of Justice on implementation of this new law. SBREFA contains numerous
. provisions which will affect the manner in which the Federal government conducts enforcement
against small businesses and small communities, and requires the Federal Government to
implement a number of programs within one year of enactment. However, some provisions are
effective immediately. In particular, sections 331 and 332 of the law amend the Equal Access to
Justice Act1 ("EAJA") to allow the awarding of attorneys fees to non-prevailing parties in an -
administrative or civil judicial enforcement action.
1 ' 28 U.S.C. § 2412; 5 U.S.C. § 504. See also 40 C.F.R. § 17 (Implementation of the
Equal Access to Justice Act in EPA Administrative Proceedings). : .
- ' /' > • ; ;. , '••;/. 000416
* • * *
R.cycl«d/R«cycl*bl« .Prtn!*l with Ve^ —~ »•« on 100% Recycled Paper (40% PosJconsumer)
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This memorandum is intended to provide interim guidance to reduce the Agency's risk of
creating a cause of action in an administrative or judicial penalty action under SBREFA's
amendments to the EAJA, This guidance does not address whether EAJA claims may apply to
corrective action orders or cost recovery actions. These issues will be dealt with in a subsequent
guidance being developed by the Office of Site Remediation Enforcement (OSRE).
Attached to this memorandum is a summary of some of the other provisions of SBREFA
that are significant for enforcement purposes (see Attachment 3). As we work through these
additional provisions, in conjunction with OECA's Office of Planning and Policy Analysis, we
will provide further guidance and information as appropriate. ....
B. BACKGROUND ON CHANGES TO EQUAL ACCESS TO JUSTICE ACT
The revisions to EAJA made by SBREFA are a- significant departure from the current
state of EAJA law, which in general allows only a "prevailing party" to recover attorney's
fees where the position of the government is riot substantially justified. Sections 331 and 332
of SBREFA amend the EAJA to allow the award^of attorney's fees to a non-prevailing party2 in
an administrative or civil enforcement action where "the demand by the agency is substantially
in excess of the decision of the adjudicative officer3 and is unreasonable when compared with
such decision, under the facts and circumstances of the case." "Demand" is defined iriboth
sections as "the express demand" of the United States or Agency "which led to the adversary
adjudication," but excludes "a recitation of the maximum statutory penalty" in the administrative
or civil complaint "or elsewhere when accompanied by an express demand for a lesser amount."
Because section 504 of EAJA defines an adversary adjudication as "an adjudication under
section 554 of this titled "* this provision may apply to any administrative enforcement action
2 For purposes of these subsections only, a "non-prevailing party" must be a "small
entity" as defined by § 601 of Title 5. "Small entity" includes, but is not limited to, small non-profit
organizations not dominant in their fields, small governmental jurisdictions up to 50,000 in .
population, and small businesses ranging up to 1,500 employees and up to $25 million in annual '
receipts. Under the applicable Small Business Administration regulations, different criteria apply to
different SIC categories. See. Small Business Size Regulations, 61 Fed. Reg. 3,286 (January 31, 1996)
(to be codified at 13 C.F.R. § 121).
3 Or, in the case of a civil judicial action subject to § 332, "the demand by the United
States is substantially in excess of the judgment finally obtained by the United States." The
"legislative history" generated after passage of the legislation of SBREFA suggests that "demand"
includes the value of any injunctive relief. See 142 Cong. Rec. S3242 (daily ed. March 29,
1996)(statement of Sen. Bond); 142 Cong. Rec. E571-573 (daily ed. April 19, 1996)(statement of
Rep. Hyde). Please consult with ORE prior to relying on this.
* See 5 U.S.C. § 504(b)(l)(C). : .. ' "
'"•'•.- • ' - 000417
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• . • . - _
to be .brought using procedures subject to § 554 of the Administrative Procedure Act.
(APA), as well as to any civil judicial complaint filed on or after March 29, 1996.
SBREF A may allow a party which has been adjudged fully liable for violations of an •
environmental law to recover attorney's fees for its defense against the action if the court or
adjudicating officer finds that the Agency's penalty demand was unreasonable and excessive,
based on the record and the facts and circumstances of the case. . As a result, in order to
minimize the risk of a finding that the agency's penalty proposal is both unreasonable and
excessive, agency practitioners should continue to make reasonable and appropriate proposals
for specific penalties based upon the best evaluation of the facts at hand, the statutory penalty
factors, and the applicable penalty policies. However, this new law creates additional exposure
to EAJA awards as a result of Agency litigation, and concerns about possible awards may affect
'litigation decisions. With this in mind, Agency practitioners should consider the following
options in preparing for litigation, drafting a complaint, and responding to EAJA claims
C. ADMINISTRATIVE ENFORCEMENT
"• ' •. •• .
1. Maintain Consistency With Current Procedures
Implementation of SBREF A, and the changes to EAJA, are not incompatible with strong,
fair and effective enforcement. As noted above, we are confident that our current practice of
-proposing specific penalties in administrative complaints, consistent with applicable EPA
pleading penalty policies, will not result in significantly increased exposure to possible EAJA
awards under SBREF A. In this regard, we urge the Agency's litigation teams and managers to
craft complaints and develop litigation strategies with an awareness of the change's, but do not
hesitate to initiate an action or to seek penalties for clear violations. Please continue to develop
proposals for civil penalties that are reasonable and appropriate to the facts and circumstances of
the case. In addition,'it is highly advisable to include as standard language in any consent
agreement a statement that each party agrees to bear its own costs and fees.
2. . Options Where Ability to Pay and Other Factors Are Uncertain
As a general practice, we recommend that the litigation team identify and assess all
information relevant to liability and the proper amount of a penalty prior to issuance of a
complaint. If your preparations do not produce enough reliable information to develop a
defensible, specific proposed penalty amount, you should consider one of the following three
options: .
.5 •• 5 U.S.C. §551 et. seq. Thus, formal administrative enforcement actions brought
using the Consolidated Rules of Practice at 40 C.F.R. Part 22 rriay be subject to an EAJA claim.
000418
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a. Issue a Pre-filing "Show Cause '"or Settlement Letter Seeking Additional
Information on Penalty Issues. . •'
• Prior to filing a complaint, issue a pre-filing "show cause" .or settlement letter in
which the 'respondent is asked for any relevant information (including inability to pay)
EPA should consider in determining an appropriate penalty. We advise practitioners to
. be cautious about including specific penalty proposals in these pre-filing letters. If, after
such information is received, settlement does not occur, this information will assist in
developing a more accurate, appropriate, and defensible penalty proposal for the
' - complaint. Some Headquarters and Regional offices have adopted this practice, and it
• appears to work well, A model letter is attached for your consideration at Attachment I.
'...,•' .'•''. • : «
b. Reference Ability to Pay, Affirmative Defenses in Letter Accompanying the
Complaint or in the Complaint Itself.. ..
In a cover letter accompanying a complaint, or in the complaint itself, state
clearly that the penalty proposed may be adjusted if the respondent establishes bonafide
issues of ability to pay, or other defenses relevant to the appropriate amount of the
proposed penalty. Consider indicating in the complaint that the proposed penalty was
developed based upon the best information available to the Agency at the time, and in
consideration of the statutory factors, etc.' Such indications may be relevant to the "facts
and circumstances" language of SBREFA referenced above, and may work to mitigate
.the amount of any EAJA fee award. Model complaint language is attached as
Attachment 2. - .
c. Use "Notice Pleading" for the Penalty .
In cases where information relevant to proposing an appropriate penalty cannot be
obtained before issuing the complaint and there are nonetheless reasons to proceed with •
the action, the litigation team should consider "notice" pleading -- that is, pleading "up to
the statutory maximum amount" for each violation alleged. This notice pleading
approach would not eliminate the need to make a definite penalty proposal, but would
postpone it until full information about the case, including all violations and respondent's
defenses, are known, so that the Agency can produce better informed penalty proposals.
Note, that if a respondent defaults by failure to answer, it will be necessary to develop a
specific'penalty proposal in the motion for default judgment, in order to comport with the
current default procedures in 40 C.F.R. § 22.17(a), which assume a proposed penalty in
. the complaint. In any event, a specific penalty proposal and argument.will still have to
be developed for the purposes of a hearing. Sample language for notice pleading in
administrative complaints is included in attachment 2.
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•••'-•..•• 5 : '• - '• .
3. • Adjust the Penalty Proposal as Necessary . ..' . . "'
. "In the event of an EAJA claim, the Agency may be able to successfully argue that the
assessed penalty should be compared to the Agency's best offer before an adjudication, rather
than the penalty initially proposed in the complaint or in any pre-filing proposal. In all cases,
attorneys should ensure that the respondent receives a written proposal containing a specific
penalty amount based on the most current assessment of all the facts in the case before each
adjudication occurs. This proposal should be made as far in advance of the adjudication as
possible. Of course, whenever the Agency's understanding of the facts and legal issues in a case
changes in such a way as to significantly impact the appropriate settlement penalty, the Agency
should present the respondent with a written revised settlement offer. . r
D. CIVIL JUDICIAL ENFORCEMENT
When referring a civil judicial action to the Department of Justice (DOJ), any proposal
made by EPA in a pre-filing negotiation must be disclosed to DOJ, including any proposal' ,
related to injunctive relief.6. Informing DOJ of any Agency proposal made prior to referral is
essential to allow the Department to assess the potential for EAJA concerns in each case. In
addition, where the SIC code for the defendant is known, or an analysis of the defendant's
classification as a "small entity" has been made, please include that information in the litigation
report forwarded to DOJ so that the Department will be on notice that the defendant may be
eligible under EAJA for a possible fee award. :
E. NEXT STEPS
Additional guidances and updates will follow as we move to implement SBREFA's
provisions. In the meantime, if you have questions regarding SBREFA's impact on
administrative or judicial enforcement, contact Robert Kinney (202-564-3712), Scott Garrison
(202-564-4047) or David Hindin (202- 564-6004). If you have questions about other aspects of
SBREFA implementation, please contact Kate Perry, who is in OECA's Office of Planning and
Policy Analysis (202-564-4059), or the appropriate ORE division.
Attachments (3)
cc: OECA Office Directors
ORE Division Directors
ORE Branch Chiefs
Deputy Assistant Attorneys General, Environment and Natural Resources Division, DOJ
Section Chiefs, Environmental Enforcement and Environmental Defense Sections, DOJ .
' "' See fn. 3, supra.'; regarding the relationship between "demand" under SBREFA and.
injunctive relief sought. <
••,-:•.• - -. • >. . ;. . - 000420
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. Attachment 1
EXAMPLE PRJE-FILING LETTERS
' B j
Example 1 ..'..*
• * . * '. * -.
Dear__ : • . . " ' - •'',".''
'• - - " ' ". • ' *
.Tliis is to notify you that the U.S. Environmental Protection Agency is prepared to bring a
civil administrative or judicial enforcement proceeding against [name] for violations of the [statute].
The complaint will allege that [name] has violated [section] of the [statute], and [regulation section],'
in that [name][ describe violation]. The complaint will seek civil penalties for these violations.
Before filing the complaint, however, we are extending to you the opportunity to advise the
Agency of any factors you believe that the Agency should consider before issuing the civil
complaint. Relevant factors might include any evidence of reliance on compliance assistance
provided by EPA or State agencies exercising delegated authority, misidentification of the proper
party, or financial factors bearing on your ability" to pay a civil penalty. Even if you are unaware of
any mitigating or exculpatory factors, we are extending to you the opportunity to commence •
settlement discussions concerning the above-described violations.
It is our intention to file the civil administrative complaint two weeks from today, unless you
first advise us of substantial reasons not to proceed as planned. Please direct your response to [name,
address, phone number]. Thank you for your prompt attention to this matter.
» • ,
Example 2 . . .
Dear :
1 • , •* •
• ! •
The Environmental Protection Agency ("the Agency") has reason to believe that [name] may be in •
. violation of the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA" or "the Act") for
selling and distributing a pesticide in violation of FIFRA § 12(a)(l)(C).
Under § 12(a)(l)(C) of FEFRA, it is unlawful for any person to distribute or sell any registered
pesticide the composition of which differs at the time of its distribution or sale from its composition
as described in the statement required in connection with its registration under section 3 of the Act.
FEFRA § 2(gg) defines "To Distribute or Sell" as "to distribute, sell, offer for sale, hold for •
distribution, hold for sale, hold for shipment; ship, deliver for shipment, release for shipment, or .
receive and (having so received) deliver or offer to deliver..^.". . .
i " "
• " . ' • '
The Agency has learned that [name], a registrant as defined in FIFRA §2(y), may be selling and/or
distributing a registered pesticide, the composition of which differs from the composition as
described in .the confidential statement of formula submitted in connection with the product's
'00042V
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gives new powers to the Small Business Ombudsman. Specifically, the SBAombudsrnanwilLrf Sf*
provide a "means to comment on the enforcement activity" by EPA personnel whicfrare 'conducting:S
v.,an enforcement action. An "enforcement action" includes an "audit, on-site inspection^compliance.?:;;
. assistance effort, or'other enforcement related communication ...." This does not appear'itb be limited '-
, to past and/or completed actions, but applies at any point in the enforcement process'^-' inciuding,'-,yi •
. .while the case is in active litigation. There is also a provision made for abusiness which is' currently^
1 being enforced against to-make a confidential referral to the Inspector General "regarding'agency V';v/S
employees conducting compliance or enforcement activities '...:V:"• The legislative history indicates v"'
• — • « • • • '" ' ""*» Vf ' '-"•..• ^^ — • . * - , ^ • '.- * „ f rl • t ^
that this is intended to address instances where Agency personnel are hot following established -^^ • v
policies, or where a policy is, in effect, allowing the Agency to enforce too'zealously 3P|I^'£;:>'^.V £!
"•.-,; • .The' SB A's regional boards are to report to the SBA Ombudsman on those' ''excessive^ ^£££.;$
. enforcemeni actions" and recommend changes to "enforcement policy or practice." ^This boards are^'-.
.;_ * .- *•* •-•• *..- •T'' •'- >• ••• ,• . , . ' »•-."• '
1; also to "rate" the "enforcement activities" of agency personnel in reports to CongresSvfThe '?:C"'::- '.:• ''tf?C
legislative history likens this to a "customer satisfaction" index. .The boards must be established by v;:i:
• the SBA within 180 days after enactment, j. .-._ ."..•' '•...' -( . ..'..-.. -.'v. "•';• '•:;"^-;';'?^t^::.V^-- ^^S-^-.
• . . {, ..;1 -. - . • • • • -.-...---. - . . . ^ :
3. ••' • "Rihts of Small Entities in" Enforcement Actions
••' -OECA's June 1995 Interim Policy on Compliance Incentives for Small Businesses is '-;.- '••"* '••."'
. essentially codified by Section 323 of the Act (the legislative history indicates that the policy satisfies '•
the section's requkements). Accordingly, while this section directs that each covered Federal .;! .
agency to establish a program within one year to implement this section, EPA has already done this,
although a final version of the Interim Policy will be issued shortly. In addition, the Policy on .., ;
Incentives for Self-Policing (the Audit Policy) also appears to satisfy the criteria in this section of the '..
. . .. . -
4. -V Other Enforcement Impacts •. • .. ' .. " ' . .y'. -.,'.-.•'. .•:"" - '"'
./.:'. • .' "• - " • ' ;' • ''•• '.''•*'•''.-. :•'•'' ,-•'•"'
• '.-'.• ••".• '•'•.'••• ,.'.•:".. .• '• ...-..• .• • •.!
•, • Because the Act is still being analyzed, the full extent of its impact remains to be determined. '•
However, the provisions of more immediate concern are, hopefully, noted above. There are other
provisions which raise enforcement concerns ~ such as the termination under Section 342 of ongoing
and future enforcement actions brought under a rule for which a court has found that Regulatory .
Flexibility Act adherence was not sufficient. Many of the Act's other provisions affecting f
enforcement seem to be focused on changes to the rulemaking process, provisions for legislative veto
of new rules, etc. • . , • . ' . ,' :--v'' :-'"i- ' -.
• Attachment 3 - Page 2
:':::' >'•.';000422
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registration. Specifically, it has come to the Agency's attention that [product name] may have been
formulated with [chemical] as an active ingredient, which was not registered with the Agency. '
Therefore, the Environmental Protection Agency requests that your company submit to this office
within fifteen (15) business days of receipt of this letter the following information regarding the
above named products. Provide all records and documents relating to:
•• 1. .the dates of sale and/or distribution of the product, • "' . '. ••
• '•
2. the quantity (pounds or gallons) of products sold and/or distributed, ' .. • :
3. the locations of all sale and/or distribution sites,' . • •' .-..'• •. •
' i • ' f'.
• '...." • ' ' '••'
4. all shipping records, _ . - . .
5. a copy of the full product labeling associated with the product, " •. • . '
6. any product packaging inserts or flyers used in the marketing aspects of the product,
7. any information that would indicate the source of the [chemical] as an active ,
ingredient used in the production of the [pesticide product],
8. product chemistry and physical characteristic data supporting [pesticide product] as
being similar or identical in composition or labeling to EPA Registration [number],
9. the process used to produce [chemical] as an active ingredient, and
10. your legal relationship to [affiliated corporation] • •
Following receipt of the requested information, the Agency may wish to meet with representatives
of [name] to further discuss this matter and allow [name] additional opportunity to show cause why
the Agency should not proceed with enforcement action.
Please direct your response to [name, address, phone number]. Thank you for your prompt
attention to this matter.
Attachment 1 - Page 2 . '
• -."- - 000423
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, Attachment!
EXAMPLE NOTICE PLEADING LANGUAGE -
Example 1: •. ... ' . '.:
' ;. - - CIVIL PENALTY . '. ,' ;''• ;., . ' ' . ' •
Section 14(a)(l) of FIFRA, 7 U.S.C. Section 1361(a)(l), authorizes the assessment of a civil
penalty of not more than $5,000 for each violation of FIFRA. The penalty assessed must reflect the
size oTthe business of the person charged, the effect on the person's ability to continue in business, '
and the gravity of the violation. .„•'.'•- . : ' ' V '
Example2: . . ' ' .' ...;'• ' ''..'.. . . :
' •'. .. • CIVIL PENALTY "• . " ..
Section 16 of TSCA, 15 U.S.C. Section 2615, provides that any person who violates TSCA
shall be liable for a civil penalty in an amount not to exceed $25,000 for each violation, and that each
day a violation continues shall constitute a separate violation of TSCA. The penalty assessed must
reflect the nature, circumstances, extent and gravity of the violations, and, with respect to
Respondent, ability to pay, effect on ability to continue to do business, any history of prior such • *
violations, the degree of culpability and such other matters as justice may require.
Example 3: . -. . " .-'..-.
Civil Penalty
Pursuant to Section 309(g)(2)(B) of the Clean Water Act, 33 U.S.C. § 1319(g)(2)(B), any
person who has violated [insert appropriate statutory requirement of the Act] may be assessed a civil
penalty by the Administrator that may not exceed $10,000 per day for each day during which the
violation continues, as long as the total amount of such a penalty does not exceed $125,0.00.
Therefore, Complainant requests that the Administrator, after consideration of the statutory
assessment factors set forth at Section 309(g)(3) of the CWA, 33 U.S.C. § 1319(g)(3), assess a civil
penalty against Respondent of up to $ 10,000 per day for each day during which a violation(s) cited ia
this complaint continues. . . . - "
V 00042-4
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Attachment 3
' OTHER PROVISIONS OF SBREFA > '
...•'•'..'... '.' ' !....>:.
SBREFA has a very broad reach, and will likely apply to a sizable percentage of the regulated ..
community. It applies to all "small entities," as that term is defined in 5 U.S.C. §. 601,15 U.S.C. §
632, and in SBA regulations codified at 13 C.F.R. Part 121. The universe of "small entities" is larger •
than the definition used in Section 507 of the Clean Air Act and OECA's "Policy on Compliance '•,:'.;.;
Incentives for Small Businesses," both of which use a lOQ-employee limit. .The SBA regulations '•'• . ••
. define "small" by reference to either a company's number of employees (e.g., up to 1500, or greater) X
or a company's annual receipts (up to $25,000,000), depending on the company's SIC codei'The .; v /'
Act's definition of "small entities" also includes "small governmental jurisdictions" (smaller'than 7 :;•'{
50,000 persons), and "small organizations" (e.g., non-profits), further expanding the reach, of this ' "• - -
Act. SBREFA requires the Agency to establish within a year of enactment a number, of programs to'.'.'"'.''.
benefit this segment of the community, some of which are summarized below. ••.'. •.•••';': :.:."•- •- ^ :,;
x • .. .;. . .... . ' . ' . ' •' .'.'.':' ; "'" ',.• ''••'•-•('•'''.'
1. Programs to Provide Advice and Guidance to a "Small Entity"— Potential Evidentiary Impact".
Section 313 of SBREFA requires each department and agency of the Federal government to
establish a program to "answer inquiries" or give "advice" on "interpreting and applying the law t&
specific sets of facts" provided by a small entity. The legislative history indicates that this provision
contemplated a range of mechanisms, many of which are already commonly used by the Agency to -
provide this kind of information, including the use of hotlines. However, the effect of this kind of
guidance in an enforcement action may have been given greater weight by a provision specifying that
"[i]n any civil or administrative action against a small entity, guidance given by an agency applying
the law to facts provided by the small entity may be considered evidence of the reasonableness... of
any... fines, penalties or .damages " Given the informal nature of some forms of advice
provided by different parts of the Agency (both Regional- and Headquarters-based), this has the
potential to affect an enforcement case involving a violator who was provided with an inconsistent or .
erroneous interpretation of law as applied to the facts at issue. Whether this provision in fact imbues •
such advice with any greater evidentiary weight than already afforded under current law is an open
question. . '."-'•
• *.'•"• ''*. » •.
Nevertheless, this provision tends to highlight the issues which might arise in an action
involving a party who had relied in good faith on erroneous advice or guidance provided by the
Agency. However, because the Agency has in place a number of Headquarters and Regional-based
mechanisms to provide advice and guidance to both large and small entities, this provision raises the
potential for forum-shopping by a business. As such it will place a premium on the Agency's ability
to ensure a reasonable consistency in interpretations when a business is provided with guidance that
qualifies under this section. The "program" to be established under this section for responding to
inquiries must be established within 1 year. • ,; '"...' .
2. Oversight of EPA Enforcement Personnel bv the SBA - ...... . / .
Section 322, on "Oversight of Regulatory Enforcement" by the Small Business :
Administration, establishes regional boards chaired/run by the Small Business Administration, and
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