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Agency Washington DC 20460
EPA Litigating Civil Penalties
El Strategies
El Techniques
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Selected Resource Materials
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PLEADING c’7 LITIGATING CIVIL PENALTIES
Administrative Law Desk Guide: Index of Resource Materials
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 provides a list and a hard copy,
where appropriate, of regulations, 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 can be obtained in your regional library 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 AIj
and EAB decisions on a monthly basis. A sample copy is included page 1
(2) Procedural Rules
(A) 40 CFR Part 22 page 8
(B) The proposed “technical amendments and refinements” to 40 CFR Part 22, published
in the federal register on February 25, 1998. This proposed rule includes the new
non-APA procedural rule, Subpart I. A copy of Subpart I is provided page 39
(3) EPA 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.
(1) Statutory Penalty Section Regarding
Penalty Assessment page 44
(II) GM 21 “Policy on Civil Penalties” page 46
(III) GM 22 “A Framework for Statute-Specific Approaches to Penalty
Assessments” page 53
(I V) Guidance on the Use of Penalty Policies in Administrative Litigation.
12/15/95. Gives language to insert into Complaints to reflect \VAUSAU
decision page 86
(\ ) “Impact on WAUSAU on Use of Penalty Policies” 3/19/97 page 90
(VI) “Modifications to EPA Penalty Policies to Implement the Civil Monetary
Penalty Inflation RuIe(Pursuant to the Debt Collection Improvement Act
of 1996)” 5/9/97 page 92

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(B) Statute Specific - The statute specific penalty policies (also called “Enforcement Respcn e
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.
(1) 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
(II) 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
(111) RCRA
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
(IV) TSCA - 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
(V) TSCA - Title II
1. Interim Final ERP for AHERA. 1/31/89
2. ERP for Asbestos Abatement Projects: Worker Protection Rules. 11/14/89
(Vi) TSCA - Title X
1. Residential Lead-Based Paint Hazard Reduction Act of 1992;
Interim Enforcement Response Policy. 1/2/98
111

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(VU) FIFRA
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)
(VIII) EPCRA
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, arid 312 of EPCRA and
Section 103 of CERCLA. 6/13/90
(IX) CERCLA
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. 1/19/89
(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 page 116
(B) “Voluntary Environmental Self-Policing and Self-Disclosure Interim Policy
Statement” Federal Register 4/3/95. Provided as background page 122
(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 page 126
(D) “Audit Policy Interpretive Guidance” 1/15/97
Qs&As page 133
iv

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(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 page 162
(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 encouragin g 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 makes a good faith effort to comply and there is no criminal behavior and no significant
health, safety or environmental threat.
(A) “Interim Policy on Compliance Incentives for Small Businesses” Federal Register
6/23/95. Effectuates Clinton’s 4/26/95 Executive Memo on Regulatory Reform.
Identifies that in 1997 EPA will consider whether to continue, modify, or
discontinue program page 184
(B) “Qs and As on Interim Policy on Compliance Incentives for Small Businesses”
9/19/95. Provides mitigation to small businesses who participate in compliance
assistance programs page 191
(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 administative 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.
(A) “Guidance for Calculating the Economic Benefit of Noncompliance for a Civil
Penalty Assessment” 11/5/84 page 198
(B) “Guidance on Determining a Violator’s Ability to Pay a Civil Penalty”
12/16/86 page 203
(C) “Change in Methodology for Determining the BEN Model’s Discount Rate”
10/19/92 page 208
(D) “BEN, ABEL and CASHOUT Models on National LAN Platform”
12/13/94 page 213
(E) Kimberly Zanier memos, “Financial Analysis/General Synopsis” and “Financial
Analysis Memorandum #2”, August 2, 1995 page 217

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(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 page 246
(B) See the Statute Specific ERPs.
(C) “Guidance on Certification of Compliance with Enforcement Agreements”
7/25/88 page 254
(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 page 261
(B) “Policy Against ‘No Action’ Assurances” 11/16/84 page 264
(10) Guidance on Intra-Agency Process and Procedure - These guidance documents explain
who does what and how within EPA when it comes to administt ative practice.
(A) “Procedures to Improve Coordination before the Environmental Appeals Board”
1/25/93 page 266
(B) “Redelegation of Authority and Guidance on Headquarters Involvement in
Regulatory Enforcement Cases” 7/11/94 page 277
(C) “OECA/Regional Procedures for Civil Judicial and Adminis ative Enforcement Case
Redelegation” 11/8/94 page 292
(D) “Documenting Penalty Calculations and Justifications in EPA Enforcement Actions”
8/9/90 page 307
(11) Delegations of authority. Available at EPA’s website.
(12) Models of 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 Celitech Media, Inc. aka Health Care
Products , Docket Nos. FIFRA 95-H-04; FIFRA 93-H-02F and I.F.&R. VIII-90-
279C; February 26, 1996 page 310
(B) Complaint in GEC Precision , EPCRA Docket No. 94-T-381-E page 336
(C) Memo in Support of Penalty in GEC Precision page 345
(D) Transcript of hearing in GEC Precision page 351
(E) Transcript of hearing in WAUSAU page 364
(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 arid
Civil Judicial Enforcement Following Recent Amendments to the Equal Access to
Justice Act”, 5/28/96 page 385
(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 3 CFR
Part 1320. The statute requires the EPA to get 0MB approval for any regulation,
permit, etc. which requires the collection of information. Where EPA has failed to
get 0MB 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.
(D) Antideficiency 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.

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(14) Access to Information:
(A) Guidance documents, memos and policies can be accessed through the Enforcement
and Compliance Docket and Information Center located in Room 4033 of EPA’s Ariel Rios
Building. E-mail address is OECA/Docket@EPAMaiLGov. 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 AU and EAB
decisions as well as a Policy and Guidance library.

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ADMINISTRATIVE LITIGATION PRACTICE
NE TWORK
Helene C. Ambrosino - 202-564-2627 + Michael J. Walker - 202-564-2624
fax: 202-501-0633
Distributed for use to EPA administrative law practitioners;
fill te a b d c y documct s have been ieee to eath regional coordinaz .
Januarj; 1999. Greetings to EPA administrative law practitioners coast to coast. We
are pleased to bring you summaries of key decisions of the administrative law judges and
Environmental Appeals Board issued since our December edition. In addition, we have
induded a compilation of administrative practice developments from recent Weekly
Activity Reports. 1999, like every new year, offers fresh hope and the opportunity to
become revitalized once again. The cases this month represent an interesting mix of issues,
some positive, some problematic. Note in particular:
• Full penalty awarded in CWA Wetlands case: Condor Land Company
• Dismissal averted in Wallace Stone CWA dredge case
• EAB saves EPCRA Penalty Policy in Hall Szgns appeal challenge
• EAB Remand Order supports fee award in Asbestos NESHAP appeal
The two EAB decisions merit your special attention. EPA appealed one line in Judge
Pearistein’s Hall Sig,u decision in which he held that the EPCRA ERP was “arbitrary and
inconsistent with the statute.” The penalty that Judge Pearistein imposed and his method of
calculating the penalty, which appeared to be well ‘ thin the requirements of 40 CFR
22.27(b) were not at issue it was the act of discounting the ERP that was at issue. In the
dedining to reverse, the Board held that the references to the ERP were limited to the Jactc in
this case, and had no broad precedential effect, noting that AU’s do not have the authority to
“strike down” EPA penalty policies. Remember, you must read this decision in light of the
Board’s ruling in Employen Inswunce of Wausau . Accordingly, proper practice procedures
dictate that penalty policies must be pled and argued in conformity with the statutory
provisions for penalty assessment in each applicable statute.
The decision in L c CSewices is also well worth the attention of each an every
administrative practitioner. In this decision the Board reversed the decision of Judge
Charneski which denied recovery of attorney fees and expenses under the Equal Access To
Justice Act Judge Charneski had dismissed EPA’s CAA Asbestos NESHAPS case, £nding
that samples were not taken to establish the presence of asbestos for some counts and
where samples were collected, they were not properly tested to establish that the asbestos
was “friable.” The respondent sought recovery of attorney fees and expenses.; TO recover
attorney fees, a respondent must demonstrate that EPA was not “sub tantially justified” in

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bringing the action. In this case, because of the sheer magnitude of the asbestos abatement
project (demolition of a refinery) the contractor elected to treat all material removed as f it
coitained asbesta .c. The state inspector who visited the demolition site on numerous occasions
found insulation material improperly stored in many locations in violation of the asbestos
NESHAPS requirements. The Court, and now the Board refused to allow a circumstantial
inferences of asbestos mismanagment to be drawn. The bottom line to inspectors and case
developers: when in doubt collect and test your samples.
The case has been remanded to Judge Charneski for consideration of the fee request.
Approximately $70,000 is being sought.
Admimstratrv-e Practice Highlights
Take some time to scan the Administrative Practice Highlights compiled from the
regional weekly activity reports. We will continue to compile this information and to
highlight key developments in the administrative practice that may never result in the
issuance of an initialor final decision. As you are aware, with the vast majority of our cases
settling, it is vital that administrative practitioner have the ability to see the larger practice
picture beyond the orders and decisions issued by the Environmental Appeals Board or
Office of Administrative LawJudges. Note in particular
• Inl2nd Steel pays $248,000 to settle RCRA violations
• The Bureau of Indian Affairs pays $90,000 to settle RCR.A violations
• 3M Fined for not having proper RCRA training certification
• An AHERA training course provider is suspended
• Rhode Island DOT Pays $100,000 for SPCC & RCRA violations
• Realtors are cited for Lead-Paint Disdosure violations
A great deal is happening across our multi-statute practice and this compilation of
items will allow you to see what other practitioners are doing. You should be able to get
some great practice ideas from this information. Don’t hesitate to call the practitioner
identified in each items for more information.
Administrative Practice Training & Professional Development
Several courses and meetings are on the horizon of interest to administrative
practitioners:
From the National Enforcement Training Institute:
Administrative Hearings & Trials : February 24, 1999 - Region 2
March 17, 1999 - Region 1
April 21, 1999 - Region 4
July 14, 1999 - Washington, D.C.

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Pleading & Litigating Civil Penalties : February 25, 1999 - Region 2
March 18, 1999 - Region 1
April 22, 1999 - Region 4
Supplemental Environmental Projects : February 18, 1999 Washington, D.C.
May 6, 1999 - Region 9
May 19, 1999 - Region 4
July28, 1999 - Region 7
Negotiation Skills Training (Advanced ) April 28-29, 1999 - Region 4
9 th Annual Advanced Administrative Practice Institute
April 20-21, 1999 - Region 4 (for lawyers from all regions)
These courses are open to EPA attorneys and technical professionals. Invest
in yourself take a NETI course
Also the National EPCRA Conference will take place in New York City, May 4 and
5th, 1999. This is the first time that the “313” and “non-313” groups will be meeting
together. For more information, contact Jon Jacobs at 202-564-4037.
OUR TRIBUTE: Like A Meteor. He Lit Up the Skv and we said “ WOW ”
On a sad note for many EPA, we regrettably announce that Judge Edward
Kuhlmann has retired. In the short time that he was assigned to work at EPA, Judge
Kiihlmann created a record of decisions, orders and “firsts” that are unparalleled in the
history of EPA. He issued an accelerated decision on liability and penalty in Oleiahoma
Metal Processing that imposed a $1.3 million dollar TSCA penalty. The highest penalty ever
imposed by an vhninistraiive law judge in the history of EPA, under any statute ever. ..and it
was on a motionfracakrateddecuion. Later Judge Kulhmann issued his decision in the
DuPont FIFRA use, where he found that DuPont had failed to print eye-protection
warnings on the label of there popular Bladex corn herbicide Noting that FIFRA required
him to consider the gnzv y of the violation, the appropriateness of the penalty to the of
business and the effect of the penalty on the persons’s ability to continue in business, Judge
Kiahlminn found that the violations were significant and that a fine of $1.9 million was
appropriate to send a message to this corporate giant with $36 billion in gross sales. $1.9
million. From a statute where the maximum penalty is $5,000 per violation per day. To
Judge Kuhlm nn : best wishes and thankc for showing us what is possible.

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* SIGNIFICANT ORDERS & INITIAL DECISIONS *
* Condor Land Company Docket No. CWA-404-95-106. FULL PENALTY
AWARDED!
On December 8, 1998 Judge Charneski issued an Initial Decision in this CWA
Section 301(a) case. Respondent was charged with illegally discharging a pollutant into a
wetland without a Section 404 permit when it used bulldozers and loaders to clear and plow
its land. The Judge rejected Respondent’s argument that the land was not a wetland and
found the three EPA witnesses on this subject persuasive. The Judge rejected Respondent’s
argument that EPA failed to correctly use its own guidance document in making the wetland
determination on the grounds that it is merely a manual to aid field personnel. Likewise, the
Judge rejects Respondent’s argument that a wetland does not constitute a navigable body of
water under the CWA and, therefore, there is no jurisdiction. The U.S. Supreme Court held
in U.S. v Riverside Bayview Homes . 474 U.S. 121 (1985) that, for the purposes of the CWA,
the phrase “navigable waters” may indudes wetlands. The Judge ruled that the subject
property in this case constituted a “wetland system contiguous with coastal waters” and,
thus, subject to the CWA. The Judge also rejected Respondent’s argument that it did not
“discharge” pollutants and held that the “redepositing” of material would constitute a
“discharge”. As a final liability issue, the Judge rejected Respondent’s argument that it did
not have to get a permit due to the farming exemption contained in the CWA. The Judge
held that the burden of establishing the exemption was on Respondent and they failed to
show that the illegal discharge was due to “established (Le. ongoing ) farming.
operation”. Respondent had failed to raise the issue of penalty at hearing or in its post-
hearing brief. The Judge held that the civil penalty requested by EPA is appropriate and
assessed a $32,160 penalty. Melissa Allen Heath and Philip G. Mancusi-Ungaro
represented EPA Region 4 in this proceeding.
* Wallace W. Stone . [ CWAJ Docket No. VII-97-0024. EPA ds dges up more
evidence to support its case and dismissal is averted!
On December 17, 1998 Judge Bullock issued an Order Denying EPA’s Motion for
Default Order and Finding that EPA’s Case Should Not be Dismissed. The complaint
alleged violation of CWA Se tiôn 301(a) charging that Respondent’s dredging operation
caused an Illegal discharge into a navigable waterway. EPA filed a Motion for a Default
after Respondent failed to file a prehearing exchange. The Judge denied the Motion when
Respondent wrote a letter iiidicatnig that he nnot afford a lawyer and would explain his
position via a letter. The Judge indicated that more lenient standards apply to a pro se
Respondent. During the pendency of the moion for default, the Judge issued an Order for
EPA to supplement its a preht arng exchange in order to show that the case should not be
dismissed as a result of National Mining Assoc. et aL v. U.S. Army Corps of Eng’rs. et al .
No. 97-5099, 1998 U.S. App. LEXIS 13009 (D.C. Cit 1998). In National Mining the court
of appeals explained that a “discharge of a pollutant” under the CWA definition does NOT
indude the “incidental failback” resulting dredging activities. The Judge did not dismiss the

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case because EPA was able to supplement the prehearing exchange sufficiently to show that
there will be evidence produced to demonstrate that Respondent was responsible for
“sidecasting and redepositing of material” and not merely incidental failback. Audrey Asher
represents EPA Region 7 m this proceeding.
* Lipscomb Industries Inc. , Docket No. FIFRA-VI-028-C. Untimely Answer
Results in Dismissal and Remand, but why not default?
On November 30, 1998 Judge Gunning issued an Order Dismissing the Case and
Returning File to the Regional Hearing Clerk Judge Barbara Gunning dismissed the case
and had it returned to the Regional Hearing Clerk after ruling that Respondent’s letter did
not constitute a timely flied Answer. The grounds for dismissing the case are a bit uiidear,
as it the failure of the Court to grant a motion for default Consistent with the Rules of
Practice, the Region is filing a motion for darification. Gary Smith represented EPA
Region 6 in this proceeding.
* Franidin and Leonhardt Excavating Company Inc. , Docket No. CAA-98-O11.
EPA motion to demolish Respondent’s affirmative defenses postponed!
On December 7, 1998 Judge McGuire issued an Order Denying Complainant’s
Motion to Strike Affirmative Defenses in this CAA Asbestos NESHAPs case. The Judge
denied EPA’s motion and ruled that motions to strike are not favored and should be denied
unless the legal insufficiency of the defense is dearly apparent. TheJudge held that, since a
prehearing exchange has not yet been completed, the record is largely undeveloped and any
evidence on Respondent’s affirmative defenses should be heard. Specifically, Respondent
alleges in four affirmative defenses, facts intended to establish estoppel and lathes against
EPA. Respondent.alleges that it is a demolition company that relied on the representations
of the State Air Pollution Control District that the building involved was free of RACM
before demolition began. The Judge opined that evidence would be needed to determine the
role and responsibility of the state in the proceeding and pursuant to CAA Sections 112(1)
and (8).
* United States Air Force Tinker Air Force Base , Docket No. UST-6-98-002-
AO-t. EPA’s Argument to consolidate grounded in air force cases.
On December 17, 1998 Judge Gunning issued an Order Denying Complainant’s
Motion to Consolidate. EPA’s motion requested the consolidation of two cases against
Respondent that arose out of the same inspection. The instant case alleges violations of
RCRA Section 9006 and the UST regulations. The other case alleges violations of the CAA.
In denying EPA’s request, the Judge held that consolidation is. authorized by 40 CFR 22.12
which allows for consolidation only if the record supports a finding that there “exists
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

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otherwise separate proceedings”. The Judge felt that the record did not support such a
finding..
* Hallar Enterprises. Inc . Docket No. RCRA-VI-8L5-H. Judge rejects RCRA
Test method challenges for now; to be raised later at trial.
On January 20, 1999 Judge Nissen issued an Order in this RCRA 3008 case.
Respondent was charged with several RCRA counts involving the disposal and storage of
hazardous waste without a permit Respondent has denied that any waste was hazardous
and argues that EPA’s sampling was not done in accordance with accepted procedures and
applicable rules and, thus, are not representative and should be rejected. EPA now seeks a
ruling by the AU that EPA is not bound by regulation or guidance to perform sampling in
any prescribed manner as long as it can be shown by scientifically acceptable methods that
the sampling was representative. Specifically, is SW-846 a required sampling method or
merely advisory? In coming to a decision the Judge was persuaded by EPA’s deletion of a
statement in the preface to SW-846 that had said “SW-846 test methods would be used in
RCRA investigations.” The Judge held that the necessity is for a scientifically acceptable
method of sampling regardless of the status of SW-846. Finally, the Judge granted EPA’s
motion to the extent that whether sampling methods in SW-846 are mandatory and whether
samples taken were representative of wastes at the facility will be decided after the evidence
is heard.
* EAB DECISIONS *
* Hall Signs. Inc. . EPCRA Appeal No. 97-6. Good sign for the EPCRA
Section 313 Enforcement Response Policy!
On December 16, 1998 the EAB issued a Final Order in this EPCRA appeal in which
EPA sought to reverse Judge Pearistem’s holding that the EPCRA Section 313 Enforcement
Response Policy was arbitrary and inconsistent with the statute The EAB was reluctant to
rule at all holding that they do not want to be drawn routinely into parsing the language of
an initial decision assessing a penalty when neither party has appealed the amount of the
penalty assessment. Because they felt that the question at issue could be dealt with in short
order, they decided to address it. The EAB conduded that the opinion of the AU need not
be vacated because the Initi2l Decision does not establish a precedent that undermines the
validity of the ERP. The EAB held that the ALJs references to the ERP as being arbitrary
were all limited to the facts of the case and based solely on the record and, therefore, carries
no broad, reaching precedential effect The EAB agreed that the ALJs do not have the
authority to “strike down” EPA policy per ce, however, they found no evidence in the record
that Judge Pe steinhad exceeded his authority in this regard. Ignacio L Arrazola
represented EPA Region 5 in this proceeding.

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* L & C Services. EAJA Appeal No. 98-L Hard Lessons Learned in EAJA
Appeal.
On January 15, 1999 the EAB issued a Final Decision and Remand Order concerning
Respondent’s application for attorney’s fees and expenses under the Equal Access to Justice
Act The underlying action involved allegations of CAA Asbestos NESHAP violations. The
case was dismissed because no samples were taken to establish the presence of asbestos for
four out of six counts and ,where samples were taken, the record did not establish that the
asbestos was “friable”. The AU denied Respondent’s request for EAJA reliefand held that
EPA had been “substantially justified” in bringing the action. On appeal, the EAB has
reversed the AU and held that EPA was not substantially justified in bringing the action.
Specifically, the EPA “had no reasonable basis in fact for its position.. . where the
administrative record reveals that the Region adduced neither direct evidence nor compelling
circumstantial evidence in support of key elements of its claim”. The government has the
burden of proof with respect to “substantial justification” and EPA failed to meet this
burden. The EAB rejected using the Asbestos Notification Forms submitted by Respondent
which identified the presence of friable asbestos at the facility. First, the EAB points out
that the forms were never admitted into evidence at the hearing! Second, the forms can only
lend support to the fact that there was friable asbestos at the facility and does not support
any factual determinations as to whether the material observed by the inspector was actually
asbestos or friable. The notification forms support the legitimacy of conducting an
inspection, but not as direct or circumstantial evidence of noncompliance. The matter has
been remanded to determine the size of the award.
* MISCELLANEOUS NEWS *
On January ii, 1999, OECA’s Office of Regulatory Enforcement sent out an
announcement that they have created a new position intended to enhance our ability to
coordinate implementation of the Audit Policy and related self-disdosure initiatives and have
appointed Leslie Jones as ORE’s Self Disdosure Coordinator. See enclosed memo for
details.

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[ Code of Federal Regulations)
[ Title 40, Volume 1, Parts 1 to 49
[ Revised as of July 1, 1998)
From the U.S. Goverm’nent Printing Office via GPO Access
[ CITE: 40CFR22]
[ Page 221—227)
TITLE 40--PROTECTION OF ENVIRONI ’ NT
CHAPTER I--ENVIRONI ’ENTAL PROTECTION AGENCY
PART 22—-CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart A--General
Sec. 22.01 Scope of these rules.
(a) These rules of practice govern all adjudicatory proceedings for:
(1) The assessment of any civii penalty conducted under section
14(a) of the Federal Insecticide, Fungicide and Rodenticide Act as
amended (7 U.S.C. 1361(a));
(2) The assessment of any administrative penalty under sections
113(d) (1), 205(c), 211(d) and 213(d) of the Clean Air Act, as amended
(CAA) (42 U.S.C. 7413(d) (1), 7524(c), 7545(d) and 7547(d)).
(3) The assessment of any civil penalty or for the revocation or
suspension of any permit conducted under section 105 (a) and (f) of the
Marine Protection, Research, and Sanctuaries Act as amended (33 U.S.C.
1415 (a) );
(4) The issuance of a compliance order or the issuance of a
corrective action order, the suspension or revocation of authority to
operate pursuant to section 3005(e) of the Solid Waste Disposal Act, or
the assessment of any civil penalty under sections 3008, 9006 and 11005
of the Solid Waste Disposal Act, as amended (42 U.S.C. 6928, 6991(e) and
6992(d)), except as provided in 40 CFR parts 24 and 124.
(5) The assessment of any clvii penalty conducted under section
16(a) of the Toxic Substances Control Act (15 U.S.C. 2615(a));
(6) The assessment of any Class II penalty under section 309(g) of
the Clean Water Act (33 U.S.C. 1319(g));
(‘7) The assessment of any administrative penalty under section 109
of the Comprehensive Environmental Response, Compensation, and Liability
Act of 1580, as amended (42 U.S.C. 9609);
[ [ Paqe 222)]
(8) The assessment of any administrative penalty under section 325
of the Emergency Planning and Conununity Right-To-Know Act of 1986
(EPCP.A) (42 U.S.C. 11045)
(9) The assessment of any civil penalty conducted under section
1414(g) (3) (3) of the Safe Drinking Water Act as amended (42 U.S.C. 300g-
3(g) (3) (3)
(b) The Supplemental rules of practice set forth in subpart H
establish rules governing those aspects of the proceeding in question
which are not covered in subparts A through G, and also specify
prccedures which supersede any conflicting procedures set forth in those
subparts.
(c) Questions arising at any stage of the proceeding which are not
addressed in these rules or in the relevant supplementary procedures
shall be resolved at the discretion of the Administrator, Regional
Administrator, or Presiding Officer, as appropriate.
[ 45 FR 24363, Apr. 9, 1980, as amended at 52 FR 30673, Aug. 17, 1987; 53
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FR 12263, Apr. 13, 1988; 54 FR 12371, Mar. 24, 1989; 54 FR 21176, May
16, 1989; 56 FR 3757, Jan. 30, 1991; 57 F 4318, Feb. 4, 1992]
Sec. 22.02 Use of number and gender.
As used in these 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.
Sec. 22.03 Definitions.
(a) The following definitions apply to part 22:
Act means the particular statute authorizing the institution of the
proceeding at issue.
Administrative Law Judge means an Administrative Law Judge appointed
under 5 U.s.c. 3105 (see also Pub. L. 95—251, 92 Stat. 183)
Administrator means the Administrator of the U.S. Environmental
Protection Agency or his delegate.
Agency means the United States Environmental Protection Agency.
complainant means any person authorized to issue a complaint 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 decision.
Complaint means a written coimnunication, alleging one or more
violations of specific provisions of the Act, or regulations or a permit
promulgated thereunder, issued by the complainant to a person under
Secs. 22.13 and 22.14.
consent Agreement means any written document, signed by the parties,
containing stipulations or conclusions of fact or law and a proposed
penalty or proposed revocation or suspension acceptable to both
complainant and respondent.
Environmental Appeals Board means the Board within the Agency
described in Sec. 1.25 of this title, located at U.S. Environmental
Protection Agency, A-hO, 401 M St. SW., Washington, DC 20460.
Final Order means (a) an order issued by the Administrator after an
appeal of an initial decision, accelerated decision, decision to
dismiss, or default order, disposing of a matter in controversy between
the parties, or (b) an initial decision which becomes a final order
under Sec. 22.27(c).
Hearing means a hearing on the record open to the public and
conducted under these rules of practice.
Hearing Clerk means the Hearing Clerk, A—flU, U.S. Environmental
Protection Agency, 401 M St. SW., Washington, DC 20460.
Initial Decision means the decision issued by the Presiding Officer
based upon the record of the proceedings out of which it arises.
Party means any person that participates in a hearing as
complainant, respondent, or intervener.
Permit means a permit issued under section 102 of the Marine
Protection, Research, and Sanctuaries Act.
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 the Administrative Law Judge designated by
the Chief Administrative Law Judge to
[ [ Page 223]]
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serve as Presiding Officer, unless otherwise specified by any
supplemental rules.
Regional Administrator means the Administrator of any Regional
Office of the Agency or any officer or employee thereof to whom his
authority is duly delegated. Where the Regional Administrator has
authorized the Regional Judicial Officer to act, the term Regional
Administrator shall include the Regional Judicial Officer. In a case
where the complainant is the Assistant Administrator for Enforcement or
his delegate, the term Regional Administrator as used in these rules
shall mean the Administrator.
Regional Hearing Clerk means an individual duly authorized by the
Regional Administrator to serve as hearing clerk for a given region.
Correspondence may be addressed to the Regional Hearing Clerk, U.S.
Environmental Protection Agency (address of Regional Office——see
appendix). In a case where the complainant is the Assistant
Administrator for Enforcement or his delegate, the term Regional Hearing
Clerk as used in these rules shall mean the Hearing Clerk.
Regional Judicial Officer means a person designated by the Regional
Administrator under Sec. 22.04(b) to serve as a Regional Judicial
Officer.
Resrondent means any person proceeded against in the complaint.
(b) Terms defined in the Act and not defined in these rules of
practice are used consistent with the meanings given in the Act.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5323, Feb. 13, 1992)
Sec. 22.04 Powers and duties of the Environmental Appeals Board, the
Regional Administrator, the Regional Judicial Officer, and the
Presiding Officer; disqualification.
(a) Environmental Appeals Board. The Admd.nistrator delegates
authority under the Act to the Environmental Appeals Board to perform
the functions assigned to it in these rules of practice. An appeal or
motion under this part directed to the Administrator, rather than to the
Environmental Appeals Board, will not be considered. This delegation of
authority to the Environmental Appeals Board does not preclude the
Environmental Appeals Board from referring any case or motion governed
by this part to the Administrator when the Environmental Appeals Board,
in its direction, deems it appropriate to do so. When an appeal or
motion is referred to the Administrator, all parties shall be so
notified and the rules in this part referring to the Environmental
Appeals Board 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 the
ex parte rules set forth in Sec. 22.08.
(b) Regional Administrator. The Regional Administrator shall
exercise all powers and duties as prescribed or delegated under the Act
and these rules of practice.
(1) Delegation to Regional Judicial Officer. One or more Regional
Judicial Officers may be designated by the Regional Administrator to
perform, within the region of their designation, the functions described
below. The Regional Administrator may delegate his or her authority to a
Regional Judicial Officer to act in a given proceeding. This delegation
will not prevent the Regional Judicial Officer from referring any motion
or case to the Regional Administrator. The Regional Judicial Officer
shall exercise all powers and duties prescribed or delegated under the
Act or these rules of practice.
(2) Qualifications of Regional Judicial Officer. A Regional Judicial
Officer shall be an attorney who is a permanent or t orary employee of
the Agency or some other Federal agency and who may perform other duties
within the Agency. A Regional Judicial Officer shall not be employed by
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the Region’s Enforcement Division or by the Regional Division directly
associated with the type of violation at issue in the proceeding. A
Regional Judicial Officer shall not have performed prosecutorial or
investigative functions in connection with any hearing in which he
serves as a Regional Judicial Officer or with any factually related
hearing.
(c) Presiding Officer. The Presiding Officer shall conduct a fair
and impartial
[ [ Page 224fl
proceeding, assure that the facts are fully elicited, adjudicate all
issues, and avoid delay. The Presiding Officer shall have authority to:
l) Conduct administrative hearings under these rules of practice;
(2) Rule upon motions, requests, and offers of proof, dispose of
procedural requests, and issue all necessary orders;
(3) Administer oaths and affirmations and take affidavits;
(4) Examine witnesses and receive documentary or other evidence;
(5) For good cause, upon motion or sua sponte, order a party, or an
officer or agent thereof, to produce testimony, documents, or other
nonprivileged 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 rules.
(d) Disqualification; withdrawal. (1) The Administrator, the
Regional Administrator, the members of the Environmental Appeals Board,
the Regional Judicial Officer, or the Presiding Officer may not perform
functions provided for in these rules of practice regarding any matter
in which they (i) have a financial interest or (ii) 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 made
to the Regional Administrator request that the Regional Judicial Officer
be disqualified from the proceeding. Any party may at any time by motion
to the Administrator request that the Regional Administrator, a member
of the Environmental Appeals Board, or the Presiding Officer be
disqualified or request that the Administrator disqualify himself or
herself from the proceeding. The Administrator, the Regional
Administrator, a member of the Environmental Appeals Board, the Regional
Judicial Officer, or the Presiding Officer may at any time withdraw from
any proceeding in which they deem themselves disqualified or unable to
act for any reason.
(2) If the Administrator, the Regional Administrator, the Regional
Judicial Officer, or the Presiding Officer is disqualified or withdraws
from the proceeding, a qualified individual who has none of the
infirmities listed in paragraph (d) (1) of this section shall be assigned
to replace him. Assignment of a replacement for Regional Administrator
or for the Regional Judicial Officer shall be made by the Administrator
or the Regional Administrator, respectively. The Administrator, should
he or she withdraw or disqualify himself or herself, shall assign the
Regional Administrator from the Region where the case originated to
replace him or her. 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 Presiding Officer if the original
Presiding Officer was not an Administrative Law Judge. The Chief
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Administrative Law Judge shall assign a new Presiding Officer from among
available Administrative Law Judges if the original Presiding Officer
was an Administrative Law Judge.
(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.
45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5324, Feb. 13, 1992; 57
FR 60129, Dec. 18, 1992]
Sec. 22.05 Filing, service, and form of pleadings and documents.
(a) Filing of pleadings and documents. (1) Except as otherwise
provided, the original and one copy of the complaint, and the original
of the answer and of
[ [ Page 225))
all other documents served in the proceeding shall be filed with the
Regional Hearing Clerk.
(2) A certificate of service shall accompany each document filed or
served. Except as otherwise provided, a party filing documents with the
Regional Hearing Clerk, after the filing of the answer, shall serve
copies thereof upon all other parties and the Presiding Officer. The
Presiding Officer shall maintain a duplicate file during the course of
the proceeding.
(3) When the Presiding Officer corresponds directly with the
parties, the original of the correspondence shall be sent to the
Regional Hearing Clerk, a copy shall be maintained by the Presiding
Officer in the duplicate file, and a copy shall be sent to all parties.
Parties who correspond directly with the Presiding Officer shall in
addition to serving all other parties send a copy of all such
correspondence to the Regional Hearing Clerk. A certificate of service
shall accompany each document served under this subsection.
(b) Service of pleadings and documents—-(1) Service of complaint.
(i) Service of a copy of the signed original of the complaint, together
with a copy of these rules of practice, may be made personally or by
certified mail, return receipt requested, on the respondent (or his
representative).
(ii) Service upon a domestic or foreign corporation or upon a
partnership or other unincorporated association which is subject to suit
under a common name shall be made by personal service or certified mail,
as prescribed by paragraph (b) (1) (i) of this section, directed to an
officer, partner, a managing or general agent, or to any other person
authorized by appointment or by Federal or State law to receive service
of process.
(iii) Service upon an officer or agency of the United States shall
be made by delivering a copy of the complaint to the officer or agency,
or in any manner prescribed for service by applicable regulations. If
the agency is a corporation, the complaint shall be served as prescribed
in paragraph (b) (1) (ii) of this section.
(iv) Service upon a State or local unit of government, or a State or
local officer, agency, department, corporation or other instrumentality
shall be made by serving a copy of the complaint in the manner
prescribed by the law of the State for the service of process on any
such persons, or:
(A) If upon a State or local unit of government, or a State or local
department, agency, corporation or other instrumentality, by delivering
a copy of the complaint to the chief executive officer thereof;
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(B) If upon a State or local officer by delivering a copy to such
officer.
(v) Proof of service of the complaint shall be made by affidavit of
the person making personal service, or by properly executed return
receipt. Such proof of service shall be filed with the complaint
immediately upon completion of service.
(2) Service of documents other than complaint, rulings, orders, and
decisions. All documents other than the complaint, rulings, orders, and
decisions, may be served personally or by certified or first class mail.
(c) Form of pleadings and documents. (1) Except as provided herein,
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 pleading, letter, or other document
shall contain a caption identifying the respondent and the docket number
which is exhibited on the complaint.
(3) The original of any pleading, letter or other document (other
than exhibits) shall be signed by the party filing or by his counsel or
other representative. The signature constitutes a representation by the
signer that he has read the pleading, letter or other 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 initial document filed by any person shall contain his name,
address and telephone number. Any changes in this information shall be
communicated promptly to the Regional Hearing Clerk, Presiding Officer,
and all parties to the proceeding. A party who fails to furnish such
information and any changes thereto shall be deemed to have waived his
right to notice and service under these rules.
[ [ Page 22631
(5) The Environmental Appeals Board, the Regional Administrator, the
Presiding Officer, or the Regional Hearing Clerk may refuse to file at y
document which does not comply with this paragraph. Written notice of
such refusal, stating the reasons therefor, shall be promptly given to
the person submitting the document. Such person may amend and resubmit
any document refused for filing upon motion granted by the Environmental
Appeals Board, the Regional Administrator, or the Presiding Officer, as
appropriate.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5324, Feb. 13, 1992]
Sec. 22.06 Filing and service of rulings, orders, and decisions.
All rulings, orders, decisions, and other documents issued by the
Regional Administrator, Regional Judicial Officer, or Presiding Officer,
as appropriate, 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 Environmental Appeals Board. Copies of such rulings,
orders, decisions, or other documents shall be served personally, or by
certified mail, return receipt requested, upon all parties by the
Environmental Appeals Board, the Regional Administrator, the Regional
Judicial Officer, or the Presiding Officer, as appropriate.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5324, Feb. 13, 1992]
Sec. 22.07 Computation and extension of time.
(a) Computation. In computing any period of time prescribed or
allowed in these 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 legal holidays shall be
included. When a stated time expires on a Saturday, Sunday or legal
holiday, the stated time period shall be extended to include the next
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business day.
(b) Extensions of time. The Environmental Appeals Board, the
Regional Administrator, or the Presiding Officer, as appropriate, may
grant an extension of time for the filing of any pleading, document, or
motion (1) upon timely motion of a party to the proceeding, for good
cause shown, and after consideration of prejudice to other parties, or
(2) upon its or his own motion. Such a motion by a party may only be
made after notice to all other parties, unless the movant can show good
cause why serving notice is impracticable. The motion shall be filed in
advance of the date on which the pleading, document or motion is due to
be filed, unless the failure of a party to make timely motion for
extension of time was the result of excusable neglect.
(C) Service by mail. Service of the complaint is complete when the
return receipt is signed. Service of all other pleadings and documents
is complete upon mailing. Where a pleading or document is served by
mail, five (5) days shall be added to the time allowed by these rules
for the filing of a responsive pleading or document.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5324, Feb. 13, 1992]
Sec. 22.08 Ex pane 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 Regional Judicial Officer, the Presiding
Officer, or any other person who is likely to advise these officials in
the decision on the case, 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 addressed
to the Administrator, the Regional Administrator, the Environmental
Appeals Board, the Regional Judicial Officer, 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
[ [ Page 2271)
to such memorandum or communication.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
Sec. 22.09 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 aocuments shall be made available by the Regional Hearing Clerk,
the Hearing Clerk, or the Environmental Appeals Board, as appropriate.
(b) The cost of duplicating documents filed in any proceeding shall
be borne by the person seeking copies of such documents. The Agency may
waive this cost in appropriate cases.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992)
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49)
[ Revised as of July 1, 1998]
From the U.S. Government Printing Office via GPO Access
[ CITE: 4OCTR.22]
[ Page 227—228]
TITLE 40-—PROTECTION OF ENVIRONMENT
CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE C-OVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart B——Parties and Appearances
Sec. 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 -
Sec. 22.11 Intervention.
(a) Motion. A motion for leave to intervene in any proceeding
conducted under these rules of practice must set forth the grounds for
the proposed intervention, the position and interest of the inovant and
the likely impact that intervention will have on the expeditious
progress of the proceeding. Any person already a party to the proceeding
may file an answer to a motion to intervene, making specific reference
to the factors set forth in the foregoing sentence and paragraph (c) of
this section, within ten (10) days after service of the motion for leave
to intervene.
(b) When filed. A motion for leave to intervene in a proceeding must
ordinarily be filed before the first prehearing conference or, in the
absence of a prehearing conference, before the initiation of
correspondence under Sec. 22.19(e), or if there is no such
correspondence, prior to the setting of a time and place for a hearing.
Any motion filed after that time must include, in addition to the
information set forth in paragraph (a) of this section, a statement of
good cause for the failure to file in a timely manner. The intervener
shall be bound by any agreements, arrangements and other matters
previously made in the proceeding.
(c) Disposition. Leave to intervene may be granted only if the
movant demonstrates that (1) his presence in the proceeding would not
unduly prolong or otherwise prejudice the adjudication of the rights of
the original parties; (2) the movant will be adversely affected by a
final order; and (3) the interests of the movant are not being
adequately represented by the original parties. The intervenor shall
become a full party to the proceeding upon the granting of leave to
intervene.
(d) Aimicus curiae. The motion shall identify the interest of the
applicant and shall state the reasons why the proposed aznicus brief is
desirable. If the motion is granted, the Presiding Officer or
Administrator shall issue an order setting the time for filing such
brief. If the motion is granted, the Presiding Officer or the
Environmental Appeals Board shall issue an order setting the time for
filing such brief.
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[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
Sec. 22.12 Consolidation and severance.
(a) Consolidation. The Presiding Officer may, by motion or sua
sponte, consolidate any or all matters at
proceedings docketed under these rules of
exists common parties or common questions
consclidation would expedite and simplify
and (3) consolidation would not adversely
engaged in otherwise separate proceedings.
(b) Severance. The Presiding Officer may, by motion or sua sponte,
for good
[ [ Page 229]]
cause shown order any proceedings severed with respect to any or all
parties or issues.
issue in two or more
practice where (1) there
of fact or law, (2)
consideration of the issues,
affect the rights of parties
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, 1998]
From the U.S. Government Printing Office via GPO Access
[ CITE: 4OCFP.22]
[ Page 228—232]
TITLE 40--PROTECTION OF ENVIRON NT
CHAPTER I--ENVIRON 1ENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESS NT OF C
Subpart C——Prehearing Procedures
Sec. 22.13 Issuance of complaint.
If the complainant has reason to believe that a person has violated
any provision of the Act, or regulations promulgated or a permit issued
under the Act, he may institute a proceeding for the assessment of a
civil penalty by issuing a complaint under the Act and these rules of
practice. If the complainant has reason to believe that
(a) A permittee violated any term or condition of the permit, or
(b) A permittee misrepresented or inaccurately described any
material fact in the permit application or failed to disclose all
relevant facts in the permit application, or
(c) Other good cause exists for such action, he may institute a
proceeding for the revocation or suspension of a permit by issuing a
complaint under the Act and these rules of practice. A complaint may be
for the suspension or revocation of a permit in addition to the
assessment of a civil penalty.
Sec. 22.14 Content and amendment of the complaint.
(a) Complaint for the assessment of a civil penalty. Each complaint
for the assessment of a civil penalty 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 and implementing
regulations which respondent is alleged to have violated;
(3) A concise statement of the factual basis for alleging the
violation;
(4) The amount of the civil penalty which is proposed to be
assessed;
(5) A statement explaining the reasoning behind the proposed
penalty;
(6) Notice of respondent’s right to request a hearing on any
material fact contained in the complaint, or on the appropriateness of
the amount of the proposed penalty.
A copy of these rules of practice shall accompany each complaint served.
(b) Complaint for the revocation or suspension of a permit. Each
commiaint for the revocation or suspension of a permit shall include:
(1) A statement reciting the section(s) of the Act, regulations,
and/or permit authorizing the issuance of the complaint;
(2) Specific reference to each term or condition of the permit which
the respondent is alleged to have violated, to each alleged inaccuracy
or misrepresentation in respondent’s permit application, to each fact
which the respondent allegedly failed to disclose in his permit
application, or to other reasons which form the basis for the complaint;
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(3) A concise statement of the factual basis for such allegations;
(4) A request for an order to either revoke or suspend the permit
and a statement of the terms and conditions of any proposed partial
suspension or revocation;
(5) A statement indicating the basis for recoxrffnending the
revocation, rather than the suspension, of the permit, or vice versa, as
the case may be;
(6) Notice of the respondent’s right to request a hearing on any
material fact contained in the complaint, or on the appropriateness of
the proposed revocation or suspension.
A copy of these rules of practice shall accompany each complaint served.
(C) Derivation of proposed civil penalty. The dollar amount of the
proposed civil penalty shall be determined in accordance with any
criteria set forth in the Act relating to the proper amount of a civil
penalty and with any civil penalty guidelines issued under the Act.
(d) 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 or Regional Administrator, as
appropriate. Respondent shall have twenty (20) additional days from the
date of service of the amended complaint to file his answer.
(e) 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
[ [ Page 229)]
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 or Regional Administrator, as appropriate.
Sec. 22.15 Answer to the complaint.
(a) General. Where respondent: (1) Contests any material fact upon
which the complaint is based; (2) contends that the amount of the
penalty proposed in the complaint or the proposed revocation or
suspension, as the case may be, is inappropriate; or (3) contends that
he is entitled to judgment as a matter of law, he shall file a written
answer to the complaint with the Regional Hearing Clerk. Any such answer
to the complaint must be filed with the Regional Hearing Clerk within
twenty (20) 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 (1)
the circumstances or arguments which are alleged to constitute the
grounds of defense, (2) the facts which respondent intends to place at
issue, and (3) whether a hearing is requested.
(c) Request for hearing. A hearing upon the issues raised by the
complaint and answer shall be held upon request of respondent in the
answer. In addition, a hearing may be held at the discretion of the
Presiding Officer, sua sponte, 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.
Ce) Amendment of the answer. The respondent may amend the answer to
the complaint upon motion granted by the Presiding Officer.
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Sec. 22.16 Motions.
(a) General. 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 or order sought;
and (4) be accompanied by any affidavit, certificate, other evidence, or
legal memorandum relied upon. Such motions shall be served as provided
by Sec. 22.05(b) (2).
(b) Response to motions. A party’s response to any written motion
must be filed within ten (10) days after service of such motion, unless
additional time is allowed for such response. The response shall be
accompanied by any affidavit, certificate, other evidence, or legal
memorandum relied upon. If no response is filed within the designated
period, the parties may be deemed to have waived any objection to the
granting of the motion. The Presiding Officer, the Regional
Administrator, or the Environmental Appeals Board, as appropriate, may
set a shorter time for response, or make such orders concerning the
disposition of motions as they deem appropriate.
(c) Decision. Except as provided in Sec. 22.04(d) (1) and
Sec. 22.28(a), the Regional Administrator shall rule on all motions
filed or made before an answer to the complaint is filed. The
Environmental Appeals Board shall rule on all motions filed or made
after service of the initial decision upon the parties. The
Administrator shall rule on all motions filed or made after service of
the initial decision upon the parties. The Presiding Officer shall rule
on all other motions. Oral argument on motions will be permitted where
the Presiding Officer, the Regional Administrator, or the Environmental
Appeals board considers it necessary or desirable.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992; 57
FR 60129, Dec. 18, 1992]
Sec. 22.17 Default order.
(a) Default. A party may be found to be in default (1) after motion,
upon failure to file a timely answer to the complaint; (2) after motion
or sua sponte, upon failure to comply with a prehearing or hearing order
of the Presiding Officer; or (3) after motion or sua sponte, upon
failure to appear at a conference or hearing without good cause being
shown. No finding of default on the basis of a failure to appear
[ [ Page 230])
at a hearing shall be made against the respondent unless the complainant
presents sufficient evidence to the Presiding Officer to establish a
prima facie case against the respondent. Any motion for a default order
shall include a proposed default order and shall be served upon all
parties. The alleged defaulting party shall have twenty (20) days from
service to reply to the motion. Default by respondent constitutes, for
purposes of the pending action only, an admission of all facts alleged
in the complaint and a waiver of respondent’s right to a hearing on such
factual allegations. If the complaint is for the assessment of a civil
penalty, the penalty proposed in the complaint shall become due and
payable by respondent without further proceedings sixty (60) days after
a final order issued upon default. If the complaint is for the
revocation or suspension of a permit, the conditions of revocation or
suspension proposed in the complaint shall become effective without
further proceedings on the date designated by the Administrator in his
final order issued upon default. Default by the complainant shall result
in the dismissal of the complaint with prejudice.
(b) Procedures upon default. When Regional Administrator or
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Presiding Officer finds a default has occurred, he shall issue a default
order against the defaulting party. This order shall constitute the
initial decision, and shall be filed with the Regional Hearing Clerk.
(C) Contents of a default order. A default order shall include
findings of fact showing the grounds for the order, conclusions
regarding all material issues of law or discretion, and the penalty
which is recommended to be assessed or the terms and conditions of
permit revocation or suspension, as appropriate.
(d) For good cause shown the Regional Administrator or the Presiding
Officer, as appropriate, may set aside a default order.
Sec. 22.18 Informal settlement; consent agreement and order.
(a) Settlement policy. 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
respondent may confer with complainant concerning settlement whether or
not the respondent requests a hearing. Settlement conferences shall not
affect the respondent’s obligation to file a timely answer under
Sec. 22.16.
(b) Consent agreement. The parties shall forward a written consent
agreement and a proposed consent order to the Regional Administrator
whenever settlement or compromise is proposed. The consent agreement
shall state that, for the purpose of this proceeding, respondent (1)
admits the jurisdictional allegations of the complaint; (2) adin.its the
facts stipulated in the consent agreement or neither admits nor denies
specific factual allegations contained in the complaint; and (3)
consents to the assessment of a stated civil penalty or to the stated
permit revocation or suspension, as the case may be. The consent
agreement shall include any and all terms of the agreement, and shall be
signed by all parties or their counsel or representatives.
(C) Consent order. No settlement or consent agreement shall dispose
of any proceeding under these rules of practice without a consent order
from the Regional Administrator. In preparing such an order, the
Regional Adm.tnistratcr may require that the parties to the settlement
appear before him to answer inquiries relating to the consent agreement
or order.
Sec. 22.19 Prehearing conference.
(a) Purpose of prehearing conference. Unless a conference appears
unnecessary, the Presiding Officer, at any time before the hearing
begins, shall direct the parties and their counsel or other
representatives to appear at a conference before him to consider:
(1) The settlement of the case;
(2) The 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 lirn.itation of the number of expert or other witnesses;
( ) Setting a time and place for the hearing; and
[ [ Page 231)]
C ?) Any other matters which may expedite the disposition of the
proceeding.
(b) Exchange of witness lists and documents. Unless otherwise
ordered by the Presiding Officer, each party at the preheariag
conference shall make available to all other parties (U The names of
the expert and other witnesses he intends to call, together with a brief
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narrative summary of their expected testimony, and (2) copies of all
documents and exhibits which each party intends to introduce into
evidence. Documents and exhibits shall be marked for identification as
ordered by the Presiding Officer. Documents that have not been exchanged
and witnesses whose names have not been exchanged shall not be
introduced into evidence or allowed to testify without permission of the
Presiding Officer. The Presiding Officer shall allow the parties
reasonable opportunity to review new evidence.
(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 upon
motion of a party or sua sponte. The Presiding Officer shall prepare and
file for the record a written summary of the action taken at the
conference. The summary shall incorporate any written stipulations or
agreements of the parties and all rulings and appropriate orders
containing directions to the parties.
Cd) Location of prehearing 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 (1) the Presiding Officer determines that there
is good cause to hold it at another location in a region or by
telephone, or (2) the Supplemental rules of practice provide otherwise.
(e) Unavailability of a prehearing conference. If a prehearing
conference is unnecessary or impracticable, the Presiding Officer, on
motion or sua sponte, may direct the parties to correspond with him to
accomplish any of the objectives set forth in this section.
(f) Other discovery. (1) Except as provided by paragraph (b) of this
section, further discovery, under this section, shall be permitted only
upon determination by the Presiding Officer:
(i) That such discovery will not in any way unreasonably delay the
proceeding;
(ii) That the information to be obtained is not otherwise
obtainable; and
(iii) That such information has significant probative value.
(2) The Presiding Officer shall order depositions upon oral
questions only upon a showing of good cause and upon a finding that:
(i) The information sought cannot be obtained by alternative
methods; 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.
(3) Any party to the proceeding desiring an order of discovery shall
make a motion therefor. Such a motion shall set forth;
Ci) The circumstances warranting the taking of the discovery;
(ii) The nature of the information expected to be discovered; and
(iii) The proposed time and place where it will be taken. If the
Presiding Officer determines that the motion should be granted, he shall
issue an order for the taking of such discovery together with the
conditions and terms thereof.
(4) When the information sought to be obtained is within the control
of one of the parties, failure to comply with an order issued pursuant
to this paragraph may lead to Ci) the inference that the information to
be discovered would be adverse to the party from whom the information
was sought, or (ii) the issuance of a default order under Sec. 22.17(a).
Sec. 22.20 Accelerated decision; decision to dismiss.
(a) General. The Presiding Officer, upon motion of any party or sua
sponte, may at any time render an accelerated decision in favor of the
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complainant or the respondent as to all or any part of the proceeding,
without
[ [ Page 232]]
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, as to all
or any part of the proceeding. In addition, the Presiding Officer, upon
motion of the respondent, may at any time dismiss an action without
further hearing or upon such limited additional evidence as he requires,
cn 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. (1) If an accelerated decision or a decision to dismiss
is issued as to all the 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 in good faith.
He shall thereupon issue an interlocutory order specifying the facts
which appear substantially uncontroverted, and the issues and claims
upon which the hearing Will proceed.
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, 1998]
From the U.S. Government Printing Office via GPO Access
[ CITE: 40CFR22]
[ Page 232—234]
TITLE 40--PROTECTION OF ENVIRONNENT
CHAPTER 1--ENVIRONNENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSI NT OF C
Subpart D——Hearing Procedure
Sec. 22.21 Scheduling the hearing.
(a) When an answer is filed, the Regional Hearing Clerk shall
forward the complaint, the answer, and any other documents filed thus
far in the proceeding to the Chief Administrative Law Judge who shall
assign himself or another Administrative Law Judge as Presiding Officer,
unless otherwise provided in the Supplemental rules of practice. 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. If the respondent requests a hearing in his
answer, or one is ordered by the Presiding Officer under Sec. 22.15(c),
the Presiding Officer shall serve upon the parties a notice of hearing
setting forth a time and place for the hearing. The Presiding Officer
may issue the notice of hearing at any appropriate time, but not later
than twenty (20) days prior to the date set for the hearing.
(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 Sec. 22.19(d)
Sec. 22.22 Evidence.
(a) General. The Presiding Officer shall admit all evidence which is
not irrelevant, immaterial, unduly repetitious, or otherwise 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 is not admissible. In the presentation,
admission, disposition, and use of evidence, the Presiding Officer shall
preserve the confidentiality of trade secrets and other commercial and
financial information. The confidential or trade secret status of any
information shall not, however, preclude its being introduced into
evidence. The Presiding Officer may make such orders as may be necessary
to consider such evidence in camera, including the preparation of a
supplemental initial decision to address questions of law, fact, or
discretion which arise out of that portion of the evidence which is
confidential or which includes trade secrets.
(b) Examination of witnesses. Witnesses shall be examined orally,
under oath or affirmation, except as otherwise provided in these rules
of practice 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.
Cc) Verified statements. The Presiding Officer may admit an insert
into the record as evidence, in lieu of oral testimony, statements of
fact or opinion prepared by a witness. The admissibility of the evidence
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contained in the statement shall be subject to the same rules as if the
testimony were produced under oral examination. Before any
[ [ Page 2333.3
such statement is read or admitted into evidence, the witness shall
deliver a copy of the statement to the Presiding Officer, the reporter,
and opposing counsel. The witness presenting the statement shall swear
to or affirm the statement and shall be subject to appropriate oral
cross—examination upon the contents thereof.
(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
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.
Sec. 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) Offer of proof. Whenever evidence is excluded from the record,
the party offering the evidence 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 evidence excluded. The offer of proof for excluded documents or
exhibits shall consist of the insertion in the record of the documents
or exhibits excluded. Where the Environmental Appeals Board decides that
the ruling of the Presiding Officer in excluding the evidence was both
erroneous and prejudicial, the hearing may be reopened to permit the
taking of such evidence.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
Sec. 22.24 Burden of presentation; burden of persuasion.
The complainant has the burden of going forward with and of proving
that the violation occurred as set forth in the complaint and that the
proposed civil penalty, revocation, or suspension, as the case may be,
is appropriate. Following the establishment of a prima facie case,
respondent shall have the burden of presenting and of going forward with
any defense to the allegations set forth in the complaint. Each matter
of controversy shall be determined by the Presiding Officer upon a
preponderance of the evidence.
Sec. 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
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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 order to be kept confidential by the Presiding Officer.
Sec. 22.26 Proposed findings, conclusions, and order.
Within twenty (20) days after the parties are notified of the
availability of the transcript, or within such longer time as may be
fixed by the Presiding Officer, any party may submit for the
consideration of the Presiding Officer, proposed findings of fact,
conclusions of law, and a proposed order, together
UPage 234)]
with briefs in support thereof. The Presiding Officer shall set a time
by which reply briefs must be submitted. All submissions shall be in
writing, shall be served upon all parties, and shall contain adequate
references to the record and authorities relied on.
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, l998
From the U.S. Government Printing Office via GPO Access
[ CITE: 40CFR22]
[ Page 234]
TITLE 40--PROTECTION OF ENVIRONT’ NT
CHAPTER I--ENVIRONI ’ENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart E—- Initial Decision and Motion To Reopen a Hearing
Sec. 22.27 Initial decision.
(a) Filing and contents. The Presiding Officer shall issue and file
with the Regional Hearing Clerk his initial decision as soon as
practicable after the period for filing reply briefs under Sec. 22.26
has expired. The Presiding Officer shall retain a copy of the complaint
in the duplicate file. The initial decision shall contain his findings
of fact, conclusions regarding all material issues of law or discretion,
as well as reasons therefor, a recommended civil penalty assessment, if
appropriate, and a proposed final order. Upon receipt of an initial
decision, the Regional Hearing Clerk shall forward a copy to all
parties, and shall send the original, along with the record of the
proceeding, to the Hearing Clerk. The Hearing Clerk shall forward a copy
of the initial decision to the Environmental Appeals Board.
(b) Amount of civil penalty. If the Presiding Officer determines
that a violation has occurred, the Presiding Officer shall determine the
dollar amount of the recommended civil penalty to be assessed in the
initial decision in accordance with any criteria set forth in the Act
relating to the proper amount of a civil penalty, and must consider any
civil penalty guidelines issued under the Act. If the Presiding Officer
decides to assess a penalty different in amount from the penalty
recommended to be assessed in the complaint, the Presiding Officer shall
set forth in the initial decision the specific reasons for the increase
or decrease. The Presiding Officer shall not raise a penalty from that
recoirmtended to be assessed in the complaint if the respondent has
defaulted.
(c) Effect of initial decision. The initial decision of the
Presiding Officer shall become the final order of the Environmental
Appeals Board within forty-five (45) days after its service upon the
parties and without further proceedings unless (1) an appeal to the
Environmental Appeals Board is taken from it by a party to the
proceedings, or (2) the Environmental Appeals Board elects, sua sponte,
to review the initial decision.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
Sec. 22.28 Motion to reopen a hearing.
(a) Filing and content. A motion to reopen a hearing to take further
evidence must be made no later than twenty (20) days after service of
the initial decision on the parties and shall (1) state the specific
grounds upon which relief is sought, (2) state briefly the nature and
purpose of the evidence to be adduced, (3) show that such evidence is
not cumulative, and (4) 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.
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(b Disposition of motion to reopen a hearing. Within ten (10) 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 an answer thereto. The Presiding Officer shall
announce his intent to grant or deny such motion as soon as practicable
thereafter. The conduct of any proceeding which may be required as a
result of the granting of any motion allowed in this section shall be
governed by the provisions of the applicable sections of these rules.
The filing of a motion to reopen a hearing shall automatically stay the
running of all time periods specified under these Rules until such time
as the motion is denied or the reopened hearing is concluded.
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, 1998)
From the U.S. Government Printing Office via GPO Access
[ CITE: 40CFR22]
[ Page 234—236]
TITLE 40--PROTECTION OF ENVIRON €NT
CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart F--Appeals and Administrative Review
Sec. 22.29 Appeal from or review of interlocutory orders or rulings.
(a) Request for interlocutory appeal. Except as provided in this
section, appeals to the Environmental Appeals Board shall obtain as a
matter of right
[ [ Page 235]]
only from a default order, an accelerated decision or decision to
dismiss issued under Sec. 22.20(b) (1), or an initial decision rendered
after an evidentiary hearing. Appeals front other orders or rulings shall
lie only if the Presiding Officer or Regional Administrator, as
appropriate, upon motion of a party, certifies such orders or rulings to
the Environmental Appeals Board on appeal. Requests for such
certification shall be filed in writing within six (6) days of notice of
the ruling ox service of the order, and shall state briefly the grounds
to be relied upon on appeal.
(b) Availability of interlocutory appeal. The Presiding Officer may
certify any ruling for appeal to 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 (1) an irmnedi.ate appeal from the order or ruling will
materially advance the ultimate termination of the proceeding, or (ii)
review after the final order is issued will be inadequate or
ineffective.
(C) Decision. If the Environmental Appeals Board determines that
certification was improvidently granted, or if the Environmental Appeals
Board takes no action within thirty (30) days of the certification, the
appeal is dismissed. When the Presiding Officer declines to certify an
order or ruling to the Environmental Appeals Board on interlocutory
appeal, 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 made within six (6) days of service of an
order of the Presiding Officer refusing to certify a ruling for
interlocutory appeal to the Environmental Appeals Board. Ordinarily, the
interlocutory appeal will be decided on the basis of the submissions
made by the Presiding Officer. The Environmental Appeals Board may,
however, allow further briefs and oral argument.
(d) Stay of proceedings. The Presiding Officer may stay the
proceedings pending a decision by the Environmental Appeals Board upon
an order or ruling certified by the Presiding Officer for an
interlocutory appeal. Proceedings will not be stayed except in
extraordinary circumstances. Where the Presiding Officer grants a stay
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of more than thirty (30) days, such stay must be separately approved by
the Environmental Appeals Board.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
Sec. 22.30 Appeal from or review of initial decision.
(a) Notice of appeal. (1) Any party may appeal an adverse ruling or
order of the Presiding Officer by filing a notice of appeal and an
accompanying appellate brief with the Environmental Appeals Board and
upon all other parties and am.icus curiae within twenty (20) days after
the initial decision is served upon the parties. The notice of appeal
shall set forth alternative findings of fact, alternative conclusions
regarding issues of law or discretion, and a proposed order together
with relevant references to the record and the initial decision. The
appellant’s brief shall contain 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, argument on the issues presented, and a
short conclusion stating the precise relief sought, together with
appropriate references to the record.
(2) Within fifteen (15) days of the service of notices of appeal and
briefs under paragraph (a) (1) of this section, any other party or amicus
curiae may file and serve with the Environmental Appeals Board a reply
brief responding to argument raised by the appellant, together with
references to the relevant portions of the record, initial decision, or
opposing brief. Reply briefs shall be limited to the scope of the appeal
brief. Further briefs shall be filed only with the permission of the
Environmental Appeals Board.
(b) Sua sponte review by the Environmental Appeals Board. Whenever
the Environmental Appeals Board determines sua sponte to review an
initial decision, the Environmental Appeals Board shall serve notice of
such intention on the parties within forty—five (45) days after the
initial decision is served upon
[ [ Page 236]]
the parties. The notice shall include a statement of issues to be
briefed by the parties and a time schedule for the service and filing of
briefs.
(C) Scope of appeal or review. If the Environmental Appeals Board
determines that issues raised, but not appealed by the parties, should
be argued, it shall give counsel for the parties reasonable written
notice of such determination to permit preparation of adequate argument.
Nothing herein shall prohibit the Environmental Appeals Board from
remanding the case to the Presiding Officer for further proceedings.
(d) Argument before the Environmental Appeals Board. The
Environmental Appeals Board may, upon request of a party or sua sponte,
assign a time and place for oral argument after giving consideration to
the convenience of the parties.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5325, Feb. 13, 1992]
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[ Code of Federal Regulations)
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, 19981
From the U.S. Government Printing Office via GPO Access
[ CITE: 40CFR22)
[ Page 236)
TITLE 40--PROTECTION OF ENVIRON NT
CHAPTER I--ENVIRON? NTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart G—-Final Order on Appeal
Sec. 22.31 Final order on appeal.
(a) Contents of the final order. When an appeal has been taken or
the Environmental Appeals Board issues a notice of intent to conduct a
review sua sponte, the Environmental Appeals Board shall issue a final
order as soon as practicable after the filing of all appellate briefs or
oral argument, whichever is later. The Environmental Appeals Board shall
adopt, modify, or set aside the findings and conclusions 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,
in its discretion, increase or decrease the assessed penalty from the
amount recossnended to be assessed in the decision or order being
reviewed, except that if the order being reviewed is a default order,
the Environmental Appeals Board may not increase the amount of the
penalty.
(b) Payment of a civil penalty. The respondent shall pay the full
amount of the civil penalty assessed in the final order within sixty
(60) days after receipt of the final order unless otherwise agreed by
the parties. Payment shall be made by forwarding to the Regional Hearing
Clerk a cashier’s check or certified check in the amount of the penalty
assessed in the final order, payable to the Treasurer, United States of
America.
[ 45 FR 24363, Apr. 9, 1980, as amended at 57 FR 5326, Feb. 13, 1992)
Sec. 22.32 Motion to reconsider a final order.
Motions to reconsider a final order shall be filed within ten (10)
days after service of the final order. Every such motion 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 Sec. 22.04(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 specifically so ordered by
the Environmental Appeals Board.
[ 57 FR 5326, Feb. 13, 1992]
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[ Code of Federal Regulations]
[ Title 40, Volume 1, Parts 1 to 49]
[ Revised as of July 1, 1998]
From the U.S. Government Printing Office via GPO Access
[ CITE: 40CFR223
[ Page 236—242]
TITLE 40--PROTECTION OF ENVIRONMENT
CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY
PART 22--CONSOLIDATED RULES OF PRACTICE GOVERNING THE ADMINISTRATIVE ASSESSMENT OF C
Subpart H--Supplemental Rules
Sec. 22.33 Supplemental rules of practice governing the administrative
assessment of civil penalties under the Toxic Substances
Control Act.
(a) Scope of these Supplemental rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding consolidated
rules of practice (40 CFR part 22), all formal adjudications for the
assessment of any civil penalty conducted under section 16(a) of the
Toxic Substances Control Act (15 U.S.C. 2615(a)). Where inconsistencies
exist between these Supplemental rules and the Consolidated rules,
(Secs. 22.01 through 22.32), these Supplemental rules shall apply.
(b) Subpoenas. (1) The attendance of witnesses or the production of
documentary evidence may be required by subpoena. The Presiding Officer
may grant a request for a subpoena upon a
[ [ Page 237]]
showing of (i) the grounds and necessity therefor, and (ii) the
materiality and relevancy of the evidence to be adduced. Requests for
the production of documents shall describe the evidence sought as
specifically as practicable.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) Witnesses suimrtoned before the Presiding Officer shall be paid
the same fees and mileage that are paid witnesses in the courts of the
United States. Fees shall be paid by the party at whose instance the
witness appears. Where a witness appears pursuant to a request initiated
by the Presiding Officer, fees shall be paid by the agency.
Sec. 22.34 Supplemental rules of practice governing the administrative
assessment of civil penalties under title II of the Clean Air
Act.
(a) Scope of these Supplemental rules. These Supplemental rules
shall govern, in conjunction with the preceding Consolidated Rules of
Practice (40 CFR part 22)r all proceedings to assess a civil penalty
conducted under sections 205(c), 211(d), and 213(d) of the Clean Air
Act, as amended (42 U.S.C. 7524(c), 7545(d), and 7547(d)). Where
inconsistencies exist between these Supplemental rules and the
Consolidated Rules (Secs. 22.01 through 22.32), these Supplemental rules
shall apply.
(b) Issuance of notice. (1) Prior to the issuance of an
administrative penalty 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. Such notice shall be provided by the
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issuance of a complaint pursuant to Sec. 22.13 of the Consolidated Rules
of Practice.
(2) Notwithstanding Sec. 22.15(a), any answer to the complaint must
be filed with the Hearing Clerk within thirty (30) days after service of
the complaint.
(c) Subpoenas. (1) The attendance of witnesses or the production of
documentary evidence may be required by subpoena. The Presiding Officer
may grant a request for a subpoena upon a showing of;
(1) The grounds and necessity therefor, and
(ii) The materiality and relevancy of the evidence to be adduced.
Requests for the production of documents shall describe with specificity
the documents sought.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) Witnesses sunsnoned before the Presiding Officer shall be paid
the same fees and mileage that are paid in the courts of the United
States. Fees shall be paid by the party at whose instance the witness
appears. Where a witness appears pursuant to a request initiated by the
Presiding Officer, fees shall be paid by EPA.
[ 57 FR 4318, Feb. 4, 1992]
Sec. 22.35 Supplemental rules of practice governing the administrative
assessment of civil penalties under the Federal Insecticide,
Fungicide, and Rodenticide Act.
(a) Scope of these Supplemental rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), all formal adjudications for the
assessment of any civil penalty conducted under section 14(a) of the
Federal Insecticide, Fungicide, and Rodenticide Act as amended (7 U.S.C.
1261 (a)). Where inconsistencies exist between these Supplemental rules
and the Consolidated rules, (Secs. 22.01 through 22.32), these
Supplemental rules 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.
(c) Evaluation of proposed civil penalty. In determining the dollar
amount of the recor ended civil penalty assessed in the initial
decision, the Presiding Officer shall consider, in addition to the
criteria listed in section 14(a) (3) of the Act, (1) respondent s history
of compliance with the Act or its predecessor statute and (2) any
evidence of good faith or lack thereof. The Presiding Officer must also
consider the guidelines for the Assessment of Civil Penalties published
in the Federal Register (39 FR 27711), and any amendments or supplements
thereto.
[ [ Page 238])
Sec. 22.36 Supplemental rules of practice governing the administrative
assessment of civil penalties and the revocation or suspension
of permits under the Marine Protection, Research, and
Sanctuaries Act.
(a) Scope of these Supplemental rules. These Supplemental rules
shall govern, in conjunction with the preceding Consolidated Rules of
Practice (40 CFR part 22), all formal adjudications conducted under
section 105(a) or (f) of the Marine Protection, Research, and
Sanctuaries Act as amended (33 U.S.C. 1415(a) and (f)). Where
inconsistencies exist between these Supplemental rules and the
Consolidated Rules, (Secs. 22.01 through 22.32), these Supplemental
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rules shall apply.
(b) Additional criterion for the issuance of a complaint for the
revocation or suspension of a permit. In addition to the three criteria
listed in 40 CFP. 22.13 for issuing a complaint for the revocation or
suspension of a permit, complaints may be issued on the basis of a
person 1 s failure to keep records and notify appropriate officials of
dumping activities, as required by 40 CFR 224.1 and 223.2.
Sec. 22.37 Supplemental rules of practice governing the administrative
assessment of civil penalties under the Solid Waste Disposal
Act.
(a) Scope of these Supplemental rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding Coi solidated
Rules of Practice (40 CFR part 22), all proceedings to assess a civil
penalty conducted under section 3008 of the Solid Waste Disposal Act (42
U.S.C. 6928) (the ‘ ‘Act’’). Where inconsistencies exist between these
Supplemental rules and the Consolidated Rules, (Secs. 22.01 through
22.32), these Supplemental rules shall apply.
(b) Issuance of notice. Whenever, on the basis of any information,
the Administrator determines that any person is in violation of (1) any
reauirement of subtitle C of the Act, (2) any regulation promulgated
pursuant to subtitle C of the Act, or (3) a term or condition of a
permit issued pursuant to subtitle C of the Act, the Administrator shall
issue notice to the alleged violator of his failure to comply with such
requirement, regulation or permit.
(C) Content of notice. Each notice of violation shall include:
(1) A specific reference to each provision of the Act, regulation,
or permit term or condition which the alleged violator is alleged to
have violated; and
(2) A concise statement of the factual basis for alleging such
violation.
(d) Service of notice. Service of notice shall be made in accordance
with Sec. 22.05(b) (2) of the Consolidated Rules of Practice.
(e) Issuance of the complaint. (1) Except as provided in paragraph
(e) (3) of this section, the complainant may issue a complaint whenever
he has reason to believe that any violation extends beyond the thirtieth
day after service of the notice of violation.
(2) The complaint shall include, in addition to the elements stated
in Sec. 22.14 of the Consolidated Rules, an order requiring compliance
within a specified time period. The complaint shall be equivalent to the
compliance order referred to in section 3008 of the Act.
(3) Whenever a violation is of a non—continuous or intermittent
nature, the Administrator may issue a complaint, without any prior
notice to the violator, pursuant to Sec. 22.14 of the Consolidated Rules
of Practice which may also require the violator to take any and all
measures necessary to offset all adverse effects to health and the
environment created, directly or indirectly, as a result of the
violation.
(4) Notwithstanding Sec. 22.15(a), any answer to the complaint must
be filed with the Regional Hearing Clerk within thirty (30) days after
the filing of the complaint.
(f) Subpoenas. (1) The attendance of witnesses or the production of
documentary evidence may be required by subpoena. The Presiding Officer
may grant a request for a subpoena upon a showing of (i) the grounds and
necessity therefor, and (ii) the materiality and relevancy of the
evidence to be adduced. Requests for the production of documents shall
describe with specificity the documents sought.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) Witnesses summoned before the Presiding Officer shall be paid
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the
[ [ Page 239]]
same fees and mileage that are paid witnesses in the courts of the
United States. Fees shall be paid by the party at whose instance the
witness appears. Where a witness appears pursuant to a request initiated
by the Presiding Officer, fees shall be paid by the Agency.
(g) Final Orders to Federal Agencies on Appeal. (1) In the case of
an administrative order or decision issued to a department, agency, or
instrumentality of the United States, such order or decision shall
become the final order for purposes of the Federal Facility Compliance
Act, 42 U.S.C. 6961(b), in accordance with Secs. 22.27(c) and 22.31
except as provided in paragraph (g) (2) of this section.
(2) In the case of an administrative order or decision issued by the
Environmental Appeals Board, if 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 thirty days of the Environmental Appeals Board’s service of the
order or decision, a decision by the Administrator (rather than the
Environmental Appeals Board) shall be the final order for the purposes
of the Federal Facility Compliance Act.
(3) In the event the department, agency, or instrumentality of the
United States files a motion for reconsideration with the Environmental
Appeals Board in accordance with Sec. 22.32, filing such motion for
reconsideration shall not toll the thirty—day period for filing the
request with the Administrator for a conference unless specifically so
ordered by the Environmental Appeals Board.
(42 U.S.C. 6901, et seq.)
[ 45 FR 24363, Apr. 9, 1980, as amended at 61 FR 11092, Mar. 18, 19963
Effective Date Note: At 45 FR 79808, Dec. 2, 1980, paragraphs (b),
(C), (d), (e) (1) and (3) of Sec. 22.37 were suspended until further
notice, effective Dec. 2, 1980.
Sec. 22.38 Supplemental rules of practice governing the administrative
assessment of Class II penalties under the Clean Water Act.
(a) Scope of these supplemental rules. These supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), administrative proceedings for the
assessment of any Class II civil penalty under section 309(g) of the
Clean Water Act (33 U.S.C. 1319(g)).
(b) Consultation with states. The Administrator will consult with
the state in which the alleged violation occurs before issuing a final
order assessing a Class II civil penalty.
(c) Public notice. Before issuing a final order assessing a Class II
civil penalty, the Administrator will provide public notice of the
complaint.
(d) Comment by a person who is not a party. A person not a party to
the Class II proceeding who wishes to comment upon a complaint must file
written comments with the Regional Hearing Clerk within 30 days after
public notice of the complaint and serve a copy of the comments upon
each party. For good cause shown the Administrator, the Regional
Administrator, or the Presiding Officer, as appropriate, may accept late
comments. The Administrator will give any person who comments on a
complaint notice of any hearing and notice of the final order assessing
a penalty. Although commenters may be heard and present evidence at any
hearing held under section 309(g) of the Act, cornxrtenters shall not be
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accorded party status with right of cross examination unless they
formally move to intervene and are granted party status under
Sec. 22.11.
(e) Administrative procedure and judicial review. Action of the
Administrator for which review could have been obtained under section
509(b) (1) of the Act shall not be subject to review in an administrative
proceeding for the assessment of Class II civil penalty under section
309(g)
(f) Petitions to set aside an order and to provide a hearing. If no
hearing on the complaint is held before issuance of an order assessing a
Class II civil penalty, any person who commented on the complaint may
petition the Administrator, within 30 days after issuance of the order,
to set aside the order and to provide a hearing on the complaint. If the
evidence pre.sented by the petitioner in support of the petition is
material and was not considered in the issuance of the order, the
Administrator will immediately set aside the
[ [ Page 240]]
order and provide a hearing in accordance with the Consolidated Rules of
Practice arid these supplemental rules of practice. If the Administrator
denies a hearing under section 309(g) (4) (C) of the Act, the
Administrator will provide to the petitioner, and publish in the Federal
Register, notice of and the reasons for the denial.
[ 55 FR 23840, June 12, 1990]
Sec. 22.39 Supplemental rules of practice governing the administrative
assessment of administrative penalties under section 109 of
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
(a) Scope of these Supplemental rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), 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 these
Supplemental rules and the Consolidated Rules (Secs. 22.01 through
22.32), these Supplemental rules shall apply.
(b) Subpoenas. (1) The attendance and testimony of witnesses or the
production of relevant papers, books, and documents may be required by
subpoena. The Presiding Officer may grant a request for a subpoena upon
a showing of——
(i) The grounds and necessity therefor, and
(ii) The materiality and relevancy of the evidence to be adduced.
Requests for the production of documents shall describe the evidence
sought as specifically as practicable.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) 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. Fees shall be paid by the party at whose instance the
witness appears. Where a witness appears pursuant to a request initiated
by the Presiding Officer, fees shall be paid by the Agency.
(c) Judicial review. Any person who requested a hearing with respect
to a Class II civil penalty under section 109 of CERCLA 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
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hearing with respect to a Class I civil penalty under section 109 of
CERCLA 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
issued.
(d) Payment of civil penalty assessed. Payment of civil penalties
finally assessed by the Regional Administrator 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.
Notice of payment must be sent by Respondent to the Hearing Clerk for
inclusion as part of the administrative record for the proceeding in
which the civil penalty was assessed. Interest on overdue payments shall
be collected pursuant to the Debt Collection Act, 37 U.S.C. 3717.
[ 54 FR 21176, May 16, 1989]
Sec. 22.40 Supplemental rules of practice governing the administrative
assessment of administrative penalties under section 325 of
the Emergency Planning and Community Right-To-Know Act of 1986
(EPCRA).
(a) Scope of these Supplemental Rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), administrative proceedings for the
assessment of any civil penalty under section 325 for violations of the
Emergency Planning and Community Right-To-Know Act of 1986 (EPCRA).
Where inconsistencies exist between these Supplemental rules and the
Consolidated Rules, (Secs. 22.01
[ [ Page 241)]
through 22.32) these Supplemental rules shall apply.
(b) Subpoenas. (1) The attendance and testimony of witnesses or the
production of relevant papers, books, and documents may be required by
subpoena. The Presiding Officer may grant a request for a subpoena upon
a showing of (1) the grounds and necessity therefore, and (ii) the
materiality and relevancy of the evidence to be adduced. Requests for
the production of documents shall describe the evidence sought as
specifically as practicable.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) 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. Fees shall be paid by the party at whose instance the
witness appears. Where a witness appears pursuant to request initiated
by the Presiding Officer, fees shall be paid by the Agency.
(C) Judicial review. Any person against whom a civil penalty is
assessed may seek judicial review in the appropriate district court of
the United States by filing a notice of appeal and by simultaneously
sending a copy of such notice by certified mail to the Administrator.
The notice must be filed within 30 days of the date the order making
such assessment was issued. The Administrator shall promptly file in
such court a certified copy of the record upon which such violation was
found or such penalty imposed.
(d) Procedures for collection of civil penalty. If any person fails
to pay an assessment of a civil penalty after it has become a final and
unappealable order or after the appropriate court has entered final
judgment in favor of the United States, the Administrator may request
the Attorney General of the United States to institute a civil action in
an appropriate district court of the United States to collect the
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penalty, and such court shall have jurisdiction to hear and decide any
such action. In hearing such action, the court shall have authority to
review the violation and the assessment of the civil penalty on the
record. Interest on overdue payments shall be collected pursuant to the
Debt Collection Act, 37 U.S.C. 3717.
[ 54 FR 21176, May 16, 1989]
Sec. 22.41 Supplemental rules of practice governing the administrative
assessment of civil penalties under Title II of the Toxic
Substances Control Act, enacted as section 2 of the Asbestos
Hazard Emergency Response Act (AHERA).
(a) Scope of the Supplemental rules. These Supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), all proceedings to assess a civil
penalty conducted under section 207 of the Toxic SubstanCes Control Act
(the “Act t1 ) (15 U.S.C. 2647). Where inconsistencies exist between
these Supplemental rules and the Consolidated rules (Secs. 22.01 through
22.32), these Supplemental rules shall apply.
(b) Collection of civil penalty. Any civil penalty collected under
section 207 of the Act shall be used by the local educational agency for
purposes of complying with Title II of the Act. 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 AHEPA.
[ 54 FR 24112, June 5, 1989]
Sec. 22.42 Supplemental rules of practice governing the administrative
assessment of civil penalties for violations of compliance
orders issued under Part B of the Safe Drinking Water Act.
(a) Scope of these supplemental rules. These supplemental rules of
practice shall govern, in conjunction with the preceding Consolidated
Rules of Practice (40 CFR part 22), all proceedings to assess a civil
penalty under section 1414(g) (3) (B). Where inconsistencies exist between
these supplemental rules and the Consolidated rules, these supplemental
rules shall apply.
(b) Definition of “person.’’ In addition to the terms set forth in
40 CFR 22.03(a) that define person, for purposes of this section and
proceedings under section 1414(g) (3) (B) of the Safe Drinking Water Act,
the term person shall also include
[ [ Page 242]]
any officer, employee, or agent of any corporation, company or
association.
(C) Issuance of complaint. If the Administrator deterraines that a
person has violated any provision of a compliance order issued under
section 1414(g) (1) of the Safe Drinking Water Act, 42 U.S.C. 300g—
3(g) (1), he may institute a proceeding for the assessment of a civil
penalty by issuing a complaint under the Act and this part.
(d) Content of the complaint. A complaint for the assessment of
civil penalties under this part shall include specific reference to:
(1) Each provision of the compliance order issued under section
1414(g) (1) of the Act, 42 U.S.C. 300g—3(g) (1), which is alleged to have
violated; and
(2) Each violation of a Safe Drinking Water Act regulation,
schedule, or other requirement which served as the basis for the
compliance order which is alleged to have been violated.
(e) Scope of hearing. Action of the Administrator with respect to
which judicial review could have been obtained under section 1448 of the
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Safe Drinking Water Act, 42 U.S.C. 300j-7, shall not be subject to
review in an administrative proceeding for the assessment of a civil
penalty under section 1414(g) (3) (B) of the SDWA and this part.
[ 56 FR 3757, Jan. 30, 1991)
Sec. 22.43 Supplemental rules of practice governing the administrative
assessment of civil penalties under section 113(d) (1) of the
Clean Air Act.
(a) Scope of these Supplemental rules. These Supplemental rules
shall govern, in conjunction with the preceding Consolidated Rules of
Practice (40 CFR part 22), all proceedings to assess a civil penalty
conducted under section 113(d) (1) of the Clean Air Act (42 U.S.C.
7413(d) (1)). Where inconsistencies exist between these Supplemental
rules and the Consolidated Rules (Secs. 22.01 through 22.32), these
Supplemental rules shall apply.
(b) Issuance of notice. (1) Prior to the issuance of an
administrative penalty 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. Such
notice shall be provided by the issuance of a complaint pursuant to
Sec. 22.13 of the Consolidated Rules of Practice.
(2) Notwithstanding Sec. 22.15(a), any answer to the complaint must
be filed with the Regional Hearing Clerk within thirty (30) days after
service of the complaint.
(c) Subpoenas. (1) The attendance of witnesses or the production of
documentary evidence may be required by subpoena. The Presiding Officer
may grant a request for a subpoena upon a showing of;
(i) The grounds and necessity therefor, and
(ii) The materiality and relevancy of the evidence to be adduced.
Reciuests for the production of documents shall describe with specificity
the documents sought.
(2) Subpoenas shall be served in accordance with Sec. 22.05(b) (1) of
the Consolidated Rules of Practice.
(3) Witnesses summoned before the Presiding Officer shall be paid
the same fees and mileage that are paid in the courts of the United
States. Fees shall be paid by the party at whose instance the witness
appears. Where a witness appears pursuant to a request initiated by the
Presiding Officer, fees shall be paid by EPA.
[ 57 FR 4318, Feb. 4, 1992)
Appendix to Part 22—-Addresses of EPA Regional Offices
Region I--John F. Kennedy Federal Building, Boston, MA 02203.
Region II—--26 Federal Plaza, New York, NY 10007.
Region Ill—-Curtis Building, 6th and Walnut Streets, Philadelphia, PA
19106.
Region IV-—345 Courtland Street NE., Atlanta, GA 30308.
Region V——77 West Jackson Boulevard, Chicago, IL 60604.
Region VI---First International Building, 1201 Elm Street, Dallas, TX
75270.
Region VII—-1735 Baltimore Street, Kansas City, MO 64108.
Region VIII-—1860 Lincoln Street, Denver, CO 80203.
Region IX--215 Fremont Street, San Francisco, CA 94105.
Region X-—1200 6th Avenue, Seattle, WA 98101.
[ 45 FR 24363, Apr. 4, 1980, as amended at 62 FR 1833, Jan. 14, 1997)
[ [ Page 243])
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WELCOME TO SUBPART I
?7 L VAO A W QI JL
The proposed amendments to 40 CFR Part 22 contain a something new - Subpart I.
Subpart I is the non-APA procedural rule which completely replaces the proposed Part 28.
Subpart I is to be used as of the effective date of the proposed Part 22 rule. The following are
eight tips for using our new procedural rule:
1) Subpart I relies on the use of many sections already contained in Part 22. Therefore,
good Part 22 practitioners will also be good Subpart I practitioners!
2) If your statute makes the proceeding subject to Section 554 of the Administrative
Procedure Act - STOP - you may not use Subpart I. If your statute authorizes the use of non-
APA procedure you MAY use Subpart I.
3) Your complaints must specifically state that EPA is bringing the action under Subpart I.
4) The following provisions do not apply to Subpart I proceedings:
22.11 - There will be no intervention nor amicus curiae in Subpart I proceedings.
22.16(c) - The Regional Judicial Officer serves as the Presiding Officer for Subpart
I proceedings and will rule on all motions until art Initial Decision
becomes final or is appealed.
22.2 1(a) - After an Answer is filed there is no need to forward the file to the Chief
Administrative Law Judge because all Subpart I proceedings will be
handled by the Regional Judicial Officer.
22.29 - There is NO right to interlocutory appeal in Subpart I cases.
5) Where Subpart I applies, it supersedes any conflicting provisions in Subparts A - G.
However, note that Subpart H (the “supplemental rules”) supersedes any conflicting provisions in
Subparts I or Subparts A - G.
6) In Subpart I cases, Respondent’s have an additional obligation to submit any
information on economic benefit, including gross revenues and delayed or avoided costs in their
prehearing exchange.
7) In Subpart I cases, Respondent’s have NO right to 22.19(e) discovery.
8) In Subpart I cases, EPA may use 22.19(e) to discover information on Respondent’s
economic benefit andlor ability to pay a penalty.

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Subpart I - Administrative Proceedings not Governed by §554 of the Administrative
Procedure Act
§22.50 Scope of this Subpart.
(a) Scope. This Subpart applies to any adjudicatory proceedings where the complainant
designates in the complaint that Subpart I shall apply, except that the procedures of this
Subpart sha [ l not apply in any case where the Act makes the proceeding subject to §554 of
the Administrative Procedure Act, 5 U.S.C. 554.
(b) Relationship to other provisions. Sections 22.01 through 22.45 apply to proceedings
under this Subpart, except for the following provisions which do not apply: 22.11,
22.16(c), 22.21(a), and 22.29. The provisions of this Subpart shall supersede any
conflicting provisions of subparts A through G. The provisions of subpart H shall
supersede any conflicting provisions of this subpart or of subparts A through G.
§22.51 Presiding Officer.
The Presiding Officer shall be a Regional Judicial Officer. The Presiding Officer shall 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.
§22.53 Interlocutory orders or rulings.
Interlocutory review as set forth in §22.29 is prohibited.

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Section 22.50 : Section 22.50 defines the scope of Subpart I. Subsection (a) indicates that
the initial decision to bring a proceeding pursuant to Subpart I is made by the Agency and requires
that the Agency indicate such decision in the complaint. The Agency may in any case decline to
apply Subpart I and instead give the respondent the greater process of law afforded by a
proceeding conforming to section 554 of the APA. Subsection (a) acknowledges that the Agency
may not apply Subpart I where a statute requires a hearing in accordance with section 554 of the
Administrative Procedure Act. Examples where Congress has authorized EPA to administratively
assess penalties through proceedings that are not subject to the requirements of section 554 in
certain circumstances include: CWA §309(g)(2)(A) and §31 1(b)(6)(A) & (B)(i) (33 USC
1319(g)(2)(A) and 132 1(b)(6)(A) & (B)(i)); section 109(a) of the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) (42 USC 9609(a)); section 325(b)(1), (c),
and (d) of the Emergency Planning and Community Right-To-Know Act (EPCRA) (42 USC
1 1045(b)(1), (c), and (d)); SDWA §1414(g)(3)(B) (42 USC 300g-3(g)(3)(B)); and CAA
§1 13(d)(3)(42 USC 7413(d)(3)); and issuance of a penalty-only order or a penalty/compliance
order under SDWA § 1423(c) (42 USC 300h-2(c)). At this time, EPA does not intend to alter its
present practice of providing the full APA process in CERCLA and EPCRA cases, although if
circumstances warrant, the Agency may in the future exercise its authority to assess CERCLA and
EPCRA penalties through non-APA proceedings. EPA welcomes comment concerning the types
of CERCLA and EPCRA penalty cases for which non-APA procedures would be appropriate.
Subsection (b) describes how the Subpart works in conjunction with the preceding
sections of the CROP, and also identifies those sections of the CROP which are inapplicable to a
non-APA proceeding brought under Subpart I.
Section 22.51 : The term “Presiding Officer” would be defined for the purposes of a
proceeding under this subpart to mean a Regional Judicial Officer, and provides that the Regional
Judicial Officer shall rule on all motions, notwithstanding the provisions of Section 22.16(c) which
provide that post-answer motions be ruled on by the Administrative Law Judge.
Section 22.52 : This section defines the parameters of information exchange for purposes
of non-APA proceedings. The Agency’s goal is to encourage complete and voluntary information
exchange by the parties and limit unnecessary motion practice. Parties would be subject to the
prehearing information exchange authorized in Section 22.19(a), but most additional discovery
would be prohibited under this Subpart. The subsection would also require the respondent to
provide in its prehearing exchange information in regard to any economic benefit it may have
enjoyed as a result of the alleged non-compliance or a failure to act. Requiring this information
up-front will help to claris’ penalty issues early on, and avoid excessive and time-consuming
motion practice.
The proposed Section 22.52 would prohibit most additional discovery that would
otherwise be allowed under Section 22.19(e). Although it would prohibit most discovery, the
complainant would be entitled to discovery of information concerning res ondent’ s economic
benefit of noncompliance and of financial records probative of respondent’s ability to pay a
penalty. Under several statutes, this information must be made part of the administrative record
supporting a penalty determination, but it generally is not available to the Agency except through
discovery of the respondent. Accordingly, discovery of this information must be permitted in
order to prevent respondents from avoiding enforcement by simply withholding information.
Section 22.53 : This section prohibits interlocutory appeals in proceedings under this
Subpart. The Agency sees little value in allowing interlocutory appeals in these relatively informal
enforcement actions, particularly since parties to a proceeding under Subpart I retain full appeal
rights once an initial decision is issued. The Agency is particularly concerned that permitting
interlocutory appeals would slow resolution of non-APA enforcement actions considerably.

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(A) The extent to which the petition states an issue relevant and
material to the issuance of the consent order;
(B) Whether complainant adequately considered and responded to the
petition; and
(C) Whether a resolution of the action 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 proposed
consent 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 action without a hearing is appropriate, the Petition Officer shall
deny the petition and:
(A) File with the Regional Hearing Clerk;
(B) Send copies to the parties and the commenter; and
(C) Publish, as required by law, an order denying the petition and
stating the reasons for such denial.
(viii) Upon a finding by the Petition Officer that a resolution of
the action without a hearing is appropriate, the Regional Administrator
max’ issue the consent order, which shall become final 30 days after
both the order denying the petition and a properly signed consent order
are filed with the Regional Hearing Clerk, unless further petition for
review is filed by a notice of appeal in the appropriate United 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 consent order is denied, the consent
order shall become final 30 days after such denial has been filed with
the Regional Hearing Clerk.
Secs. 22.46--22.49 [ Reserved].
Subpart I- -Administrative Proceedings Not Governed by Section 554
of the Administrative Procedure Act
Sec. 22.50 Scope of this subpart.
(a) Scope. This subpart applies to any adjudicatory proceedings
where the complainant designates in the complaint that subpart I shall
apply, except that the procedures of this subpart shall not apply in
any case where the Act makes the proceeding subject to section 554 of
the Administrative Procedure Act, 5 U.S.C. 554.

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(b) Relationship to other provisions. Sections 22011 through 22.45
apply to proceedings under this subpart. except for the following
provisions which do not apply: Secs. 22.11, 22.16(c), 22.21(a), and
22.29. The provisions of this subpart shall supersede any conflicting
provisions of subparts A through G of this part. The provisions of
subpart H of this part shall supersede any conflicting provisions of
this subpart or of subparts A through G of this part.
[ [ Page 9494}}
Sec. 22.51 Presiding Officer.
The Presiding Officer shall be a Regional Judicial Officer. The
Presiding Officer shall rule on all motions until an initial decision
has become final or has been appealed.
Sec. 22.52 Information exchange and discovery.
Respondent’s information exchange pursuant to Sec. 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 Sec. 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.
Sec. 22.53 Interlocutory orders or rulings.
Interlocutory review as set forth in Sec. 22.29 is prohibited.
Appendix A to Part 22--Addresses of EPA Regional Offices and
Headquarters
Environmental Protection Agency, Region I--John F. Kennedy Federal
Building, One Congress Street, Boston, MA 02203.
Environmental Protection Agency, Region II--290 Broadway, New York,
NY 10007-1866.
Environmental Protection Agency, Region III--84 1 Chestnut Building,
Philadelphia, PA, 19107.
Environmental Protection Agency, Re ion IV--Atlanta Federal Center,
100 Alabama Street, SW., Atlanta, GA 30365.
Environmental Protection Agency. Region V--77 West Jackson

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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.
1. TSCA - section 2615(al
ki Afl\’ 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.
(B)In determining the amount of a civil penalty, the Administrator shall take into account the nature, circumstances. extent,
and gravir ’ of the violation or violations and, with respect to the violator, ability topa ’, effect on ability to continue
business, any history of prior such violations, the degree of culpability, and such other matters as justice mar 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.
11. RCRA - section 692S(a (3 )
Any order issued pursuant so this subseclion 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 an good faith efforts to comply with applicable requirements.
section 6991e underground storage tank regulation )
ah3 1f 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 Urnted States for a civil
penalty in an amount not to exceed S25.000 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 subchapter shall be assessed in accordance with the
.4dministraror ‘s RcRA civil PenaLty Poiicr”, as such policy’ may be amended from time to time.
Ill. CERCL.4 - section 9609(a)(3 )
In determining the amount of any penalty’ assessed pursuant to this subsection, the President shall take Into account tile
nature, circumstances, extent and gravity of the violation or violations and, with respect to the violator. ability to pay.
an ’ prior history of such violations, the degree of culpability, economic benefit or savings (if an\’) resulting from the
violation, and such other matters as justice mar require.
IV. EPCRTKA - section 11045
ih J i,Ci ipenalty 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 arid.
with respect to the violator, abili to pay. any prior history of such violations, the degree of culpability, economic
benefit or savings j’if any) resulting from the violation, and such other matters as justice may require.
000047

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V. FIFRA - Section 1361(a)(4 )
In determining the amount of the penalty, the Administrator shall consider the aopropriateness of such penalty to the
size of the business of the person charged, the effect on the person ‘s abiLir 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 7413(e)(1 )
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
histor 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 previous/v assessed for
the same violation, the economic benefit of noncompliance, and the seriousness qf 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 emissionsi
In determining the amount of any civil penalty assessed under this subsection, the Administrator shall take 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 penair’ ’ on the violator ‘s ability to continue in business, and such other matters as justice mar require.
VII. CWA [ FWPCA1 - section 1319
(d) I civil penalties] An 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 b 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 525.000 per day for each violation. In determining the amount of a civil penalty, the court s/ta/I
consider the seriousness of the violation or violations, the economic benefit (‘if any) resulting from rite violation, any
history of such violations, any good-faith efforts 10 comply with the applicable requirements, the economic impact of
rite penalty on the violator, and such other matters as justice mar 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 )
Arty person who knowingly violates, and any person engaged in business as an importer or exporter of fish, wildlife, or
plants who violates, an ’ provision of this chapter, or any provision of any permit or certificate issued hereunder, or of
any regulation issued in order to implement subsection (a)(1)(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, ma’
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 mporter or exporter of fish, wildlife, or plants who violates. an
provision under this chapter may be assessed a civil penalty by the Secretary of not more than S 12.000 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 mar 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 pena/ ’ mar be remitted or
mitigated by the Secretary. Upon any failure to pay a penalty assessed under this subsectton. the Secretary ma
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 an ’ 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 *GM - 2].
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY
EFFECTIVE DATE: f J 4

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57
—1—
Introduction
This document, Policy on Civil Penalties , establishes a
single set of goals for penalty assessment in EPA administrative
and judicial enforcement actions. These goals — deterrence,
fair and equitable treatment of the regulated community, and
swift resolution of environmental problems - are presented here
in general terms. An outline of the general process for the
assessn ent 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
iii 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 arget figures. Similarly, it does not
address differences between statutes or between priorities of
different programs. Accordingly, it cannot be used, by itself,
as a basis for determining an appropriate penalty in a specific

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—2—
aCtion. Each EPA program office, in a joint effort with the
Office of Enforcement and Compliance Monitoring, will revise
existing policies, or write new policies as needed. These
policies will guide the assessment of penalties under each
statute in a manner consistent with this document and, to the
extent reasonable, the accompanying Framework .
Uptil 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:
o For cases that are substantially settled,.
apply the old policy.
o 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 S]07 . 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 S3ll(f) and (g) . This also
is cost recovery in nature. As in CERCLA
Sl07 actions, the penalty assessment
approach is inappropriate.
o 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—case in deciding, for example, how to apply the
economic benefit and ability to pay sanctions, if at all. Further
guidance on the issue of seeking penalties against non—profit
entities will be forthcoming.

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—3—
Deterrence
The first goal of penalty assessment is to deter people from
violating the law. Specifically, the penalty should persuade the
violator to take precautions against falling into noncompliance
again (specific deterrence) and dissuade others from violating the
law (general deterrence). Successful deterrence is important
because it provides the best protection for the environment. In
additidn, 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
benei it, as defined by the program—specific guidance, the case
development team must explain in the case file why it fails to do
so. The case development team must then include this explanation
in the memorandum accompanying each settlement for the signature
of the Assistant Administrator of Enforcement and Compliance
Monitoring, or the appropriate Regional official.
The removal of the economic benefit of noncompliance only
places the violator in the same position as he would have been if
compliance had been achieved on time. Both deterrence and funda-
mental fairness require that the penalty include an additional
amount to ensure that the violator is economically worse off than
if it had obeyed the law. This additional amount should reflect
the seriousnesS of the violation. In doing so, the penalty will
be perceived’ as fair. In addition the penalty’s size will tend
to deter other potential violators.
In some classes of cases, the normal gravity calculation may
be insufficient to effect general deterrence. This could happen
if, for example, there was extensive noncompliance with certain
regulatory programs in specific areas of the United States. This
would demonstrate that the normal ’penalty assessments had not been
achieving general deterrence. In such cases, the case development
team should consider increasing the gravity component sufficient to

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—4-.
achieve general deterrence. These extra assessments should
balance the other goals of this policy, particularly equitable
treatm 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
combina tion 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 sLgnlf 1-
cañtly 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 1 they

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—5—
will exhibit relative consistency from case to case. Because
the methodologies account for a wide range of relevant factors,
the penalties generated will be responsive to legitimate
differences between cases.
However, not all the possibly relevant differences between
cases are accounted for in generating the preliminary deterrence
amount: Accordingly, all preliminary deterrence amounts should
be increased or mitigated for the following factors to account
for differences between cases:
o Degree of willfulness and/or negligence
o History of noncompliance.
o Ability to pay.
° Degree of cooperation/noncooperation.
O 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—
gatiort.
The preliminary deterrence amount adjusted prior to the
start of settlement negotiations yields the initial penalty
target figureN. 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 irtf.ormation 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
proz ct 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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—6—
The Agency will pursue two basic approaches to promoting
quick settlements which include swift resolution of environmental
problems without undermining deterrence. Those two approaches
are as follows:
1. Provide incentives to settle and institute prompt
remedial action .
EPA policy will be to provide specific incentives to settle,
including the following:
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. 1 ! This would
be considered in the adjusti ient factor
called degree of cooperation/noncoopera-
tion discussed above.
o 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.
1/ For the purposes of this document, litigation is deemed to
begin:
0 for administrative actions — when the
respondent files a response to an adminis-
trative complaint or when the time to
file expires or
o for judicial actions — when an Assistant
United States Attorney files a corn—
plaint in court.

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—7—
Intent of Policy arid Information Requests for Penalty Calculations
The policies arid 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

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—8—
ATTACHMENT A
Outline of i ’ci Penalty Assessment
I. Calculate Preliminary Deterrence Amount
A.’ Economic benefit component and
B. Gravity component
(This yields the preliminary deterrence amount.)
11. Apply Adjustment Factors
A. Degree of cooperation/noncooperation (indicated through
pre—settlement action.)
B. Degree of willfulness and/or negligence.
C. History of noncompliance.
D. Ability tO pay (optional at this stage.)
E. Other unique {actors (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.
ID. Alternative payments agreed upon prior to the
commencement of litigation.
(This yields the adjusted penalty target figure.)

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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 16 984

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1
Contents Pa
Introduction 1
Writing a Program—Specific Policy 2
I. Developing a Penalty Ffgure 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
In trod u c t ion
The Preliminary Deterrence Amount
I. The Benefit Component
A. Benefit from delayed costs
B. Benefit from avoided costs
C. Benefit from competitive advantage
D. Settling a case for an amount less than
the economic benefit component
II. The Gravity Component
A. Quantifying the gravity of a violation
B. Gravity factors
Initial and Adjusted Penalty Target Figure
i. Flexibility—Adjustment Factors
A. Degree of willfulness and/or negligence
B. Degree of cooperation/noncooperation
C. History of noncompliance
D. Ability to pay
E. Other.unique factors
4
5
6
6
6
6
7
9
ic
11
13
13
14
16
17
17
19
21
23
24

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11
Appendix (Con’t )
II. Alternative Payments 24
III. Promoting Consistency 27
rise of Penalty Figure in Settlement Negotiations 28

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—1—
Introduction
This document, A Framework for Statute—Specific Approaches
to Penalty Assessment , provides guidance to the user of the
Policy on Civil Penalties on how to develop a medium—specific
penalty policy. Such policies will apply to administratively
imposed penalties and settlements of both administrative and
judicial penalty actions.
In the Policy on Civil Penalties , the Environmental
Protection Agency establishes a single set of goals for penalty
assessment. Those goals — deterrence, fair and equitable
treatment of the regulated community, and swift resolution of
environmental problems — will be substantially impaired unless
they are pursued in a consistent fashion. Even different
terminology could cause confusion that would detract from the
achievement of these goals. At the same time, too much rigidity
will stifle negotiation and make settlement impossible.
The ptrrpose of this document is to promote the goals of
the Policy on Civil Penalties by providing a framework for
medium—specific penalty policies. The Framework is detailed
enough to allow individual programs to develop policies that
will consistently further the Agency’s goals and be easy to
administer. In addition, it is general enough to allow each
program to tailor the policy to the relevant statutory provi-
sions and the particular priorities of each program.
While this document contains detailed guidance, it is not
cast in absolute terms. Nevertheless, the policy does not
encourage deviation from this guidance in either the development
of medium—specific policies or in developing actual penalty
figures. Where there are deviations in developing medium-
specific policies, the reasons for those changes must be
recorded in the actual policy. Where there are deviations from
medium—specific policies in calculating a penalty figure, the
case development team must detail the reasons for those changes
in the case file. In addition, the rationale behind the deviations
must be incorporated in the memorandum accompanying the settlement
package to Headquarters or the appropriate Regional official.
This document is divided into two sections. The first one
gives brief instructions to the user on how to write a medium-
specific policy. The second section is an appendix that gives
detailed guidance on implementing each section of the instruc-
tions and explains how the instructions are intended to further
the goals of the policy.

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—2—
Writing a Program Specific Policy
Summarized below are those elements that should be present
in a program—specific penalty policy. For a detailed discus-
sion of each of these ideas, the corresponding portions of the
appendix should be consulted.
I. Developing a Penalty Figure
The development of a penalty figure is a two step process.
First the case development team must calculate a preliminary
deterrence figure. This figure is composed of the economic
benefit component (where applicable) and the gravity component.
The second step is to adjust the preliminary deterrence figure
through a number of factors. The resulting penalty figure is
the initial penalty target figure. In judicial actions, the
initial penalty target figure is the penalty amount which the
government normally sets as a goal at the outset of settlement
negotiations. It is essentially an internal settlement goal and
should not be revealed to the violator unless the case development
team feels it is appropriate. In administrative actions, this
figure generally is the penalty assessed in the complaint.
While -in judicial actions, the government’s complaint will request
the maximum penalty authorized by law.
This initial penalty target figure may be further adjusted
in the course of negotiations. Each policy should ensure that
the penalty assessed or requested is within any applicable
statutory constraints, based upon the number and duration of
violations at issue.
II. Calculating a Preliminary Deterrence Amount
Each program—specific policy must contain a section on
calculating the preliminary deterrence figure. That section
should contain materials on each of the following areas:
• Benefit Component . This section should
explain:
a. the relevent measure of economic benefit
for various types of violations,
b. the information needed,
c. where to get assistance in computing -
this figure and
d. how to use available computer systems
to compare a case with similar previous
violations.

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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:
o amount of pollutant,
o toxicity of pollutant,
0 sensitivity of the environment,
° length of time of a violation and
0 size of the violator.
The policy then should assign appropriate dollar amounts
or ranges of amounts to the different ranked violations to
constitute the TM 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 environmenta.l problems). Those guidelines should
be consistent with the approach described in the appendix. The
factors may be separated according to whether they ôan 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 devel?p an
initial penaly target to use at the outset of negotiation include:
° Degree of willfulness and/or negligence
° Cooperation/noncooperation through pre—
settlement action.
History of noncompliance.

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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—settlernent 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

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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.
t•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.
n L
Courtney 11. Price
Assistant Administrator for
Enforcement and Compliance Monitoring
Attachment

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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
noncompliance. Then it adds an amount to the penalty which reflects
the seriousness of the violation. The second section provides
adjustment factors so that both a fair and equitable penalty will
result and that there will be a swift resolution of the environmenta
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 tc--
as the “benefit component;” that part of the penalty which reflects..
the seriousness of the violation is referred to as the “gravity
component.” When combined, these two components yield the “prelim-
inary deterrence amount.”
This section of the document provides guidelines for calcu—
lating the benefit component and the gravity component. It will
also present and discuss a simplified version of the economic
benefit calculation for use in developing quick penalty deter-
minations. This section will also discuss the limited circum-
stances which justify settling for less than the benefit component.
The uses of the preliminary deterrence amount will be explained
in subsequent portions of this document.
I. The Benefit Component
In order to ensure that penalties remove any significant
economic benefit of noncompliance, it is necessary to have
reliable methods to calculate that benefit. The existence of
reliable methods also strengthens the Agency’s position in both
litigation and negotiation. This section sets out guidelines for
computing the benefit component. It first addresses costs which
are delayed by noncompliance. Then it addresses costs which are
avoided completely by noncompliance. It also identifies issues

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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:
o Failure to install equipment needed to meet
discharge or emission control standards.
O Failure to effect process changes needed
to eliminate pollutants from products or
waste streams.
o Testing violations, where the testing still
must be done to demonstrate achieved corn—
p1 iance.
o Improper disposal, where proper disposal is
still required to achieve compliance.
o Improper storage where proper storage is still
required to achieve compliance.
° 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

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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 acase 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 neededto support or
defend the Agency’s position. Accordingly, this “rule of thumbu
method generally should not be used in any of the following cir-
cumstances:
° A hearing is likely on the amount of the
penalty.
° The defendant wishes to negotiate over the
amount of the economic benefit on the basis
of factors unique to the financial condition
of the company.
° The case development team has reason to
believe it will produce a substantially
inaccurate estimate; for example, where the
defendant is in a highly unusual financial
position, or where noncompliance has or will
continue for an 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
f or 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

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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 re.flect 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..
o Failure to properly operate and maintain
existing control equipment.
o Failure to employ sufficient number of
adequately •trained staff.
° Failure to establish or follow precautionary
methods required by regulations or permits.
o Improper storage, where commercial storage is
reasonably available.
0 Improper disposal, where redisposal or cleanup
is not possible.
0 Process, operational, or maintenance savings
from removing pollution equipment.
o 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 Computir g the Economic Benefit of Noncom—
pliance . Again, until the Metholology is issued, the method
contained in the July 8, 1980, Civil Penalty Policy should he
used as modified to reflect recent changes in the tax law.

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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 to provide- goods or services which
are not available elsewhere or are more attractive to the
consumer. Examples of such violations include:
a
o selling banned products.
o Selling products for banned uses.
o Selling products without required labelling
or warnings.
Removing or altering pollution control
equipment for a fee, (e.g., tampering with
automobile, emission controls.)
o 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:
• The amount of the profit should be based on
the best information available concerning
the number of transactions resulting from
noncompliance.
° 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.
o The benefit derived should be adjusted to
reflect the present value of net profits
derived in the past.

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—11—
It 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 y other programs. The
programs should also ensure that sufficient contract funds are
available to obtain expert advice in this area as needed to
support penalty development, negotiation and trial of these kinds
of cases.
D. Settling cases for an amount less than the economic
benefit
As noted above, settling for an amount which does not remove
the economic benefit of noncompliance can encourage people to
wait until EPA or the State begins an enforcement action before
complying. For this reason, it is general Agency policy not to
settle for less than this amount. There are three general areas
where settling for less than economic benefit may be appropriate.
But in any individual case where the Agency decides to settle for
less than enconomic benefit, the case development team must detail
those reasons in the case file and in any memoranda accompanying
the settlement.
1. Benefit component involves insignificant amount
It is clear that assessing the benefit component and
negotiating over it will often represent a substantial commitment
of resources. Such a commitment of resources may not be warranted
in cases where the magnitude of the benefit component is not likely
to be significant, (e.g. not likely to have a substantial impact on
the violator’s competitive positions). For this reason, the case
development team has the discretion not to seek the benefit com-
ponent where it appears that the amount of that component is
likely to be less than $10,000. (A program may determine that
other cut—off points are more reasonable based on the likelihood
that retainingthe benefit could encourage noncomplying behavior.)
In exercising that discretion, the case development team should
consider the following factors:
* Impact on violator : The likelihood that
assessing the benefit component as part
of the penalty will have a noticeable
effect on the violator’s competitive
position or overall profits. If no such
effect appears likely, the benefit com-
ponent should probably not be pursued.
o The size of the gravity component : If the
gravity component is relatively small, it
may not provide a sufficient deterrent, by

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—12-
itself, to achieve the goals of this policy.
The certainty of the size of the benefit
component : If the economic benefit is quite
well defined, it is not likely to require
as much effort to seek to include it in the
penalty assessment. Such circumstances also
increase the likelihood that the economic
benefit was a substantial motivation for the
noncompliance. This 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 violat’..on. 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:
o 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.
o 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.

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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 whece there is a
likelihood of continued harmful noncompliance.
3. Litigation practicalities
The Agency realizes that in certain cases, it is highly unlikely
the EPA will be able to recover the economic benefit in litigation.
This.may be due to applicable precedent, competing public interest
considerations, or the specific facts, equities, or evidentiary
issues pertaining to a particular case. In such a situation it is
unrealistic to expect EPA to obtain a penalty in litigation which
would remove the economic benefit. The case development team then
may pursue a lower penalty amount.
II. The Gravity Component
As noted above, the Policy on Civil Penalties specifies that
a penalty, to achieve deterrence, should not only remove any eco-
nomic benefit of noncompliance, but also include an amount reflecting
the seriousness of the violation. This latter amount is referred
to as the 0 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 Qravity of a violation
Assigning a dolla’ 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.
70

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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:
o 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.
o 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.
o Availability of data from other sources :
The violation of any recordkeeping or
reporting requirement is a very serious
71

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—‘s’:-
matter. But if the involved requirement
is the only source of information, the
violation is far more serious. By contrast,
if the Agency has another readily available
and cheap source for the necessary infor-
mation, a smallei 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 itis not taken into account by
other factors.
The assessment of the first gravity factor liste.d 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:
o 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.
o ToxiCity of the pollutant : Violations
involving highly toxic pollutants are more
serious and should result in relatively
larger penalties.
o 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.
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Although each program—specific policy should address each
of the factors listed above, or determine why it is not relevant,
the factors listed above are not meant to be exhaustive. The
programs should make every effort to identify all factors rele-
vant to assessing the seriousness of any violation. The programs
should then systematically prescribe a dollar amount to yield a
gravity component for the penalty. The program-specific policies
may prescribe a dollar range for a certain category of violation
rather than a precise dollar amount within that range based on
the sp cific 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. Tne
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.
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Nevertheless, it should be noted that equitable treatment is
a two—edged sword. While it means that a particular violator will
receive no higher penalty than a similarly situated violator, it
also means that the penalty will be no lower.
I. Flexibility—Adjustment Factors
The purpose of this section of the document is to establish
additional adjustment factors to promote flexibility and to iden-
tify management techniques that will promote consistency. This
section sets out guidelines for adjusting penalties to account for
some factors that frequently distinguish different cases. Those
factors are: degree of willfulness and/or negligence, degree of
cooperation/noncooperation, history of noncompliance, ability to
•pay, and other unique factors. Unless otherwise specified, these
adjustment factors will apply only to the gravity component and
not to the economic benefit. component. Violators bear the burden
of justifying mitigation adjustments they propose based on these
factors.
Within each factor there are three suggested ranges of
adjustment. The actual ranges for each medium—specific policy
will be determined by those developing the policy. The actual
ranges may differ from these suggested ranges based upon program
specific needs. The first, typically a 0—20% adjustment of the
gravity component, is within the absolute discretion of the case
development team. 1/ 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
1/ Absolute discretion means that the case development team
may make penalty development decisions independent of EPA
Headquarters. Nevertheless it is understood that in all
jtidicial matters, the Department of Justice can still review
these determinations if they so desire. Of course the authority
to exercise the Agency’s concurrence in final settlements is
covered by the applicable deleg s.

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—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,
indic ite 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:
o How much control the violator had over the
events constituting the violation.
o The forseeability of the events consti-
tuting the violation.
o Whether the violator took reasonable
precautions against the events con-
stituting the violation.
0 Whether the violator knew or should have
known of the hazards associated with the
conduct.
o 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.
° Whether the violator in fact knew of the
legal requirement which was violated.
It should be noted that: this last point, lack of knowledge
of the legal requirement, should never be used as a basis to
reduce the penalty. To do so would encourage ignorance of
the law. Rather, knowledge of the law should serve only to
enhance the penalty.
The amount of control which the violator had over how
quickly the violation was remedied is also relevent in certain
circumstances. Specifically, if correction of the environmental
problem was delayed by factors which the violator can clearly
show were not reasonably foreseeable and out of its control, the
penalty may be reduced.
The suggested approach for this factor is for the case
development team to have absolute discretion to adjust the
penalty up or down by 20% of the gravity component. Adjustments
in the + 21—30% range should only be made in unusual circumstances.
.7c

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—19—
Adjustments for this factor beyond + 30% should be made only in
extraordinary circumstances. Adju&Ernents in the unusual or
extraordinary circumstance range will be subject to scrutiny in
any audit of performance.
B. Degree of Cooperation/Noncooperation
The degree of cooperation or noncooperation of the violator
in remedying the violation is an appropriate factor to consider in
adjusting the penalty. Such adjustments are mandated by both the
goals of equitable treatment and swift resolution of environmental
problems. There are three areas where this factor is relevant.
1. prompt reporting of noncompliance
Cooperation can be manifested by the violator promptly
reporting its noncompliance. Assuming such self—reporting is not
required by law, such behavior should result in the mitigation of
any penalty.
- The suggested ranges of adjustment are as follows. The case
development team has absolute discretion on any adjustments up to
+ 10% of the gravity component for cooperation/noncooperation.
Adjustments can be made up to + 20% of the gravity component, but
only in unusual circumstances. In extraordinary circumstances,
such as self reporting of a TSCA premanufacture notice violation,
the case development team may adjust the penalty beyond the ÷ 20%
factor. Adjustments in the unusual or extraordinary circumstances
ranges will be subject to scrutiny in any performance audit.
2. Prompt correction of environmental problems
The Agency should provide incentives for the violator to
commit to correcting the problem promptly. This correction must
take place before litigation is begun, except in extraordinary
circumstances. 2 ! But since these incentives must be consistent
with deterrence, they must be used judiciously.
2/ For the purposes of this document, litigatipn is deemed to
begin:
O for administrative actions — when the
respondent files a response to an adminis-
trative complaint or when the time to
file expires or
o for judicial actions — when an Assistant
United States Attorney files a com-
plaint in court.
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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 c iscretion of the case development team. This
smaller adjustment still recognizes the efforts made to correct
the environmental problem, but the benefit to the source is not
as great as if a complete settlement is reached. Adjustments
greater than 25% are permitted, but will be the subject of close
scrutiny in auditing performance.
In all instances, the facts and rationale justifying the
penalty reduction must be recorded in the case file and in-
cluded in any memoranda accompanying settlement.
3. Delaying compliance
Swift resolution of environmental problems will be encour-
aged if the violator clearly sees that it will be financially
disadvantageous for the violator to litigate without remedying
noncompliance. The settlement terms described in the preceding
section are only available to parties who take steps to correct a
problem prior to initiation of litigation. To some extent, this
is an incentive to comply as soon as possible. Nevertheless, once
litigation has commenced, it should be clear that the defendant
litigates at its own risk.
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In addition, the methods for computing the benefit component
and the gravity component are both structured so that the penalty
target increases the longer the violation remains uncorrected.
The larger penalty for longer noncompliance is systematically
linked to the benefits accruing to the violator and to the con-
tinuing risk to human health and the environment. This occurs
even after litigation has commenced. This linkage will put the
Agency in a strong position to convince ‘the trier of fact to
imposesuch 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:
O How similar the previous violation was.
O How recent the previous violation was.
o The number of previous violations.
o Violator’s response to previous violation(s)
in regard to correction of the previous
problem.
Detailed criteria for what constitutes a Nsimilar v.io .ation”
should be contained in each program-specific policy. Neverthe-
less a violation should generally be considered similarN if the
Agency’s previous enforcement response should have alerted the
party to a particular type of compliance problem. Some facts
that indicate a. wsimilar violations was committed are as follows:
* The same permit was violated.
o The same substance was involved.
O The same process points were the source
of the violation.
o The same statutory or regulatOryprOViSiOfl
was violated.
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° 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 developmentteam 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 independc t.
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.
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D. Ability to pay
The Agency will generally not request penalties that are
clearly beyond the means of the violator. Therefore EPA should
consider the ability to pay a penalty in arriving at a specific
final penalty assessment. At the same time, it is important
that the regulated community not see the violation of environ-
mental requirements as a way of aiding a financially troubled
business. EPA reserves the option, in appropriate circumstances,
of seeking a penalty that might put a company out of business.
For example, it is unlikely that EPA would reduce a penalty
where a facility refuses to correct a serious violation. The same
could be said for a violator with a long history of previous vio-
lations. That long history would demonstrate that less severe
measures are ineffective.
The financial ability adjustment will normally require a
significant amount of financial information specific to the
violator. If this information is available prior to commence-
ment of negotiations, it should be assessed as part of the
initial penalty target figure. If it is not available, the
case development team should assess this factor after commence-
ment of negotiation with the source.
The burden to demonstrate inability to pay, as with the
burden of demonstrating the presence of any mitigating circum-
stances, rests on the defendant. If the violator fails to
provide sufficient information, then the case development team
should disregard this factor in adjusting the penalty. The
National Enforcement Investigations Center (NEIC) has developed
the capability to assist the Regions in determining a firm’s
ability to pay. Further information on this system will be made
available shortly under separate cover.
When it is determined that a violator cannot afford the
penalty prescribed by this policy, the following options should
be considered:
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.
O Consider non—monetary alternatives, such as
public service activities : For example, in
the mobile source program, fleet operators
who tampered with pollution control devices
8O

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—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, thi
reasons for the case development team’s
conclusion as to the size of the necessary
reductioo should be made a part of the formal
enforcement file and the memorandum accompany-
ing the settlement. 3
o 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
mdiv dual 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 upor 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.
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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, EP A has
accepted for credit certain expenditures whose actual environ-
mental benefit has been somewhat speculative.
The Agency believes that these alternative payment projects
should be reserved as an incentive to settlement before litigation.
For this reason, such arrangements will be allowed only in preliti—
gation agreements except in extraordinary circumstances.
In addition, the acceptance of alternative payments for
environmentally beneficial expenditures is subject to certain
conditions. The Agency has designed these conditions to prevent
the abuse of this procedure. Most of the conditions below applied
in the past, but some are new. All of these conditions must be
met before alternative payments may be accepted: 4 /
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.
o The project cannot be something which the
violator could reasonably be expected to do
as part of sound business practices.
4/ In extraordinary circumstances,.the Agency may choose not to
pursue higher penalties for “alternative” work done prior to
commencement of negotiations. For example, a firm may recall a
product found to be in violation despite the fact that such
recall is not required. In order for EPA to forgo seeking
higher penalties, the violator must prove that it has met the
other conditions herein stated. If the violator fails to prove
this in a satisfactory manner, the case development team has the
discretion to completely disallow the credit project. As with
all alternative projects, the case development team has the dis-
cretion to still pursue some penalties in settlement.
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o 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. 5 !
In all cases where alternative payments are allowed, the
case file should contain documentation showing that each of
the conditions listed above have been met in that particular
case. .In addition when considering penalty credits, Agency
negotiators should take into account the following points:
o 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.
o 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.
o The project should receive stronger
consideration if undertaken at the
facility where the violation took place.
° The company should agree that any publicity
it disseminates regarding its funding of
the project must include a statement that
such funding is in settlement of a lawsuit
brought by EPA or the State.
5/ This limitation does not apply 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 p-reventing 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.

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—27—
Each alternative payment plan must entail an identified
project to be completely performed by the defendant. tinder 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-
rient of the penalty. Together, they add up to the preliminary
deterrence amount. The document also sets out guidance on uniform
approaches for applying adjustment factors to arrive at an initial
penalty target prior to beginning settlement negotiations or an
adjusted penalty target after negotiations have begun.
Nevertheless, if the Agency is to promote consistency, it
is essential that each case file contain a complete description
of how each penalty was developed. This description should cover
how the preliminary deterrence amount was calculated and any
adjustments made to the preliminary deterrence amount. It should
also describe the facts and reasons which support such adjustments.
Only through such complete documentation can enforcement attorneys,
program staff and their managers learn from each others’ experience
and promote the fairness required by the Policy on Civil Penalties .
To facilitate the use of this information, Office of Legal
and Enforcement Policy will pursue integration of penalty infor-
mation from judicial enforcement actions into a computer system.
Both Headquarters and all Regional offices will have access to
the system through terminals. This would make it possible for
the Regions to compare the handling of their cases with those of
other Regions. It could potentially allow the Regions, as well
as Headquarters, to learn from each others’ experience and to
identify problem areas where policy change or further. guidance
is needed.
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Use of Penalty Figure in Settlement Discussions
The Policy and Framework do not seek to constrain negotiations.
Their goal is to set settlement target figures for the internal
use of gency 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.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460 -
‘ L p i F’
De ember 15. 1995 OFF1CEC
EMFORCE VE,NT AND
OMpUANCZ AZSUP.* . CE
MEMORANDUM
SUBJECT: Gu ce on Use of Penalty Policies in Administrative Litigation
FROM Ro ert Van euI b &or
Office of Regulatory Enforcement
TO: 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
A. lntroductio
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.
Background
On September 29, 1995. Chief AdminisifâTive Law Judge Lotis issue nInitial
Decision in In Re: EmDlovers Insurance of Wau , 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 poli ies by•
the Environmental Appeals Board, in particular DIC 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.
Recyc ad/ .c .yc abI.
— .u
86 -.

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page 2
. U .s f Per altv Policies in Administrative Litigation
1. Federal environmental statutes set forth various factors which EPA or a court
ntus co ider in establishing penalties. EPA’s penalty policies are based on the statutory
penalty factors. The policies provide EPA enforcement staff with a logical calculation
mology for determining appropriate penalties. The polièies help EPA apply the
statutory penalty factors in a consistent and equitable manner so that members of the
regulated cOmmunity are treated similarly for sinulla violations’across the country. As
policies, they are not substantive rules under the Administrative Procedure Act’
2, inc penaity amount sought in the administrative complaint is based on the
relevant statutory factors. The penalty axnountplè should be calculated pursuant to any
applicable penalty policy and the specific facts of the case. 2 If there is. no applicable policy,
the penalty amount to be pled in the compI2rn liotIld be based on the statutory factors
governing penalty assessment, case law interpretib süchfactori, and theiacrsof the
particular case. 3 .
3. The aaministnnve complaint should explain that the penalty requested is based
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 has 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
The policies are a mix of legal interpretations, ge eral policy, and procedural guidance in how -
EPA should allocate its enforcement resources and exercise its enforcement discretion. As such, they
are exempt from the notice and comment rulemaking zequirements of the Adminisrrariye Procedures
Act, 5 U.S.C. § 553
Not all EPA programs have penalty policies that establish calculation methodologies fqr use i
determining the ènalty.amouñt to plead in an administrative complaint. For example, the May 1995
Interim RMte4 aeaiz Water Act Settlement Policy and the May. 1994 Public Water System Supervision
Settlement Pehaizy Policy only establish, how the Agency expects to calculate the minimum penalty for
which it would be willing to settle 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 penalty amount produced by the
calculation methodolo v produces an amount that appears inconsistent with the statutory penalty
factors or otherwise unreasonable. In such a case, the Region must consult with OECA prior to
deviating from the policy. See Redelegari.on of Authority and Guidance on Headquarters Involvement
iii Reguiawrv Enforcement Cases, memo issued by the Assistant Administrator, on July 11, 1994.
espedally page 3. and pafle 2 of the redelegaxion issued the same date, and subsequent program
specific implementing ‘guidances.
87

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page 3
account [ enumerate statutory penalty factors]. to develdp the proposed
penalty in this complaint, complainant has taken into account the particular
facts and circumstances of this case with specific reference to EPA’s [ name of
relevant penalty policy, if applicable], a copy, of which is enclosed with this.
Complaint. This policy provides a ranonal, consistent and equitable
calculation methodology for applying the statutory penalty factors enumerated
above to particular cases.,
4.. As further support of the .penalty proposed in the complaint, a case TM record 1
file should document or reference all factual information on which EPA relied to develop the
penalty a mount pled in’ the omplaint. 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 not.be lengthy, but it should
explain how any applicable penalty. policy methodology was applied to the specific facts in
the case.’ If there was no apprlicable 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. 5 ,
5. Pursuant to the Consolidated Rules of Practice Governing the Adminis ’ative
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;.
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 Penalr 1 ’ PoIici, October 1990. pages 6,to 8. 41 to 47.
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
should not be released.
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a. Presenting any applicable penalty policy as a reasonable approach . In the prehcarIng
exchange or at the hearing, EPA counsel should brierly 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. Adminis azive law judges, however, may prefer some parts of this analysis
to be presented through testimony or affidavits.. If the Presiding Officer or respondent
chailenes the rationale or 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 ftamework for quantifying the statutory penalty factors to the particular circumstances
of the in.sr.arit 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 penal 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. Why the particular facts merit the penalty proposed in the complaint . This task requires
the cornpiaiiiant 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
poiic 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 idendfya 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 s iould 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
Regions sheui consult with ORE on how to respond to such challenges.

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C P— q ’
{signed March 19, 1997
MEMORANDUM
SIJBJEC,T: Impact of Wausau on Use of Penalty Policies
FROM Robert L 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 II
Director, Compliance Assurance 8 Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice,
Region V I II
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 ofEm joyers 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 ceneept, and
validated the Agency’s method of applying its penalty policies.
The EAB a.ffirrned that the Agency’s penalty policies are not rules, and that the Agency
can use penalty policies without going through, notice and comment rulemalting so long as
Agency decisionmakers çi.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. . at 35.
In order to establish the uappropriateness of a recommended penalty, complainant must
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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. 4. ax 34-35. Complainant need not offer such evidentiaiy 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. . ax 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. . at 31. The PresidingOfficer 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. j . at 36-37.
The EA.B ruled that where complainant gives clear notice in its prehearing 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. J.d. ax 34-3 5. 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. j ,
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 Litigaxion ’, 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 the 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
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( 4 )
L P 0
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
MAY — 9 j997
MEMORANDUM
SUBJECT:
FROM:
TO:
Modifications to EPA Penalty Policies to Implement the Civil Monetary Penalty
Inflation Rule (Pursuant Debt Collection Improvement Act of 1996)
Steven A.
Assistant
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
occ on or after January 31, 1997, are subject to the new
amounts. 1 We have attached a copy of the published rule, and the March 20, 1997, correction.
for your convenience.
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. 300 g-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 IS 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.
R.cyCl.d/R.CYCI2bIS .Pnnted wtth Vegetable Oil Based Inks on 100% Recycted Paper (40% Po consumer)
CfF ICEOF
ENFO CEMENT AND
COMPUANCE ASSURANCE
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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 affer the date the increases take effect on January 30. 1997 -
that is violations which occur on or after Jariua 31. 1 9972 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 .ñew 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 S25,000 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
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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 below 4 . 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 newrule 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.
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 czraviw
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%.
Where no specific petialty 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.
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.
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3. Deteimine 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 step 1, 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 2ravitv 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
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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. § 13 19(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. §1311(a), that occurred
prior to January 31, 1997; and $27,500 per day for each violation of Section 301
of the Act, 33 US.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 arty 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. § 1’319(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. §13 11, up to the date of
judgment herein.
ADMINISTRATIVE PENALTY CAPS FOR CWA. SDWA. AND çAA
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 S220,000
(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
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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 oMer to exceed the previous maximum penalty of$125.000 (12
violations X SI 1,000 = S132.000). If there are not at least 12 violations occurx-jn 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 527.500 =
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
l eneral
Policy on Civil Penalties (2114/84)
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A Framework for Statute-Specific Approaches to Penalty Assessments (2/14/84)
Guidance on Use of Penalty Policies in Administrative Litigation, (12115/95)
Clean Air Act - Stationary Sources
Clean Air Act Stationary Source Civil Penalty Policy (10/25/9 1) (This is a generic policy
for stationary sources.)
Clarifications to the October 25, 1991 Clean Air Act Stationary Source Civil Penalty
Policy (1/17/92)
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 II- Vinyl Chloride Civil Penalty Policy (Not Dated)
Appendix III - Asbestos Demolition and Renovation Civil Penalty Policy ( Revised
5/5/92 )
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 3/2/88’ )
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 pit a Motor Vehicle Air 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)
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 X I- 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)
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)
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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 PCB 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
(8/5196)
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 (AHER. )
Interim Final ERP for the Asbestos Hazard Emergency Response Act (1131/89)
ERP for Asbestos Abatement Projects; Worker Protection Rule (1 1114 S9)
Safe Drinking Water Act - U1C
Interim Final UIC Program Judicial and Administrative Order Settlement Penalty Policy -
- Underground Injection Control Guidance No. 79 (9/27/93)
$ fe Drinking Water Act - PWS
New Public Water SystemSupervision Program Settlement Penalty Policy (5/25/94)
EPCRA
Final Penalty Policy for Sections 302, 303, 304, 311, and 312 of EPCRA and Section 103
of CERCLA (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
(12118/96)
Clean Water Act
Revised Interim Clean Water Act Settlement Penalty Policy, Februaiy 28, 1995
Clean Water Act Section 404 Civil Administrative Penalty Actions Guidance on
Calculating Settlement Amounts
RCRA
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RCRA Civil Penalty Policy (October 1990)
liST
U.S. EPA Penalty Guidance for Violations of UST Regulations (November 1990)
Guidance for Federal Field Citation Enforcement (OSWER Directive- No. 9610-i 6)
(October 1993)
CERCLA
Final Penalty Policy for Sections 302, 303, 304, 311, and 312 of EPCRA and Section 103
of CERCLA (6/13/90)
FIFRA
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 (9/30/9 1)
Attachments
cc: (w/attachments)
OECA Office Directors
ORE Division Directors
OSRE Division Directors
Regional Counsels, Resions I -
Director, Office of Environmental Stewardship, Region I
Director, Division of Enforcement and Compliance Assurance, Region H
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
Cl vfP 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
Cary Secrest, ORE-AED
Mary Andrews, ORE-RED
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Nancy Ketcham-CoIwill, OGC-ARD
Lone Schmidt, OGC-CCID
Richard Wirt, OGC-WD
Robert Friedrich, OGC-IGD
Lynn Johnson, OSWERJOPMiPARMS
David R .Wiliiams, OPPTS
Edie Goldman, Re ion 1 ORC
Wilkey Sawyer, Region 2 ORC
Judith Ka , Region 3
Leif Palmer, Region 4 ORC
Will Waisner, Region 4
Evan L. Pearson, Region 6
Alma Eaves, Region 7
Kim Muratore, Region 9
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Tuesday
December 31, 1996
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— —
=
— —
—
— S —
— S —
— S —
S S —
:
. :
-
iT - = PartV
I Environmental
____ Protection Agency
___ 40 CFR Parts 19and 27
Civil Monetary Penalty Inflation
________ Adjustment Rule; Final Rule
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102

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69360 Federal Register / Vol. 61. No. 252 I Tuesday, December 31. 1996 / Rules and Regulations
ENViRONMENTAL PROTECTION
AGENCY
40 CFR Pars 19 and 27
(FR.L-5671-1]
Civil Monetary Penalty Inflation
Adjustment Rule
AGENCY Environmental Protection
Agency (EPA).
ACTION: Final rule.
si v: 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
penakies 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 U lFORMATlON COPffACT
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 .steven@epamail.epa.gov.
SUPPLEMENrA.R -Y INFORMATiON: Pursuant
to the 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”). 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 the 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 the statutory penalty
provisions administered by EPA are
being Increased. All of these increases
are for the maximum allowed, ten
percent. The affected penalty provisions
arid their statutory ma amum 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 desaibed under
section 4 shall be determined by increasing
the maximtmi CMP or the range of minimum
and maximum CMPs. as applicable, for each
CM? by the cost.of-living adjustment. -
The term “cost-of.livizig” adjustment is the
percentage for each CM? by which the
Consumer Price Index (CP () 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 CM? was
la. set or adjusted pursuant to law. Any
Increase determined under this amendment
shallberounded •
However, the DCIA also sets a ten
percent cap on the first adjustment for
inflation. Since EPA ’s penalties have
never previously been adjusted for
inflation, this first statutorily required
adjustment will be limited to ten
percent. Table A below sets forth each
CM? provision which Is being increased
pursuant to the DCIA and the
intermediate calculations performed to
arrive at the adjusted final maximum
penalty contained in the last column
and in today’s rule.
TABLE k—SUMMARY OF CML MONETARY PE Ti’ INFLATION A usn T C i.cu L.A’rIoNs
U.S. C e
d at n
C na8y
desa ipt n -
Year pen-
a8y
a t
w)1 last

law
Maxm ts,, pen-
Y
by law as o(
1
ltet Ofl f ctOl’
a ilabon’
MIXITP.en pen-
asy rnaeas.
amo efl alter
P.L —
otedU g
Maximm pe
say T JC8
alter r ease
and P.L 101-
410 drg
Marrrw.sn pen-
aty anourfl
alter P.L 101-
410 ro nding
and 10% I rut
7 U.S.C. 1361 (1)
7 U.S.C. 1381 (2) —
15 U.S.C. 2615
IS U.S.C. 2647(a)
31 U.S.C.
3802 (aX l).
31 U.S.C.
38 02(aX2).
33 U.S.C. 1319(d)..
33 U.S.C.
1319(Q)(2XA).
FEDERAL NSECTTCDE. FUN-
GICIDE. & ROOENT1CIOE ACT
CML PENALTY—GENERAL—
COMMERCIAL APPUCATORS.
ETC.
FEDERAL INSECTICIDE. FUN-
GICIDE. & ROCENTICIDE ACT
CML PENALTY—PRNATE sip.
PLICATORS—1ST & SUBSE.
O(JENT OFFENSES OR ViOLA-
TIONS.
TOXIC SUBSTANCES CONTROL
ACT CML PENALTY.
ASBESTOS HAZARD EMER-
GENCY RESPONSE ACT CML
PENALTY.
PROGRAM FRAUD CML REM-
EDIES ACTMCLATION IN-
VOLV1NG FALSE CL*JM.
PROGRAM FRAUD CML REM-
EDIES ACTN1OLATION IN-
VOL VING FALSE STATEMENT.
CLEAN WATER ACT V iOLATiON!
CIVIL .JUDIC IAL PENALTY.
CLEAN WATER ACT VIOLATION!
ADMINISTRATIVE PENALTY
PER VIOLATION AND MAX-
MUM.
1978
35.000
456.7/195.3
37,000
S12.000
S5.5C0
1978
500/1.000 ... . ....
456.7/195.3
700/1,000
1,200/2.000 .....
550/1.100
1976
25.000 ....._
456.7/170.1
40,000 ..__,..
65,000 .._.
27.500
1986
5.000
456.7/327.9
2.000
7,000
5.500
1986
5.000 ......
456.7/327.9
2,000
7,000 ..__. .....
5.500
1986
5.000 ........ ..
456.7/327.9
2,000
7,000 ._...
5.500
1987
25.000 .. —.
456.7/3.40.1
10.000
35.000 ...._.... .
27.500
1987
10.000125.000 ..
456.71340.1
3,000110,000 .
13.000/35.000 ..
11.000/37.500
103

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Federal Register / Vol. 61. No. 252 / Tuesday, December 31. 1996 / Rules and Regulations 69361
T i .3LE k—SUMMARY OF CIVIL MONETARY PENALTY INFLATION ADJUSTMENT
U.S. Cod.

f
J
CM pen y

‘I’
say

.
set Di
w
U i etn pen-
U.
by w
(23 )96
, ‘
a4a on’
M*xwm,n pen-
amount after
P.L 101-410
r .J g 2
Matvm. n pen-
after r c aa.a.
. P.L 101-
410 tvuneng
Max un pen-

ater P.L 101-.
410 ro # d ig
and 10% rid
1967 10.000(125.000
1990 10.000125.000
1990 10.000/125,000
456.7/340.1 3.000 /40.000 13.0001155.000 11.000/137,500
456.7/389,1 2.00015,000 — 12.000)30.000 - 11.000 /27,500
456.7/359.1 2.000/20.000 _, 12.000/145.000 11.000(137.500
5.000 or 200 15.000 or 1200
per baneiftaid - . per b e i&
1990
1990
1990
1990
1953
1963
.19 3 3
1986
1986
1986
10.000 or
1. 0 0 0psrbAj -.
25.000 —
2S. -
100.000 or
3.000 per bAi.
600 _.
50.000/125.000

25,000
25,000
5.000
33 U.s.C.
131 9( .g)(2XB).
33 U.S C.
1321(bX5XBX1 .
33 U.S.C.
1321(b)(5)(8X 1).
33 U.S.C.
1321(bX7XA .
33 U.S.C.
132 t(b 7)(B).
33 U.S.C.
1321(b)(7) C).
33 U.S.C.
1321(bX7)(D ).
33 U.S C. 14149(d)
33 U S.C. 1415(a) -
42 U.S.C 3009-
3kb).
42 U.S.C. 3009—3(c)
42 U.S.C. 3009-
3( X3)(A).
42 U.S.C. 3009-.
42 U.S.C. 30Q - .
2(b 1
42 U.S.C. 3 - .
2(cX l).
42 U.S.C. 30 -
2(c)(2 ).
42 U.S.C. 300h-
3(cX l ).
42 U.S.C. 0b-
3(c 2 ).
42 U SC. 30 -1(b)
42 U.S.C. 300 eg2)
42 U.S.C. 30 -4(c)
CLEAN WATER ACT VIOLAT)ONI
ADIHNISTRATTVE PENALTY
PER VIOLATION AND MAXI-
CLEAN WATER ACT VIOt.ATIOW
ADMIN PENALTY OF SEC
311(b)(3) & PER VIOLATION
AND MAx iu
CLEAN WATER *01 VIOLAT)OW
ADMIN PENALTY OF SEC
311(bX3) £ PER VIOLATION
AND MAX
CLEAN WATER ACT VIOLAT)ON/
CN3. JJDICIAL PENALTY OF
SEC 311(bX3)—PER VIOLA-
‘flON PER DAY OR PER BAR-
REL OR LHT.
CLEAN WATER ACT VIO.ATICPU
CiVIL .LJOICIAL PENALTY OF
SEC 311 (c) £ (eXl)(B).
CLEAN WATER ACT V1O.AT1ON /
CIVIL ,AJOCIAL. PENALTY OF
SEC 311w.
CLEAN WATER ACT VIOLAT 1ON /
M 4IML* CIVIL .LIOICtAL
PENALTY OF SEC 311(b)(3) ’—
PER VIOLATION OR PER BAR.
RELAfrIT.
MAR1NE PROTECTION. R-
SEARCH AND S.AJ ’4CTUAR ES
ACT VIOL SEC 1049(d).
MARINE PROTECTION. R-
SEARCH AND SANCTUAR ES
ACT ViOLATIONS—FIRST &
SUBSEQUENT VIOLATiONS.
SAFE DR*EING WATER ACT)
CIVIL JJDICIAL PENALTY OF
SEC 1414(b)
SAFE DRINI(ING WATER ACTI
CIVIL .LJOIC IAL PENALTY OF
SEC 1414(c ).
SAFE DRIM(J’.IG WATER AC ?)
C /VIL JJ0 C/AL PENALTY OF
SEC. 1414(9X3%A).
SAFE DRIP J 1G WATER AC1/
MA M ADM TRATNE
PENALTY PER SEC.
1414(9)(3X8).
C7 1. JDIQAL ALTYf ’IOLA-
‘T)ONS OF REDS—UNDER-
GROUND BUECTION CON-
TROL
CNL AOMIMSTRATNE P9
AL T Y-V 1OLATIONS OF
REOS—4JNOERGROLBC IN-
EC11ON CONTROL-PER
VIOLATION AND MAX UM.
CIVIL ADMI /’ISTRATIVE PEN-
ALlY-VIOLATIONS OF
REDS—UNDERGROUND IN-
JECTION CONTROL PER VIO-
LATION £ MAXIML$4.
VIOt .ATIONIOPER.ATION OF
NEW UNDERGROUND W’UEC-
TION WELL
WLLFLL VIOLATION/OPER-
A’flON OF PEW UNDER-
GROUND INJECTION WELL
ATTEMPTiNG TO OR TAMPER-
ING Th PUBLIC WATER
SYSTEJI&CIVII. JDICIAL PEN-
ALTY.
FAILURE TO COMPLY WPORDER
ISSUED UNDER SEC.
V441(CX I).
REFUSAL TO COMPLY WITh
REDS OF SEC. 1445(a) OR (b).
456.7/389.1
456.7/389.1
456.7)389.1
456.7(389.1
456.7/3533
456.7(353.5
456.71327.9
456.71327.9
456.7/327.91
456.7/327.9
456.7/327.9
4.56.71327.9
5.000 _________
15,000 or 1.000
per Nu.
200
15,000 140,000 -
10.000
10.000
10,000
2.000
10.000
4.000(50.000
11.000.
21,000
10.000120.000 -.
5.000
10.000
11.000 or 1.100
per
Te4 or un
27.E. OC
27.500
¶1.C 00 or
3.300
per 5ar tWUn*
660
55 C’cCJ1 7.500
27. 5 X
27.5CC
5.5 CC
27.5 0
11.000/137.500
5.500(137.500
5.50’O
22. O C Ci S . 5.000
2.750
27.500
1966 25.000 ___
1966 10.000(125,000
1986 5.000(125.000
30.000 ___
30.000 ___
115.000 or
4.000 per ta’-
rtlfta iL
800
5 51 6 . 5000
35.000
35.000
35.000 ___
7.000 ——
35.000 ______-
14 ,0 0 0 (175. 0CC
7.0001175.000 —
15.000
31,000
30,000(70.000
7,500
35.000
4.56.7(327.9 2.000150.000
1974
1974
1936
5,000
10.000
20,000 /50.000 -.
456.7/146.9
456.7(1469
456.7/327.9
456.71146.9
456.7/327.9
1974 2.500 ....-...
1986 25,000
104

-------
VIOLA ’flONSJSECT )CN 1463(b) —
FIRST OFFENSE/REPEAT OF-
FENSE.
RESOURCE CONSERVATION
RECOVERY ACT/VIOLATION
SUBTTTLE C ASSESSED PER
ORDER.
RES. CONS. a REC. ACT/CON-
TINUED NONCOMPLIANCE OF
COMPLIANCE ORDER
RESOURCE CONSERVATION &
RECOVERY ACTMOLATION
SUBTITLE C.
RES. cons. a REC. ACTi ON-
COMPUANCE OF CORREC-
TiVE ACTION ORDER.
RES. CONS. & REC. ACT/NON-
COMPUANCE ‘MTh SECTION
3013 ORDER.
RES. cons. & REC. ACTMOtJ.-
TIONS OF ADMINISTRATIVE
ORDER.
RES. co . a REC. ACT/NON.
COMPUANCE WITh UST
AOMIN. ORDER.
RES. CONS. 4 REC. ACT/FAfl.-
URE TO NOTIFY OR SUBMIT
FALSE INFO.
V1OLACT1ONS OF SPECIFIED UST
REGULATORY REQUIRE-
MENTS.
NONCOMPUANCE W/MEDICAL
WASTE TRAC$JNG ACT AS-
SESSED T)IRU ADMIN ORDER.
NONCOMPUANCE WIMEDICAL
WASTE TRACKiNG ACT
ADMIN ORDER.
MEDICAL WASTE TRACKING
ACT V1OLATIONS—fiJOICLAL
PENALlY.
CI..EAN AIR ACTMOLAT1ONSI
oWNERS a OPS OF STATION-
ARY AIR POllUTION
SOURCES—JUDICIAL PEN-
ALTIES.
CLEAN AIR ACT/STATIONARY
AIR POU.UT1ON SOURCES—
ADMINISTRATIVE PENALTIES
PER VIOLATION AND MAXI-
MUM.
CLEAN MR ACT/MINOR
VIOLATIONS/ STATIONARY
AIR POLLUTION SOURCES—
FIELD CITATIONS.
TAMPERING OR MANUFAC-
TURE/SALE OF DEFEAT DE-
VICES IN VIOLATION OF
7522(a)(3XA) OR (aX3XB)—BY
PERSONS.
VIOLATION OF 7522 (a)(3XA) OR
(a)(3)(B)—BY MANUFACTUR-
ERS OR DEALERS: AU. V)O-
L& TlONS OF 75 2 2(a) (‘1). (2).
(4). 4 (5) BY ANYONE
ADMINISTRATIVE PENALTIES
AS SET IN 7524(a) & 754.5(d)
WTTH A MAXIMUM ADMINIS-
TRATIVE PENALTY.
VIOLATIONS OF FUELS REGU-
LATIONS.
SIJPERFUNO AMEND. & REAL)-
ThORIZ.A11ON ACT/NON-
COMPLIANCE WIREQUEST
FOR INFO OR ACCESS.
SUPERFUWD)WORK NOT PER.
FORMED W/1UMINENT. SUB-
STANTIAL ENDANGERMENT.
69362 Federal Register / Vol. 61. No. 252 / Tuesday. December 31, 1996 / Rules and Regulations
TABLE A— .SUMMARY OF CML MONETARY PENALTY tNFLAT1ON ADJUSTMENT CALCULATIONS—COnUIiIJed
U.S. Code
CflZtJCfl
C v8 tnen y penaay

YeM pen-
.*
wncI.xfl
set by
—.—
I-.
-.
-
10123/96
‘
Maxama i pen-
afty rCrease
amcta’lt after
P.L 101—4’1O
O4 thflQ2
Maxri um pen-
a8y amou1 t
after ,aua.
and P.1.. ‘101-
410 i d ;
Maxr ,, pen-
a y
after P.1.. 101—
410 rc .1 d g
and 10% 1 11,8
1988 5.000(50.000 —
1984 25.000
456.71353.5
456.7)310.7
456.71310.7
456.7/170.1
456.7/310.7
45871170.1
456.7/170.1
456.7/310.7
456.7/310.7
456.7/310.7
456.7/353.5
456.7/353.5
4567/353.5
456.7/181.8
1.000115.000
10,000 ______
io.ôoo
40.000
8.000
8.000
10.000
5.000 .._..
5.000
5.000
5.000 ..
5.000
40.000
6.000/65.000
35.000
35.000 -___
65.000.
35.000
13.000
13.000
35.000 —_____
15.000
15.000
30.C00
30.000
30.000
55.000
65.000 / 3 OC.CU I
42 U.S.C. 300j-.
23 ( 8 ).
42 U.S.C.
592 6 (a)(3).
42 U.S.C. 692 3 (c )..
42 U.S.C. 6928(g) —
42 U.S.C.
69 28(PiX2).
42 U.S.C. 6934(e) -
42 U.S.C. 6973(b) —
42 U.S.C.
6991e(a)(3).
42 U.S.C.
6991e ( 8X1).
42 U.S.C. 699 le (d)
(2).
42 U.S.C. 6992(d)
(2).
42 U.S.C. 69928( 5)
(4).
42 U.S.C. 69928(8)
42 U.S.C. 7413(b)
42 U.S.C.
7413(dX1).
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. 75.45(d)
42 U.S.C.
9604(eX5X6).
42 U.S.C. 9606(b)
1984
1976
1964
1976
1976
1964
1984
1984
1988
1988
1988
1977
1977
1990
1977
5.500/55.000
27.500
27.500
27.500
27.500
5.500
5.500
27.500
11.000
11.000
27.5 00
27.500
27.500
27.500
27.500 1 320.000
25.000
25.000
25.000
25.000
5.000
25.000 -
10.000
10.000
25.000
25,000
25.000_
25.000
25.000/200.000
5.000 —
2.500
4
456.7/181.8 40.000/300.000
456.71389.1 1.000 .. .. 6.000 ..._..__ 5.500
456.7/181.8 2,000 6.500 -.______ 2.750
456.7/3.89.1 5.000 30.000 27.500
456.7/389.1 30.000 ........._.. 230.000 220.000
‘1990 25.000
1990 200.000
1990
1986
25,000......
25.000
456.71389.1
456 7/389.1
1986 25.000
5,000 ..... 30.000 . . .. . ._..._. 27.500
10,000 35.000 _.__. ... 27.5 30
456.7 /389.1 10.000 - ...... 35.000 .._......... 27.5CC
O5

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Federal Register / Vol. 61. No. 252 / Tuesday. December 31. 1996 / Rules arid Regulations 69363
TAaz A—SUMMARY OF CML MONETARY PENALlY INF1 .ATION ADJUSTMENT CALCULA11ONS—Cortlinued
U.S. C ad.

CNi panasy
d. so ’ t
Ye pan-
aSy
amoisd
w St
set by
.
Masetse p
say wn set
by w se
10123 196
thfl.bo t .

sty u ’ ’eas.
$ S X *fla
P.L. 101—410
roi$idI 9 2
-.
sty w ou ’
after mcezae
and P.L ¶01—
410 l ’ % tCl•
P
ary smount
after P.L 101-.
4 0 r trids ’ g
3fl0 IC% ltrtd
42 U.S.C. 9609(a) &
(D).
SUPERFUNDIAOMIN. PENALTY
/ O1_AT)ONS L94DER 42 U.S.C.
SECT. 9603.9606. CR 9622..
1933
25.000
456.7/327.9
10.000
35.000
27.500
42 U.S.C. 9609(b) -
SUPERFUNDIADM2& PENALTY
V OtAT lONS-SUSSE iJENT.
1985
75.000
4537/3279
3Ø
105.000
82.500
42 U.S.C. 9609(c) -
S1 . .PEP .FtR4DCIVIL .JUDICIAL
PENALTYMOLAT!ONS OF
SECT. 9603. 9606.9622.
1986
25,000
456.7/327.9
10,000..
35.000
.
27.500
.42 U.S.C. 9309(c) -
42 U.S.C. 11045(a)
JUDICIAL
pENAI .1-y,SuBSEOuEN’r VIO-
LI riOtG OF SECT. 9603,
960
EJ NCY PLANN89G AND
1966
1986
75.000
25.000
456.7/327.9
456.7/327.9
30.000
.
10.000 .
105,000
35,000 ——
52. 5 00
27.500
£ (b) (1). (2)6(3).
COMW..WY RGNT .704C’IOW
Ad’ t.ASS I & U ADMINIS-
TRA’flVE AND ML PEN-
ALTE&
42 U.S.C. 11045(b)
(2) & (3).
42 U.S.C.
EPCRA CLASS I & I ADMIMS-
TRATTVE AND CIVIL PEN-
ALTIES-SL SEOt 4T VtO-
ATICtG .
EPCRA CIVIL jI.j, AD4W3$TR) . -
1986
1966
75000
25,000
456.7/327.9
456.7/327.9
30,000
10.000
105,000 82.500
I

35,000 27.500
1 1 04${cX1).
42 U.S.C.
TIVE REPORTI4G PENALTIES
FOR VIOLATiONS OF SEC-
liONS 11022 OR 11=
EPCRA CNL MG Aj)WMSTRA . ’
1936
10000 —.
456.7/327.9
4,000 .._....
I

14,000 11.000
1 1045 ’(CX2).
TIVE REPOR ’rtlG PENALTIES
FOR VIOLATIONS OF SEC.-
lIONS 11021 OR 11043(b).
42 U.S.C. 11045(d)
(2) & (3).
EPCRA—FRIVtXOUS TRADE
SECRET CL*JMS—CN’IL AND
ACM*IIS’T RATIVE PENALTIES.
1986
25.000 ..._.
456.71327.9
10.000
35,000
27. CC
The U ii I U I. ream d.vetvIg UI, .keie 1995 CPI by UI. CPI t .in. 9w yv the panaly was last set adjusted.
Th Pefl&**1 fl bi voi.ridid tie s’ biCn aCp str’ 1 pswal te Pubic I , . w 1O1...41 0 s.c s,a..
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 yeaz .
Procedural Requirements
I. Adminiso-adve Procedw’e 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
r usterial. 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 Its 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..
I I. Small Business Regulatory
Enforcement Fairness Act
Under 5 U.S.C. 801(a)(1)(A). as added
by the Small Business Regulatory
Enforcement Faixrtess Act of 1996
(“SBREFA”). EPA submitted 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 U cited
States prior to publication of the rule in
today’s Federal Register. This nile is a
not a “major rule” as defined by 5
U.S.C. 804(a).
I II. Executive Order 12866-Regulatory
Review
Under Executive Order 12868. (58 FR
51735 (October 4. 1993)). the Agency
must determine whether the regulatory
action is “significant” and therefore
subject to Office of Management arid
Budget (“0MB”) review and the
requirements of the Executive Order.
The Executive Order defines
“sign.iflcarit regulatory action” as one
that Is likely to result in a rule that may
(I) 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. col’npeliuon. jobs.
the environment. public health or safety. or
State. local, or tribal goverrxxnerits or
commu nitie s
(2) create a serious inconsistency or
otherwise interfere with an action taken or
planned by another agencv
(3) materially alter the budgetary impact of
entitlements. grants. user fees. or loan
programs or the rights arid obligations of
redpients thereof: or
(4) raise novel legal or policy is,si.ies arising
out of legal mandates, the President’s
priorities, or the principles set forth in the
Executive Order.
106

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69364 Federal Register / Vol. 61.
No. 252 / Tuesday. December 31. 1996 / Rules arid Regulations
EPA has determined that this rule is
not a “significant regulatory action”
under the terms of Executive Order
12866 and is therefore not subject to
0MB review.
IV. Unfunded Mandates Reform Act
Title U 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
S 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
nile 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 entitles.
in addition, even if the assessment
requirements of UMRA Title 11
otherwise applied to this rule, the
requirements of section 203 of UMRA
(requiring EPA to develop a small
government agency plan before EPA
establishes arty regulatory requirements
that may significantly or uniquely affect
small governments, including tribal
governments) would riot apply here.
This nile 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 monetazy
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 ol this 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
alr.er 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.
3501 et seq.
List of Subjects
4OCF’RPartl9
Environmental protection.
Administrative practice and procedure,
Penalties.
4OCFRPart27
Administrative practice and
procedure, Assessments, False claims.
False statements, Penalties.
Date ± December 20. 1996.
Carol M. Browner.
Administrator.
For the reasons set out in the preamble.
title 40. chapter 1 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.
19.1 Applicability.
19.2 Effective Date.
19.3 IReservedi.
19.4 Penalty Adjustment and Table.
Authority: 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.
PART 19-ADJUSTMENT OF CIVIL
MONETARY PENALTIES FOR
INFLATION
§ 19.1 ApplIcability.
This part applies to each statutory
provision under the laws adrnir..istered
by the Environmental Protection Agency
concerning the ma arnurn civil
monetary penalty which may be
assessed in either civil judicial or
administrative proceedings.
§ 19.2 EffectIve Data,
Th 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 [ Reser/ed].
§ 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 SEc’nON ‘ 9.4.—CML MONETARY PENALTY INFLATiON ADJUSTMENTS
U.S. Code dtation
CMI monetary penalty desaiption
New ma murn
pena’ty amount
FEDERAL INSECTICIDE. FUNGICIDE. & RODENTICIDE ACT CML PENALTY— 55.500
ERAL—COMMERCIAL APPLICATORS. ETC.
FEDERAL FUNGICIDE. & ROD ENALTY—PRI- 550/1.000
VATE APPLICAT SEQUENT OFFENSES OR VIOLATIONS.
ANCES CONTROL ACT CML 27.500
ASBESTOS Ra.ZARD EMERGENCY RESPONSE ACT CIVIL 5.500
PROGRAM FRAUD CIVIL REMEDIES ACTN1OLATION INVOLVING FALSE CLA
U,se_ C Or( \ o,-\
7 U.S.C. 13 fl7 —’ -. . . . , , , ,,_
7 U.S.C. 136(2)
31 U.S.C. 3532(a)(1)
107

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Federal Register I Vol. 61. No. 252 / Tuesday. December 31. 1996/Rules arid Regulations 69365
TABLE 1 OF SECTION 1 9.4.—CML MONETARY PENALTY INFLATION ADJUSTMENTS—Continued
PROGRAM FRAUD CML REMEDIES ACTMOLATION INVOLVING FALSE STATE- 5.500
MEWr.
CLEAN WATER ACT VIOLATION/CIVIL JUDICLAL PENALTY ............ ..._ 27.500
CLEAN WATER ACT VIOLA flON/ADMINISTRATIVE PENfiJ.Ty PER V1OLA flON 1oOor27 o
AND MAXiMUM.
CLEAN WATER ACT V1OLATION/ADMINISTRAT1VE PENALTY PER VIOLATION 11.000/137.500
AND MAXIMUM.
CLEAN WATER ACT VIOLATION/ADMIN PENALTY OF SEC 311 (B)(3)&(J) PER V1O- 11.00 .500
LATION AND MAXIMUM.
WATER ACT V1OLATIONIADMIN PENALTY OF SEC 311(B)(3)&(J) PER vlo- 11. /137.500
ON AND MAXIMUM.
WATER ACT V1OLATION/CML JUDICIAl.. PENALTY OF SEC 311(b)(3)—. .000 or 1.100 per
PER LATION PER DAY OR PER BARREL OR UNIT. barrel or unit
CLEAN ATER ACT VIOATlON / Cr /L JUDICIAL PENALTY OF S . 27.500
311(c)&(e ).
CLEAN WAT T V1OLATJONJCML JUDlCL PENALTY OF SEC 3110) ... - 27.500
CLEAN WATER CT VIOLATION/MINIMUM CIVIL JUDICIAL PENALTY SEC 11.000 or 3.300
311(b)(3)—PER LAT1ON OR PER BARREL/UNIT. per barrel or unit
MARINE PROTECTIO RESEARCH & SANCTUARIES ACT VIOL SEC b(d) ESO
MARINE PROTE RESEARCH AND SANCTUARIES ACT LATIONS—’ 55.000/137.500
FIRST AND SUBSEQ VIOLATIONS.
SAFE DRINKING WATER A /CML. JUDICIAL PENALTY OF SE 414(b) 27.500
SAFE DRINKING WATER ACT I. JUDICIAL PENALTY OF S 1414(c) 27.500
SAFE DRINKING WATER ACT JUDICIAL PENALTY OF C. 1414(g)(3)(a) .... 27.500
SAFE DRINKING WATER ACT MUM ADMINISTRA PENALTY PER SEC. 5.500
l4l4(QJ(3)(B).
CIVIL JUDICIAL PENALTYMOLAT1O OF REQ DERGROUND INJECTION 27.500
CONTROL (U1C).
CML ADMIN PENALTYMOLATlONS OF UI REQ ER VIOLATION AND MAXI- 11.000/137.500
MUM.
CML ADMIN PENALTYMOLATIONS OF UIC S—PER VIOLATION AND MAXI-. 11.000
MUM.
VIOLAT)ON PERATION OF NEW UNDER OUND EC11ON WELL 5.500
WTLLFU. V1OLAT1ON/OPER. .AT1ON OF N UNDERGR ND INJECTiON WELL .... 11.000
ATTEMPTING TO OR TAMPERING PUBUC WA SYSTEMJCML JUCI- 22.000/55.CO
CLAL PENALTY.
FAILURE TO COMPLY W /ORDER UED UNDER SEC. 1441 1) 2750
REFUSAL TO COMPLY WITH R S. OF SEC. 1445(a) OR (b) -. 27.500
VIOLATIONS/SECTION 1463(b RST OFFENSE/REPEAT OFFE E .... 5.500/55.000
RESOURCE CONSERVATI & RECOVERY ACT/VIOLATION SU ITLE C As-: 27.500
SESSED PER-ORDER.
RES. CONS. & REC. CT/CONTINUED NONCOMPLIANCE OF CO LLANCE 27.500
ORDER.
RESOURCE CONS ATION & RECOVERY ACTMOLAT1ON SUBTITLE C ‘27.500
RES. CONS. & . ACT/NONCOMPLIANCE OF CORRECTIVE ACTION ORDER .. 27.500
RES. CONS. & C. ACT/NONCOMPLIANCE WITH SECTION 3013 ORDER .. 5.500
RES. CONS. C. ACTMOLATIONS OF ADMINISTRATIVE ORDER . . .500
RES. CONS REC. ACT/NONCOMPLIANCE WITH UST ADMINISTRATiVE ORDER 2 500
RES. CO - & REC. ACT/FAILURE TO NOTIFY OR SUBMIT FALSE INFO 11. 0
VIOLA NS OF SPECIFIED UST REGULATORY REQUIREMENTS 11.00
NO MPLIANCE W/MEDICAL WASTE TRACKING ACT ASSESSED THRU ADMIN 27.500
O ER.
OMPLLANCE WIMEDICAL WASTE TRACKING ACT ADMINISTRATIVE 27.500
ORDER
VIOLATIONS OF MEDICAL WASTE TRACKING ACT—JUDICIAL PENALTIES ... 27.500
CLEAN AIR ACTNIOLATION/OWNERS & OPS OF STATIONARY AIR POLLUTION 27.500
SOURCES—JUDICIAL PENALTIES.
CLEAN AIR ACTMOLATION/OWNERS & OPS OF STATIONARY AIR POLLUTION 27.5001220.000
SOURCES—ADMINISTRATIVE PENALTIES PER VIOLATION & MAX.
CLEAN AIR ACT/MINOR VIOLATIONS/STATiONARY AIR POLLUTION SOURCES— 5.500
FIELD CITATIONS.
TAMPERING OR MANUFACTURE/SALE OF DEFEAT DEVICES IN VIOLATION OF 2.750
7522(a)(3)(A) OR (a)(3)(B)—BY PERSONS.
VIOLATION OF 7522(a)(3XA) OR (a)(3)(B)—BY MANUFACTURERS OR DEALERS: 27.500
ALL VIOLATIONS OF 7522(aXl). (2). (4). & (5) BY ANYONE.
ADMINISTRATIVE PENALTIES AS SET IN 7524(a) & (7545(d) WITH A MAXIMUM 220.000
ADMINiSTRATIVE PENALTY.
VIOLATIONS OF FUELS REGULATIONS 27.500
SUPERFUND AMEND. & REAUTHORIZATiON ACT/NONCOMPLIANCE W/RE. 27.500 -
QUEST FOR INFO OR ACCESS. I , .—.
Cvtr Q. \ iS’
31 U.S.C. 3802(a)(2)
U.S. Code ótation
Civ monethy p by desaipbon New macmum
penalty amount
33 U.S.C. 1319(d)
33 U.S.C. 1319(g)(2)(A)
33 U.S.C. 131 9(g)(2)(B)
3.3 U.S.C. 1321(b)(6XB)(I)
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. 3009—3(c)
42 U.S.C. 300g—3(9X3)(A) ..
42 U.S.C. 300g—3(g)(3)(B)
42 U.S.C. 300 —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. 300i.-1(b)
42 U.S.C. 300j(e)(2) __..
42 U.S.C.. 300j-4(c) .._.....
42 U.S.C. 300i-23(d) _ .._.
42 U.S.C. 6928(aX3)
42 U.S.C. 6928(c)
42 U.S.C. 6928(g) ..
42 U.S.C. 5928(h)(2)
42 U.S.C. 6934(e) .._
42 U.S.C. 6973(b)
42 U.S.C. 6991 e(a)(3) -.
42 U.S.C. 6991e(d)(1) _...
42 U.S.C. 6991e(d)(2) . ._... .
42 U.S.C. 5992d(aX2)
42 U.S.C 6992d(aX4)
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 US C. 7524(c) ......
42 U.S.C. 7545(d)
42 U.S.C. 9604(e)(5)(B)
108

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69366 Federal Register / Vol. 61. No. 252 / Tuesday, December 31. 1996 / Rules and Regulations
TABLE I OF SECTION 19.4.—CML MONETARY PENALTY INF1.AT1ON ADJUSTMENTS—Continued
U.S. Code citation

I Civil monetary penalty desmption ‘4ew manmum
penally amount
42 U.S.C. 9606(b)
PERFUNDJWORK NOT PERFORMED W/1MMINENT. SUBSTANTIAL 27.5 00
NGERMENT.
42 u.s.c. 9609(a) & (b)
42 u.s.c. 9609(b) ..
42 U.S.C: 9609(c)
42 U.S.C. 9609(c) ..,, ..
42 u.s.C. 11045(a) & (b)(1). (2)
& (3).
42 U.S.C. 11045(b) & (2)(3)
SUPERF ADMIN. PENALTY VIOLATIONS UNDER 42 U.S.C. SECT. 9603. 9608. 27.500
OR 9622.
SUPERFUND/ADMI . TY VIOLATIONS—SUBSEQUENT ...... .. 32.5 00
SUPERFUNDICML JUDIC ENALTYN )OLAT1ONS OF SECT. 96 , 08, 9622 27,500
SUPERFUND1CML JUDICIAL r TYFSUBSEQUENT VIO iONS OF SECT. 32.500
9603. 9608. 9622.
EMERGENCY PLANNING AND COMMUN 0-KNOW ACT CLASS I & II 27.500
ADMINISTRATIVE AND CML PENALTIES.
EPCRA CLASS I & II ADMINISTRA 0 CML TIES—SUBSEQUENT 82.500
VIOLAT iONS.
42 U.S.C. 11045(c)(1)
EPCRA CML AND ADMIN liVE REPORTING PENALTIES F OLATIONS 27.500
OF SECTIONS 110 11023.
42 U.S.C. 11045(c)(2) ....._.
42 U.S.C. 11045(d) & (2)(3) ....-.

EPCRA CML ADMINISTRATIVE REPORTING PENALTIES FOR V1OLATI
OF SE S 11021 OR 11043kb).
EP —FRIVOLOUS TRADE SECRET CLAIMS—CIVIL AND ADMINISTRATIVE 27.500
ENALTIES.

PART 27— AMENDED)
2. The authority crtation for part 27 is
revised to read as follows:
Authorlty 31 U.S.C. 3801—3812: Pub. L
101—410. 104 Stat. 890.28 U.S.C. 2461 note:
Pub.L 104—134. 110 Scat. 1321.31 U.S.C.
3701 note.
4. Section 27.3 is amended by revising
paragraphs (a)(l) and (b)(1) 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.
• S S S *
(b) Statements. (1) Except as provided
in paragraph (c) of this section. any
erson who makes a written statement
that—
As adjusted in accordance with the Federal
Civil Penalties Inflation Adjustment Act of 1990
(P ub.L 101—410. 1O4Stzt.890).asaxnendedbythe
Debt Collection Impeovement Act of 1996 (Pub. L.
104—134. IlOStat. 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 mater al 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 ilhirmation of
the truthfulness and accuracy of the
contents of the staceme r. 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.
* S S S *
IFR Doc. 96—32972 Filed 13—30—96: 8:45 am)
BIWNG coce 5560-50-P
2 As adjusted In aecordan with the Federal
Civil Penalties Inflation Ad u .erit Act of 1990
(Pub.L 101—410. lO4SraLs9c).asamendedbythe
Debt Collection Improvement Ac of 1995 (Pub. L.
104—134. 110 Stat. 1321).
109

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Thursday
________ March 20, 1997
= , ..
—
- __
—
— —
—
— -
— ..— =
— _ —
a - —
_____ Part VIII
Environmental
Protection Agency
___ 40 CFR Parts 19 and 27
Civil Monetary Penalty Inflation
________ Adjustment Rule; Final Rule
—
-
110

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13514 Federal Register / Vol. 62. No. 54 / Thursday. March 20 , 1997 / Rules and Regulations
ENViRONMENTAL PROTEC11ON
AGENCY
40 CFR Pare 19 and 27
[ FRL-571 1-7]
Civil Monetary Penalty Inflation
Adjustment Rule
AGEiic’r: Environmental Protection
Agency (EPA).
AC ’OON: Corrections To final rule.
SU ARY This document contains
corrections to the Civil Monetary
Penalty Inflation Adjustment Rule, final
regulations (FRL-5671-l). which were
published Tuesday. December 31. 1996.
(61 FR 69359). The regulations adjusted
the Environmental Protection Agency’s
(“EPA”) civil monetary penalties
( “CMPs”) for inflation as mandated by
the Debt Collection Improvement Act of
1996 (‘DCLA’). A corrected version of
Table 1. from 40 CFR 19.4. which now
lists all but one of the EPA’s civil
monetary Penalty authonties, appears
near the end of this notice.
EFFEC ’TlVE DATt: January 30. 1997.
FOR FURT1ER INFORMAT)ON CONTACT: For
further information, contact Steven NI.
Spiegel. Office of Regulatory
Enforcement, Multimedia Enforcement
Division. Mail Code 2248W. 401 NI
Street. SW. Washington. D.C. 20460. or
at (703) 308—8507. Further information
may also be requested by electronic mail
(e-mail) to:
spiegeLsteven epamail.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.
SL PW.ENTAR r o wno
Need For Correction
As published, the preamble and final
regulations cont.arn 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 categones. 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 ma.x :: ...m penalty figures.
Third. there are .ner minor non-
substantive changes, as well as the
addition of explanatory information
which does nor affect the angina] 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 nowprovidesaljstof
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 15 U.S.C. 2615. as
amended by the Residential Lead-Based
Paint Act of 1992. 42 US.C. 4852d, and
the corresponding regulations in 40 CER
Part 745. which were omitted from the
December 31. 1996 nile-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 I
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.
4
Coaection 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 [ Correctedj
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 136L(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 1361.(a)(2)—(the number 136. is
followed by the letter “1”, not the
number one).
15 USC 2615 is corrected to 15 USC
26 15(a).
On page 69361. Table A. is corrected
as follows:
33 U.S.C. 132 l(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. 3 00i—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 szarutor.’
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 a.rnounts set by the
1996 amendments to the Safe Drinking
Water Act,” between the words
“statutory maximum arr.ounts” and “are
set out in Table
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 colun’in.s with “N/A’;
and in the eighth column, replace
“5,500” with “5,000125,000”.
Following 42 U S.C. 3 00g—3(g) (3) (3).
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! T .ESHOLD
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 arid
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. 300i—6(b)(2): for
the second column, insert SAFE
DRINKING WATER ACT! FAILURE TO
COMPLY WITH ADMIN. ORDER
i i . ’

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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: arid in the eighth column.
insert “25,000”.
Procedural Requirements
I. Small Business Regulatory
Eni’orce.menr 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 (“APAl, that soliciting
public comment prior to publication of
the rule was not necessary because EPA
Ls 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
(FL 104-4). Because this action Is not
subject to notIce-and-comment
requirements under the . PA or any
other statute, it is not subject to tne
provisions of the ReguLatory FIex bilitv
Act (5 U.S.C. 601 er seq.).
Under 5 U.S.C. 801(a)(l)(A), as added
by SBREFA. EPA submitted a re orr
containing this rule and other reçuired
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
today’s Federal Register. This rule is a
not a “major rule” as defined by S
U.S.C. 804(a),
PART 19 [ CORRECTED WiTH
ADDITIONS]
Beginning on page 69364. Table 1 of
Section 19.4—Civil Monetary Penalty
Inflation Adjustments, is cor ’rec ed to
read as follows:
TABLE 1 OF SECTION 1 9.4.—CML MONETARy PENAL lY INFLATION ADJUSTMENTS
7 U.S.C. 1351.(a)(l)
7 u.s.c. 1361.(a)(2)
15 U.S.C. 2615(a)
15 US.C. 2547(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)(5)(B)(I)
33 U.S.C. 1321(b)(5)(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)(0)
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. 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. 3 O0t —3(c)(2)
S27.SC C.
S5. C.
S5. SC0.
55.SC O.
527.5C0.
Si 1,0C C ’S27.EC0.
S1i,0CCi 37.5C0.
$11 .00i 27.500.
511 .0OC 3137.50C.
S27.SCO crSl.1CO er bar-
reL or u’Jt.
$27,500.
S27. SCO.
5110.0CC orS3.3C0 per
barrel or urt t.
$660.
S55.0C 0/$137.5C0.
S27. SC O.
527.500.
527.5C’ O.
5.00525.000.
$25,000.
527.500.
$11 .ODO/51 37.500.
55.500 /Si 37.500.
S5.5 00.
511000.
U.S. Code citation
Civil monetary penalty de j on New ma. mum ;enalty
amo&,’r.X
55.500.
5550 13 t.CC0.
FEDERAL INSECTICIDE. FUNGICIDE. & RODENTICIDE ACT CML PENALTY—
GENERAL—COMMERCIAL. APPLICATORS, ETC.
FEDERAL INSECTICIDE. FUNGICIDE, & RODENT1CIDE ACT CIVIL PENALTY—
PRIVATE APPLICATORS—FIRST AND SUBSEQUENT OFFENSES OR VIOLA-
TIONS.
TOXIC SUBSTANCES CONTROL ACT CML PENALTY
ASBESTOS HAZARD EMERGENCY RESPONSE ACT CML PENALTY
PROGRAM FRAUD CML REMEDIES ACTMOLATION INVOLV iNG FALSE
CLAIM.
PROGRAM FRAUD CML REMEDIES ACTMOLAT]ON INVOLViNG FALSE
STATEMENT.
CLEAN WATER ACT V1OLATION/CML JUDICIAL PENALTY _. ..
CLEAN WATER ACT V1OLAT1ON/ADMINISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM.
CLEAN WATER ACT V1OLAT1ONJADM1NISTRATIVE PENALTY PER VIOLATION
AND MAXIMUM..
CLEAN WATER AC ’PVIOLATION/ADMIN PENALTY OF SEC 3 11(b)(3 ).&Q) PER
VIOLATION AND MAXIMUM.
CLEAN WATER ACT VIOLA’TlON/ADMIN PENALTY OF SEC 311(b)(3)&(j) PER
VIOLATION AND MAXIMUM.
CLEAN WATER ACT V1OLAT1ON ML JUDICIAL PENALTY OF SEC 311 (b)(3)—
PER VIOLATION PER DAY OR PER BARREL OR UNIT.
C1..EAN WATER ACT VIOLA11ON/CML JUDICIAL PENALTY OF SEC
31 1(c)&(e)(1)(B).
CLEAN WATER ACT VIOLAT1ON/CML JUD 1CLAL PENALTY OF SEC 3110) ..
CLEAN WATER ACT ViOLATION/MINIMUM CML JUDICIAL PENALTY OF SEC
31 1(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 ACTICIVIL JUDICIAL PENALTY OF SEC 141 4(b)
SAFE DRINKING WATER ACT/CIViL, JUDICIAL PENALTY OF SEC 1414(c)
SAFE DRINKING WATER ACTICML JUDICIAL PENALTY OF SEC 1414(g)(3)(a)
SAFE DRINKING WATER ACT/MAXiMUM ADMiNISTRATIVE PENALTIES PER
SEC 1414(g)(3)(B).
SAFE DRINKING WATER ACT/THRESHOLD REQUIRING CML JUDICIAL AC-
TION PER SEC 1414(gl(3)(C).
SDWNCIVIL JUDICIAL PENALTYMOLAT1ONS OF REQS—UNDERGROUND IN-
JECTION CONTROL (UIC).
SDWNCVIL ADMIN PENALTY/ViOLATIONS OF UIC REQS—PER VIOLATION
AND MAXIMUM.
SDWA/CML ADMIN PEP4AL ’TYMOLATIONS OF IJIC REOS—PER VIOLATION
AND MAXIMUM.
SDWA/V1OLATIONJOPERATION OF NEW UNDERGROUND INJECTION WELL
SDWA/WILLFUL VIOLATION/OPERATION OF NEW UNDERGROUND INJECTION
WELl...
112

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13516 Federal Register / Vol. 62. No. 54 / Thursday. March 20, 1997 / Rules and Regulations
TABLE 1 OF SECTiON 1 9.4.CML MONETARY PENALTY INFLATION ADJUSThIENTS—Contjnued
SDWA/FAILIJRE TO COMPLY WITh IMMINENT AND SUBSTANTIAl..
ENDANGERMENT ORDER.
SDWAIATTEMPT]NG TO OR TAMPERING WiTH PUBUC WATER SYSTEM/CML
JUDICLAL PENALTY.
SDWA/FAIWRE TO COMPLY W/ORDER ISSUED UNDER SEC. 1441(c)(1) ..
SDWA’REFUSAL TO COMPLY WITH REQS. OF SEC. 1445(a) OR (b) ...
SDWA/FAILtJRE TO COMPLY WITH ADM 1N. ORDER ISSUED TO FEDERAL FA-
dUTY.
SDWAMOLATIONS/SECTION 1463(b)—.flRST OFFENSE/REPEAT OFFENSE
RESOURCE CONSERVATION & RECOVERY ACT/ViOLATION SUBTiTLE C AS-
‘SESSED PER ORDER
RES. CONS. & REC. ACTItONTINUED NONCOMPUANCE OF COMPLIANCE
ORDER.
RESOURCE CONSERVATiON & RECOVERY ACTNIOLXT1ON SUBTITLE C
RES. CONS. & REC. ACT/NONCOMPLIANCE OF CORRECTIVE ACTION ORDER
RES. CONS. & REC. ACT/NONCOMPUANCE WITH SECTiON 3013 ORDER
RES. CONS. & REC. ACTMOLAT1ONS OF ADMINISTRATIVE ORDER
RES. CONS. & REC. ACTINONCOMPUANCE WITH UST ADMINISTRATiVE
ORDER.
P. 5 5. CONS. & REC. ACT/FAILURE TO NOTIFY OR FOR SUBMITTING FALSE
INFORMATION.
RCRANIOLATIONS OF SPECIFIED UST REGULATORY REQUIREMENTS
RCR.AJNONCOMPLLANCE W/MEDICAL WASTE TRACKING ACT ASSESSED
THRLI ADMIN ORDER
RCR.4JNONCOMPLLANCE W/MED1CAL. WASTE TRACKING ACT ADMINISTRA-
TIVE ORDER.
RCR.AJV1OLATIONS OF MEDICAL WASTE TRACKING ACT—JUDICIAL PEN-
ALTIES.
CLEAN AIR ACTMOLAT 1ON/OWNERS & OPERATORS OF STATIONARY AIR
POLLUTiON SOURCES—JUDICIAL PENALTIES.
CLEAN AIR ACTMOLAT1ON/OWNERS & OPERATORS OF STATIONARY AIR
POLLUTION SOURCES-AOMINISTRATIVE PENALTIES PER VIOLATION &
MAX,
CLEAN AIR ACT/MINOR V1OflONSISTATIO &.RY AIR POLLUTION
SOURCES—FiELD CITATIONS.
TAMPERING OR MANUFACTURE/SAIl 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)—8Y MANUFACTURERS OR DEAL-
ERS: ALL VIOLATIONS OF 7522(a)(i).(2) , (4).&(5) BY ANYONE.’
ADMINISTRATIVE PENALTIES AS SET IN 7524(a) & 7545(d) WITH A MAXIMUM
ADMINISTRATIVE PENALTY.
VIOLATIONS OF FUEIS REGULATIONS
SUPERFUND AMEND. & REAUTHORIZATiON ACT/NONCOMPLIANCE W/RE-
QUEST FOR INFO OR ACCESS.
SUPERFUND/WORK NOT PERFORMED WJ1MMINENT. SUBSTANTIAL
ENDANGERMENT.
SUPERFUNDFADMIN. PENALTY VIOLATIONS UNDER 42 U.S.C. SECT. 9603.
9608. OR 9621
SUPERFUNDIADMIN. PENALTY VIOLATIONS—SUBSEQUENT ...—..._.-.._.
SUPERFUND/CML JUDICIAL PENALTY/ViOLATIONS OF SECT. 9603, 9608.
9622.
SUPERFIJND/CIVIL JUDICIAL PENALTY/SUBSEQUENT VIOLATIONS OF SECT.
9603. 9608. 9622.
EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT CLASS I & II
ADMINISTRATIVE AND CML PENALTIES.
EPCRA CLASS I & U ADMINISTRATIVE AND CML PENALTIES—SUBSEQUENT
VIOLATIONS.
EPCRA CML AND ADMiNISTRATiVE REPORTING PENALTIES FOR VIOLA-
TIONS OF SECTIONS 11022 OR 11023.
EPCRA CIVIL AND ADMINISTRATIVE REPORTING PENALTIES FOR VIOLA-
TIONS OF SECTIONS 11021 OR 11043(b).
EPCRA—FRIVOLO JS TRADE SECRET CLAJMS—CML AND ADMINISTRATIVE
PENALTIES.
U.S. Code citation
Civil monetary penatty desaiption
New rnazrnum penalty
amount
42 U.S.C. 3001(b) ..
42 U.S.C. 300 1 —1( 0) ..
42 U.S.C. 300j(e)(2)
42 U.S.C. 300j—4(c)
42 U.S.C. 300j-6(b)(2)
42 U.S.C. 300 -23(d)
42 U.S.C. 6928{a)(3)
42 U.S.C. 6928(c)
42 U.S.C. 6928(ç)
42 U.S.C. 6928(ti)(2)
42 U.S.C. 6934(e) ... ..
42 U:S.C. 6973(b)
42 U.S.C. 6991 e(a)(3)
42 U.S.C. 6991 e(dXl)
42 U.S.C. 6991e(d)(2)
42 U.S.C. 6992d(a)(2)
42 U.S.C. 6992d(aX4)
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)(1).
42 U.S.C. 9609 (a) & (b)
42 U.S.C. 9609(b)
42 U.S.C. 9609(c) ..
42 U.S.C. 9609(c) . .._
42 U.S.C. 11045 (a) & (b)
(1). (2) & (3).
42 U.S.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}(1)
S15. 0 00.
S22.000J$55.000.
52.750.
S27.500.
525.0CC.
S5.500 / $55.000.
527.500.
327.500.
S27.500.
327.5 00.
s5.5c.0.
s5, 5 00.
327.5CC.
511.000.
SI 1.000.
527.500.
527.500.
527. 5 00.
527.5C 0.
527.ECC . 5220 .00 0.
S 5.500.
52.750.
$27. SC O.
S220.000.
S27.5C0 .
527.500.
S27.500.
S27 . SC ’ O.
582.5 00.
S27. SC O.
582.500.
527. 5 00.
582.5 00.
527.500.
Si I .C CC.
527 .5 00.
113

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Federal Register / Vol. 62. No. 54 / Thursday. March 20. 1997 / Rules arid Regulations 13517
PART 27— [ CORRECTED]
On page 69366. in the first column.
the amendatory instruction identified as
number “4’ is corrected to “3”.
Mithael M. Stahl.
Deputy AssisranrAdmirzistraror. 0(17cc of
Enforcement and Compliance Assurance.
IFR Doc. 97—7069 Filed 3—19—97: 8:45 amj
1 UNG 000E U O-SO-P
114

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FOR FURThER lNFORMA O CONTACT:
Contact the following persons for more
1 tjon about a permit l ed n this
tice:
For plants in New York. Cery
DeCaetano. (212) 2e4—6685. EPA Region
For plants in Florida and Kentucky.
Scott Davis. (404) 347—5014. EPA
Region 4 (address above).
For plants in Missouri. Jon Knodal.
(913) 551—7622. EPA Region 7.
suPPLaI9ITARY s ORMATlCM Title IV of
the ri.ir Air Act directs EPA to
ectabli a program t teduce the
adverse effects of a thc deposition by
promulgating tu lsa and issuing permits
to i i iOfl subject to the
program.. On January 11. 1993. EPA
prnznu.lgated final rules’ implementing
the program. Subsequently. several
parties filed pennons f review of the
rules with the U.S. Court of Appeals for
the District of Columbia Crcuit. On
November 18. 1993. EPA published a
áotica of pzvp d revisions to ru
regarding Phase I substitution and
reduced utiui xion plans Isections 404
(b) and (cI and 408(c)(IXB) of the Acti.
On May 4. 1994. EPA and other paruc
signed a settlement agreement
aadressiog the substitution and reduced
utilization issues.
in todays actron. EPA is i ing
ennits that are consistent with the May
4. 1994 settlement E. pt as noted
below. EPA approves for 1995- 1999 all
compliance options for which EPA
deferred action for 1996-1999 in the
draft oermits.. In addition, eXcept as
noted below, the numbers of
substitution and compensating unit
allowances allocated to each unit fox
1995—1999 axe identical to the numbers
of allow i-,c allocated to each unit for
1995 in the draft permits. The
additional allowances discussed below
are a one-time only allocation pursuant
toth settlement Upon activation of
conditionally-approved plans.
substitution or comoensating unit
allowances are allocated for the
remaining years the plan is in effect.
EP. issues the following permitu
Northport in New York.
Port Jefferson in New York.
Big Bend in Florida.
F) Cannon in F1c .a: No change tot
unit GB01: 4.581 su situtioo
allowances for each year and 9
additional allowances to unit GBO2
upon aci ‘anon of substitution plan:
7.003 substrn.tron allowances for eech
year and 437 additionel flowances to
unit C303 upon activation of
£bsziluticn plan: 7.570 substitution
allowances for each year and 450
adth ionai allowance.s to unit GBO4
t.pcn activation of substitution plan:
10.293 substitution allowances for each
year and 520 additional allowances to
unit CBOS unon.activauon of
substi u on plan: 16.107 sub utica
allowances for each year and 377
additional allowances to unit G306
upon activation of substitution plan.
Hookers Point iii Floiida 0
substitution owa fc
and 27 additfo 1 allowances to unit
HBOI upon activation of sub tjtution
plan: 31 substitution allowances for
each year and 3 addItional allowances
to unit HBO2 upon activutionof
substitution platu 92 sbstittgjon
allowances Ict each year and 9
additional allowances to unit l O3
upon a vaticn of substitution plan:
145 substitution allowances for each
year md iS additional allowances to
unit 11804 upon acti L1an of
su tuticn plan 124 sub tution.
allowinces for each year and 13
additional allowances to unit 11805
upon activation of substitution pLan:
207 substitution allowances for each
year and 13 additional allowanry.s to
unit 11806 upon activation of
$ )ç!istItip plan.
Big Sandy In Kentucky.
Cqle n n in Kentucky.
Cooper in r.ntuc±y.
Dale in Kentucky 2.115 substitution
allowan foreadi year and
additional allowances to unit 3 upon
activation of substitution plan. and 226
additional allowances iT th. unit
becomes affected for NO.,, 1.729
substitution allowances for each year
and 166 additional aflowances to unit 4
upon a vatiun of subni nsinn plan.
and 166 a’ ditionaI allowances if the
unit be mea ffcted ‘ NO..
East Bend in Kentucky.
H L Spurlock in Kanurcky- 14206
substitution allowances for each year
and 1.593 “dditional allowances to unit
2 upon activation of substitution pun.
and 1.593 additional aflowaz if the
wut becomes affected for NO.
R D Green in Kentucky No d nge for
unit G1; ’ ’,827 substitution a1lowan
for each year and 492 dditiooal
allowances to u nit.G2.
Sibley in ?vüsscuri 2.782 r ctituUoc
allowances foruch year and 2$
addition.al a1lowan to unit 1:3.332
substitution allowances for each year
and 130 additional allowances to unit 2.
flated Jul 14.. 1994 .
Brün I.
Dira wc . Acid Raisi Di , Ofjke of
Atmospheric Pro roms. of Air and
othat ,ori. -
I FR Dcc. 94-18323 Filed 7—27-41: L45 ami
se.t.s c coca ‘— — — —
Restatement of Policies ReLa to
Environmentai Audlung
AGENCY: Environmental Protection
Agency (EPA ).
ACTION: Notice.
su ARy: The EPA Environmental
Auditing Policy S’””mait ( ‘1985
Policyl W13 originally puhli d in the
Federal Rer on July 9. 1986 (51 FR
25004). The 1988 Policy sates that
ic))arificatioo of EPA’s position
regarding auditing mey help an wig.
regulated entities to establish audit
progr or upgrade sy erns already in
place. ’ The — of th notice is to
clarify EPAs axrz po r1se on and
approathto a*z’ ’ r This n ee
summw hw . t poina from the 1988
• Policy, which x -’ in &ffect In
addition, this tice uodais . the
Agency’s vities with . zesp.ct to.
auditing and auditing policy and
references pertinent Language from other
relsv. g paiicy documents, in
anticipation of the public meeting o i)
auditing acb.duMd for July 27—la. 1 4
This notice desa n represent *
EPApolicyorpositiccon
envirornn,a.tal auditing: all existing
policies in effect.
P”Mle M 4ing r r g.of
The x p m to EPA•s aowwiInaeot
(59 FR 31914. June 20. 1994k to hold a
public meeting on auditing on Tuly 27—
28.1994 hes owbairuing. Due to-
the exp d si of the audlence
therefore, the Ageony has changed the
location of this event. The
is the Stauffea Mayffower H sI in
Washington. DC. at 1127 Comiecticet
Avenue. NW. P . (2 ) 347—3008
U. The Auditing PoU jL est
In response to a req by
Administrator Carol M. &owner. the
Office of Enforcement and Compliance
Assurance (OECAIis x’ .c . ’ ing the
Agencys currant policy regarding
environ rn*nt ,al auditing and sell-
evaluation by the regulated community.
EPA has conimiued to investigating the
perceived problems relating to auditing.
self-evaluation, and di loswe through
an empiri L £Jocmsiioo-gathering
effort. The Agency must develop an
adequate information base to give
serious consideration to any policy
options and to an.i a that any decision
to either reinforce. rK.n .
supplement existing policy is informed
by fact.
EPA hopes to 11ect such relevant
data through the imp entat$oI? of four
actions this summer. First, the Agency
Federal egisZer / Vol. 59. No. 144 1 Thurs.lay . July 28. 1994 / Notj e
EC —?— c
(FRL .-.6 021 —.5 l
38455
/9
116

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-- 38. 56
Federal Register ! v 3 :. .it. No. i Th:;.- :. .; ;:v i. i ) /
tc il convene a p bI:r nt vi .ng cn July
i7— 8. t9 4. as an opportunity to obra n
• ur QC van etv of sews and tn sha:pen
the fo i:s on xhe c t scues. The range of
iccues a;prcpriate for discussion a: the
btic meet in i. dude the
imDlerten:auon of the 1986 Policy;
spec. fic su esZiGeS ior auditing policy
cp!ions: State audit privilege legislation:
au4i ing in the context o(criminal
enforcement: and advances in the field
of auditing since 1988. Interested parties
are encouraged to toad the Federal
Register notice dazed june 20. 1994 (sg
FR 319143 for more details on the public
meeuttg.
Second. EPA published in the June
:1, 1994 Federal egister (59 FR 320623
a notice requ mg proposals (or
Environmental Leadership Program
(EL?) pilot pro s. EPA expects that
these pilot proje s wiU generate useful
data an auditing methodology and
measur . and may also serve as.
vehicles for experimenting with policy-
driven incentives.
Third. EPA will encourage the private
sector to coiled data and survey
auditing pzactzces in order to gauge the
effect of enforcement policies on self-
evaluation arid discloswe in the
regulated community. The Agency will
also eek input on auditing and related
issues from Szates environmental and
pubLic i teres1 groups, and trade and
prt esSiOn3laSS0O3tiOns.
Finally. in this Federal Register
notice. EPA is restating aJieot points
from the 1986 Policy and reviewing its
activities and other policies relating to
envircomemal auditing. The goal of this
nu;it.e is to clarify EPA ’s current
policies on and approach to auditing. in
order to ensure a well-informed policy
d bae. -
Ill. Review a(Gtmeral EPA Policy on
Lonmental Auditing
.t. EP.4 £1.-r.urngFc the Use of

EPA h irt !y encouraged and
n the development of
- :4l t iditing and improved
m nagemeflt practices.
the d. t’ ) Os. In fact. the 1q86
?oli i..v has .a rr. ed as the basis for
deingtha pot.t ce and profession of
riron ’e taI diting. The 19 1s6
Piilit dearly stat EPA cuppor.ibr
er:’. rini. ’ Ul diui ; 1 ..iri li’ il
,. . -k of ucerall comptianc. 3n11
r’1 u( i rick to huit h taLttt and th
i’ i”t t EPA endorses the pTaCflcitt)f
a m niaJ audi(ti g and support ’; its
i.- i i u ’e r guLatcd enti:.. ’ ; to h’ip
toe oal ’ uf F dt raL. ‘ Zaie and t s I
ri ’ . &iir -tr.s nt ’ .
serves as a çu4t:’ .
to heip improve the etT* t,vr .. s ‘if
hn’ic environmental man nfvrneot )I)
i..r.r?ing that mLnagemeru prai:tx-& i tt
pi te. fUtt tiu i g and adequate.
Erivtrnruneetaj audits v.luite. 3nd rt not a
ub izute for. du compl;ance ivities
such as obtaining pesutits. installing controls.
momtnnng compliance. reporting violations.
nzl keeping records. Environmental auditing
ma. verify but does not include activities -
r ’r iired by law. regulation. or permit teg. .
_c.unnnuous enissions xncnimnag. cwuposiie
cur?eCtiOfl plans at wastewater treatment
plants. etc.). Audits do not in any way
replace regulatory agency inspections.
Hai.eicr . environmental audits can isriptove
crenpliance by complementing conventional
Fed’rul. state and local oversight.
Environmental auditing has developed for
sound busin reasons. paruculatty u a
means of helping regulated enrtnes manage
pollution control a rmatively over tune
instead of r ing to ctses. Auditing can
resuLt in improved 1ity envinmxmal
performance. help communicius effective
solutions to comrecn environmental
problems. focus faculty “ gers ’ attention
on current and upcoiimg regulator.
requirements. and 9enerate protocols arid
checklists which help lacilities bet manage
themselves. Auditing also can result in
better.inteçated etanagemneat of
environmental hazards, since auditors
frequently identify environmental liabilities
which go beyond egtilazory compliance
The Agency cleaily supports auditing
to help ensure the adequacy of internal
s stems to achieve, maintain, and
monitor compliance. By vohmtarily
implementing environmental
management and auditing programs.
regulated entities can identify, resolve.
and avoid environmental problems.
EPA does not intend to dictate or intcriere
with the environmental management
- praczic of private or public organi tions.
nr does EPA intend to mandate auditing
ithough in certain instances EPA may wi k In
indude provisions for en rtrcnmental
auditing as part of settlement a ement i. is
noted below). Because ec ,”ntal
auditing systems have been wi.leiv adopted.
on a vitluntary basis in the past. and bet ause
uzlir qualit’ depends to a large d. ree upOn
cnuine management commitment to the
pruçurn and its obtectives. auditing should
n!mein a voluntary activtry.
Because senior managers of regulated
entities-are ultima:ely responsible lot
taking all necessary seps to ensure
c.ompliance with environmental
requirements. EPA believes they have a
s’.rottg incentive to use easoti.thIe
means, such as environmental auditing.
to secure reliable information ahout
btility MmplianCe s131u5.
B rleiin:rion nfS nn . n:J .lu ;:i,i
Ekmcrzrs vf Effecrive nrnnrn: i
AudiLing Progrcms
The 1985 Policy also defines
environmental auditing, and outlines
what EPA considers to be the elements
of art effective environmental auditing
program. The 1985 Policy presents the
Following definition: -
En vironrnenzaL auditing is a syst tic. -
documented, periodic arid ob ecrive review
by regulated entities of facility opcranons.
and practices relaxed to meeting
environmental requirements. Audits can be
designed to aei iu tplish any or all of the
following: verify compLiance with
environmental requi. Jmt .4x evaluate the
effectiveness of environinental management
systems already in ptacti or amen tisl.s from
regulated arid unregulated materials and
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 bay. certain discernible
elements in common with other kinds of
audit programs. EPA generally considers
these elements important to ensure
program effectiveness. This general
desaiption of effective. mature audit
programs can help those starting audit
- programs. especially Federal agencies
and smaller bu Regulatory
agencies may also tase these elements in
negotiating environmental auditing
provisions (or consent deàees. Finally.
these elements can help guide states and
localities considering auditing
initiatives
As stated in the 1986 Policy,an
effective environmental auditing system
will likely include the follcv.ing general
elements
L Explidttop management support far
,tnvjron,menwi auditing and commiwteflt to
follow-up on audit finding. Management
support may be demoesnaz d by a vort n
pot icy articulating upper mnanagernent.
support for the auditing program. and for
cnrnptiance with all pertinent requmremttn .
including corporate policies and pemit?
requirements as well as Federal note anti
kical statutes and regulations.
Management Support for the auditing
program also should be demonstrated b v an
explicit written commitment to foliow ip on
audit findio to correct identified prohis ’ ns
.ifl(l prevent their recurrence.
IL An erwitonmental auditing function
independrnf of audited activities. The sIu u
or organizational loctis of environmental
auditors should be ufflcierit to ensu n
oh ective and unobstructed inquiry.
nk ervation arid testing. AuditOr tbi, .ti iv
should not be impaired by personal
relationships. financial or other curifliz.i
interest. interferrince with free ir.qu.r tic
jtidgmnnt. or f ar of pntenli.sI rt-IriIii, i ’in.
l7

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44 jequot0 team szcflThg cndcuditcr
• EnvirOnmental auditoes should
x have ready a ’ to the
jg • ç 4Ik and dindpliaes needed to
audit objecuv Each individual.
onply with the enronaf y’S
• standards of co ’duct Auditors.
fufltims or pan-urns. should.
• their technical and analytical -
through onnlir I1ir!g ji tie n
udil program o6
cur arid frequency At a
audit objC ivau . ..1. •I rw J
ingccmpLian with appI kl...
— laws and evaluating the
fL i a1 ptian policies.
and p rnng pw i
— Iin
sl ,uId be bawl on a proc whiá
.l41h all r’ -
k. and FideraL mte. and looaL
— p neat to the cilfty and
s or protocols addzeedeg sp 5c
that should be svaJ” d by vlM4nrs .
jldt wdXl audit pzocaduius rn i IIy
dbs uasd e
audit ps. hiog audit
____.
. audit r n and
3, ocw that auil s an&yeas
and do ’ w infotnviion
___to achieve audit obj ses .
Fi- should be e I)qe 4 before and
j antregudIng -
i im ” ’ on prt (1)
‘ -- t sffecriveuen (23 and other
t 3) r ’ 1 to audit obj.atver and
s. £bis Infoou.atloa should be ‘ . ‘t
shie. relevant and uiful to provide a
ad beds for audit finds and
- SujJ t tioc is ettsL
quite and vindng so that a prudent.
xed p soa would be likely to reach the
as the auth
• .IiehL Mfti. ig the best
2h4 through use of ap .i.te audit
— _
• Rekvant information supports audit’
iiogs and re ’tondatious and is
i gent with the objectives for the audit.
• Useftd jfl nr! , 2tiOn helps the
meet its goals.
‘he audit process should include a
:odic review of the reliability-and
pity of this information and the ‘ ‘
to identify. measure, classify and report
uit procedures. includ ing the t. ’ lng
amp1ing techniques employed, should
elected in advance. to the xteoz
L and expanded or altered ii
mstances warrant. The process of
‘ecting analyzing. i nterpreting and
mt ng inf6rrnor on should provide
nable assurance that audit objectivity is
nuined and audit goals are t.
1. A process tha t inciudes specific
edwes to proiriptl ,v prepare candid clear
appropriate wrizen reports on audit
r coneczi-.e actions arid schedules for
ientoticn. Poced ires should be in
• osure that such information is
mi nicated to managers. including
it nd corporate management, who n
evaluate the information and ensure
correction of identified problems. Procedures
also snould be in place for determining what
internal findings are reportable to sate or
Federal agr tet
V7L A pro that includes quality
assurance proCeaums to zte the armisucy
and thoroughness of env unmetoi audits.
Quality assurance may be accomplished
through supervision. ndep daat internal
reviews. uniernal reviews, o _____
of these approaches.
C. EPA Activities Reloted to Auditing
Szandw’is
EPA is currently participating in two
major non-regulatory efforts to develop
voluntary standards inditing and
environmental . negernaI t systems.
First. the International Orgr ii rion of
Standards (ISO), based In Geneva..
switzerland. ct li.h d In 1993*
Technical ( t,i%rn,ttl4 for Environmental
Man geiTu.vtt Standards CISO-TC—207).
Subcommi?tee Two of TC-207 is in the
process of developing environmental
auditing dards. The standards fall
into three çoup Auditing Principles.
Auditing Procedures, and Auditro
Qualifications . Second. in the U.S.. the
National Sanitation Fonnd tion (NSF)
in Ann Arbor. Michigan, is Mvejoping
environmantal auditing standards that
are intended to be compatible with and
augment the ISO standards. Work is
p Ijng rapidly within ISO and NSF.
with draft standards expected by the
• end of the year.
The ’propoesd NSF and iSO auditing
standards are being developed within
the framework of overall environmental
management systems standards. Neither
ISO nor NSF intends to establish.
ciflcenvironmen stendard
increed lioth are seeking to provide
n.gls!nent tools that include auditing
and standards. The EPA 1986
Policy has been a “trel reference
dociment for bctkthelSO and NSF
worL As these new do’nments develop.
issues of auditor qualifications and
explicit m.nagerneut commitment to
audit follow-up will be of particular
interest to EPA.
W. Review of EPA Policy on Specific
Envirnnmr’ ’ l Auditing Issues
A. Agency Requests for Audit Reports
EPA5 1986 Policy clearly states that:
• :. - EPA believes routine Agency requests
foraudir reports could inhibit auditing in the
long run. decteasing 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
38457
reports may not shield monitoring,
compliance or other information that
would otherwis, be reportable and/or
accessible to EPA even iEthereis no
explicit requirement to generate that
data. Thus, the 1988 Policy does not
alter regulated entities’ e sting or
future obligations to monitor, record or
report information required undar
environmental- statutes. iegulatlans or
permits. or to allow EPA to that
information. Nor does.thn 1986 Policy
alter EPA’S eenhn ty to request and
receive any relevantinLormation- --.
including that contained in audit
reports—under various environmental
statutes or in other edi uin’c euvs or - -
pid a . al proceedinga.
EPA’s authority to requ an audit rec .
or zel vant portions thiteef, will be a ri
on a as. .by-caea baslsw the Age -
determines it is nee’ 4 .d to plizh a
sratu y esianine , or where the Government
it to be material toe
inv ir4gii i.w . EPA i•seth re re to
be Umftat lihety bcoa on
matioa de ‘ th. snore
report , and ua y wh the--
‘toe1i” “ d be obtained frnm
monitoring. reporting. or.othar dare -
otherwise available to the Agency. Eanreples
would likely incled. where: audits
are conductad under consent decu.e or other
se ’ 4 —”- ” açe r a “pauy has placed
its .i .g.vi es prve?fr at la na. by r i i’ug
them as a or of mind or intent
are a relevant of Inquiry. n as
during ac ’ ” 1 1n;-itI aticn . This list Is’
fihisuadve tether than th em
there ‘ oubd will be other n . tiaas . not
subject to pw 4 Irl ’i? .L in whith audit reports
rather than information may brreqpized...
3. EPA Respopse to Environmental-
Auditing •
L General Polic . -.
The 198 Policy states that “EPA wilt
not promis. to forgo inspecti ,o . reduce.
enforcsment responses. or offer ocher
such incentives in e r1 4 ueng , for
implminentationof environmental
auditing or other sound environmental
management practices.” EPA is required
by law to independently
compliance status of facilities, and
cannot elimin2t. inspections for
particular firms or c12c e 5 of firms.
Certain statutes (e.g. RCRA).and Agency
policies establish minimum facility
in pecuon freqtienaes to which EPA
will adhere, Environmental audits are in
no way a substitute for regulatory.
oversight..
As explainedin the 1986 Policy.
however. A will take into account a
facility’s eff ts to audit in setting
inspection priorities and in fashioning
enforcement responses to violaric is:
- EPA will c nflnue to address
environmental problems on a ppor ty basis
Federal Register! VoL 59. No. ]44 / Thursday. July 28. 1994 1 Notices
118

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334 8
Federal Register I V L 5 ). “ u. 4Is,:r :...’j. jt. ’.Y . /‘lt t:r
4 d —.fl con ugn:+Y ‘ SP’ with
p.X rfl vntncoL4I rec.fltitS an pr.& ia
xnlit5 & nty. Sthca u ’ e
• ni i ed u.ng he1 m us nt
;. tu y art.d pm np*ly cQm a u l
pr 1ei 3. audzed mitri.ts
c m tl *T Ct fl should iinpmv .
.b ie EPA in peCLtC 11 o{.e f.authied
iit wafl continue, to the enlent that
c c ;!.ix per aDCe is co dered in
.. (Ung P ’°’ - CiIILien with a
od a pIianl* histtwv l av be sub jocs to
wcf tnsp iOen.
In f shiunlng enfcr ment e ponsen to
ini4tlflitS. EPA policy is to aka into actotzn’ ,
o a cs -by-co basis. the hoo and
genuine efforts of r ula 4eeUties to avoid
â d pT 7 iTh
• ual*fiyiDg ,ovU c 1 evbl Wbe
enones take
to iroi4 noocompIian . .zpedlxiøusly.
Cz OndD esyjg 1. itUt p obhe
.jiImVCOd thzou b smd t oth
and unpLeni t r’- ”es to jz t their
reoce . EPA ay d i di e ee
toenstci.trsucb u b and
getmine c ris to marS aauph c SUCh
ccaszd atsen appU pas I ty wbso a
r iIazed encty fy r orta
or conp1tan d othw e e am
to he r.c dad re wctod to EPA
These prtnciples have be
incorporeted Irno.tbe Agency’s
enkrceent response and QVI p ty
2. Audit Pmvisionsas Remedies in
tfortem nt SettIem’ ts
The 1986 Policy iuchtd the
flowing language audit provtsoes
asiemedies in enfort .cwant settlntn
alA ay ptopoia Sn nn 1 ’ aaaditzo
ptoviqnns in ct ” t d zies sod in oL
tienent negotiadons where auditing could
provide a .dy c i4enti6 problems and
the likelihood of similar pzob
ri wrtng in the ft.&rure. E vtxàninentoI
4ud ting provis ions are likely to he
pmpusud in s ujesoant Diif tin’ wb
• A pan n of vl ish an be
t hest in part, to the ebsena arpo
funning of in enyimntoanraI.? 1 1lL t
• The type of onture of violsc aes iedl
a likelihood that nnular non ’ pliana
pnthl s roay exist o ehewb e In
ciky or .it other O .lioes op atod by tbs
i . ulated isin y.
F2As enforcomenl o ien issued
hi thi r guidanco on thin iz to in 1986
in a doc.zroenz enuded ..EPrA Policy on
the thclusion of Environmental
Auditing ov sioxt.s in Enfoa’C2meflt
S ctlement.s. This guidance has been
consistently applied in enforcement
acions as approprtate. and has 1orn ed
the basis for the inclusion olaudit
a reernents or provisions In numerous
tnr.serfl d cees . Selected text from this
docwnent. also sz U in eff . is
incluiled heres
•tn rwt y s. Agency negotiators hai.e
oux voI ihi.t r iire
• ! ‘ l4(ed entities to . •.zdjt thiir op— ruinc
Th st i n Varve sitttI XT Iti3t5 he 1 .,n
highly cc s .fu1 in ertsDhn the Agency to
accomplish cooreeffe veiy its pr mary
nt ssiiM%. onincir. to serue extvimnmen %
complianco. Indeed. auditing provitions in
enforc ent sattements have prnv ded
cp,ez*1 int%x iao beneftis to the Agency by
nkw ng its ability t
• Addr s pliance at an entire f,álity
• arar all ólitles owned or operated by.
p .rry ’laiher than jusi the violatinni
discovered during thsp tionz and izl &ify
and ViOlatIons that roxy have gone
undetected (and uncnzecud) otberwi,
• Focosthe i o(amgu p ty ’s
top eve1 ‘g ’ on
co pIlant prodt u por a pdlisies and
pro ud that saab ). a party to achieve sod
a.iaain ooapl . end help a parry to
.ge — c t oI if rn*uveIy eves’
ome ins’-,d n J reatsiag to
• a a qusIny - r— a-h 4 be, ,,
__
mane ent p” ate in pI .
hiw a nt g and ad oa&a.
• S U U
It is the policy OIEPA to settle i jtrdii4. .i
and “ ‘atIvs O U cases
where violators ure the Agency thet
their no Tpb’ww will be (or ban benal
upixoprist. pest o le tt t wb,&
— ma s o id
lo the soM
ro i s ir .
• S U U U
In àthes or 1 af -.
following two typen of adlte
should be considered (In
s. i e ts l
1. C plMaa Audit An indeperic t
s .ntof the ent aranas of * party’s
oli with plkihle teLiks and
rogu esy — —
aiw*ys . )m a requAz t irtve
swen be token to tenedy u .essd
cotoplisane —. sad in - _____
when coupled with a requi.t ent that the
root aai of ooplianca also be
ed ) .d..
3. Mwsa enXelUAatht
• ev .Lua oo of. ptotys ueats1
pIl*nce — pinencas. and cou oIn
Such y thS need
(1) A’ j.jp atl anrtrun isatol
cnmp’ a policy, and pr uzen Ice
tm pten 5nt tioo of that poizcy (2)
educational and training prnçams for
empio, (3) uipmenl pwth
operation and maintanana p gianii(4)
envuojunerital compliencrOEcer proçims
(or other’ organizational s ucttcns relevant to
P 1 )i (5) budpdng and planning
sy ems for erwtronrnentkI compliint : (6)
triozatoriog. - 5 ord keeping and reporting
sy am (7) ta-pLant and csxnuIufllty
emergency ptansi (8) internal
conununiontlOn! and control systerosi and (9)
h*zard idectl catlOn and risk a inient .
Whether to seek a compilsaca audit. a
management audit, or both will depend upon
the unique msian of each . A
compliance audit usually will be zpproçwlate
where the violations uncovered by Agency
inipectiOtti wi the likelibood that
‘:trn t:a! r onLnmpIi1nce tzinS
ew rv within a partys operations. ‘ ‘
axia urne t audit should be sought wt zr it
appenre that a major contributing iacwr to
noncomnplia is inadequate (or
nooe st t1 managerial attention to
environmental policies. pmocodions or
stafFing. Seth rypse of audits sbo@id be
sought whet, h corrans
and sboriags in a parry’s e ed
management pc ncei need to be edth ’
C. Eàvizarim, ,itoI 44 4 ng and”
CrinUnOJ info ent Policy
Following EPA’s 1986 PolIcy. zha&
siri ” or T %Pn t the
evoliatLoo a d-ip tsd of •.
ctiminal en ent policy vesuing . ;
the tree of eedlta end the ve4unxai .
v o o : -
• •1
of Jus an ianLed a guidar anri1leé .
Fac xs Dedsions CIn Criminal
P r o so c otio n s Par E nvij onme n2aI
Violations I Th&Cr Of Significa-
Volirnti.ry effi ii. r D inaua
Efforts By Tb. V ’i . Mr. The ds..
sets tha-g aI D policy
It Is the, pobcy of the Departm. ofluatIa
to ancaar , ,ilf ’.udltin& jnJf .pçj iig , aed .
voluntary adann O(SnVIZVO
vioI ” by the regulated by
iidicath zhetthses attrivities are e ’wed en
mzngit 4 Y g f f to the DscansntS
dlauetioo .
____ _____ -
tained t provirle a
___________ z
particuLar case peesemi th. type of
mstances in which lenience would’
PPZOPTIatL The factarsto be
considered In exirdsing the
Depertxnent!s p .tr iY4al dLscedcn,
in cases wb . the law and vid eze
otherwis ffiäent for prnIl4r!1 tiao,
includer voluntary dlosuz%
oo uthe m uen and
compliance pru .m pen.einveness of
nonco ’ th naI pli ry
Caion nd sul queut compliance
efforts. -
Seconds on November 11. 1393. the
Final Draft Environmenhil Sentencing
Guid tlinR provided for the mitigation
of sentances where a court finds that the
following le nrs for environmental
corn pli.ance ere satisfied: line
management attention to ccmpliance
integration of environmental policies.
standards, and pzocoduzes auditing.
monitoring. reporting and tracking
systerns regtilatce7 expense. tr ntng
and avalu.atioc . incentives foe
compliance disapltnary procadures
c.ontinum€ evaluation and
lmorovemeflt -
Eixiafly. on fenuaty 12. 1994. EPA ’s
Director of Qitninal Enforcement ksuud
a guidance entitled: “The Exer ,.se of-
• LnT IgaX1Ye Dlstreticn. ’thet sets forth’
119

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F d r l
sthat . , ist ç..i-th ‘ t ’
0 entflg crirni al i tig tiort. W rh
r SPeCt to corpcrattort3 conducting
ironmental aud t . me guidance
Corporate i l Zy = r be iocic-.ted
bea a mpany performs an environ ncntal
ffzplian or nageanern audit, and then
owingIy fails to promptly remedy the non-
pIian and corr any harm onne. On
• , other hand. EP? pokcv strongly
ur3geS so f-monuonng. self-disclosure.
,slf. rrection . When se1f auditing Su
ee c e 4. t d (followed up by prompt
tedia’on of the nan .coa1ph2i r, and any-
g hannl and h L manplate d ra
o ned. the coanp.ry ’s anojv,
riti should be a nudared as mitigating
Ictccs in EPAs cIM Of iav igvive
• on. Tberefoa. aviI that is
,øèunt*tily revealed and fully and promptly
e4” d as part of a rporatio s
5 IT and coprehansi s wit -
generally will nor Ii. a
rth. , pemdlturs of rm
•D. j4 i&t P2frilege Legislation
Fur States (Coloradø. j 0 di n2
en’nôy 1 . and OleL) have recently
en id l gislatlon which, with same
nriati . .stes * ‘self-.veluative”
pdvils e fur audit apor EPA has
ft ittrttly opposed this approach.
principally bsceus. of the risk of
k. , ing State enforcement pro s.
imposition of mn - ’y
upn c’ on s and delays in
mt ant actions, and the potmitial
increase in the number of stuatans
requiring the expenditure of scarce
Agency resources. Including the
avethling of State enforcement
- EPA urges States that are
mnsidering a privflep.orir uii 4
approach to actively participate in the
mrnprehensive pro described in the
June 20. 1994 Federal Regiatà notice
(59 FR 31914) before puz uing any
legislative actin . The Agency alsø
encourages Stares that hays pissed such
legislation topresenx documentary
justification for this approach either at
the public meeting on July 27—28. 1994.
or in written comments.
L F .tn*vnrnen to! Auditing at Federal
Fociiitios
The 1986 Policy also encourages all
Federal agenpes sub ecz to
vironrnental laws and regulatiorn to
institute envirorunental auditing, to
help ensure the adequacy of internal
sys1ems to achieve, maintain and
• monitor compliance. Such Federal
facility environmental audit programs
thould be structured to promptly
ufy environmental problems and
editiously dece lop scheduies for
remedial action.
:pp p;.. e. E?. tt iii
i t, a e r .ts with other agertr.ies to
c ifv the respective roles,
responsibilities and commitments of
each agency n conducting and
responding to Federal ci!ity
environmental audits. Also, to the
extent fessible EPA tvill provide
technical e isrance to help Federal
agencies design and initiate audit
programs. Currently, the EPA Federal
Facility Enforcement Office IFFEC) is
co-chairing an inter-Ageflcy work group
to revise auditing guidel ’ .s and
protocols for Federal agences. In
addition, FFEO is developing the
Federal Covenunsrg Environmental
Oiallenge Program required by
Or er 12856. which coils for’
he _____ of a Code of
Environmental Principles and a Mode!
Ios&htion Program for Federal
facilities. This program is likely to
include environmental auditing
ponen
The 1986 Policy staru that
With respect to insp fons of self-indited
f o EPA
, ,micilly will respoadjo enviruamanal
by F’ .J i1jHa . in theism.
as it does for other regulated odas .
• • • • S
Federal e ”‘ sheold. however , be
ewes that the Freedom of 1n rt j A
will g ve u any dhsdoiw, of audit zap u or
aud ganested info oa re from
Federatag.”fi—’ by th,publle.
- When Fedeeni agencies discover
sir ifit!e,W violations through an audit,
EPA enc rs them to voluntarily
snbi tit the related fint 4 ingn and
corrective acti’ ” plans to the
appropriate EPA Regional office and
Star. agencies . even when not ; ,
specifically required to do so. EPA will
review the audit finAing , a a in
plans. and negotiate either a c ’ns ”
agreement or a Federal Facilities
Cnmp1tw Agreement pursuant to its
eaforcenwr,t authorities under the
various en -tixonmer ital statuzes In any
event. Federal agencies are expected to
report to EPA pollution abatement and
prevention protects involving costs
nv’-’ y to correct compl’ -
problams discovered through the audit.
in accordance with 0MB CIrcular A-
106. Upon request. and in appropriate
cnnl t2ncnt , EPA may assist affected
Federal agencies through coordination
of any public release of voluntarily
submitted audit findings with approved
action plans once agreement has been
reached and/or appropriate enforcement
actions have been taken.
i8459 -
V. Review of Relationship to State or
Local ReguLatory Agencies
2lfecrive Federal/state partnerships
are critical to accomplishing the mutual
goal of achieving and maintaining high
levels of compliance with
environmental laws and regulations.
The greater the consistency between
state and local policies and the Federal
response-to environmental audifing. the
greater the degree to which sound
auditing practians might be adopted and
comp i vire levels iproved. Stare and
local reguiatary agencies. of course.
have independent sdiction over
regulated entities . EPA encourages them
to adopt these or similar policies an
environmental au 4 iting. in order to
advance the use of effective
environmental auditing in a consistent
mnnne -
The 1986 Policy e nph2ei this
point
EPA that statm have
already nn mken envitOo mJ n&Mn
athea that d somewhat from this
policy. Oi r — *1w may want to develop
Pi g p”- w that ‘ . modat . rhefr
per i1er “—deer Nothlng in
this policy F ’----— ” is knrs, 4,d to
or p’- i. sate . from developing o ’
to envirunminial snaIft4 g EPA
en,w s star. and local a rh th
‘ der the heii p’indpb that gained the
In deeslopteg thin polIcy’.
• Ragulatad eo _ ti des meat
tsp . rt or 4
required ander i Uig or
egu 4 l .s dJ of wba anch
in j at g .—u’-.d by en anvfrun 1
audit ‘ “ 1 in an audIt rap tt ’
Required _ i1na be-WithKI3d
merely b.ucaan . It is generated by an audIt
er nbyauus. Ø m_ . .i
• R .gu1s y r ” ‘ “ make,
psr mIs to ge or l it t.. - -- - ”‘’ cti a
e” a prit . .ii.’c f
in foe the use of
envir em l s tiog . somg However.
t ir din ette to
adjust east ‘4 ’ oca
basis in m. prm to b’ nec and r” ‘ ’ ”.
. ts by zeg ”’ d intitise to taunt
snvtron tal cp 1 ’” ’
- . Wbenntng th
reguiarmy gi.iti’.. . should f iis to the extent
p ibI . on cnmpIi a performance and
• Regulatory Sgir.n -iai . flst CO ” 10
meer’ . ” - . program requirements (e g..
mi& om inspection requirements. etcl. -
• . “a . should not affampt
to prascrib. the premse form and stuctws of
regulated “ ‘
________or auditing programs.
‘W - Cn”deszon
All of the-policies referenced in this
notice remain in effect. The Agency
intendc. however, to re-examine these
policies comprehensively and mem ins
open to suggestions for changes and
... 3. 4

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3360
Federal Re ista:r I V. I 59. 1 4 I •
;prGVeInerttS re znrdin! nil is r f
uditini Luy. Tht
rui.ac n ç rns zited hate is
.r the av ie of interested
. met. in p pa ion fC4t the July . -
& 4 publi?.. I tIling. The Agency
op that thz. infortr.ation will clarify
?A rrnnt ai jvities . nd polica
-bxed to envircamental a dit :n .
Th Offii of CorepUance will
spend to wr’ tzen reque.szs kr p of
e documents referenced in this no ce .
nd all requ s to: U.S. A. Office of
1ILT t. Attfl 123 L FaMiliaL
eciaJ CounseL 401 M Street. NW
, . 03). W .is i gtoa. DC 20460.
A Iie w.
& icraru . inzsee1 Ofl ef
afo nenz end Cs atplia4ce
94- laW Filed 7-Z7-44 & —
ce
1? G M T Forte Op
a.cY Eavioomental Protection
.gency (EM .
cnoie Netice of meeting.
U *RTt The Emuent Cuidelines Task
orce. an EPA advisøcy committee. wiil
:old * meenng to di ” ixnpmvcwents
tfle Agency’s E1Thi i Guidettoes
rngmm. The meeting is open to the
ublic.
ATE5 The meeting will be held on
ueeday. August 16.. ñv i &30 am a to
: )0 pm. and Wednesday. August 17.
994. from &30 am to 300 pm.
0 e ea The meeting wifl take place
tne Dupont Pla.za Hotel. 1500 New
iarnpsthe Avenue NW, Washington.
).C. Cotumnents may be sent to Eric
mssler, Effluent Guidelines Task
Oce of Water (4303), EPA. 401
.1 S’re t. S.W.. Washington. DC. )460.
: P iRT ER lw R*sTI0It caci ACT: Eric
csi t .it fl2—25O—7l50. fax 2132—250--
• I
M84T*RY tl FORMAttOC Puz uant
‘ e eder il Advisory Crirru! uztee Act
?.b L 2-4 3 . the Estvirixtmental
A r—:’ cv s notice of a
.:. tirg of the Effluent Guidelines Task
ECTF). Tht ECTF is a
s cr. :t ’o f :hts N3t0n31 Advisory
iur ! kit zi rz,nrnenxal ?&ic 1 and
4 r.L j AL .i?T1. the et rr ii
: . d• -.ry c,oard to tba
The IT w c ablisht d in iul of
: ; EPA on tht E1flue t
Prz m. whirii develops
n . !auon br disc rgers of indu’izrial
r tt .r p su3nl to Title iLl of the
Jt•an Act 133 U.S.C. l 5l et si?q.}.
•r T:,, k Fot ‘.On.cicls ci m.:r. ’ s
mp inted by EPA frvJ4n ;‘ .htstry. ‘it.zi n
grue p$. state iad 1O4 1! ovetnmtnZ. the
and i. ntilic c;ommun;tes,
ar.rl EPA regional ofFices. The Task
Force wa crested o otT advice to the
Adrriini raXOr on the thag-term xntegy
for the effluent guidelines prv am. and
particularly to provide
recommendations on a pm for
expediting the prom iJgauoo of etfluecit
gudelines. The Task Force generally
does not dic1 c specific eflluent
guideline egulatio cun ’ently ar r
development.
The meeting agenda wiU iecluda
discussio on draft recommendations
for improving the pro e m tnagemeeL
and data collection pres. e - [ or
effluent guidelines. There will else be
disciic cions on the methodolo for
conducting preliminary industry
studies, and a planning ses for
future k fce activities.
The m ..ting is open to the ptthEc.
Limited seeting for the public is
available on a 6x,t-c ,
basis . Th.pu.bic may sa 1u it wriflee.
enmaments to the Task Feece r rdi
improvements to th. ni ns
Guidelines pmoç m. br .nd
be seat to A at the ebo,. ed& .
Comnnients submitted by August 6 will
be considered by the Task Force at or
subseqoent to the meeting.
r d July i.a. i 9a.
E Sw - ‘
Derigna d Federal Cff L r-
Guidelines Task Farce.
IFR - . q4—le o P d ;— i—3e e s j
ee —
bnpro’vhtgEPA’s thu t Pro an
Oper o .
AGOICT U.S. Environmental pr ath i
Agency..
ACTtcs Soliatmg public comnients no
the agency’s eü orts to eokmznce Indian
program opemations..
SUt ARY: The Environmental Protection
Agency (EPA) is soliciting comments
from the public on the fol1 wing -
potential approacbei for improving the
Agency’s Tribal operations, including
the establishment of a new national
Indian Program Office. To obtain Tribal
input into this pro s. as well as input
on future Tribal matters, the EPA
Administrator convened the Tribal
Operations Continittee (TOC) c rnpn d
olTribal nrpresenlatives and EPA
Senior Managers. EPA is now ,eeking
broader input on these approaches. and
will consider comments received during
t Lb!..: L-rr IniT1 perud to , nct:re
‘hat tbv rni s si npticrts ha - e hirt:n
id* n: :ñi .d.
. LC CO&W9 T P lC0: Comments
rn ct he r t eived by September 12..
1 4.
Ac13R ES Comments should be t to
Caren Rothstein.Tr al Omnrinns
Team. US EPA. Mail Coda i19 . t M
Street SW_ Washiogton , I X wi ..
FOR RSfiT) pi T
Caren Rnih einat 207.-Z&G-7519.
SiJppL rrARY PI A1U1 ‘ ‘ e
Erorimental Protection Ag cy h .
made continual prugr in bn l h e
Tribal progrm “ iw at the
Agency’s 1 4 ffl( 41 2fl Poli ..ln F &-
Year 1993. ap mxie*iáy S3 mIW— ’
and 165 w 1O -
implement E A p. e ther
through d ui toTrib ‘
through Federal impl -. ’ 1 and
technicel assistance to Trlbs .
Regulations and guit 4 m pea&c to
• Tribes have be
of PA ’s pri ra s abRch1ng the..,
pr i forTrfbss to apply for gra
and p gramiith tion - . .
Tre xn.nt m the —“ ‘ M n”
State d.tism ri lnns. Ymmerly 1 t34
to as Treatment us Stat.. bee. beeó
• made under’ *rioa. wat& pregR .
Numerous Thbes have rnhrnb d w
quality stindard for authnri by
EPA. and tinee hav.already been
approved. Many more Trlbal
applications are expected 1ri th. -funue
for abroad array ofEPA programs .
The owth nL PA’s
has led to an m .sa .d tmderstars g of
the seri r cn of en,fronm hhns($.
to human health and env1r eats
within Indl Country by A a the’
Tribes. To premote Improved
Cuuuui . cat 003 arid partmersbt Ith
Tribes to adth these s,
EPA Adra±uintrator cooveRed a Tribal
Operations Com 1Ues (TOC) to meet
with her arid other EPA Senior
Management as co-reguLatota on a
regular basis. nd to provide Tribaf
. input into Agency decision rr ing that
may affect Tribes.
The TOC is cmtnprisad of t8 ThbeI
representatives, who are either Tribal
Leaders or Tribal environmental
offlcats selected by Tribes within EPA
regions. -There are Tribal representatives
from each of EPAs regions ezcept
Region Ill. wttidi has no Federally
reco izadThb
On Febnmry 17.1994.81 the first
official TOC meeting, the Adnrini5imior
committed to srretrgtherting the
AgencyS Tribal ope tians and
reaffira ed the Agency’s 1 4 thdlac
Policy. As one of the fire actions for the
Tribal rirpresentatives to the TCX and In
121

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ENVIRONMENTA1 PROTECTION
AGENCY.
L-S1&4-4]
4
Vo1 ta j Envfronn enxal Self-Policing : • •
Self-Disclosure Interim Policy Sr f. .-m ff
AGENCY: Eovircol Protection Ag cy
(EPA - _
ACTION: Tnt m policy 2I i1 f!T and requ z
SUMMAR The Env cnme P ec cn
Ag y ( EPA ) and reques
_____on an iY r m policy to Fo ide
i v for regulated ermnes that co
voly ph CY M2 1150
and rec oladoos. 1 .
nr yes , w 1tit 1 fir.g or
r&mcing grzvuy cc pon of civil
peoalries and cases for thmi I
proc on wl’ e sp cified
met T.ne policy also m that EPA w t
vo y andit to
invenigarn Th_s j .m
policy was developed in close
with EPA ’s regi I o ccs the
of Jus re . and w be applied
i thfurm1y by the Agcy’s
___ - V
DATES: Ths . t rr policy i t .- in s
effeedve as ; m gtndanon 15 days a .
pub tir in ord to give the Agency
to cootd r - i p on of the policy
tlanc hov EPA H dquat s and the
Ret - EPA ntges ii t ed r es to
com on this policy in writxng
Comments must be r vu1 by EPA the
adàess below by June 2. 1995.
Apof’ SSt - Subimt three copies of
to the U$. EPA Air Dc k?t . Mail
Code 6102,401 M Street. SW, Washington..
D.C 20460. fb- j Docker C . 94-O1.
FOR RWTHEN V(F0 IIATION CONTACT: V
Mdiuocal ll !1 -m .noo r th g to the
development of this interun policy is
couLiine i in e xrcneatal ithiing
V public docket Documents from. do
ay be requested by calling (202) 260—7548.
eques fig an index to docket C-94—O1. and
faxing doctir w ii teqU to (202) 260-4400.
Hours of opezurion are 8 a.m. to S3Op. ..
Monday deough Friday. except legal
holidays. Addi5áual con e Geoff
or Boan Riedel. at (202) 564-4187.
SUPPLEMENTARY FO AT1OtC
LBackgronnd V
Ahswcth c V V
One of the Envãn l PrDteC itWI
Agency’s most u4X)tVtm L respoesibilines is
obE .g pfv! with fCd 2l laws
— — and . .J id
— That goal be achie d only
wj volm.t-ry coopm adon of thous’ s•
of tiii t s other regulated .iV:
• m=ts. Today,.
annotmcmg m ves for those who te .
responsibility for vohmrarily Cv2h1
dis 1 smg and g violations. These
j enttves , developed after nine months of
poblic me nngs and ç p. analysts. are
fOtth in d 1 below and take eff in 15
days. At the me time. EPA ap sm.
a dialogue with s 1 14 and
edder ___
policy. The ii M iv t EPA is off i g
fail into thene di
First, the Ag y wm cr p 1 !y
gravity-based (or “ ) p” ’ ’ for
orlic agu rii.*
i€ fy, di and
• ding to in
V y EPA will also r’ p siiv
• pM ) by to 75% for
moe, bat all, of these
Seoned. EPA w t
D runmu o Jii ii
be brought a a 1 a uy g i ngond
th to ri ; ,Vt;5IL . 5 .- SOd
violadcns.so long an s tiens acnnd
— ily, Agency w n
pLqn .cr vol=y -•••- “ ‘ “ £0
trigger enf .. nt _____
• The inceenves offe in rths policy kese
b ued above all to
___ __ ___
even — conditices for og d
tight to eoll full civil fo _____
t n& , viobtices that esent an n tr
5 ! I L.1I 1I i2fl , 5 5 I lfl
senous C1 1 h rffi , 1P Cat ViflIafl .
will n be allowed to g n an.
noc advantage over th& p . n -rnrc by
delaying in - in com.p Nor
will EPA h t2 to bring a acxton V
- 2 2fl f jndivithmis ndh for itn4 t
EPA is conudedog didonaI i1w.t nves
for voltmmry compli beyond the benefits
offcrnd in the policy today. On April 7, 1995.
the Agency will a 12 Euviiental
fVPt14! r hjp Program (s . .?) pilot proj with
m es and public agencies to test reiteria
for auditing and c ficadon of voluntary
compfl!nc progras. If suceessfiaL standards
developed t heough En orm l Leadership
could lead to inspecnocs and public
recoguinon for compantes agencies with
staze-of-the-azt compliance programs. In
keeping with the President’s announcemmt
on March 16. 1995. EPA also will shortly be
ymi-ing e4iririm1 coani Viiv ennves
for =fl ___ - V -
The Agency is especially interested in
. re1 rii g to wheth this inueim
policy appropriately d n the criteria for
& “g whether a self-audit, self-
evahiatron or disclosure is voluntary; wherher
the in im policy adequately preserves the
Agy’s authority to_assess a gravity penalty
co onent in appropriate cases: and whether.
and according to what crreria.. the Agency
Should consider giving credit against the
econorxnc bene5t component of a penalty for
stare-of-the-art enviroun r mnag P r
B. Public Procerz
In.May 1994. the Administrator asked the
O th of Enibreemear and Compliance
As ancc to determine whether addic oca1
to encoarage volunraty
ths’ ”sure and c xxecrion of violations -
during environuental audits and
Tn -developing mis interim policy, the
Agency held a major two-day public m ii g
in July 1994 announced in the Federni
Rgl rr-on June 20. 1994 (59 FR 31914);
a R rcm tit of Policies Related
Auditing in the Federal
P gLi’t’rouJn1y 2& -1994 (59 FR 38455);
considered over 80 wju corn1’n
_______ to the environmental auditing
policy docket held a focus group meeting in
San Francisco on January 19. 1995 with key
fr I Md rs from industry, trade iwpS ,
Stare envixvn xal commistions., State
aunrneys general o ces, district anorucys’
envi±onmmral and public inte.—est
and profeadonal env onmenml
auruti g grvixps and held a public comment V
session in San Francisco on Jamxary 20. 1995.
Inad±ticri to considering opinion from
c’ o s . EPA conducted its own analysis
of relevant facts. For example, the Agency
considered EPA and or Furies-al policies
• relating to cnvixun ta1 andinng self-
disdosure , and as well as
inves suggested by State and local
policies and legislation. and by aouiicarions
submined for die a.p pilot program. The
Agency also considered relevanz sux-.’eys on
audiung pricoces and incanrives.
-
Notices V..
Federa1 Register / Vol. 60, No.
63.1
.
Monday,
April
•
3, 1995 /Notices Page 16875
This se cn of the FEDERAL REGISTER
documents other than r ies or
proprlcd n.4es that are applicable to the
— Notices of hearings and irrvestiga&Yer .
1 ..ãtree rne.thgs. agency decx ons and
nkigs. delega ons of authot ty, filing of
• petiticrts and applica ons and agency
V of af o’i and fte ons are
e i uplu of doctansets applarrag in
_ V
122

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C. Purpose
This inreri policy is intended to proc oc
ez cnra1 compliance by providing
greater outainty as to EPAs eniorcemenz
response to voluntaiy uanor2s. and
vohm y disclosure and prompt corr on of
violadons. The policy fimber provid
guidance for States and local authorides in
encoura ng this behavior among regulated
Fed a1 laws and reguladons set minimu
standards for prececung P n health and
sehieving ‘ r2 protecuon goals -
such as clean an and clean war . EPA wifl
coodnue to uphold these laws ongb
vigorous ons -
psuiy violators. P lri s
help ensue a level playing field by ensuring
that violators do not ob in an m,f2fr
econoc advage over their compe tois
who made fl d t 17 ves in
compliance. ? Iri s also promote protecuon
-of the enviromanent and public health by
encouraging adopdoe of polludoa preven on
and recycling pracdces that lisuit exposure to
liability for pothitañt discharges and deterring
ftmire vioanons by the violator and others.
At the sata time, the Agency reco zes
that we cannnc hieve maalmm copH ni e
withous the cooperanon of a regulated
coi rmnity willing to a responsibly by
de r±ng. disclosing . and correcung.
violations. Already, regulated enrines have
many couxoelling i, ,tives to
environmental m2 g.m nrJanthg sy mns.
as noted in EPA’s 1986 zaditing policy..
Indeed. recent surveys show that
majontyof large comnanies tgagt in
enviroemal auditing and/or have
e nviroeu j N2g. -rnPTTr sysl.e s in pl .
Nonetheless. EPA has concluded th -
additional mi! enrives in this intmim policy -
will further pronioce the regulated -
coi r ii4ty’s co unenr to adopting
systesus for ma ” ’tg co 1iance
D. FrL pLes for VoIwua7y Comp1i rce
The nre -tita policy that EPA is zmouxicing
today is based on seven printhpi
1. Self-policing by re 1 2tP j ties
play a crocial role in finding, fixing and
preventing violations. -
2. Violations discovered thmuglt self-
policing should be disclosed and nvu tl
corrormed
3 Regulated entities that self-police and
vcju arjJy disclose and self-correct
violations in accordance with this policy
sbou.ld be assessed pen.alties that are
consistently and prediaabiy lower than
penalties for those Who do not.
4. Re uIaued entinee that self-police and
voluntarily disclose and self-correct vioLations
in acnordance with this policy should also not
be a nzeended for irT!Tn I pros man.
5. ?oviding predictoble incentives for
vclxnt disclosure and corre on of
vioiadsldcndfled through self-policing
offers a oositive alternative to across-the.
board prxvileges arid irnrnunities that could be
used to shield ntiuünal miscorudnnt, drive up
litigation costs and oreate an aon.osphere of
discoust between regulators. industry and local
conimnunities.
6. EPA should not seek voluntary ‘•
enviror,!1 r I audit information to an
investigation of a civil or rr r a violation
of mentaJ laws.
7. To preserve a level playing field. EPA
should rver any economic benefit realized
frv violations of env oe j- law.
E. ReLadOnSJÜp to Emerging St mdards
EPA also recn zes the deveIop nt of
and growing r nt on international
vohmL envuonnientaj fl i g ?
standards in the U.S. and other connotes. - -
These szan th. if properly niafted and
inip1e ’ -ed, can provide a powerful tool for
or nstoiniprovethe irov e rafl
compliax e with envronmennd requirements
-and move beyond cop1 ne t&ough
innovative approaches to pollution.
prevention. In addition to issuing this interim
policy, EPA will conthme to pursue a
dialogue with interested parties and to pildt .
policy approaches through programs such as
the EL? to determine how EPA can make use
of and encourage these standards.
IL I ter±m Policy
A.. Defrutions
The conditions for rei idirmg ,civil pltice-
and not rr 2k mg i r l referrals in
accordance with Sertiocs IIC. and ILD. of
this interim policy are as follows:
1. VoLw .x -y re4 -polking The regu1ar
entity discovers a violation through a
C Redz ce Civil Pcialties for VoLia fry
Dzxdozr4 ‘idPTomPdY Corrected
Regu1a entities will be ei ble for the
following r&” ons in eevil penalties:
a. EPA will 0 lii n all of the gravity
component of the penalty (or violanons by
regulated nes thatmeet conditions 1
though 7 outlined in Section. ILB.. ex.cenr for
violadons involving (I) 4m 1 condust by
the nnty or any of its entoloy .
or (ii) an imminent and gubst2I!t,21
e.ndzngernicnr. or serious actual harm., to
hi r’. rn health or the envronmenz.
voluntary envirczxmeou,l audit or volunra.-v
self-evaluation appropriate to the size and
nature of the regulated erxtity and
2. VoLwuw’y dtrcksure. The reg l t
entity, fully and vohmrariIy discloses the
____ - violation in writing to all appropriate federaL
stare and local agcies-as soon as it is
discovered cincludiru a reasonable time to
___ de mine that a violation exists), and prior
to (1) the comm mut of a federal. stare
or local agcy inspection., investigation or
information reques (2). notice of a citizen -
sum (3) legal conxpLathtby a third parry or
(4) the regulated entity’s owledg that the
discovery of.the violation by a regulatory
agency or third parry was im m- and
______ 3. Prompt correotm. The regulated en_dry
____ _________ cotre the violation either within 60 days of
discoversmg the violation or if mote titae is
as expeditiously as pra cable arid
4. Rane’ ia.tion of immcrze,u and szthraunndl
esddnge :. The megn t.d entity
- e xped i -- : .emxxedies any condition that bas
- oreared - .: z ornate an irT,m 7,enx and
substantial ‘ ngermom to human health or
the erivironnienti and--
. Remedia .tion of harm and prever ron of
repeat violatioltL The regn M entity
imp1ern nts appropriate measures to redy
any enviromaxenzal doe to the violation
and to prevent a re urmce of the violation;.
- and.
- 6. No lack of appropriate preventhie -
- mennaes. The violation does not indicate that
theregenrxrybasfailedtorake ;
For purposes of this interim policy, the. approptiate steps to avoid repeat or r ting
following defithtions apply: . violthons and -
• y= j auditing ” bar the - - 7. Cooperation. The regulated entity
deflthtion given to it in EPA’s 19 6 policy- cooperates as rnqxthed by EPA and provdez
on environmental andi ing , i.e. “a sy--oc, such information as is r asrinabiy nec sary
dor .m .i st f , periodic and objective review by- and required by EPA to determine -
regulated entities of f lity operations and -. - applicability of this policy. Cooperation may
prac ie s related to n ’eting envfron l providing all requested ‘ 4 ocun ins
- r-qá- r n—m - . . and employees a nd “ cismauc in any
zadit xt ’ n’-aW further inv ons into the violation.
n ion-of- information r ] rng to an W C appropr a xe, EPA may require that -
envro unil teudit, bus not in hiding to satisfy any of these Conditions,. a regnj
fac ” i infinmarion underlying or testmmoulal entity nst er into a writren agreement,
evidence relaneg ___ adnunistiative consent ord orjuthaal
• ‘p l “ consent deeree, particularly where compliance
irw’1nding a federal, stare, and enmicipal - or remedial mea ns are complex or a.
f ity i 4 federal -. lengthy scb rle for r? tnmg arid
environmental laws that EPA ThI S. T1 rtr nrn g compliance or remediathng harm
- “Self-evaluation” n an at is required. . . . -
not necessarily meeting all the orrt a of a
full environmental audit, by a regulated entity
of its compliance with one or mom ‘ - . -
_____ I . Incentive -
“Voluntary” m i’ not re mired by
5 r fI,t regulation. permit ordez ; or
BConditioiis -
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3
b. EPA may mitigate up to 75% of the
unadjusted gravity component of the penalty.
r kmn into account any of conditions 1—7 in
Section 11.3. that are met, in the following
(1) cases in which inog but not ail of the
conditions in Section 11.3. axe e or
eu ’) cases involving an immis r and
jbp rfl J iid erment. but not serious
anmal harna. in which all the conditions in
Seedon fl_B. are me or
(iii ) cases involving the disclosure of
irnn2I conduct in wincu all the conditions
in Section 11.3. axe
c. EPA will metein its full discretion to
recover any economic benefit gained as a
i k of eoncomplian to preserve a ‘level.
playing .fle1d ’ in which violators do nor gain
a umpetltive advantage through
noncompliance However. EPA may forgive
the entire penalty for v ol tious which inom
- conditions I through 7 outlined in Section
fl.B. and, in EPA’s diicretioo. do not merit
any penalty due to the insignificant amount
of any econorrec benefit.
2. Dittrit . ion.
a. Providing a clear and significant
reduction in clvii p , for companies that
‘ ‘ responsibility for finding , disclosing
correcting violations will aenre a snong
n ” ve for regulated entities to prevent or
fix violations before EPA expends’__
enforcement es urc . The policy s
clearly the conditions under which EPA will
forpve all or part of the viLy component
of a penalty for valunmnry disetmume and
coiie ont
b. The policy appivptiamly preserves the
r’nc.pr of recovering economic bi ’ ,i .fit. .
except wbere.it is imignifl ’ ’ant as
rm ended by a broad spectrum of
W [ itLU ” i , tfl hIffii1g ii wy wwD’ a
c. Re i” ”g EPA’s discretion to collect the
gravity component of the penalty in.
appropriate cases , such as where a violatioi
involves conduct, or m,..fl ff
substantial end ngerment, will help todu .
the most egregious euvironmeutsi violations.
At the samedme. by preserving flexibility to
reduce the gravity e 1 - by up to 75% for
good faith efforts to disclose and promptly
comply âven in tho e ens the policy will
retain, an appropriate compli rn ’cve
D. Limit Crimä mat Referrvlr fur Volzo iany
Disclosure aid Correcnon u/Violations
-
EPA will not rndommcnd to. the
Deparunem of Justice that criirth I charges.
be brought 2 in5t a regulated entity whute
A demrniines that conditions. 1—7 in.
S on 11.3. above for reduction of civil -
penalties are mar. and the violation does not
demonswaze or involve (1) a prevaleàt
corporate em ir philosophy or prac ce
that, concealed or condoned environmental
violations;(2) high-level corporate o cials
or managers’ conic ous involv n’ in or
wiliM blindness to the violation; or (3)
serious. actual harm to bnirian health or the
environment. This policy does not apply to
Ci4TI tn I acts of individual managers or
employees. Where EPA determines puz u
to this Section that a “ ‘ l referral tb the
Deparonent of Justice is un nxranzed. EPA
may nonetheless pzoce d with civil..
enforcement in accordance with Section UC.
of this policy or other applicable cnforc rn
response and penalty policies.
2. Disc” ’on
The policy will p onra candid and -
thorough ndf-policing by providing grear
c a r3r as to how EPA will exercise its
. ;rn.. .2l invesuptive discretion to enonwnge
yOIm . . .x1 dir sure and prompt co . cn by
megared eurn
£ EZhninose Ro ze Requests jbrAudit
Reporcr in Pre .Er9brca .* rececdhzp
Lincentive .
EPA will not request a voLun y
envixonm I audit reporrto th er a clvii
or ci m nal invesugation. For example. EPA
will nor request an audit in routine
inspections. Once the Agency has reason to
believe a violation has be cov!?mir t EPA
may seek through an inv gamon or
enfv = action any information relevant
to idemifying violations orde1&min .i g
Thth 1it p or c Im t of
2. Dicc oa
S
a. This policy i’s fr clnm that EPA wifi
not routinely request audit repoiu Ar the
same e thepobcy i nnowaylimitsthe
n of regnhr ’ d eunties to claim c ’m .
law prrvilegca ( e.g.. aucrany-clicar and wOrk
product)’ as iate . EPA believes that
this clariflcatic along with the other
___ in policy; should
grnatly redune any v - vuon
environmental audits may be used mifairty in
environmental
b. With respect to federal ilItien,.
although federal facility environial audit
reports may be ‘ ibIe to the public taider
the Freedom of Information Act (FOZA) in
certain drcunistai r . EPA oc t?titi?
FOTA to request krmation from oth
federal agencies. Thus, EPA will apply s
policy on requests for audit reports to federal
(and zc and municipal ) facilities the same.
as it does for other regulated entities.,
•F. Apptkabilüy.
Tha i f m policy applies to violations
onder nfl of the fedoral cavironm mal a” ’ —
that EPA and mneracrhe
otherwise noted) any conflicung or
inconsistent provisions in the dia-sp flc
penalty or ecfo em res onse policies and
EPA’s 1986 Environmental Auditing Policy
• Sr r it E.th g enforr m.mr policies will
continue to auply in conjunction with this
interim policy. except where ncccmstent.with
this policy. In addition, where appropriate.
EPA’s Supplemental Environmental Project
Policy may at EPA’s discretion be applied in
conjunmion with this policy.
Tfl. Favor These Ti .ntives Over Broad
Privileges and TmmW.1Iti
Ths interim policy offers a positive
a1tm arive to across-the-board privileges and
j’ ””’ jD that could be used to shield
er nii J rni condnet , drive up litigation costs
and create an amiosphere of dismist between’
regulators, industry and local com immities,
A. D wu nn .
I. P lty ii m.mry provisions for
vohmtaiy disclosures of-violations can give.•
lawbreakers an economic advantage over
their law-abiding competitors. It m2k sense
to give substantial penalty reducti ons for
those who come forward with their violations
and promptly correct ’ - ‘. but to n intain a.
le €t playing field. tht. eral and stare
governments must be r e to recoup the
economic benefit of violations.
2, A principal rntiôhale for environmental
audit privileges and penalty immunities for
- voluntary disclosures is to reduce the
exposure of regulated entities that conduct
sell-evaluations aid act on the findings by
iiirmediosdy correcn rg violations. EPA has
addressed this conon n with the inceunves for
dis 1 ore arid correction outlined above.
3. Privilege runs coen to efforts to open
‘up environmental ded .siornm king and
encourage public participation in n’ ff 5 that
affect people’s homes. workplaces and’
communities.
4. An en’ riiu. . . . n’ ! audit privilege could
be misused to shield bad actors or to frusrnre
.ac 4o cruclal f& information.
5. Environmental audit privileges and
p ky could encourage increased
litig on as opposing lawyers battle over.
what is privileged or mmm, from penalties
and what is not. Litigation over the scope of
the privileges atid .i. .rnrmties could bürden
ouc already taxed Jn&clal sysma. drain
govxnmem and private resOurces, and in
some cases prevent quick amin to address
environmental emergencze .
6. The Su Court has noted.
“privileges are not lightly created nor
expansively construed for they are in
derogation oI the search for the truth.”
United Sater v.Maun, 418 U.S. 683, 710
(1974). Moreover, the sell-evaluation
‘privilege has regularly and uniformly been
rejecied by the co mt in cases where
dn m i? were sought by a governmental
agency;
IV. Coi equences for States
EPA recognizes that stares ma important
pareners in fedemt eufomeenr. and that it is
desirable to create -a di,it ±i ’ in which stares
can be innovative. At the same time, EPA is
reqitired to establish a ‘cm- .ai c nimnu
consistency in federarenforcemect. so that.
124

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the saococns a business faces for violating
federal law do not depend on wbere the
business is located..
Acordingly. to main n national
cotzsistency -
A. EPA will saurinue enf n nt re
closely in states with audit privilege and/or
penalty immn 4 ty laws and may find it
ne 7 ‘to increase federal enfotteinent
where environmental selfevaluadon
privileges or penalty prevent i
State ROte Obr’ ”
l . infortoazion’ to e blisö er4n, ,&
abil _
2. f nd to establish the n une and
extent of a violation
3. appropoare p ki for n vw! t and
subs1 1 i edangermeàr or s oes barm to
human be 1th or the àViIDn or from
recovering economic b nefi
4. appropriate neDono or penalties for
£tZte 31 conduct and £ pear vtolancns or
5. prompt xecuonof viob.fil tc and
expeditious remediation of those that involve
jmm+n 1jt substa itiaJ endangerment to
bu ao beilth or the e’ironm nt.
B. EPA will bring to the state’s rton
any provisions of m audit privilege and/or
penalty mity that raise any of the
COflCtefl$ outlined above, and will work with
the state to address those concetm and cosme
that federal req x ta ate satisfied. , -
V. Limitado on Appliosbllity cC This
Policy
i s m policy s cm forth =nal
rM 2?, M EPA ’s penalty
polices in smmarions involving voluntary seIf
poliang. dis ’ vere currectioà. In
wth boapplicablepenalry
policy, these gnidclii s w aid EPA
in proposing appropriate penaitmes
or ueg ’ g r ’ ’ ’ in serativc.
and judicial orc ni senona. The r ,r 4m
olicy also serves to anoe the Agency’s
enforeesuent au nriry and states the’.
Agency’s viàw as to the proper allocad
its cuforcernen Deviations from
these gnidelin s . where merited, ate
ant orized so long as the masons for the
deviatioos ate
This interim policy is nor final agency
action, but is intended solely as guidance. It
is nor ime ed. nor can irbe reliedupon. to
create any rights enforceable by any party in
litigation rh the United States. EPA
officials may decide to follow the
provided in this interim policy or to act at
variance with the gttidan besmi on analysis
of coac-specific facts and circ.st ncet
Application of this policy an the cm of any
iudiv idua lca seisattheso lediseretionof.
EPA and is not subje to review by any
• coiut. In addition, the policy baa no effect on
ibe c Je ulztion of any costs. remedial
co . ztacual mao ces l ” gea or
emergency rnspQuse.cocm assoP td with a
• vielatico. EPA reserves the right an____
this policy at any time without public
notice.
Dared: Merub 30, 1995.
St evenA.Her iL
uAir rforErgbrcemeiv i
• CeAasww c& -
(PR Dcc. 95-8218 Piled 3—31—95; 8:4S amj
- t
125

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L.—p.-J9c _l&_/
Federal Register / Vol 60. No. 246 1 Friday, December 22. 1995 / Notices
ENVIRONMENTAL PROTECTION
AGENCY
incentives for Sel1-PolicIng. Discovery,
0lsc osure, Gorrectlofl and Prevention
of Vioians
AGe4CY Eavx.ronmental Protection -
Agony fEPA).
*c icc Final Policy Stat nenL .
St ARV The E rironmeotal Prote on
Agency (EPA) today issues its anal
policy to enhance protection of human
health and the environment by
encouraging regul ted entities to
voluntarily discover, and discloss end
c zact violations of environmental
requize ents. Incentives include
&ir,!in ting or substantially reducing
the gravity component of civil penalties
and not recommending cosee for
mie iIpmsecution where specified
conditions are met, to those who
voluntarily self-disclose and promptly
violations. The policy also
restates EPA ’s long-standing practice of
not requesting voluntary audit reports to
thgger enforcement investigations. This
policy was developed in close
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 pro ams.
DA1 This policy is effective January
22. 1996.
FOR RJRTHE 1NFORMA1 0N CONTACT
Additional doonmentatron relating to
the development of this policy is
contained in the environmental auditing
public docketDo iments from the
docket may be obtained by ceiling (202)
250—7548. requesting an index to docket
—94—Ol. and foaing document
requests to (202) 260-4400. Honr of
operation are 8 a-m. to 5:30 p.m..
Monday through Friday. except legal
holidays. Additional contacts are Robert
Fen ess or Brtan Riedel. at (202) 564—
4187.
SUPPL 4TARY !NFO AT ON
L Explanation of Policy
A. Ln ’oduc n
The Environmental Protection Agency
today issues its Eo.aI policy to enhance
protection of h ni ’ an health and the
environment by encouraging regulated
entities to discover voluntarily, disclose.
correct and prevent violations of federal
enviror..-nental law. Effective 30 days
from :oday. where viciations are Found
through volu.ntarv erivL-onrne r tal audits
or efforts that reflect a regulated entity’s
due diligence, and are promptly -
disclosed and expeditiously corrected.
EPA will not seek gravity-based (La.. -.
non-economic benefit) penalties and
will generally not recommend
prosecution against the regulated entity.
EPA will reduce gravity-based p.iI.lties
by 75% for violations that axe-
voluntarily discovered, and are
promptly d5 c1osed and corrected, even
if not found through a formal audit or
dir, diuigenc*. Finally, the policy
r tee EPA’s long-held policy and
practice to refrain from routhr.reque
for environmental audit reports.
The policy includes important
safeguards to deter 1pi ni.ihL .
behavior and prot ct th. public a d
environment For’ example, In ed’ 4tton
to prompt - t r cure and editiu
the policy requ .
copm ies to act to present recurrence
of the violation and to rem dy any ’
environmental harm iihith may hav
ocourred. Repeated violations or those
whichrasultinactualharmarmay
present irnI!linent end ub,f nt .l--
endangerment ax. not eligibl, for re’lisf
under this policy, and companies will
not be allowed to gain an ‘ . nc-•
advantage over their competitors by
delaying their inv tma ir in --...
compIi ”r ’ Corporations
1 ’ ii1 lly liabl, for vioLstio s that
result from ronscious disr gasd of their
obligations under the law, and
individuals ax. liable for in i .I
misc ondu
.me of this policy concludes
EPA’s eighteenmoiuh public evaluation
of the optimum way to encourage
voluntary self-policing whil pra iog
fair and e ve enforcenierzt The
incentives, co, ditions and exceptions
annau today reflect thoughtful
- su e ons from. the Department of. - .
Justi . state attorneys general and locel
pros ors, state environmental -. -
agencies. th. regulated cmtmity, md
public interest organixarions. EPA.. -
believes that it has found a bilàn d
and responsible approach, and will
conduct a study within three years.to
determine the effectiveness óf.thii
policy.
B. Public Pftcess
One of the Environmental Prote on
Agency’s most important
responsibilities is ensuring compii ”
with federal laws that protect publ
health and safeguard the environxn ,enL,
Effective deterrence requires inspecting.
brin ng penalty actions and sealing
compliance and rernediation of haxm.-.
But EPA realizes that achieving
compliance also requires the
cooperation of thousands of buai &
and, other regulated entities sub ect t
these requirements. Accordingly. 1n
May of 1994. the Adn tin ator asr.ad
the OEca of Enforcement and
Compliance Assurance (OECA) to
determin, whether additional
inr ntive 5 were needed to encou.-ag,
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
W ’thington. D.C.,. followed by a two-
day meeting in San Francisco on
jáuary 19. 1995 with stakehoiders from
industry. trade groups. state
environmental c2 1nn r sioners and
.ltuzxzeys general, district attorneys.
public interest orrni tious and
professional environmental auditors.
The Agency also established and
maintained a public docket of t ony
presented at these meetings and all
comment and correspondence
submitted to EPA by outside parties on.
In addition to considering opinion
and information from stakecolders. the
Agency ri ined other federal and
state policies related to self .policing.
seU’-di Ioeure and corre on. The
Agency usc considered relevant surveys
on auditing practices in thö private
sector. EPA completed the Eret stage of
this effort with the announcement of an
interim policy on April 3 of this year.
which de ned conditions under which
EPA would reduce vil penalties and
not recommend ceinrirtal 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 FR 168751.
and EPA received over 300 responses
from a wide variety of private and
public organirations. (Comments on the
interim audit policj-are contained in the
Auditing Policy Docket hereinafter.
‘t)ocker.) Further,. the Ainericen Bar
Association SONR .. Subcommittee
hosted five days of dialogue with
representatives from the regulated.
industry, states and public interest
or ni tions in June and September of
this year, which ident ified options for
strengthening the interim po cy. The
changes to the interim policy
announced today reflect insight gained
through comments submitted to EPA.
the ABA dialogue, and the Agency’s
practicel experience implementing the
interim policy.
.C.Purpose
This policy is designed to encourage
greater compliance with !aws and
regulations thatprotect hun an health
and the environment It prnr ctes a
higher standard of self.poiic g by
waiving gravity.besed penalties rot
66706
126

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- ; Federal Register / V 1o . 246 I Friday. December 22. 1995 1 Notices
66707
violations that are promptly disclosed
and corrected, and whi were
disco vered through ‘voluntary audits or
compli ce management systems that
demonstrate due diligence. To F.irther
promote compliance. the.policy reduces-
gravity-based pønRIti c by 75% for any
violation voluntarily discovered and
promptly disclosed and corrected, even
if not found through an audit or
cnmplian management system.
EPA’s enforcement program provides.
a stiong i mive for responsible
behavior by imposing stiff ,rtjons for
noncompliance. Enfoxc 1 ent has
contributed to the dramatie expansion
of en .iit 1 auditing measured in
numerous recent sm rv.ya. For example,
more than 90% of the corporate
respondents to a 1995 Price-Waterhouse
survey who conduct audits said that one
ofthemeasoustheydidsowastofind
and correct violations before they were
found by government inspectors. (A
copy of the Price-Waterhouse survey is
conmined in the Docket as document
VW—A—76.)
At the e time, because government
resour are limited. ma mwn
compliance cennot be achieved without
active efforts by the regulated
communityto -police themselves. More
than half of the respondents to the same
1995 Price-Waterhouse survey said that
they would expand ’envixonmental
auditing in . change for reduced
penalties for violations discovered and
comected. While many companies
already audit or have compliance
management programs. EPA believes
that the r ntives offered in this policy
will improve the frequency and quality
of these selfmonitoring efforts.
D. Lnc ntives for Se1f-PoIf .thj -
Section C of EPAs policy identifies
-the major incentives that EPA will :.
provide to encourage’self.policing. self-
isclosure, end prompt self-correction..
These include not seeking gravity-based
dvil penalties or reducing them by
75%, declining to recommend a rni e1
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 recuests for audit
reports since ssuarice of its 1986 policy
en envir timental auditing.)
1. Eliminating Gravity-Based Penalties
Under Section Cii) of the policy. EPA
will not seek gravity-based penalties for.
violations found through auditing that
are promotiv disclosed and corrected.
Gravity-based penalties will also be
waived br violations found through any
docuzientedprocedure for self-policing.
where the company can show that it has
a npliance management program that
meets-the criteria for due diligence in
Secffon B of the policy.
.Cavity-based penalties (defined in
S ±idii.B of the policy) generally reflect
th io’tisness of the violator’s
behavfdL EPA has elected to waive such
per 1tfes for violations discovered
throughdue diligence or environmental
audits. recagumug that these voluntary
eff play a critical role in protecting
huimi’n , health and the environment by
idf g. cor cti.ñg and ultimately•.
prev iittng violations. All of the
conditions set. forth in Section D, which
includ, prompt disclosure and
expeditious co e on,.thust be satisfiod
for gravity-based penalties to be waived. ’
- As in. t ha interim policy. Areserves
the right to collect any economic benefit
that may have been: realized as a result
of noncompliance, even where
companies.meet all other conditions of -
the policy. Economic benefit may be
- wajved, —however, where the Agency.
determines that it is insignificant.
- After considering public comment..
EPA has decided to retain the discretion
to recover economic benefit for two
reasons. First. it provides an incentive
to p1y 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 have.
delayed their invesonent in camp 1 w ’ e
Seconditis ir because it protects
responsible companies from being
undercut by their noncomplying
competitors. thereby preserving a level
playing field. The concept of recovering
cortozthc benefit was supported in
public comments by manystakeholders,,
including indusu ’y representatives (see.’
e.g., Docket. I1-F-39. II-F--28. and U—F-.
-
2.75%-Reduction of Gravity
The poUcy eppropriately limits the
complete wasver of gravity-based civil
penalties to companies that meet the-
higher standard of environmental
auditingor systematic compliance
management However, to provide ‘
additional encouragement for the kind
of self-policing that benefits the public.
gravity-based 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 resolve
environmental problems and begin to
develo an effective compliance
management progr-am.
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 axe 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 cr ff inal
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 minaJ
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
policy. -
This policy is limited to good actors.
and therefore has important limitations.
it will not apply. for example, where
corporate o cials are consmousiy
involved thor willfully blind to
violations, or conceal or condone
noncompliance. Since the regulated
entity must satisfy all’of the conditions
of Section D of the policy, violations
that caused serious harm or which may
pose immiti.nt and substantial
endangerment to hnrnjrn health or the
environment axe 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 poicy are not met, however, it is
important to remember that EPA may. -.
decline to mecommend 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 dvii liability for gravity-
based penalties. That is because the
same conditions for discovery.
disclosure, arid correction apply in both
cases. This represents a clarification of
the interim oclicy. not a substantive
change.
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66708
Federal Register / VoL 60. No.246 / Friday. December 22. 1995 1 Notices
4. No Routine Requests for Audits
EPA is reaffirming its policy, in effect
since 1986. to refrtin from routine
recuests for audits. Eighteen months of
puhlic 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 degre. of culpability. In general.
howeisi . an audit which results in
prompt correction cleeriy will reduce
liability. not expand it. Furthermore, a
review of the ciimii i1 4ocket did not
reveal a single prosecution for
violatinni discovered as a result of an
audit salf-disclàsed to the government
£ Cond Woos
S. ou D desaib.s the nine
conditions that a regulated entity must
maet i order for the Agency riot to seek
(or to reduce) gievity-b.ud penalties
under the policy. As explained in the
Srn ..ry above. regulated entities that
meet all nine conditions will not face
gr*vity sd civil p*naiti.s . arid will
generaLly not have to fear ci i mi ,. . 1
prosecubon. Where th. regulated entity
nests all of the ccndidon except the
first (D(1ll. EPA will reduce gravity.
based p.i mlt4a by 75%.
1. Discnvemy of the Violation Through
an Envisaunienal Audit or Due
Dthgence
Under Section D(1), the violation
must have been discovered through
either (a) an environmental audit that is
systematic. abjectly,, arid periodic as
defined in the 1986 audit policy, or (hI.
a documented. syst.mAtic procedure or
practha which reflects th. regulated
entity’s due diligence in pre nting. -
dete ng. and correcting violations. The
interim policy provided full ciedit for
any violation found through “voluntary
self-evaluation,” even if the evaluation
did not constitute an audit In order to
receive full ciedit under th. final policy.
any self-evaluation that is riot an audit
must be part of a “due diligence”
program. Both “environmental audit”
and “due diligence” are defined in
Section B of the policy.
Whey, 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 the
citsria for duo diligence as defined in
Section B of the policy. These iteria;
which are adapted from existing codes
of practice such as the 1991 Criminal
Sentencing Guidelines, were fully
discussed during the ABA dialogui The
ciiteria are flexible enough to
accomodate different types and sizes
of businesses. The Agency recognizes
that a variety of compliance
management programs may develop
under the due diligence iteria. and
will use its review under this policy to
determine whether basic cirteria have
been met. .
Compliance anagement programs
which train and motivate production
staff toprevent, detect and correct
violations on a daily basis are a valuable
complement to periodic viditing . The
policy is responsive to
recommendations received during
public cfvmment arid from the ABA
dialogue to give compliance --
management efforts which meet thw
citeria for due diligence the Same -
penalty zedu on offered for- -_
environmental audits. (See. e.g.. li-F—
39, fi— —18, arid LI-C—ta in the Doc*atj
EPA may req*nr. asa condition of
penalty mitigation that a d iptiori of
the regulated entity’s due diligence
efforts be made publicly available. The
Agency added this provision in -.
response to su stions from
environmental groupa. and believes that
the availability of such information will
allow th. public to judg. the adequacy
of cumpIii c. management systems.
lead to . i hai c.d comph.nr . and foster
greater public trust in the integrity of
compliar ra ininegeiu.ntsystams.
2. Voluntary Discovery and Prompt
Disdo e
Under Sersion D(2) of the final policy.
the violation must have been identified
voluntarily, arid not through a -
monitoring, sampling, or auditing
procedure that is required by statute....
regulation, permit. udI 1 or
administrative order, or co c*nt
agreement Section D(4) requires that
disclosure of the violation be prompt
and in writing,. To avoid confusion and
respond to state re4uests far grMtar
clarity, disclosures un er this policy
should be to EPA. The Agency
will work closely with states
implementing the policy.
The requirement that discovery-of the
violation be voluntary is consistent with
proposed federal and s late bills which
would reward those discoveries that the
regulated entitycan 1egitimate1y-
attribute to its own voluntary effort .
The policy gives three speciac T !
examples of discovery that woi1ld ndt be
voluntary, and therefore would no be..
eligible for penalty mitigation:
emissions violations detected through a
requited continuous emissions anitor.
violations of NFDES discharge limits
found through presaibed mooitorizg.
and violations discovered through a
compliance audit required to be -
performed by the terms of a consent
order or settlenient agreement.
The final policy generally applies to
any violation that is voluntarily
discovered, regardless of whether the
violation is required to be reported. This
definition responds to comments
pointing out that reporting requirements
are extensive, and that excluding them
from the policy’s rope would severely
limit the incentive for self-pdiclng (see.
e.g.Jf-C-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 an timely
and alrsXe reports from the regulated
community. not only to measure
complc nc, but to evaluate health or
environmental risk and gauge process
in reducing pollutant loadinge. EPA
expects the policy-to encourage the hind
of vigorous selI polidng that will serve-
the, . objectives, and not to provid, an
excuse for delayed reporting. Where
violations of reporting reqwr ents are
voluntarily discovered, they must be
promptly reported (as discussed below).
Where a feilure to report results in
in irr iin nt and subetantial endangerment
or serious harm, that violation is not
covered under this policy (see
Conditiori D(811. The policy also
requires the regulated entity to prevent
recimence of the violation, to ensure
that noncompliance with reportng
requirements is not repeated. EPA will
closely scu tiniz, the effect of the policy
in furthering the public interest in
timely and accurate reports from the
re u1ated community.
‘tinder Section D(4), disclosure of the
violation should be made within 10
days of its discn!ery. and in writing to,
EPA.. Where a statute or regulation
requires reporting be thade in Less than -
10 days. discløsure should be made
within the time limit tablished by law..
Where reporting within ten days is not
practical because the violation is
complex and compliance concot be
determined within that period. the
Agency may accept later disclosuies if
the thcuw.sxances do not present a
serious threat and the regulated entity
meets-its burden of sho ’w-uig that the
additional time was needed to
determine compliance status. -
This condition recognizes that it is
aitical far EPA to get timely reporting
of violations in order that it might have
clear notice of the violations and the
opportunity to respond if necessaz - as
well as an accurate picture of a veri
facility’s compliance record. Promzt
disclosure is also evider.ce of the
regu.Iatedentizy’s good faith in wanting
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Federal Register I VoPSO, No. 246 / Friday December 22, 1995 I Notices
66709
to achieve or return to compliance as
soon as possible.
In the final policy, the Agency has
added the words, ‘or may have
occurred,” to the sentence. “The
regulated entity fully discloses that a
snedflc violation has occurred, or may
have o ,d• - .“ This change.
which was made in resnonse 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 swill govern the
Agency’s release of disclosures made
pursuant to this policy. EPA will.
mdependently of FOI.A. 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 D.1 of the Policy. Any material
claimed to be Confidential Business
Information will be treated in
accordance with EPA regulations at 40
CJ.R Part 2,
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
dtizen 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 stare penalty immunity laws.
and did not prove controversial in the
public comment process.
4. Correction and Remediation
Section D(5) er.r-:res that, in order to
receive the pecaI ; nitigation benefits
available under the policy, the regulated
entity not only voluntarily discovers
and promptly discloses a violation, but
expeditiously corrects it. remedies any
harm ceused by that violation
(including resoond.ing to any spiii and
carrying out any removal or remedial
action reQuiledbv law), and
expeditiously certifies in writing to
approprrate state, local and A
authorities that violations have been
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 where
necessary.
The final policy requires the violation
to be corrected within 60 days. or that
the regulated entity provide written
notice where violations may take longer
to correct. EPA recognizes that some
violations cen and should be corrected
immediately, while others (e.g.. where
capitsi expenditures are involved), may
take longer than 60 days to correct, In
all es . 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 clear 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 the interim policy, the Agency
required that the entity implement
appropriate measures to prevent a
recurren of the v olatiQa a
requiremerit thafoperates 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”—e 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.. U—F—39 and lI—C—
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 occijned
previously within the past three years at
the same facility, or be part of a pattern
of violations on the regulated entity’s
part 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 Recogniring 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 noncompliance 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
org”n tions. as..we.ll as other
commenters. [ See, e.g.. fl—F—39 and 11—
G — 18 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, U—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 oia.nv response.
removal or remedial action coverec by
a written agreement.
8. Cooperation
Under Section D(91. the regulated
entity must cooperate as required by
A and provide ir forrnation necessary
to determine the a olicability of the
policy. This condition is largely
unchanged from the ir,te;im policy. In
the final policy, however, the Agency
has added that “cooperation” induces
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/ VoL 60. No. 246 I Friday. December 22, 1995 / Notices
assistance in determining the facts of
any related violations su ested 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 where the violation is
not in itially identified by the regulated
entity.
F. Opposition to Prrvilege
The Agency remains firmly opposed
to the estabHc.hTnent of a statutory
evidentiary privilege forenvi±onmental
audits for the following reasons
1. Privilege, by definition, invites
secaecy. instead of the openness needed
to build public thzst in industry’s ability.
to s.lf-p liC*. American law reflects the
high value that the public places on fair
to the facts. The Suprecie Court.
for example, has said of privileges that.
iwihatever their origins, these
exceptions to the de, ai d for every
mans evidence axe not lightly eated
nor expansavely construed, for they are
in derogation of the search for truth.”
United States v. Nrcon. 418 U.S. 683
(1974). Federal courts have
i n i 1 .iously refused to r ogirize a
privilege for environmental audits in the
context of government investigauocs.
See. e.g.. United States v. Dexter. 132
F.R..D. 8.9—10 (D.Conn.. 1990)
(application of a privilege wou.ld
effectively impede [ EMs) 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 evdanre Furthermore.
surveys dernonstate that environmental
auditing has expanded rapidly over the
past decade without the stimulus of a
privilege. Most recently, the 1995 Puce
Waterhouse survey found that thos. 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 deasions.
3. A privilege would invite
defendants to d irn ‘audit” material
almost any evidence the government
needed to establish a violation or
determine who was responsible. For
exampi.. most audit privilege bills
under consideration in federal and state
legislatures would arguably protect
factual information—such as health
studies or contaminated sediment
data—end not just the conclusions of
the auditors. While the government
might have access to required
rnorutori.ng data under the law, as some
indusny commenters have s. .ggested. a
privilege of that narure 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 clear national standard
for audits. The ‘in comem” (i.e., non-
public) proceedings used to resolve
these disputes under some statutory
schemes would result in a series of
tim. consuming. expensive niini- ials.
5. The Agency’s policy eliI? in’tes the
need for any privilege as against the
government, by reducing vil penalties
and con inai liability for those
companies that audit. disclos, and
correct violations.. The 1995 Price
Waterhouse survey indir-it d that
companies would expand their auditing
programs in hnnge forth. kind of
int ntves 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-2i. lI-C-2$. U—
C—52. tV-C-to. fl—C-25 , Il—C—33. Il-C—
52.. fl-C-48. and U-C- .13 through U—C—
24.)
C. Effect on States
The final policy reflects EPA ’s desire
to develop fair and effective incentives
for self-policing that will have 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. Asil sult. EPA
believes its final policy is grounded in
a mmon-sense principles that should
prove useful in the development of state
programs and policies.
As always. states axe encouraged to
experiment with different approaches
that do not jeopardize the fundamental
national interest in assuring that
violations of federal law do not threaten
th. public health or the environment, or
make it profitable not to comply. The
Agency ren in opposed to stat
legislation that does not include these
basic protections, and reserves its right
to bring independent action against
regulated entities for vioiaton.s of
federal law that threaten human health
or the environment, reflect thmiflal
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 a prapriate sanctions
needed to deter such misconduct, there
is no need for EPA action.
J 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 public any complianre
agreements reached under this policy,
in order to provide the regulated
community with fair notice of deo.sion.s
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 greater.consistency and
predictability. While EPA is taking steps
to ensure consistency and predictability
and believes that it will be successful.
the Agency will consider this issue and
will provide notice if it determines that
a rulern king is appropriate.
U. Statement otPolicy: Incentives for
Self-Policing
Discovery. Disclosure. Ccz -recion and
Prevention
& Purpose
This policy is designed to enhance
protection of ht,rr an 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’to-4t in EPAS 1986
audit policy on environmental auditing.
i.e.. “a systematic doctimected.
periodic and objective review by
regulated entities of fa liry 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 followtng
(a) Compliance policies, standards
and. procedures thit identify how
employees and agents are to meet the
requirements of laws, regulations.
perm.iis and other sources of authority
for environmental requirements:
(hI Assignment of overall
responsibility for overseeing compliance
with policies, standards, and
procedures. and. assiguinent of specific
responsibility for assuring cnmnpliar.ce
at each facility or operation:
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66711.
(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 retaliatien
(d) Efforts to communicate effectively
the regulated entity’s standards and
procedures to all empldyees and other
agents; -
(e) Appropriate incentives to
managers and ernplpyees to perform in
accordance with the compliance
policies. standards and procedures.
including consistent enforcement
through appropriate disciplinary
menh nicms and
(1) 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 A essrnents’,
GM-22, 1980, US. EPA General
Enforcement Policy Compendiuml.
“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
3. No Criminal Recommendations
(a) EPA will not recommend to the
Department of Justice or other
prosecuting authority that ciiminal
charges be brought against a regulated
entity where EPA determines that all of
the conditions in Section D axe satisfied,
so long as the violation does not
demonstrate or involve:
(1) a prevalent management
philoscphy. 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 iininal prosecution
under this section, the Agency reserves
the-right to recommend prosecution for
the ci ’,minal acts of individual managers
or employees under existing policies
guiding the exercise of enforcement
d i s tion.
4. No Routine Request for Audits:
EPA will not request or us. an
environmental audit report to initiate a
civil or ryiin,iI investigation of the
entity. For example. EPA will not
request an environmental audit report i
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.
D. 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 entiJy due
diligence in preventing, detecting, and
correcting violations. The regulr.ted
entity must provide accurate and
complete documentation to the Agency
as to bow it exercises due diligence to
prevent, detect and correct violations
according to the cilteria for due
diligence outlined in Section B. EPA
may require as a condition of penalty
mitigation that a des iption 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 prescibed by statute,
regulation, permit. judicial or
administrative order, or consent
agreement For example, the policy does
ot apply to:
(a) emissions violations detected
through a continuous emissions monitor
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
by75% -
EPA will reduce gravity-based
penalties for violations of federal
environmental requirements by 75% so
long as the regulated entity satisfies all
of the coridjtionsof Section D(2)
through D(9) below.
(or alternative monitor established in a
permitl where any such monitoring is
recuired
(b) violations of National Pollutant
Discharge Elimination System (NPDES)
discharge limit detected through
required sampling or monitoring;
(c) violations discovered through a
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
priortm
(a) the commencement of a federal,
state or local agency inspection or
investigation, or the issuance by such
agency of an in.fozmation request to the
regulated eauty
(hI notice of a citizen suit;
{c) the filing of a complaint by a third
the reporting of the violation to
EPA (or other government agency) by a
“whistleblower” employee, rather than
by one authorized to speak on behalf of
the regulated entity; or
(e) imminent discovery of the
violation by a regulatory agency;
5. Correction and Remediatiori
The regulated entity corrects the
violation within 60 days. certifies in
writing that violations2iave been
coriected. and takes appropriate.
measures as determined by EPA to
remedy any environmental or human
harm due to the violation. If more than
60 days will be needed to co’rrect the
violation(s), the regulated entity must so
notify EPA in writing before the 60-day
period has passed. Where appropriate.
EPA may require that to satisfy
conditions 5 and 6. a regulated entity
enter into a publicly available written
agreement, administrative consent order
or judicial consent dea’ee. particularly
where compliance or remedial measures
are complex or a lengthy schedule for
attaining and maintaining compliance
or remediating harm is required:
6. Prevent Recurrence
The regulated entity agrees in writing
to take steps to prevent a recurrence of
the violation. which may include
improvements (0 its environmental
auditing or due diligence efforts;
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Federal Register / VoL 60 . No. 246 I Friday, December 22. 1995 / Notices
7. No Repeat Violations.
The specific violation (or closely
related violition) has not occurred
previously within the past three years at
the same facility, or is not part of a -
panem of fideral, stat. or local
violations by the facility’s parent.
orgsx”zzdon (if any). which have
ocourred within the past five years, For
the purposes of this section. a violation
i
(a) any violation of federal, state or
local envi onmental law identified In a
judicial or adminis ative order, consent -
agreement or order, complaint, or notice
of violation. conviction or le.
agreement or
(b) any act or on is’ion forwhich the
regulated entity has previously received
penalty mitigation from EPA or.a stat.
or local agency.
8. Other Violations Excluded
The violation is not one which (1)
resulted in serious actual harm., or may
have pr muted a im nir t and
substantial endangerment to. h w an
health or the environment, or U I)
violates th. specific terms of any
or adminisuetiv, order, or
consent avesment.
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 ac - to
employees and assistance in
investigating the violation, any
noac mphnr” , pmoble s related to the
dis .losute, and any envizonmenzai
consequences related to th. violations..
E. Economic Benefit’
EPA will retain its full di . etion to
recover any economic benefit gained as
a result of noncompliance to preserv , a
‘lev.l 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 arid, in the
Agency’s opinion, do not merit any
penalty due to the insignificant amount
of any economic benefit.
F. Effect on State Law. RaguLitiori or
Policy
EPA will work closely with states to
encourage their adoption of poliaes 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
im nal 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
in nn tent with this policy, ad which
may prevent a timely and appropriate
response to significant environmental
violations. The Agency reserves its right
to take ne saxy actions to protect
public health or the environment by
eufor ng against any violations of
federal law.
C. Applicability
(1) This policy applies to the
assessment of penalties for any
violations under all of the federal
environmental statutes that EPA
adnicters, and supersedes any
inconsictent provisions in media-
specific penalty or enforcement policies
and EPA’s 1986 Environmental
Auditing Policy Statement.
(2) To the exxentthat existing EPA
enfu rnent policies are not
inconsistent, they will continue to apply
in coniun ion with this i1icy.
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 policy 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 exer se of its
prosecutorisl discetion,. it states the
Agency’s views as to the proper
allocation of its enforcement resources.
Th. 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
thdl judicial enforcement a ions. It is
not intended for use in pleading, at
hearing or at iaL The policy may be
applied at EPA’s dis etion to the
set?l*m nt of admini ative 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 effecffveness of the policy
Lnencouzagingr -
(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
Cc) corporate compliance programs
that are successful in preventing
violations, improving ezivizcnmentaJ
performance. and promoting public
disclosure:
(dl consistency among state programs
that provide incentives for voluntary
c omph.n
EPA will make th. study available to
the public.
- (2) EPA will make publicly available
the terms and conditions of aily
compliance agre ixi’nt reached under
this policy. including the nature of the
violation, the remedy, and the schedule
for returning to compliance.
I. Effe ve Date
This policy is effective January 22.
1996. -
Dsied,becemnberia. 1995.
Stzv A. Herman,
A ismntAdmthisou:or for E focr ez : nd
C .omp1iancr . 4 .ssuruiior.
1FR Doc. 95—31145 Flied 12—21—95; 845 arnl
— , co .
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Audit Policy Interpretive Guidance
January 1997
Office of Regulatory Enforcement
U.S. Environmental Protection Agency
Washington, D.C.
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f UNITED STATES ENViRONMENTAL PROTECTION AGENCY
I WASHINGTON, D.C. 20460
JAN 151997
OFFICE OF
E14FORCE ENT AND
COtUANCEAS$URANCE
MEMORANDUM
SUBJECT: bsu.ance of Audit 7 Licy Interpretive Guidance
FROM: Steven
TO: Regional Administrators
Assistant Attorney General, Environment and Natural Resources Division
Attached is the :$ dit Policy Interpretive 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,”60
FecL 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 ttP 11 t gov/oecalepapolguid. 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 guidarice. 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.
l x __
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I veiy 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 Regulatoiy Enforcement and is comprised
of senior staff and managers from all civil enforcement media, the criminal enforcemen rograin,
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 OECA 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: OECA 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
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Explanatory Note
This document was prepared by EPA’s Audit Policy “Quick Response Team” (QRT). The QRT
is thaired by the Office of Regulatoiy Enfcrcement; and it is charged with making expeditious,
fair, and nationally consistent recommendations concerning the applicability of the December 22,
1995 policy on “Incentives for Self.Pthcing: Discoveiy. Disclosure, Correction 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 application, most of which have resulted in significant gravity-based penalty
reductions. Attachments 2 and 3 snmmaiize 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 saies 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 1t nti n. 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,
implied or herwise, in any third parties. -
This document can be found on the Intemet at httpi/es.ind.gov/oeca/epapolguidiitml, and in
EPA’s Audit Policy Docket located at the EPA Headquarters Air Docket; at Waterside Mall in
Wachington, D.C. (202-260-7548). Revisions additions to this guidance also will be made
publicly available at these two locations.
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Audit Policy Interpretive Guidance
TABLE OF CONTENTS
Simim ary of Q je ij n and Answers
Interpretive Issues:
Vohintaiy Discovery (Section D.2. of Audit Policy)
Discoveiy of Violations During Audits Required By Settlements 1
Discoveiy of Violations Under Clean Air Act Title V Pennit 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 Wnting 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 11
Applicability of Audit Policy in Litigation 12
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Degree of Confonnance to The Audit Policy’s Conditions. 13
Miscellaneous
EPA Inspections While Audits Are Being Performed 14
Impact Of Prior Owner or Operator’s Pattern of Violafions On Subsequent
Owner/Operator’s Eligibility Under The Audit Policy 15
Resolving Audit Policy Determinations Through Informal Or
Formal Means 16
Background Jnformalion
Policy “Incentives for Self-Policing: Discovuy,
Disclosure, on and Prevention of Violations,”
60 Fed. Reg. (December 22, 1995) hnient I
Audit Policy Update, V 1, No. 1 (April 1996): lists
disclosures and settlements er the Audit Policy, EP
for making disclosures, etc Attachment 2
Audit Policy Update (JanuaIy 1997): osures and settlements
undertheAuditPolicy,EPAc0 form gdisclosures,etc. Attachment3
List of Audit Policy” Response Team” (QRT)
Members Attachment 4
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Summ of Ouestions and Answers
Below is a suminaiy of key points raised m the Ld 4ive Guidance’s Questions and Answers. Not every rationale,
supporling refrrence, and subtlety associated with se issues are included in this nm y . Readers e advised to
- dio full te, of the Qs and As immediately following this 9Irnimliy .
Can a violator be deemed to have voluntarily discovered its violations where the violations axe discovered
during the conduct of a compliance 50 dit that is required as part of a binding settlement?
Where a violator - without any legal obligation to do so - already has committed to conducting a compliance
audit prior to any formal or inf ial enfczi çmei response ( complaint lilmg or other circumstance
described in Section ILD.4. of d po1icy) an obligation to conduct such an audit with the sume material
scope and pirpose can be incorporated into a bin iii,g 1aej1t with EPA without automatically
disqualifying violations discovered n’ iit from obtaining penalty mitigation under the Audit Policy.
(See Question #1 on page 1 for more detailed explanation.)
2. Can violations identifr4 in a required compliance certi ation accompanying an initial application for a
Clean Air Act Title V op iiug permit be eligible for penalty mitigation under the final Audit Policy?
Generally no, because discovery of violations in these circumstances is i considered vohmtaiy in light of
the comprehensive Title V requirements to inquire, analyzz, and certify as to compliance when applying for a
permit Where an applicant can demonstrate that its inquiry exceeded its obligations under 40 C.F.R. § 70.5,
however, EPA thay on a case-bycase basis consider d discovery of violations dining such an inqwiy to be
voluntary and potentially eligible for penalty mitigation urid the policy. Where permit application
requirements in er c hcr environmental sta1 1tcs do not impose a cimilarly comprehensive duty to inquire
about, analy2e and report violations violations discovered pirsuant to such permit application requirements
may plil y as voluntary discovery and, tins, arc potentially eligible for Audit Policy penalty mitigation.
(See Question #2 on page 2 for more detailed expimialion.)
3. In order to comply with ihe jA i ( disclosure requirement, n” an entity planning to perform an audit of
numerous 5 imilar 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 violator may consolidate its sulaniscion of certaiii infonnation to EPA, but the disclosure of potential
violations still must be ma to EPA within 10 days of discovering a violation. Thus where a violator
discovers a violation at o facility but theat is eason to believe that similar violations may have occurred at
od facilhtics the potential violations at all facilities must be disclosed to EPA within 10 days of the initial
discovery. At a mnmnm h disclosures in these circianstances must contain the identity and location of
all facilities that may raise çmiilar compliance concerns, and a description of the potential violations. ho
violator may supplement such disclosures by sending to EPA mare detailed consolidated information after the
audit of all facilities has been completed, as long as the audit is concluded within a reasonably expeditious
time. (See Question #3 on page 3 for more detailed explanation.)
4. Do submissions of infonnation required by law ( late submittal of an EPCRA reporting form, late
submittal of a Clean Waler Act discharge monitoring report) meet the requirements for disclosure under the
final Audit Po1ic where such submissions ar unaccompanied by a wiitlzii disclosure that a violation has or
may have occurred?
No. Late submission of infonnation required to be submitted by itself is not eligible for penalty mitigation
under the policy. The disclosure must also notify EPA that a violation exists or may exist (See Question 4
on page 4 for more detailed explanation.)
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5. Why must disclosures be in writing and to EPA?
This protects both EPA and the sulwni1t by elmainating any uneerta nty about d tTming and content of the
disclosure, and it expedites EPA’s process of evaluating claims for penalty mitigation. (See Question #5 on
page 5 for more detailed explanation.)
6. At what point does arm entity have to disclose to EPA that a violation “may have occurred?”
11 regulated entity must disclose violations when d e is an objectively reasonable factual basis for
concluding that violations may have occurred. Where d facts underlying the violation we clear but the
c,dstence of a violation is in doubt due to the possibility of differing iukapr Iions of the law, the regulated
entity should disclose the potential violations. (See Question #6 page 6 for more detailed explanation.)
7. If potential violations are disclosed before they occur, we they eligible for penalty reductions under the final
Audit Policy?
Yes, provided the regulated entity uses all best efforts to avoid d vioht The policy, is designed to
ourage disclosure as expeditiously as possible. This can be as late as 10 days after discovery that a
violation occurred crmay have Occurred, or. as early as when a compliance problem is identified. Once the
violation actually occurs, EPA may then mitigate any potential penalty. (Sec Question #7 on page 7 for more
de anation.)’
8. How does EPA nniue if disclosed violations are repeated within the 3-year time frame specified in the
final Audit Polic ’s repeat violations provision?
The 3-year period begins to nm when the government or third party has given the violator notice of a specific
violation through a complaint, consent order, notice of violation, receipt of an inspection report, citizen
suit, receipt of penalty mitigation through a compliant c a s’cW c project). If the same type of violations or
closely related violations occur at the same facility within three years of such notice, they we repeat violations
and we ineligible for penalty mitigation under the fmal Audit Policy. (See Question #8 on page 8 for more
9. Do non-penalty enforcement responses such as notices of violation or warning leffers constitute a prevous
violation for porposes of the policy’s repeat violations provision?
Generally yes, as long as the notification identifies specific violations arid the allegations are not later
withdrawi or defeated. (See Question #9 on page 9 for more detailed explan iticn.)
10. In cases where a 75% gravity-based penalty reduction is appropriate und the Audit Policy, can d .e penalty.
be fur1l reduced in consi ration of supplemental environmental projects (SEPs), good faith , or other
factors as justice may rerpthc?
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 rec iired 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 in cases of self-policing or
voluntary disclosure, which policy takes precedence?
‘11w final Audit Policy takes precedence over any other policies that offer penalty reductioás for satisfying the
same conditions ( 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.)
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12. Why is use of d final Audit Policy limited to settlement proceedings rather than being applicable also to
adjixlicaic y proceedings?
fl policy is inThkd to eate incentives for se f-pohcing prcxnll disciosine, and expeditious correction in a
mmi that mod effectively allocates sc e Agency resonrces. limiting use of the policy to settlement also
reduces transaction costs for the regulated c mimi1y. Making it the object of adversarial litigation is
inconsisteit with this carefully considered approach to xeam1ining tl enforcement pmcess (See Queslion
#12 on page 12 for more detailed cxp1 i’afirin.)
13. Must the specific conditions of the final Audit Policy be met in or& to qualify for penalty reductions, or is
consistency with the general thnig of the policy suThcient( g. where disclosure of violations occurs within
3Odaysbutnotwithinthe 1O-daypexiodspecifiedinthepolicy)?
11 specific ccaidilious must be met If they are not met, EPA instead Will ntili the flexibility provided
ut i its statute-specific penalty policies to recognize good faith efforts and determine the extent to which
penalty reductions arc appropriate. (See Question #13 on page 13 for more detailed explanation.)
14. Should the govc Iu1nent agree to no inspections, fewer inspections or other limits one forcement authorities
during the thnc periods in which an andit is being perfonned?
Although not explicitly addressed in the final Audit Policy, EPA’s longstan&ng policy is not to agree to limit
us non-penalty enforcement authorities as a provision of settlement or otherwise. While EPA may consider
such a facility b be a 1ow inspection priority than a facility that is not known to be audtting whether and
when to conduct an inspection does, and thould, remain a mafler of Agency discretion. (See Question #14 on
page 14 for more detailed explanation.)
15. If an owner or operator discovers at its facility a violation that began when the facility was owned and/or
operated by a previous entity, can the siTibsequent owner/operator receive penalty mitigation under the final
Audit Policy? Can the previous owner/operator also obtain such mitigation?
In both cases, the regulated eniit T’ must meet all conditions in the final Audit Policy, including the requirement
for prompt disclosure. If there has been an arm’s length ttansaction between the entities and they are:
considered separate, there may be situations wbae a subsequent ówner/cçerator can receive penalty
mitigation while the previous ownerloperator cannot ( where the subsequent owner discloses violations
promptly to EPA and the previous owner had not disclosed such violations). Separate entities are considered
independently, mid applicability of the policy is based on the merits of each individual entity’s actions. (See
Que ion #15 on page 15 for more detailed explanation.)
16. 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
mechani ,ic such jnf letters?
Existing Agency policies determine whether a formal enforcement document such as a consent order is
needed, or whether an informal letter will suffice. Generally, enforceable orders are used unless there is no
pending enforcement action, no penalty, and no outstanding compliance obligations. (See Question #16 on
page 16 for more detailed explanation.)
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#1: Discovery of Violations During Audit Required By
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 ( g 1 , in a consent decree or consent agreement)?
A Yes, but only ‘ md c i in cicumatances. fl final Audit Policy requires discov y of violations to
be voluntary in order to obtain any penalty mitigation, and it defines such voluntariness so as to
exclude tuati wl the violations arc “discovered through a ccrnpliance audit required to be
perflxrned by the of a COflS 1t order or settlement agreanent.” 60 Fed. Reg. 66706,66708
(Dec. 22, 1995). This language, liowevu should ix* be read in isolation, because doing so would
iinrfnly preclude penalty Tn’tig ica1 under the policy and create a gniflcam dl cnfive for future
Iing p ies to bind themselves in , r$fI inemit documents to doing compliance ani4it In d s e
section of the final policy, two key goals ar e ic& ed (1) to encourage the conduct of andit
(2) to “reward dose discoveries that the regulated entity can legitimately attribute to its own
voluntary efi ts.” j j. at 66708.
Where a violator — wid a my legal obligation to do so — already has cwnmitte4 to c ucting a
compliance m dit prior to army formal or infomial enforcanent response ( g 1 . complaint filing or
odor circumstance described in Section ILD.4. of do policy), an obligation to c uct such an audi
with do s n material scope axi iupose can be incorporated into a binding settlement with EPA
without aiiimiically discpialifyimg violations discovered tuider the audit from obtaining penalty
mitigation in the Audit Policy . In such cases , EPA should desc1ibe the voluntary nature of the
audit in do settlanent document, so that it is disth1g!1id ,le from other provisions that are not
eligible for penalty mitigalion nr the policy. By allowing audit provisions in settlanents to be
potentially eligible far penalty miUg ion in these Iimi circumstances, EPA is able to shape the
C ’tem t and timing of idit , a ne their perfarm through enforceable terms, and more
efi ctively achieve do goals of the final policy.
1 Where there is any indication that the audit is less than completely voluntary
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.
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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) ritle V operating permit be
digible for penalty mitigation under the final Audit policy?
A: Generally no, because the mann in which such violations are discovered normally will not satisfy
the polic s requirement of “voluntary discovery.” Under d final Audit Policy, the violation must
be “identified voluntarily, and not through a legally m m.id monitoring or sampling requirement
prescribed by regulation, permit, judicial or adminiatraiive order, consent agreemer iL” 60
Fed. Reg at 66711. The regulations implementing Title V of the CAA require applicants to ana1yz
ciiq l sively and describe completely the source’s compliance 40 C.F.R. 70.5(cX8), and
to include in the req tired compliance certification a Staitrzn t that ihe certification is “based on
information and belief formed after reasonable rnqia?y.” lF.mph ic added] 40 C.F.R. * 70.5(d). The
COnip P41SiVC nature of the compliance analysis, together with d specific mandate to corxiui t an
“lnquiiy” and submit a compliance certification, imposes an aThrrnalive duty for Title V permit
applicants to review the CAA requirements to which the source is subject; and to determine the
source’s viith each requirement. To do so, applicants must find and analyze any
nf m tion needed to determine compliance sthinc, inchidiiig data generated by existing monitoring
and sampling methods. Since an applicant for a Title V air operating permit cannot certify to
compliance ornoncoinpliance without first evaluating all available relevant information to determine
whether violations exist, a CAA Title V permit applicant generally cannot claim that the discovery of
violations or potential violations was vohmlaiy. 2
This does not foreclose the possibility that an entity might be able to demonsteate that its inquiry
exceeded its obligations raider 70.5, but any such claim would have to be reviewed on a case-by-
Case basis. Moreover, if disclosures of noncompliance occur 011 t icI 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 where both the discovery and disclosure occur
Well in advance of and are not piumpted by, the applicalioti process). Similarly, disclosures
occurring after the permit application process ( ç g 1 , prior to a permit decision, or after permit
issuance or 4eiiial ) potentially could involve vobintmy discovery, such as where new or previously
unforesceable violations are discovered and disclosed. Such determinations, however, would be
made on a case-by-case basis.
2 EPA emphasizes that this approach is ba d on the unique language of the Thie V
permit application regulations. Where other statutory permit application programs ( the RCRA
hazardous wastc pcuuit program, the Clean Water Act NPDES pennit program, the Clean Air Act
Acid Rain permit program, the Safe Drinking Water Act U iider mund h jection Control program) do
not impose a similarly coiupichensive 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, arc poten tia1ly eligible for Audit Policy penalty mitigation.
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#3: Consolidation of Similar Disclosures
Q: In 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
cunsolidata its disclosures and submit than to EPA later?
A: Consolidation of disckisures is acceptable in certain c irumatances, provided the Audit Policy’s
“ p pt diaclosinc” pw.=.i. nt is met. This provision meognizes EPA’s need to have clear and
timely notice of violat*wis. soth the Agency can respond quickly and appropnately to potr nti 1
health or envimnrnental ri s aixi can accurately evaluate a company’s compliance t ic 60 Fed.
Reg. at 66708 Pr—pt isciosure is also evidence of the regulated entity’s good faith in wanting to
achieve or return to ccmplia as soon as possible. 60 Fed. Reg at 66708.66709. The policy
rerpz s that disclosure be made within 10 days of discovery that a v 0 1 i 0 i has occurred cx may
have occurred, cxc where an applicable sl ’ - or regulation requires reporting in a shorter time
frame . The Ag y has the flexthllity to accept later disciosiucs in NilIi 1ionS where “reporthig within
10 days is not practical becase the violation is ccxnplex arki compliance cannot be detennined within
that period,” as big as “the ci i i mist m es do I prr it a serious duent and the regulated entity
meets its burden of thowing that the Mitioiml thnc was needed to determine compliance sthtus ” 60
Fed. Reg. at 66708.
EPA a omages the conduct of int ve ccxnpsny-wide or TmIbi-f i1ity n&tc , and a consolidated
reporting framework may be appropoate in C L1aiU circmiata cs. Specifically, although a
consolidated reporting arrangement may t c many formic depending on the duration and scope of the
proposed dit , the ii,viit mr be completed expeditiously 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 d violations. At a niinimrnn, this must includC the
identity and location of all facilities that may raise mu1 c*xnplim ca ans and a description of
the pOlr i l violations. (EPA recognizes that d deaiiption of pu rz.ti l violations may be generic
in nature wi e d mmierais facilities being ‘dited conduct niil operations.) Providing this
minimal information within 10 days thould net be an u hardship, aixi it will be a significant help
to EPA in its efforts to process requests for Audit Policy penalty mitigation in an expeditious
As big as the initial disc1osw cont inc this mimimnirm information and complies with the time
period set out in the final Audit Policy, d Agency recognizes that the piuuQt disclosure requirement
can allow for such disclosures to be siçplunaited at a later thne ( the auditresults concerning
d suspected violations can be consolidated into a subsequent s bnikcion to EPA). In such cases,
EPA would corl iI the tüwj1 disclosure recpmanent to have been met because the timeliness of
disclosure would be based upon the initial 9 ihmii on ofinfonnatbi. il Agency notes, however,
that it will consider disclosures to be iniliniely where factual inferences can be diawn about otl
probable violations (kg,. where the violator’s operations and practices are homogeneous in nature) if
the above-mentioned mininnmi information regarding such violations are not disclosed within the 10-
day period specified in the final Audit Policy.
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14: SubmittIng Inform.*ion Without DIs’ 4 oslng Specific Violations
Q Do subml%Iosj of Information required by law late submittal of an EPCRA
reporting form, late gibmittal of a Clean Water Ad discharge monitoring report).
meet the ie jiren ts for disclosure und , the final Audit Policy where such
submk. oii are vm ompan1ed by a written dbc1o w t that a violation hns or ma,
have occinTe I ?
k No. Under d final Audit Policy, an entity must fidly discloa.that specific violations
occurred or may have o zrred, and such disclosure must be made promptly within the
specified time period in order to be eligible for penalty mmgation. 60 Fed. Reg at
66711. Tbe ccfldjticas of the policy are not fulfilled by the mere disclosure of facts or
other informatioá. The policy’s explicit reference to ‘ eciflc violaiionf is meant to
require clear notice toEP thata Compliance problem has o irredo exists , and
proircts the regulated entity by eliminatirg. any doubt as to whether a disclosure has
beCa m.dr . late zbmission of required information withoUt any accothpanying
dilckim ire concerning the existence of possible violations doós not coOstitute full
discIó re of a specific violaiion wider the Audit Policy. * Full disclosure of potential
violations is neces y for EPA to get ckar notice of the violationS and the
opportunity to respond if necessary, as well as an accurate picture of a given facility’s
___ record. 60 Fed. Reg. at 66708. Without a specific reference to d fa
that the information is being wbcniued late and that it ccnstiunes or may constitute a
violation, EPA will not have clear notice of the potential violations and its ability to
respond to po fial threats may be hampered.
a
S still ,. it
. -. •:. ,
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#5: Requiruneut For Dlsdo ir To Be In Wrtting and to EPA
Q Why m dis sures un the, final AUdit Policy be in w&-ltLg and to EPA?
A: - Dsclo res under the Audit POLICY must be n welting to EPA, 60 Fed. Reg. at
66711, beTJIe prompt written disclomre to EPA gives it clear nod of the
vioLations and the opportunity to re ond if necesary, as well asan a irite picture of
a — facility’s record.w 60 Fed. Reg at 66708. Also, the policy
r gnizes that government res zrces 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 4lacIosure Otherwise, una eusry energy is expended itt determining
whether an oral disciosore o urred. Also, requthg discionares to be in writing and
to EPA ins the effect of expediting EPA’s process of evaluating Cl%i , for penalty
mitigation m & the final Audit Policy. Where EPA re ives oral notice of violation
fromthose Who would li AudltPoLicy penalty mitigation, Agency staff are
enóouraged to advise die disclosing entity as to the importance of putting the diaclonire
inwriting.
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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 shorter period provided by law) after it has discovered that the
violation has occurred, or may have occurre4 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 regulatoiy authorities to make a definitive
determination about whether the violation occurred. 60 Fed. Reg. at 66709.
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 ord
to require disclosure under the policy. This is particularly thie 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 remediafion, 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 due to
differing legal interpidafions). As long as there is an objectively reasonable factual basis
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.
6
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#7: Disclosure Before Violations Occur
Q: If potential violations are disclosed before they occur, are they digible for penalty
reductions under the fmal Audit Policy?
Generally yes. For example, if the violations cannot be avoided despite the regulated
entity’s best efforts to comply where an upcoming requiretherit to retrofit a tank
cannot be m due to unforeseeablé technological baniers), EPA may mitigate the gravity-
based penalty 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 penod
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, j 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 defiaencies. 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 minimi7e or dimin te the compliance concern before it actually occurs.
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# : Determining Whether Repeat Violations Bar Penalty Mitigation
Q: How does EPA determine if disdosed violations fail within the 3-year time period specified in
the final Audit Policy’s repeat violations provision?
A: Violations arc considered to be repeat violations that arc not eligible for penalty mitigatioti when the
subsequently dI9covered and disclosed violation are: (1) the same or closely related to d original
violations and have occurred at fl same facility within the past three years; or (2) part of a pattern of
federal, State, or local violations by the company ’s parent organization, if any, within the past five
years. 60 Fed. Reg. at 66711 The purpose of the repeat violations provision in the policy is to
deter irresponsible behav and protect the public and environment” 60 Fed. Rag. at 66706. It
also “provides companies with a ctiilimnng incentive to prevent violations, without being unfair to
regulated 11ti s responsible for managing hundreds of facilities.” 60 Fed. Rag . at 66706.
Two questions Tnustbe answered in order to detezniine whether the violations are repeat viO lationS
ineigil le for penalty mitigation m d final Audit Policy: (1) when the 3-year period begins and
(2) whcd violations which are disclosed, and for which the violator seeks penalty mitigation,
fail within the subsequent 3-year period. As to the first question, the 3-ye& period begins to run
wben the violator first receives notice of the original violations. Such notice can take several forms,
incl uding otiflcation by EPA or a State or local agency through receipt of ajudicial or
administrative or , consent agreement or cider, complaint, conviction or plea a cernent, notice of
violation such as a letter or Inspection report , notice during an inspection, or even through a third
party coniplmnt (mg,, in a citizen suit). A violator also may be put on notice of parlicular
environmental violations when it obtains penalty mitigation for such violations from EPA, a Staie, or
a local agency (mg ,,. under EPA’s Small Business Compliance Incentives policy). As noted in the
final Audit Policy, these cirvianstances collectively “identify SIIIIatiOOS in which the regulated
community has had clear notice of its noncompliance and an opportunity to correct” 60 Fed. Reg. at
66709. Wl e a government or third party has given such notice of noncompliance, the same or
closely relatcd violations cannot be repeated within the subsequent 3-year period following such
notice. This, the 3-year period begins to rim when such clear notice of noncompliance is received,
without regard to when the original wolations cited in that notice actually occurred
As to the second question, EPA Ioo&s to whether the disclosed violations actually occurred within
the 3-year period following the original noticehnitigatzon. If the violations occurred within this
period, they wonld be considered repeat violations and would not be ejigible for penalty mitigation
und the policy because corrective measures should have prevented such a recurrence. If, however,
those violations occurred either before the original notice of ncncompliancó was received by the
violator or a the 3-year period running from the original notice, they would not be considered
repeat violations under the final Audit Policy. Thus, repeat violations are determined by the date
that such subsequent violations occur, without regard to when notice of such subsequent violations
is gtven to the violator.
Typically, the Agency 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.
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.
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#9: Informal Enforcement Responses and Repeat Violations
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 nonenforcernent responses that result in
penalty mitigation. 60 Fed. Reg. at 66712 (specifically including a reference to any
violatiOn identified in a .. . notice of violation.”) The cc iimoci theme is that a
govemrnent 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 similarviolafions.
Notices of violation (NOVs) and warning letters may be worded in many diffcieut ways
sometimes alleging particular violations and sometimes speaking only generally in
terms of an upcoming need to comply with a new requirement). The title or caption on
such documents is not necessaiily 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
d ciencies 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.
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#10: Further Penalty Reductions Beyond The Audit Po y
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 “othe’ factors as justice may require”
as long as any economic benefit of noncompliance (EBN) is 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 prqject 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 proposesto 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 that an audit must be
carned out at a large complex facility in order to prevent a recurrence of violations, SEP
credit may not be provided for conducting this 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.
Similady, 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 that takes steps to correct and reinediate a violation in a
manner that is above and beyond the steps normally expected in order to qualify for
mitigation under the Audit Policy ( g. quicker or more extensive correction) may qualify
for a good faith reduction.
As to economic benefit of noncompliance (EBNT), the Audit Policy restates the Agency’s
longstanding position that recoveiy of any significant EBN is mportant in order to
preserve a level playing field for the regniated community. The Audit Policy does not
revise or modify any other Agency policies ( g., the SEP Policy) concerning recovery of
EBN.
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#11: InconsistenciesBetween Audit Policy and Statute-Specific Penalty Policies
Q: Where statute-specific penally policies provide for different penalty reductions in
cases of self-policing or voluntary disclosure, which policy takes precedence?
A The final Audit Policy states cleazly 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
incon stent; 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 Poticy s greater penalty reductions take precedence.
In some circumstances, however, the Audit Pàlicy may provide for less penalty mitigation
( e.g . 75% penalty reductions where the violations are not discovered through a systeniátic
discovery, as opposed to potential 80% or greater reductions for such cases under another
penalty policy). Here too, the udit 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 5 As long as the critena
in the Audit Policy are met; the certainty and national consistency provided by the penalty
reductions in the Audit Policy would apply.
For activities unrelated to voluntary discovery, disclosure, and remedialion/correclion,
additional penalty mitigation is available as des tibed in Question and Answ #1O.
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#12: Applicability of Audit Policy in Litigation
Q: Why is 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” [ i1tisnotifltendedforuseinpleaJIing,ath ortrj , 6OFed Reg. at66712,
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 judielal 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 in 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.
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#13: Degree of Conformance to The Audit Policy’s Conditions
Q: Must the specific conditions of the final Audit Policy be met in order to quali1 r for
penalty reductions, or is consistency with the genelal thrust of the policy sufficient
where disclosure of violations occurs within 30 days but not within the 10-day
period specified in the policy)?
A: The speaflc conditions must be met. Although the final Audit Policy is intended as
guidance, the Surnrnaiy section sates EPA’s intent to apply the policy uniformly across
the Agency’s enforcement programs. 60 Fed. Beg. at 66706. Those who disclose
violations after the policy’s Jamiary 22, 1996 ective 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 ocaining• prior to the policy’s effective date.
In such cases, however, if the policy’s ccndiiion 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.
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#14: EPA Inspections While Audits Are Being Perfonned
Q: Shoãld the government agree to no inspections, fewer inspections, or other limits on
its enforcement authorities during the time periods in which an audit is being
performed?
A: Although not explicitly addressec in the fin 1 Audit Policy, EPA’s longstanding policy is
not to a&ee to limit its non-penalty enforcement authorities as a provision of settlement or
otherwise. While EPA may consider such a facility to be a lower inspection priority than a
facility that is not known to be auditing, whetherand when to conduct an inspection does,
and should, remain a matter ofAgencydiscretion. 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 serious threat to
human health or the environment, or its ability to asswe the publicas to the compliance
stat ’c cia given facility.
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#15: Impact Of Prior Owner or Operator’s Pattern of Violations On Subsequent
Owner/Operator’s Eligibility Under The Audit Policy
Q: Han 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 sucoessor, except where the relationship between the companies makes
imputing such actions appropriate (&g. where the subsequent owner/operator is a wholly
owned subsidiary of, and connolled by, the previous owner operator): For example, if
there has been an arm’s length ansaction 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
ownedthefybudidnotdisdosesuthaviolaliontoEpA. Jnsuchacase 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 consid ed independently, and applicability of the policy is based on the merits
of each individual enity’s actions.
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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 (j 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 mio a
“publicly available written agreement, administialive consent order or judicial consent
decree, particularly where compliance or remedial measures are complex or a lengthy
schedule for attaining and maintaining compliance or rernediating bairn is required.” 60
Fed. Reg at 66711. EPA also notes that it may require as a conditioá of settlement that any
penalty mitigation premised on the final Audit Policy be contingent upon the completeness and
accuracy of the 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 ( g.. the need to expedite resolution of the case).
Regardless of the approach taken to effectuate such penaltymitigations, EPA will track
this data for purposes of implementing the repeat violations provision and it will
“independently of FO!A, make publicly available any compliance agreements reached
under the policy.” 60 Fed. Re& 66709.
6 In matters where judicial action is contemplated, EPA consults with the Department
of Justice (DOS) in the Audit Policy determination. Where judicial actions are
pending, DOJ approves and files formal consent decrees.
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EPA SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
LL i-
EPA SI IPPLEMENTAL ENVIRONMENTAL
PROJECTS POLICY
A. INTRODUCTION
I. Background
Effective May 1, 1998
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 farther EPA’S goals to protect and enhance public health and the
environment, in certain instances environmentally beneficial projects, or
Supplementil Environmental Projects (SEPs), may be part of the settlement.
ThisPolicy sets forth the types of projects that are permissible as SEPs, the
penalty mitigation appropriate for a particular SEP, and the tenDs 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 piotection and improvements that may not otherwise have occurred
without the settlçment 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 violation& EPA also seeks substantial monetary penalties in order to deter
noncompliance. Without penalties, regulated entities would have an incentive to
delay comn liance until they are caught and ordered to comply. Penalties
promote environmental compliance and help protect public health by deterring
flituri violations by the same violator and deterring violations by other members
of the regulated conaimmity. 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 heaiing. 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
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surALENVRON ENTAL PROJECTS POUCY yg 9 / i/cs.cpa.gov/occ2 ,scp.scpf aLh j
the violations, and prior history of violations. Evidence of a violato?s
commitment and ability to perform a SEP is also a relevant factor for EPA to
consider in establishing an appropriate settlement penalty. All else being equal,
the final settlement penalty will be lower for a violator who agrees to perform an
acceptable SEP compared to the violator who does not agree to perform a SEP.
The Agency encourages the use of SEPs that are consistent with this Policy.
SEPs may not be appropriate in settlement of all cases, but they are an important
part of EPA’s enforcement program.. While penalties play an important role in
environmental protection by deterring violations and creating a level playing
field, SEPs can play a additional role in securing significant environmental or
public health protection and improvements. SEPs may be particularly
appropriate to further the objectives in the statutes EPA administers and to
achieve other policy goals, including promoting pollution prevention and
environmental justice.
2. Pollution Prevention and Environmental Justice
The Pollution Prevention Act of 1990 (42 U.S.C. § 13101 et seq., November 5,
1990) identifies an environmental management hierarchy in which pollution
“should be prevented or reduced whenever feasible; pollution that cannot be
prevented should be recycled in an environmentally safe manner whenever
feasible; pollution that cannot be prevented or recycled should be treated in an
environmentally safe manner whenever feasible; and disposal or other release
into the environment should be employed only as a last resort ...“ (42 U.S.C.
§13 103). Selection and evaluation of proposed SEPs should be conducted
generally in accordance with this hierarchy of environmental management, i.e.,
SEPs involving pollution prevention techniques are preferred over other types of
reduction or ontro1 strategies, and this can be reflected in the degree of
consideration accorded to a defendant/respondent before calculation of the final
monetazy penalty.
Further, there is an acknowledged concern, expressed in Executive Order 12898
on environmental justice, that certain segments of the nation’s population,
low-income and/or minority populations, re disproportionately burdened by
pollutant exposure. Emphasizing SEPs in communities where environmental
justice concerns are present helps ensure that persons who spend significant
portions of their time in areas, or depend on food and water sources located
near, where the violations occur would be protected. Because environmental
justice is not a specific technique or process but an overarching goal, it is not
listed as a particular SEP category; but EPA encourages SEPs in communities
where environmental justice may be an issue.
3. Using this Policy
In evaluating a proposed project to determine if it qualifies as a SEP and then
determining how much penalty mitigation is appropriate, Agency enforcement
and compliance personnel should use the following five-step process:
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-- - - - - —. ‘ - .-.--.
(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 more) of the designated categories
of SEPs. (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..
(Sections F, G, H, I and J)
4. Applicability
This Policy revises and hereby supersedes the Februaiy 12, 1991 Policy on the
Use of Supplemental Environmental Projects in EPA Settlements and the May
1995 Interim Revised Supplemental Environmental Projects Policy. 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.
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 proposed 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
defendantfrespondent may not 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.
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SUFPLEMENTAL ENVIRONMflffAL PROJECTS POLICY
B. DEFLNI11ON AND KEY CIIARACIERISTICS 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
not commenced until after the Agency has identified a violation (e.g., issued a
notice of violation, administrative order, or complaint). 12
“Not otherwise legally required to perform means” 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
perfornE
(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,
(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 project will result
in 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 nor 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 expeditiously 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 &whether a
proposed SEP is within EPA ’s authority and consistent with all statutory and
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Constitutional requirements may be a complex task Accordingly, this Policy
usesfive legal guidelines to ensure that our SEPs are within the Agenc 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 ax least ne 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 if
a. the ptoject 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 rrnm2ging 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’ 4 of a project are defined by
the settlement agreement. Settlements in which the defendantlrespondent 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 satisf ’ EPA’s statutory obligation or another
federal agency’s obligation to perform a partiàular activity. Conversely, if a
federal statute prohibits the expenditure of federal resources on a particular
activity, EPA cannot consider projects that would appear to circumvent that
prohibition
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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. 11 Further, a project cannot be used to satisfy
EPA’s statutoiy 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 agr eement.
D. CATEGORIES OF SUPPLEMENTAL ENVLRONMENTAL
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
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
epidemiologcal data collection and analysis, medical examinations of potentially
affected persons, collection and analysis of blood/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 main enance 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 toxicity of pollution released
to the erivironment, 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
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 end-of-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 geágraphic 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 {21 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
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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.
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. 1
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 i iformation pursuant to 40 CFR
Part 2, SubpartB.
a. Pollution prevention assessments are systematic, internal reviews of specific
processes and operations designed tO identif r 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
prevention 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 deféndantJrespondent s
own economic interest.
b. Environmental quality assessments are investigations of: the condition of the
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environment at a site not owned or operated by the defendant/respondent; the
environment impacted by a site or a facility 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
site or facility 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/re oñdent 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 be performed on the following
types of sites: sites thatare 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 p rty would likely be ordered to perform a
remediation activity pursuant to CERCLA §106, RCRA §7003, RCRA 3008(h),
CWA § 311, 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 SF2s only when the
defendantlrespondent is a small business or small community.
& Environmental Compliance Promotion
An environmental compliance promotion project provides training or technical
support to other members of the regulated community to: 1) identif ’, 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 defendanti respondent’s economic sector.
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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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. m rc enc y 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 Eight-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 Loca’ 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 ofEPCRA,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 -ithin 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 oftheOffice 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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a. General public educational or public environmental awareness projects, e.g.,
sponsóiing public seminars, conducting tours of environmental controls at a
facility; promoting recycling in a community-,
b. Contributions to environmental research at a college or university,
c. Conducting a project, which, though beneficial to. a community, is unrelated
to environmental protection, e.g., maldng a contribution to a non-profit, public
interest, environmental, or other charitable org ni7 1ion, or donating playground
equipment;
d. Studies or assessments without a requirement to address the problems
identified in the study (except as provided for in § D.5 above);
e. Projects which the defendant/respondent will undertake, in whole or part,.
with low-interest federal loans, federal contracts, federal grants, or other forms
of federal financial assistance or non-financial assistance (e.g., loan guarantees).
E. CALCULATION OF THE F1 AL PENALTY
Substantial penalties are an important part of any settlement for legal and policy
reasons. Without penalties there would be no deterrence, as regulated entities
would have little incentive to comply. Additionally, penalties are necessary as a
matter of fairness to those regulated entities that make the necessary
expenditures to comply on time: violators should not be allowed to obtain an
economic advantage over their competitors who complied.
As a general rule, the net costs to be incurred by a violator in performing a SEP
may be considered as one factor in determining an appropriate settlement
amount. In settlements in which defendant/respondents commit to conduct
a SEP, the final settlement penalty must equal or exceed either: a) the
economic benefit of noncompliance plus 10 percent of the gravity
component; or b) 25 percent of the gravity component only; whichever is
greater.
Calculating the final penalty in a settlement which includes a SEP is a five step
process. Each of the five steps is explained below. The five steps are also
summarized in the penalty calculation worksheet attached to this Policy.
Step I: Settlement Amount Without a SEP
a. The applicable EPA penalty policy is used to calculate the economic
benefit of noncompliance.
b. The applicable EPA penalty policy is used to calculate the gravity
component of the penalty. The gravity component is all of the penalty other
than the identifiable economic benefit amount, after gravity has been adjusted
by all other factors in the penalty policy (e.g., audits, good faith, litigation
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considerations), except for the SEP.
c. The amounts in steps l.a and b are added.. This sum is the minimum amount
that would be necessary to settle the case without a SEP.
Step 2: MInimum 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
gravity component only, whichever is greater. The minimum penalty amount is
calculated as follows:
a. Calculate 10 percent of gravity (multiply amount in step 1 .b by 0.1).
b. Add economic benefit (amount in step I .a) to amount in step 2.a.
c. Calculate 25 percent of gravity (multiply amount in step 1 .b by 0.25):
d. Identify the minimum penalty amount: the greater of step 2.c or step 2.b. 1 J-
Step 3, Calculate the SEP Cost
The net present after-tax cost of the SEP. hereinafter called the “SEP COST,” is
the maximum amount that EPA may take uito consideration in determining an
appropriate penalty mitigation for performance 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. 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, developing a
compliance promotion seminar); and annual operation costs and savings (e.g.,
labor, chemicals, water, power, raw materials).L
To use PROJECT, the Agency needs reliable estimates of the costs associated
with a defendant/respondent’s performance of a SEP, as well as any savings due
to such fa tors a energy efficiency gains, reduced materials costs, reduced
waste disposal costs, or increases in productivity. For example, if the annual
expenditures in labor and materials of operating a new waste recycling process
is $100,000 per year, but the new process reduces existing hazardous waste
disposal expenditures by $30,000 per year, the net cost of $70,000 is entered
into the PROJECT model (variable 4).
In order to run the PROJECT model properly (i.e., to produce a reasonable
estimate of the 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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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 iLthe
PROJECT model.) If certain costsor savings appear speculativç 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.
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 will
not deductthe cost ofa SEPfromitstaxes and it iswillingto committothisin
the settlement docwnent, and provide the Agency with ertifica1ion upon
completion of the SEP that it has not deducted the SEP expenditures, the
PROJECT model calculation should be adjusted to calculate the SEP Cost
without reductiOns for taxes. This is a simple adjustment to the PROJECT
model: just enter a zero for variable 7, the marginal tax fate. If a business is not
willing to make this commitment, the marginal tax rate in variable 7 should not
be set to zero; rather the default settings (or a more precise estimate of the
business’ 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 defendantlrespondent and is a profitable project. Such a project is
generally not acceptable as a SEP. Wa 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 suchprojects 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
SEPs 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 goaLLi 2
Step 4: Determine the SEP MItigation Percentage and then the Mitigation
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 in priority
order.)
Benefits to the Public or Environment at Large . While all SEPs benefit public
health or the environment, SEPs which perforiu 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 to minority or low income populations which may have
been disproportionately exposed to pollution or are at environmàntal 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 lithe 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 mediuni
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 of
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 lithe 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 not 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 amoun1 , which is the amount of the SEP cost that may be used in
potentially mitigating the preliminary settlement penalty.
Step 5: Final Settlement Penalty
5.a. The SEP mitigation amount (step 4.b) is then subtracted from the settlement
amount without a SEP (step I .c). -
5.b The greater of step 2.d or step 5.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
defendantfrespondent 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 Li
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 benefit 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.vaiy 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
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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.
II. FAILUIRE 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 on account of the SEP.
2. If the SEP is not completed satisfactorily, but the defendantirespondent:
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 SE?, 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. Geneially, a small stipulated penalty
is between 10 and 25 percent of the amount by which the settlçment 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 determinatioris 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’by
the violations. 1 Soliciting community input into the SEP development process
can: result in SEPs that better address the needs of the impacted community;
07/31/98 10:30:14
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promote environmental justice; produce better community understanding of
EPA enforcement and improve relations between the community and the
violating facility. Comniimity involvement in SEPs may be most appropriate in
cases where the range of possible SEPs is great and/or multiple SEPs may be
negotiated.
When soliciting community input, the EPA negotiating team should follow the
four guidelines set forth below.
I. Community input should be sought after EPA knows that the
defendant/respondent is interested in doing a SEP and is willing to seek
community input, approximately how much money may be. available for doing a
SE?, and that settlement of the enforcement action is. likely. Lf these conditions
are not satisfied, EPA will have veiy little information to provide communities
regarding the scope of possible SEPs.
2. The EPA negotiating team should use both informal and formal methods to
contact the local community. Informal methods may involve telephone calls to
local community orgaithithons, local churches, local elected leaders, local
chambers of commerce, or other groups. Since EPA may not be able to identify
all interested community groups, a public notice in a local newspaper may be
appropriate
3. To ensure that communities have a meaningful opportunity to participate, the
EPA 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 possibilities and limitations in the
current enforcement action: This can be done by holding a public meeting,
usually in the evening, at a local sthool or facility. The EPA negotiating team
may wish to use copununity outreach experts at EPA or the Department of
Justce in conducting this meetin& Sometimes the defendant/respondent may
play an active role at this meeting and have its own experts assist in the process.
4. After the initial public meeting, the extent of community input and
participation in the SEP development process will have to be determined. The
amount of input 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 participate directly in the settlement negotiations.
This restriction is necessary because of the confidential nature of settlement
negotiations and because there is often no equitable process to determine which
community group should directly participate in the negotiations.
J. EPA PROCEDURES
1. Approvals
The authority of a government official to approve a SEP is included in the
officiaFs authority to settle an enforcement case and thus, subject to the
exceptions set forth here, no special approvals are required. The special
22
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. r I tL. £.. AL. L I.J L 4. fULI(. WywygJI9IJ/es.epagov/oe j
approvals apply to both administrative and judicial enforcement actions as
follows:
a. Regions in which a SEP is proposed for implementation shall be given the
opportunity to review and comment on the proposed SEP.
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 EPA 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 EPA’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 Environment 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 case in which a SEP is included as part of a settlement, an explanation of
the SEP with supporting materials (including the PROJECT model printout,
where applicable) must be included as part of the case file. The explanation of
the SEP should explain how the five steps set forth in Section A.3 above have
been used to evaluate the project and include a description of the expected
benefits associated with the SEP. The explanation must include a description by
the enforcement attorney of how nexus and the other legal guidelines are
satisfied.
Documentation and explanations of a particular SEP may constitute confidential
settlement information that is exempt from 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 and may be
released to anyone upon request.
This Policy is primarily for the use of US. EPA enforcement personnel in settling cases. El
theright to change this Policy at any time, without prior notice, or to act at variance to this
This Policy does not create any rights, duties, or obligations, implied or otherwise, in any t
parties.
07/31/98 10:30:16

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EPA SUPPLEMENTAL ENVH ONMENTAL PROJECTS POLICY Jles.e govioeca/sep/sepfix
ATFACHMENT
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 Privilegea Confidential
Do nen
sitr lk iour
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.
S
I .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:
S
II .c SETTLEMENT AMOUNT without a SEP: Sum of step l.a plus 1 .b. j$ I
STEP 2: CALCULATION OF THE MINIMUM PENALTY AMOUNT WITH A SEP
12.a l0% of GRAVITY: Multiply amount in step l.b by 0.10 ils
12.b BENEFiT PLUS l0% of GRAViTY: Sum of step l.a plus step 2.a.
12.c. 25 % of GRAViTY: Multiply amoui t in step 1.b by 0.25. jI$
12.d MINIMUM PENALTY AMOUNT: Select greater of step 2.c or step 2.b. is
ISTEP 3: CALCULATION OF THE SEP COST USING PROJECT MODEL. IFs
STEP 4: CALCULATION OF MiTIGATION PERCENTAGE AN) MITIGATION
A.MOUNF.
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.
%
14.b. SEP MItigation Amount. Multiply step 3 by step 4.a
ISTEP 5: CALCULATION OF THE FINAL SETTLEMENT PENALTY.
15.a Subtract step 4.b from step l.c 11$
15.b. Final Settlement Penalty: Select greater of step 2.d or step 5.a. j(s
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
19o122 O73I!9 1O
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SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY
penalty amount that should be demanded.
2. Since the primary purpose of this Policy is to obtain environmental or public
health benefits that may not have occurred “but for” the settlement, projects
which the defendant has previously committed to perform or have been started
before the Agency has identified a violation are not eligible as SEPs. Projects
which have been committed to or started before the identification of a violation
may mitigate the penalty in other ways. Depending on the specifics, if a
regulated entity had initiated environmentally beneficial projects before the
enforcement process commenced, the initial pei ialty calculation could be lower
due to the absence of recalcitrance, no history of other violations, good faith
efforts, less severity of the violations, or a short& duration of the violations.
3. The statutes EPA administers generally provide a court with broad authority
tà order a defendant to cease its violations, take necessary steps to prevent
future violations, and to remediate any hann caused by the violations. If a court
is likely to order a defendant to perform a specific activity in a particular case,
such an activity does not quali1 r as a SEP.
4. These legal guidelines are based on federal law as it applies to EPA; States
may have more or less flexibility in the use of SEPs depending 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 occurred. Ecosystem or geographic
proximity is not by itself a sufficient basis for nexus; a project must always
satisfy subparagraph a, b, or c in the definition of nexus. In some cases, a project
may be performed 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 Headquarters and/or the Department of Justice. See section J:
7. Earmarks are instructions for changes to EPA ’s. discretionary budget authority
made by appropriations committee in committee reports that the Agency
generally hOnors as a matter of policy.
8. If EPA lacks authority to require repair of the damage caused by the
violation, then repair itself may constitute a SEP.
9. Simply preventing new discharges into the ecosystem, as opposed to taking
a.fiirmative action directly related to preserving existing conditions at a property,
would not constitute a restoration and protection project, but may fit into
another category such as pollution prevention or pollution reduction.
10. These federal agencies have explicit statutory authority to accept gifts of
land and money in certain circumstances. All projects with these federal agencies
must be reviewed and approved in advance by legal counsel in the agency,
usually the Solicitor’s Office in the Department of the Interior.
11. For purposes of this Policy, a small business is owned by a person or another
07731/98 10:30:17
iq i

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zr .)L r c.A A.rc.UN Mr.N A .. CKU. L S r wy wygJ/9PnttpJies.epagov/oecaJscpiscpfm
entity that employs 100 or fewer individuals. Small businesses could be
individuals, privately held corporations, farmers, 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, these audits are not conunonly done by
small businesses, perhaps because such audits may be too expensive.
13.. Pursuant 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 98-500408GE1, or
they may be downloaded from the World Wide Web at
“ http://www. epa. gov/oecaJmodels/ .
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
defendantl 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 identif ,r 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) and it needs to be calculated in a slightly different
manner. Please àonsult with the Office 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
rig
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Si ) g. ;cC gowocc& scpi scpLmaLhtmj
CFRPart22. -
Return to SEP Guidance Documents
Return to SEP Home Page
__ Fe i a OEO EP Hvme:
Last Updateth April 22, j99g
%Ij%+9 t 0 O2 eW2 0
v?ct
07/31/98 10:30:19

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i C —p-- ,qq’ ,j
This document sets forth the Eaivironmen 1 Protection Agency’s Interim Policy on
compliance incenfives for cmall. biisine ce& This Policy is one of the 25 regulatory reform.
jj fi announced by President Clinton on March 1 , 1995, and implements, in part, the
Executive Memorandum on Regulatory Reform, 60 FR.20621 (Apr 26, 1995)...
The Executive Memorandum provides iii pertinent part:
To the extent permitted by law, each agency ha11 use its discretion to modify
the penalties for cma11 bu inesses in the following t tons. Agencies shall
exercise their enforcement discretion to waive the imposition of all or a
portion of a penalty wh i the violation is corrected within a time period
appropriate to the violation in question... For those violañons that may take
longer to correct than the period set by the agency, the agency sh 11 use its
enfàrcement discretion to waive up to. 100 percent of the financial penalties if
the aniounts waived are used to bring the entity into compliançe The.
provisions [ of this paragraph] hafl apply only where there has been a good
comply with applicable regulations and the violation does not
nvo1ve minal wro gdoing or ignifkazt threat to health, safety, or the
—ron—
II 5U2fl to this P0l1cy, A will efe cise Wits di ti , inde ppli ab1e
4 a-SPeCIfiC policies, to refiain from initi2th g an enforcement action seeking civil
p i 1tie s , or to mitigate civil penalties . whenever a cm2-11 business n 1 a good ith effort
tocomply environmental requirements arid where there is no cr mina1 bebavior and no
significant he2lth , safety or emivirànmnental threat. In addition, as announced in the package.
of regulatory reform mnjnalives , EPA is creating special incentives for small businesses io
take the initiativà to identify and correct environmental violations by requesting compliance
as tance from the government In such circ imstances, and provided the small business
meets certain other cxiteri2 set forth below, EPA will exercise its discretion to waive the
entire penalty. Moreover, EPA will defer to state actions that are consistent this Policy.
[ Pub1ish June 23; 1995 60 FR 32675]
A. .
EC c c

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C pi; Tnrf’ .itii for Sm211 Bn ne s * Jzme 1995 Iut im Policy * page 2
B. BACKGROUND
The C1 i Air Act (CAA) Amendments of 1990 require that sates. establish Small.
Business Assistance Programs (SBAPs) to provide te hnical and environmental compliance
assistance to stañonazy sources. On August 12,. 1994, EPA issued an enforcement response
licy which provided that an anthor ed or delegated state program may; consistent with
federal reaujrements. either
(1) as no. ien lti against ci 11 . bu nec es that vollmtanly seek compliance
assistance and correct vioTations revealed as a result of compliance assistance within a
limited Deriod of time: or
(2) keep confldCntial information Thai identifies thà names and’locafions of specific
5m211 businesses with violations revealed through compliance assistance, where the
SBAP is independent of the state enforcement program.
In a further effort to as t m ll businesses to comply with environmental regulations,
and to achieve health, safety,, and envirónmental benefits, the Agency is adop ng a imi1ar
policy for water, toxics, h rdous waste, and other media programs. This interim Policy
sets forth the Agency’s implementation of the Executive Memorandum.
C. PURPOSE
This int m Policy is intended to .promote envirothnental compliance among small
bit inesss by providing incenti’ies for participation in compliance assistance programs, and
encouraging the prompt correction of violations. The Policy accomplishes this in two ways.
by setting forth a settlement penalty Policy that rewarth such behavior, and by providing -
gthd ic for States and local governments 10 offer these incentives.
EPA is committed to a strong enforcem t and compliance assurance program as a
means to protect human health and the environment We expect this Policy to encourage
greater participation in compliance assistance programs that offer services to small businesses
(referred to generically as SBAPs in this Policy).. The Policy will allow greater open iess
among SBAPs and specific facl]iti s, the small business community in general, and. other
federal and state offl 1c. It will promote the sharing of information on pollution prevention
measures, cost effective means of compliance and other valuable compliance-related activities
with and among the reguil f 4 community. Application Of the policy to all media programs
should encourage small businesses to look fOr whole facility’ approaches to environmental
compli2nce. Ultimately, by bringing many small businesses into compliance, this Policy will
enhance the quality of our air, water, and land.

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C ipr . T -.ctt far Sm IIBncin *** Je 1995 1zt im PQEcy s page 3.
M suiing .the success o1 comp1 ance ‘ tance programs is a c a1 component of
EPA’s ability to assess the results of comp1ian and enforcement activities. EPA will work
with States to ev 1uate the effectiveness of this Po1icy and, in 1997,-EPA will consider.
whether this Policy should be continued, modified or discontinued.
D.. APPLICB]L1TY
This Pàlicy appIie to fa i1itie s owixed by n’ l1 bn ne c aS defined he e. A cm l1
business is z p son, corporation, -partnership, or other entity. who employs bOor fewer..
individuals (on a company wide basis). This de nitinn is a sithplifled v sión of the CAA
§507 definition of ma11 business. On b212r ce, EPA determined that-aiingle deThift on
would make implementation of this Policy simple and would allow for consistent a plication
of the Policy in a multimedia context.
This interim policy is effective immei t ly . This Policy applies tc ali civil JUd1 a1.
and administrative enforcement actions t lc n under the aithority of the environmental
statnt s and regulations that EPA athn thtezs , except for éorrective ction programs and the -.
.Pnblic Water System Supervision Program under the Safe Drinkiiig Water Act.’ This Policy
applies to all such actions filed after the effective date of this Policy, and to ali’pending cases
in which the government has not ched agreement in principle with the afleged violator on
of the civil penalty.
This Policy sets forth bów.the tst ci e its erifo±cement discretion
in dei-friing on an appropriate enforcement xesponse and d h- -rnrting an appropriate civil-.
setthriient pe aliy for violations by ma11 businesses This Policy is to be used for settlement
purposes andis not intpiided for usein ple ding , or-at he2ling rfl 4 2l To theextent that
this Policy may differ from the terms of applicable enforcement response policies under
media-spëthfle programs, this do ument supersedes those. poithes - .This Policy plethents,
but d&Wnot upplara the Aigust .12, 1994 Erybrthnent Response Policy.for Treatment of -
hybnnation Obtaiiied Through Ckmz Air AaSe on 507 &naff Busin ss
Progr - - . - .
‘This Policy does not apply to corrective action programs (such as CERCLA,RCRA 7OO3, and
SDWA §1431) because these programs are prima ilyreedial in ,i ture..aud generally dp not seek
penalties. This Policy does not apply to the Public Waxer System Supervision Progra because EPA
is developing another policy which addresses compliance by small communities

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E. CR1TERIA .FOR CIVIL PENALTY MmGAT [ ON
PA w jj hmirta or rnitlZate its settlement penalty demands against rnaU businesses based
on the following criteiia
1) For purposes of sections PCi) and P(2), the small busi iess has made agvod fafth effort to
• comply with applicable ironinen 1 reçuirements as demonstrate 1 by receiving compliance
istance from a non on entzal govemment or government supported program that offers
services to ni 1l.busin (süch as a SBAP or state university), and the viOlations a±e’
detected duñng. the compliance assistance?
Good faith does not exist if an. agency specificafly offered a compliance assis ance program
oncerning the relevant regii1 t d activities to the business and it failed to cipa±ein. such
.‘pogra .•••
• 2) This is the small business’s first violationof this re ment . This Policy applie to
businesses that have not previously b subject t&a warning letter, notice ofviolatidn,.field
• c itation, or other enforcement action by a government agency for a violation of that
requirethent within the past five years. If a bu. ness has b n subject to mul ple
• enforcement actions for violations of environmental requirements in the past five years, this
Policy does jot apply even if this is the first violation of this paxttcular requirement -
3) The policy doesnot apply if:
a) The violation has caused actual serious harm to public health , safety, or the
: 110 en Or
b) The violation may pres t an imm ñent and bs dangernient topubliO
• health!or the environmen or
c) The violaii n presents a igniflcant health , safety or environmesital threat (e.g.;
violations involving hazardous or to c substances may present such threats).
4). The violaflon does not invOlve criminal cOndu t . -
If the compliance or technical assistance pro keeps the information obtained confidential
(Le., does not share or disclose ciiity specific information on compliance status with a regulatory
agency), this Policy does not apply.. However, if a small business wishes to obtain a correthons
period after receiving compliance assistance from a confidential program, the business need oniy
disclose the violations to the appropriate regulatory agency pursuant to criterion I and comply with
the other provisions of this Policy.
C p 1 ’ In ’entives for Sm211 Bncin * * * J j995 .pjj •
paa

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C pI tt In ti for B L h ’ * * June 1995 In± ixn Policy *** -. page 5
5) The businçss cort cts. ,the viola ipn within the èorrection s peiod set fotth lelow.
Small b isine ses are expected to remedy the violations wif bin the shortest practicable
period of time. Sm 11 bu ses may ke up to 90 days folldwii2g detection of the violation
to correct the violation, or to kc subs ntia1 steps t correct the violations (e.g. apply for
nece iy permits, se e rt2ncing, order eqttipnw t). For viola±ions that t! annot be
corrected within 90 days, the correction period may be extended for an additional period not
• to exce ed 90 days, so long as the business enters into a wrirt n ag eement that sets forth the
• ailtii& ,2I correction period and any additional steps to be undert 1c n by the bt ness to
achieve ompliance. The schedule may extend for an additional period of 180 days, j , up
to a period of one y r from the date the violation is detected , only if necessaly where the
cim 11 business corrects the violation by I plei’ nting pollution prevetttion meas rres.
Correcting the violation includes reme Th ting any environmen l harm associated with’ the
vioiafion Any corrections pedod longer than 180 days should be incorporated into an
enforceable Order. The requirements of the correction period should be made l r to the
sm fl busin c offering compliance assistance.
F. PENALTY MT1IGAflON GUIDELiNES
EPA will exercise its enforcement discretion to . elimina or mitigate civil se iement
p 1ti s as follows.
1. - EPA will -hmi, t the ivll setslement penalty in any enforcement acton if a

2.. . If bc m fl business mets all of the criteria, except it needs a longer
• corrections period than provided by criterion 5 (i?e., more th2n•180 days for non-pollution
preven tion emedies , or 360 days for poiluton pr Tenton remedies), EPA wil1 ’ iaive up to
100 % ‘oi the gravity component of the penalty, but may seek the full amount áf any
economic ben f5t a ociated with the violations. 4 .
3. . If a mai1 busin has not met all the eriteria above, but. has Otherwise made a
good faith effort to comply; EPA has discretion, pi suant to its applicable policies, to refrain
from ling’an enforcement action seeking civil penalties or to mitigate its demand for
If signific nt effort will be re iired to rem iare the harm, criterion 3 is likely not to have
been s sfied.
In d ermining how nmdi of the gravity component of the penalty is appropriate, A should
consider the 1, Tnre of the violations, the duration of the violations, the environmental ox public health
impacts of the violations, good faith efforts by the çi ]1 business to promptly remed’y the violation,
and the facility’s overall record of compliance with environmental requirements.
L

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Cnp 1 ’Tn’ ruti for Sm Il Bitccii.. ces 3uze 1995 Int im Policy * * page 6
pena1ti s to the ma imum extent appropriate. These policies generally recognize good faith
efforts to comply and allow br nifigation of the penalty where there is a documented
inability to pay all or.a portion of the pen lty, thereby pl ing empha5 ic on enabling the
5m211 business to n nce compliance. . ...•. .•
G. . 0TH FACTORS
To ensure that this Policy cès nddo s not mise ublic hesith and the
:environment, t e fOllowin conditions apply:
L . Violations detected through federal, state , or local enforcement inspections or reported
to an agency y applicable reguiations or permits rernaifi fufl enforceable.
2.
ine1nd dis etion whether or not to take formal enforcement action) for afl viOlations that.
• bad been detected through compliance assistance and were not remedied within the.
corrections perod. The penalty.in such action may include the time period before and
during thecoir ction period.
• 3 . A business’s good f th. efforts to ec,i cci violatiOns detected during cOmpliance
as siance should be con. dered as a . itiganng factor in determining an appiupriate
enforcement response or penalty in a subsequent enforcement athon.. .Rowever, a State’s or
EPA’s a ons in providing compliance assistance is not a legal defense in any enforcement
actom This Policy- does not limit EPA or a state’s disoretion to use information on
‘violations revealed through compliance assistance as evidence in subsequent enforcement
. .... - - • - -
. I PPLICABILITY. TO STATES.
;. A cOgriizes that st t s are partiiers.in enforcethent and. compliance assurance.
Therefore, EPA will defer to state actions in delegated or’ aypLuved programs that are
generally consistent with guidelines set ofth in this Policy.
This Policy does not require SBAPs to provide t&EPA infdrm tion that identifies the
names orlo tions of sp flc businesses th i are found to be in violation through compliance
assistance. EPA recommends, however, .that whenever an agency provides a correction
period to a m211 business, the agency notify the appropriate EPA Region or state of its
action, to assure fed J and state enforcement responses tol the identified violations are

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Cp1 ”r Trlrp!!tcy for Srn i11 B zsin scec * * June 1995 Int&im Policy page 7
consistent.. A state program that offers confdentiaiity may,’not a1±o offer a corrections peijod
for thà n’ violations (see foothote 2).
In developing this Policy, EPA balanced three primary onsidthtons. First, the
Agency is seeking to provide States with ample opportunity to adopt innovaiive approaches to
environtheiital compliance.. Thus, the Pqliey provides the parameters within which Stafes
have il 1bility to. ilor SBAPs t their needs
- Second, EPA recognizes that parti4pation in SBAPs by individual businesses is.
typic ally vobmtary. : cssistance is provided generally ipon req iest. : Thus, the Agency is
see :ing to assure s’ es of the ability to provide incentives that will encourage many m 11
bnn’c es to participate in SBAPs.
Third, the environmental statutes covered by this Policy generally requires as a
condition of delegation or anthoti ’ation, that programs be consistent with Federal
Ieq ren and that st tes have the authority to take appropriate enforcement action with.
respect to violations.’ Thus, EPA has an obligation to ensure that state SBAPs are
s uctured so as to maintain an yiupriate level of enforcement authority within delegated or
authorized state programs. The Agency believes this.Policy will allow states sufficient
latitude to use an appropxiaxe combination of delegated state enforcement authority and
compliance assistance activity to impiove compliance in the ma11 business coxnmunity.
The CAA §507 policy establishes criteria for EPA approval of SBA.Ps in Stare Implementation
Plans to satisfy the mandate in the CAA, and addresses confidendal assistance in that context.
‘For example, the Resource Conservation and Recovery Act provides that the Administrator
may authorize any Stare to administer and enforce the Act unless he finds, among other . .things, that
such program does not provide adequate enforcement of compliance with the requ. . ents or the
Act. 42 U.S.C. §6926(b).

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 7ç2
WASHINGTON, D.C. 20460
?RO
sP 9 5G
OFFCE OF
ENFO ENTA
• CCMPt C AS.5UR. J C
StJBJECT: Qs and As on Interim Policy on Compliance Incentives
for a1l Eusinesse
FROM: Dire c t or
Office of Regulato Enforcement
Elaine G. Stanley, Directo
Of f ce of Com liance
TO: Regional program Div ion Directors
Regional Counsels
On June 13, 1995, the Assistant Administrator issued the
Interim Policy on Compliance Incentives for Small Eusinesses.
The Policy was subse ently published in the Federal Register for
public cc ent on June 23, 1995 (60 FR 32675) . We have received
a variety of c estions from E?A.Recions and the tublic on how the
POlicy was intended o be imrlemenced. We ex ect to finalize
this Policy, with a ro riate revisions, by the end of th
calendar year. In the interim, in order to rovide nationally
consistent idance on proper im lementation of the Policy, we
have compiled answers to the most co on questions. Attached is
a “Qand A” idance document.
The attached idance document answers the following
questions:
1. What is the definition of compliance assistance for pu OSeS
of this Policy?
2. What procedures should be used to document violations
discovered during compliance assistance?
3. What are the goals and objectives of this Policy?
4. What are good faith efforts to comply under the Policy?
5. What penalty mitigation is available if a small business
makes a good faith effcrt to comply, but compliance
assistance was not available or was not sought?
6. Why does the Policy apply only to “nonconfidential”
compliance assistance programs?
7. What impact does the Policy have on citizen suits?
8. How does the Policy define a “small business”; how does a
parent co oration fit in?
9. Does the Policy apply to viclations that occurred prior to
the effective date of the Policy?
i v R.cC CYC $b
p,., , SQ) C-1 d$ ‘ 1”m

cDiC
I c7

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-2-
In a few enforcement cases, respondents have filed motions
asserting that a Region has failed to provide the respondent with
the benefits of the Policy. d in a few cases,an
Administrative Law Judge has estioned whether this Policy
should be applied. EPA Regions should consult with the
appropriate contact person in the Office of Regulatory
Enforcement in every case in which a licaticn of this Policy is
raised as an issue.
The contact persons in the Office of Regulatory Enforcement
are as follows: Steven Viggiani, Air - Stationary Sources, 202
564-2002; Marc Hillscn, Air - Mobile Sources, 202 664-2255;
Kathryn Smith, Water, 202 564-3252; Barbara Reilly, Toxics and
Pesticides, 202 564-4176; and Susan Garcia, RC k, 202 564-4013.
Cuestions also may be directed to David Hindin in the Multimedia
£nforceme Division, 202 564 . 004, or to Karin Leff, 202 564-
7068, in the Office of Compliance who are coordinating
implementation of the Policy. -.
Finally, this cover memorandum and the attached Q and A
guidance document are both public documents.
Attachment
CC: (w/attachrnent)
Steven He an
Small Business Ombudsman
Regional Enforcement Coordinators
OCA Office Directors
ORE and OC Division Directors
Chief, EES, ENRD, Department of Justice
Assistant Chiefs, EESI E RD, Department of Justice

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Questions and Answers on
Interim Policy on Compliance Incentives for Small Businesses
U.S. EPA — September 19, 1995
1. What is the definition of compliance assistance for purposes of this Policy?
Compliance assistance’ is information or assistance provided by EPA, State or
another government agency or government supported entity to help the regulated community
comply with legally mandated environmental requirements. 2 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 tecbnolo y
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 targeted conferences and computer bulletin boards, to on-
site assistance provided in response to a spe ific request for help.
The special penalty mitigation considerations provided by this Policy óiilv apply
to civil violations which were identified as part of a non-confidential compliance
assistance visit. The key component of compliance assistance in this Policy is the
detection of the violations during the compliance assistance visit. While a facility may
discover it has violations based on information obtained through reading a brochure,
calling a ho tUne or attending a seminar, the Policy does not apply unless the violations
were detected as part of the compliance assistance.
2. What procedures should be used to document violations discovered during the
compliaüce assistance visit?
Section E.5 of the Policy recommends that before the compliance assistance is
provided businesses should be informed of their obligation to promptly remedy any violations
discovered during the compliance assistance. Before a government ency provides on-site
compliance assistance pursuant to this Policy or similar State policy, the agency should
provide the facility with. a short document explaining how the program works and the
responsibilities of each party. The document should emphasize the responsibility of .he
facility to remedy all violations discovered within the co ections period and the types of
violations which are excluded from penalty mitigation (e.g., violations that caused serious
harm). The facility should sign a simple form acbiowledging that it understands the Policy.
Compliance assistance is sometimes called compliance assessments, compliance audits,
or technical assistance.
2 Legally mandated environmental requirements include currently effective requirements
and requirements which have been enacted by Congress or promulgated by EPA and thus
will become effective within a few years.

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Sepceber 1995 pace 2
Qs and As — Inrexim Policy on Compliance Incentives for Small Businesses
At the end of the compliance assistance visit, the government agent should provide the
facility with a list of all violations observed. (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 within a short period after the
on-site visit, usually no longer than a month. Documentation explaining the nature of the
compliance assistance visit and the penalty mitigation guidelines is essential to ensure that the
facility understands the Policy. These documentation procedures are not burdensome and
many States already use similar procedures.
3. What are the goals and objectives of this Policy?
The ultimate goal of the Policy is to bring more small businesses into compliance in
order to protedt ublic health and our envfr nment. To this end, the Policy has two
objectives: to stimulate demand for compliance assistance and to stimulate the supply of
such programs. First on the dern nd side, the Policy is intended to encourage small
businesses to use government sponsored on-site compliance assistance programs. On-site
compliance assistance programs have eme:dous potential to help small businesses
understand their obligations to comply. Without the incentives of penalty eUmim tion or
mitigation offered by this Policy, small businesses may be reluctant to have government
agents visit their facilities to identify compliance problems. Thus, EPA hopes the incentives
created by this Policy will encourage sm l1 businesses to seek out compliance assistance.
Second, on the supply side, the Policy is intended to stimulate the growth of
compliance assistance programs by providing EPA offices, States and local governments with
the flexibility and the incentives to create successful compliance assistance pro rams. EPA
recognizes that compliance assistance progr rns are currently not available in all states for all
programs and thus hopes this Policy will stimulate the creation of additional programs.
4. What are good faith efforts to comply under the Policy?
President’s Clinton Executive Memorandum on Regulatory Reform of April e26, 1995
(60 FR 20621) directs each federal agency, to the extent permitted by law, use its
enforcement discretion to mitigate or waive penalties “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 [ emphasis added].”
Each federal agency has the discretion to define what are good faith efforts to comply.
In an effort to expand the existing compliance assistance policy under the Clean Air
Act to all media programs, and to provide the regulatory community with clear guidance on
when EPA will eliminate or mitigate penalties pursuant to this Policy, EPA has defined
good faith under this Policy as receiving compliance assistance from a non-confidential
government or government supported program in which the violations are detected
l 7 c

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Septenther 1995 page g
Qs and As — Interim Policy on Compliance Incentives for Smnll Businesses
during the compliance assistance. This is the first criterion (in section E of the Policy)
which a small business must satisfy in order for a civil penalty to be either eliminated
entirely or for the gravity portion to be mitigated. The specific penalty mitigation
guidelines set forth in subsections F(1) and F(2) of the Policy only apply where the
violations were detected as part of the compliance assistance visit and assuming all other
provisions of the Policy have been satisfied.
The second criterion for penalty mitigation in the Policy -- that the violations detected
in the compliance assistance visit are first time violations — also relates to good faith. If a
small business has received a warning letter, notice of violation, field citation, or other
enforcement action by a government agency for a violation within the past five years,
subsequently seeking compliance assistance for that violation does not qualify as good faith
under the Policy. Good faith efforts to comply are proactive and occur before the initiation
of the enforcement action. The objective of this Policy is to stimulate new incentives for
compliance ii hich companies seek help’IK complying before an enforcement action occurs.
5. What penalty mitigation is available if a small business makes a good faith effort
to comply, but compliance assistance was not available or was not sought?
Good faith efforts to comply require a company to take some nroactive efforts to
comply before a government agency discovers a violation or issues a notice of violation, a
warning letter or otherwise takes an enforcement action. Under this Policy, EPA has
specifically defined good faith as receiving compliance assistance from a non-confidential
government or government supported program in which the violations are detected during the
compliance assistance. This is the first of five criteria in section E of this Policy which a
small business must satisfy in order for a civil penalty to be either eliminated entirely or for
the gravity portion to be mitigated.
As stated in subsection F(3) of the Policy, if a violation was not discovered through
compliance assistance, but the company has otherwise made a good faith effort to comply,
EPA has discretion, pursuant to other applicable policies, to refrain from filing an
enforcement action seeking civil penalties or to mitigate its demand for penalties to the
maximum extent appropriate. Subsection F(3) does not modify any of the existhig
enforcement policies, but only serves to highlight the discretion that already exists in
these policies to mitigate penalties based on good faith. Many of the media specific
penalty policies have specific mitigation factors for good faith compliance efforts. Further,
in some media specific penalty policies, if good faith efforts are undertaken, the penalty
calculation automatically factors in such efforts through a potentially smaller economic
benefit or gravity amount. Penalties also may be mitigated pursuant to the Interim Revised
Suo lemerzzal Environmental Projects Polic1 of May 1995, or the Guidance on Determining a
Violator’s Ability to Pay a Civil Penalty of December 1986.
Finally, another way a small business (or any business) may receive penalty
mitigation is by conducting a voluntary compliance evaluation. If the small business

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Sepce ber 1995 page 4
Qs and As — Interim Policy on Co p1iance Incentives for Small Businesses
discovers its violations through a volunraiy compliance audit or self-evaluation and
voluntarily discloses its violations in writing to the appropriate government agency and
otherwise complies with the conditions in EPA’s Volunrwy Environmental Self-Policing and
Se f Disclosure Interim Policy Statement, 60 FR 16875 (April 3, 1995), EPA may reduce or
eliminate the gravity portion of the civil penalty.
In contrast, some businesses have argued that their prompt efforts to remedy a
violation after the government agency has discovered the violation through an inspection or
tiled an enforcement action should be considered as good faith. While EPA appreciates and
expects companies to promptly remedy violations after a notice of violation or an
enforcement action has occurred, such efforts to comply are not good faith efforts. If such
efforts were considered as good faith, there would be no incentives for companies to make
any effort to comply until after an enforcement action had been initiated. Good faith efforts
to comply require a company to take some proactive efforts to comply before a government
agency disco f violations through an en rcement action, issues a notice of violation, or
otherwise takes an enforcement action.
6. Why does the Policy only apply to “nonconfidential” compliance assistance
programs?
EPA recognizes that many technical and compliance assistance programs offer
services to the regulated community on a confidential basis — j. , information about speci c
companies or facilities is not shared with the enforcement agency. Nothing in this Policy
affects the continued operation of these programs.
The purpose of this Policy is to encourage small businesses to use compliance
assistance programs. With respect to programs in regulatory agencies or sponsored by such
agencies, the policy provides an opportunity to correct violations within a specified period of
time without being subject to penalties, while assuring that EPA or the State retains the
authority to address seriOus environmental problems and criminal behavior.
In the case of a confidential compliance assistance program, such an incenti”.çe is not
necessary or appropriate because the company is not exposing itself to enforcement by virtue
of its participation in the program. Nonetheless, as indicated in the Policy, a company that
wants an opportunity to correct violations without beIng subject to penalties after receiving
confidential assistance may do so by disclosing the violations to the appropriate enforcement
authority, provided it complies with the other provisions of the Policy.
7. What impact does the Policy have on citizen suits?
Many of the statutes EPA implements contain provisions authorizing citizens to
commence actions seeking civil penalties and injunctive relief for certain violations. These
provisions generally require citizens to foLlow certain procedures in bringing these suits (e.g.,

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September 1995 page 5
Qs azid As — Interim Policy on Compliance Lncentives for Small Businesses
provide the alleged violator and EPA with advance notice of the suit) and bar such suits if
the violation is being appropriately addressed by a state or federal enforcement action.
Whether a small business that receives compliance assistance pursuant to the terms of this
Policy will be protected from citizen suits will depend on the specific facts o ’f the case and
the specific citizen suit provision of the relevant statute.
8. How does the Policy define a “small business’ t ; how does a parent corporation fit
in?
For purposes of this Policy, “small business” means a business owned and operated
by a person, corporation, partnership, or other entity that employs 100 or fewer individuals
on a company-wide basis. This means that a facility with 50 employees that is a division or.
subsidiary of a corporation that has more than 100 employees on a corporate wide basis is
not a small business. Thus, any business that’ is owned by a parent company wh re the
aggregate employee number exceeds 100 persons is ineligible for consideration as a small
business under this Policy. The number of employees should be considered as full-time
equivalents on an annual basis and does not include contractors and consultants. Employees
who work less than 35 hours per week are generally not considered full-time employees.
For example, for purposes of deterrninir g the applicability of this Policy, a company with
150 employees, with 120 of those employees working only 20 hours per week, would be
considered to have 90 full-time equivalents and thus would fit the definition of a small
business.
9. Does the Policy apply to violations that occurred prior to the effective date of the
Policy?
Yes. Section D of the Policy states: “ This Policy applies to all [ enforcement] actions
filed after the effective date [ June 13, 1995] of this Policy, and to all pending cases in which
the government has not reached agreement in principle with the alleged violator on th,e
amount of the civil penalty. This means that the date when the violation occurred Is
irrelevant for purposes of determining application. Cases in which an agreement ona civil
penalty had not been reached to prior to June 13, 1995, are potentially subject to the Policy,
assuming all other conditions of the Policy are satisfied.
I I3

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( i I TJN TED 5TATZS ENYIRONM!NTALPROItCTION AGENCY
WASKINGTOM D.C. S4o
•t JIu.c’t ’
?Gf
ovnei oi
£$
MEMORANDUM
S WECT: Guidance fo’ Calculating ths Econ c 3enef t of
Noncplianc. for Civil Pa’aity
FROM: Ccurtn.y M. Price .
Assistant d in strator for Cn orce eat
and Cc pliance Mcrtori
TO: Regional A inistrators
Associate Enforcement Coun .ls
OECI’I Off ice Directors
I. PURPOSE
This guidance saplifies the ateriil inth. Appendix of
G —22, F:a ework for Statute—Sp.ci tc Approaches to Penalty
As3.ss ent. The Appendix pr.sent3& description of how to
calculate the sccno=ic benefit of no o pliance a par: of
developing a civ .l penalty. A new e ut& model, BEN, is a
ref nei nt of the ae:X odelcgy for c li ng the econcoic
benefit of nonccxtpliancsa
By r.finir.g the .thodc by which Vt .zlc alstc the ccortc ic
benefit of nonc piiance , w, will:
1. 3br:pond to tho ;roble : that s fcrce ent and ogc.
off icun ident±fLod concerning methods fo ul:t ng th
eccnic b.n f it c 2er..nt of a civil penalty;
2. Enzuz e m ng the medLg prora approprLat consistency
in calculatlag the ec:rzc ic benefit conent cf civil penalty;
3. Ensure that the occncoió benefit of nonc ;lic.n: on-
tinues to be a fairly valued, rea.oriable component of a :ivii.
penalty: and
4. Ensur, that the assumptions and data used in 3EN to
calo’. l: . the econcoic benefit component can be de nded at
eith an c inistrativ. hearing or a judicial proceeding.
( L4

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ExMbit I
B!N
A. Accessed via t.r inal tO EPA ’S IBM cputer in Durhaa, S.C.
B. Can be run in either of two modes:
1. Standard od.:
a) Requires 5 inputs:
i. Initial Capital I vest ent
ii . Annual Operating and Maiaten ncs Expense
iii. First Month of Nonccmpli ncs
iv. Cc piianc. nat.
V. PenaltyPayment D te
b) Relies on realistic standard values for
remaining variables:
i. A set of standard values for private
c p an i es
ii. A set of standard values for =unici—
pally—owned or not—f or—profit c=panies
c) Would be used for final calculation of econonic
benefit unless the violating firm ob ect.d and
supplied all. its own financial data
2. Specific mod.:
a) Requires 13 inputs
b) Would be us•d if violating firm cupplied data or
if EPA staff r.s.arched date
C. Is sief to use
1. Optional en-line documontation will guide inexpcrier.ccd
users through each step of the model
2. Written documentation will bc ‘mi1th1. by December
1984
D. I based on modern financi l i cip1c

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—2—
II.
This ‘ aidanc. describes BEN, the new cc puter model, j
terms of how this model resolves the identified problems related
tO the us. of CIVPEN. EPA personnel can us. s to ca .cuiate
economic benefit a violator gains from delaying capital expend±—
turos for pollution control equipment or-f r avoiding the costs
of operating and ma±ntsining pollution control equipment.
Exhibit I s ari:es BEN.
EPA personnel cannot us. BEN to calculate the economic
benefit component of a civil penalty if a violator’s action
does no involve a delayed or avoided •xpenditure. Under
these circumstances, program offices zay .l.ct to develop
statute—specific formulas as provided in GM-22 for calculating
the economic benefit component of a civil penalty. Th.s.
formulas would be used to develop civil penalties in response
to actions such as certain TSCA marking/disposal violations or
RC A reporting violations. The rule of th*..b in th. general
penalty policy would not be appropriat. for these types of
violations.
OPPE is considering the feasibility of developing a second
computer model or rule of thumb formula that could be applied
uniformly to violations that do not involve delayed or avoided
expenditures.
111 • NEW CIVIL PENAL I!T PO .ICY APPROACH
Regional personnel may us. the rule of thumb described in
GM-22 to develop a preliminary estimat, of th. economic ben f it
component of a civil penalty. T e rule of thumb is for the
conv.niertc. of EPA and i3 not intended to giss a violator a- lowe:
economic benefit component in a civil penalty. Regional pe:sc nncl
should consider whether an .stimat. of economic benef it derived
with the rule of thumb would be lower than an .3timate calcuiatad
with BEN. To: .zapl., the longer th. period of noncompliance,
h. more the rul. of thtb underestimates the economic benefit
of noncompliance.
If tPb pgcposes and a violator accepts the rule of thu=b
calculation-a Isgional personnel can d.v.lop th. civil penalty
without furtlier analysis of economic benefits. If a violator
disputes the economic benefit figure calculated under the ruic
of thumb, a more sophisticated method to develop the ecor.onic
benefit component of the penalty is required.
sq

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—3-.
In g.n.ra l, if the eSti.ate under the rule of thtb is
less than sio,ooo, the economic bc ef it :cpon.nt is not needed
to develop a civil penalty; 2 the other f ctcrs in GZ4—22 still.
apply. If the rul, of thib estimate is more than $10,000,
Regional p.rscnne 1 should use BEN to develop an •5t tat. of
the econ ic benefit c ponent.
IV. USING BEN TO CALCULATE ECONOMIC BENEFIT OF ONCOMPLIANc !
EPA pirsonn.l should use the revised computer model BEN
vh s never:
1. the rule of thumb indicatce that the
economic benefit of noncompliance is
gr.at.r than $10,000; or
2. th. violator r.jects the rul. of th b
calculation.
BEN uses 13 data variables. At the option of th. user,
BEN substitutes standard values for 8 of the 13 entries, and
the user only provides data or 5 variables. (See Exhibit 14
BEN also has th. capability for EPA personnel to enter
for those B variables the actual financial data of a violator.
In appropriat, cases, EPA should notify a violator of the
opportunity to submit actual financial data to use in 3!N
instead of the 8 standard values. If a violator ag:eez to
supply financial data, th. violator must 3U i data fcr all
the standard values.
V. ADVANTAGES OF BEN OVER OTNER CALCULATION M! ODS
The computer model BEN has advantages over previously
used methods for calculating the economic benefit component
o a. clvii penalty. BEN doss not require financ±alresGarch
by EPA personnel. The five required variables are information
about capita&.ccsts annual operation and aintsnancs costs,
and the dat for the period of noncompliance. Further, BEN
hac tho f1. bi1ity to allow a violator who cooperates with
EPA to provid, actual financial data that may aff cot the penalty
caleulation.
1/ Although the general penalty policy cut off point i: $10,000,
ch program of fico may establish a cut off ;o nt for the
pro;r m’s mediu=—spccific policy.

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—4—
j’ .ccn ic benefit component calculated with BEN can be
defended iU aft administrative or ludicial proceeding on the
grounds that the standard values used in BEN are derived from
standard financial procedures and the violator had an opport ..
nity to provide financial data to help develop the civil pena2ty.
The use of BEN or statute-specific formulas when appro—
pr j gives the Regional Offices flexibility in determining
the economic beef it of noncompliance. Regional personnel
hsve a consistent method for d.velo?in; a civil p.nalty under
several statutes for ultiple violations that involve delayed
capital casts and avoided operation and maintenance costs.
BEN is easy for a layman to use. The documentatior. is
built into the program so that a Regional user always has
updated documentation &nd can use th. program with minimal
training. States are more likely to follow EPA ’s lead in
pursuing the economic benefit of noncompliance through civil
penalty assessments because the method available from EPA to
serve as a model does not require extensive fInancial resear: 1 t.
cc: Regional Enforcement Contacts
Program Compliance Office irectors

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E - &- 199 - 0
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
I WASHINGTON. D.C. 20460
DEC 161986
UE
£ O C M k? £*O
COMl’Uaj , k MO ITQga
M MOP .AN tyM
Guidance on Determining a Violator’s
A ility to Pay a Civil Penalty
FROM: Thomas L. Adams, Tr. - “-.
Assistant. Adm.iristrator for -
nforcement and Compliance Monitoring
TO: Assistant Administrators
Regional Ad iniserato:s
I. PURPOSE
This guidance a lifies the discussion in the U.iforn
Civil Penalty Policy on h to adjust a penalty target figure
when a violator claims paying a civil penalty would cause
extreme financial hardship. This guidance was developed to
meet the commitment made in the Uniform Civil Penalty Policy
issued February 16, 1984, and in response to Regional Office
recuests for l•ification of the RFramework for Statute—
Specific Approaches to-Penalty Assessments” (GM—22).
1. APPLICABLI
This guidance applies’ to the calculation of civil
penalties under medium—specific policies issued in accordance
with the Uniform Civil. Penalty Policy that IPA imposes on:
1. For—profit publicly- or closely held entities: and
2. For—profit entities o ed 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 entit es; or
2. A violator who files for bankruptcy or is in bar krup cy
proceedings after EPA initiates the enforcemer.t •act .on.
FE 25

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Ill. SCOPE
This guidance only gives a general evaluation of the
financial health of a violator and the possible effects of
paying a civil penalty for the purpose of settlement
iatic s. It describes when to apply the ability to av
factor and provides a methodology for applying the factor -
using a co uter 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 or does it provide a way to predict whether paying
a certain amount for a civil penalty will cause an. already
financially troubled fi to go out of business.
For an ability to pay analysis, EPA needs specific financ.al
information from a violator (see sectiOn V). EPA includes the
financial data in a litigation repcrt only when the data are
requested by the Depértment of ust.ice or ffered by the violatoz.
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 ona violator’s ability
to pay depends on h soon the payments st be made and
what the violator has to give up to make the payments. A
violator has several options for paying a civil penalty:
1. Use cash on hand;
2 Sell assets
3. Increase debt by coercial borrowing;
4. Increase equity by selling stock;
5. Amply toward a civil penalty for a period of time
what would cthe ise be distributed as profit; or
6. Use internally—generated future cash flows by deferring
or eliminating some planned future investments.
Zach of these options will affect a for—profit violator’s
o erations to some degree. EPA st dec .de whether to adjust

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—3—
a proposed. penalty ount and by how much, taking into ac
the gravity o the violation and other criteria in medium
specific guidance.
V. Z ’TFORMATiON TO DETEPMINE ABLITY TO PAY
If ability, to pay is at issue, EPA may request from.a
violator any financial information the Acency needs to eva
the violator’s claim of extreme financial hardship. A vjO
who raises the issue has the burden of providing informati
to demonstrate extreme financial hardship.
financial information to request from for-profit ent
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;
Statements of operati ns;
6. Retained earnings statements;
7. Loan applications 1 financing agreements.
security agreements;
8. Annual reports; or
9. Business services, such asCompustat. Dun and
Bradstreet, or Value Line.
Tax returns are the most complete and in the most c
tent form for analysis. Tax returns also provide fir.anc
information in a format for direct input intO ABEL. knnt
reports are the most difficult tO analThe and may requ
the assistance of a financial analyst.
When requesting information informally or through
ir.terrogatories or discovery, EPA should ask for three t
five years of tax returns along with all other financ al
informatIOn that a violator regularly maintains s busin
records. If a violator refuses to give EPA the infor 4 t
to evaluate the violator’s abilitY t oay , EPA should se
the full calculated penalty amount under the assu tiOn
the violator can pay.

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—4—
V1. CONFIDE ’TIALITY OF FIN? CI 0 Tio
A violator can claim confidentiality for financial
j a j submitted to EPA. n accordance with the regu-
lations on confidential business informatjo , 40 CFR 2.203,
EPA st give notice to a violator that the violator may
assert a business confidentiality clairn. 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 acco anying the
informatio . Information in published annual reports would
not be entitled to confidential trea ent.
VII. APPLYING T Z ABILITY TO PAY FAC O
Under the terms of a consent decree, a violator says a
civil pena.lty in addition to making any capital investment
necessary to come into com-oliance..- EPA considers the costs
of attaining co liance 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 hardshipr -
2. Determine whether criteria in the Uniform Civil
Penalty Policy and medium—specific gui nce :equir consi raticn
of ability to pay;
3. Evaluate the àverall financial hearth of a violator’s
operations by analyzing financial information provided by a
violator or from other sources, such as business services; and
4o Project the probabilities. of a violator having future
internally—generated cash flows to evaluate bow paying a proposed
civil penalty may affect a.violator’s financial- decisions.
VIII. FN CI COM UTER PROGP
EPA’s com uter orogram, ABEL, assists in evaluating the
financial health of for—profit entities, based on the estimated
strength of internally—generated cash flows. A3EL uses financ aL
information on a violator to evaluate the overall financial
health of a violator (step 3 above). The program uses standard
ao .

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—3—
financial ratios to evaluate a violator’s abili ty to borrow
noney and pay current and long—terrn operating expenses.
A.BEL also projects the probable availability of
future jnte:nallv—c’enerated cash flows evaluate some of a
violator’s options for paying a civil penalty (step 4 above).
E?A is developing a user’s manual to provide self instruction
in the use of A3 Li addition to the documentation and helm
aids in.thecom uter procram.
Exhibit 1 is a hypothetical useof 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.
Por exan 1e, in ccr’ orate tax returns, item26 of
Schedule A (cost of goods sold) sets forth deductions for
entertaining, advertising, and professional dues. Schedule E
shows the co ensation of officers. -In Schedule L (balance
sheets), item S sets for h investments that maya include
certificates of deposit or money market funds. These types
of assets and ex enses do not directly affect operations and
may vary considerably from year to year without adversely
affecting the violator’ s operations. Becai.ise a civil penalty
should be viewed as a one—time ex ense, these kinds of assets
and ex enses could be sources of cash for a civil penalty.
Using the sources of financial information from the example
above, 1j ujd assets such as certificates of deposit and
money market funds could be used to pay a penalty. Expenses
for advertis .ng, entertaining, or professional dues could be
reduced for a short period to paya vil penalty. A co orate
officer ght even be willing ;o take less compensation fo
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.
Atta c nent

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I UNIT STATES NVIRONMENTAL. PROTECTION
WASHiNGTON, D.C. 20460
ric z’ — — — ‘•
.
-
CT I 3 2
! !(ORAND X
Change in Xethodolcçy for the BIN Model ‘s
Discount Rate
FROM: Ee.rbert H. Tate, Jr.
Assistant
TO: Assistant 4 i etrators
Regional A 4 strators
If fect,jve t ty days fro . the issuance of this mencrandun,
the Office of Inforcement (01) will enpicy a erent
ethcdo logy for calculating the BIN conputer model’s discount
rate. As a result of this, r h ge, the discount rate will decline
from the current 17.2% to 11.9*. The purpose of this nencrandun
is to notify you and your respective staffs of the r ge and to
d.iscuss some of its implications.
3ackcro d
The Office of Inforement first develned an economic
benefit model in 1978 • One o f the central theoretical ±ssues in
the model’s development was deciding on an apnropr ata discount
rats to evaluate pollution contró expenditures.
rate is an interest rate e p1oyed by the model in perfcming
benefit anelyses. Xfter extensive study of this issue, and
careful consideration of our corporate finance consultant s
vIews, 01 decided on an equity’ based rate. The equity discount
rate approach was later adopted in 1984 when the Agency developed
the BIN c utar modal) Th Agency based its decIsion on .ts
understar.e - 4 g of prevailing corporate financing of conpilan:.
eenditurez, which was that pollution control inves ents did
not contribute to a fim’s profit- a.king activities. Thus i was
logical to assume that a firm raised the capital for
which calculates a v c1ator’s fir -r o al
ahility to comply, clean up or pay a civil p ralty, will soon
employ a WACC discount rate. The-, discount rate plays a different
role in AB : 1 L is concerned with a firm’s overall financ ng
as ouucsed to just the financing of pollution control equiment.
OCT 27
t 3

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2
investme.nt 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 4 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 prodtice revenue, but it ena le . the
firm to make profits. .AnalogcusIy, 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 sane financing as other proj ects 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 c rp rate finance mainstream than assuming only
equity financing. Per these reasons, the Agency is now adopting
a WACC based discount rate for E i model analyses. A new version
of the BEN model, 3EN92, will be a zailable on the ma j rame
computer in thirty days. Users will have a choice of whih i iodel
to use until Pebruary 1, 1993 , After that date, only BEN92 will
be available. New BEN User Manuals should be in the mail in
early January.
Impact of the ChanQe on Economic Benefit Calculations
Because WACC is a weighted average of both ben-owing and
selling shares of stock, the cost for financing pollution control
investments, as calculated by BEN, is now substantially lower.
Since the cost of financing is a key assumption in the BEN odsl.
lowering the discount rate from 17 • 2% to 11.9% . will result n
lower benefit calculations for businesses. (It will have no
effect on not-for..Profit entities.) In a typical case, the

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3
benefit analysis will be 25% to 30%. lower- 2
The 11.9% standard value represents the average WACC rate
for a business. The BEN mode.l 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. alternative WACC values is a
comple c matter that must be left for the Agency’s experts. At
the same time, it is importaflt .to note that nothing in this
memorahdum prohibits EPA 3 itigation teams from using an quity-
based discount rate should our expert feel it is appropria e.
A ’o1jcation to A encv Enforcement Actions
The need to recalculate benefit analyses will depend upon
what stage the case is in. For. purposes of this aemorand , 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 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 i!.. not wrong, and those
settlements/agreements were arrived at through good-earth
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 arty BE analysis, then the litigation team will use BEN92
even if that requires recalculating the benefit portion of t.hS
penalty.
2 The actual change in the benefit figure may be less t K&fl
25% or more than 30%. The 25% to 30% range is for the typical
case. The extent of the change depends on the cost and date
inputs used in the analysis. For example, a BEN analysis for *
short term violation involving a mostly operation and maintenance
expenses might only decrease slightly with the new discount rats.

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4
3 • Cases Where the Government Has Presented the BEN
Analysis to the Defendant, But There. is No ‘inal
Agreement as to the Penalty
The more complex situatjon 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 bénef it component using BEN92 • Each case is
uinicue, 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 tie
flexibility to use either -version of BEN, the litigation team
should be cognizant of the implications of staying with :BZ 9Q,
the previous version of .BEL 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
eg iity-based benefit analyses should carefully consider the
impact on negotiations if the defendant hears about the change
from sources other than the Agency’ a negotiators.
Second, if the litigation team negotiates over an eq iity-
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
bearing. 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 bearing rath than
settle the case. Litigation teams hould carefully consider the
impact on their cases in deciding whether to recalculate the
benefit using BEN 92.
Liti ation Practicalities
Because the WACC—equity dispute became a maj or issue in a
number of our enforcement actions, several litigation teams used
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
risk” category. So while the bottom line settlement figures may
drop due to the recalculation of the benefit number, the bottc
line figures should not be affected henceforth by any litigat.ofl
risk over the discount rate.
7

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5
Should you have any questions about this me orandu , please
contact Jonathan Libber of staff. Ke z ay be reached at
(202) 260—6777.
cc: Enforcement Counsels
John Cr iden, Department of Justice
Regional Counsels
BEN Users
;;th

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i—. - — I — I
UNITED STATES ENVIRONMENTAL PROTECT 1Ot 1 AGENCY
WASHINGTON. D.C. 20460
/7
DEC 3 !9 4
OFFcE OF -
Eo .E r
• C .*P.JANCEASS JRANCE
S B ECT: ABEL ai 4 C.A$HOU’r Models on National LAN Platform
PROM: Ro 4a*’ i n, Director
Office of Regulatory Enforcement
TO: Addressees
EPA’S Office of Enforcement and Compliance Assurance (OECA)
is making available on the Agency LAN platform three financial
analysis/penalty assessment computer models. OECA developed
these three com uter models to assist the enforcement program in
its penalty assessment and cost recovery responsibilities. The
three models deal with three different financial issues that
freguently arise in enforcement cases: 1) calculation of the
economic benefit from delayed and avoided compliance;
2) assessment of ability to pay for clean—ups, compliance and
civil penalties; and 3) determining the appropriate share of a
Super und clean—up for small contributors.
These models, when used in conjunction with their respective
user manuals, allow our enforcement professionals to deal
effectively in settlement negotiations with the above mentioned
financial issues. They can achieve this effectiveness regardless
of their expertise in finance or accounting. But these models
are only tools; they are not rules. If a litigation team
believes itThas a superior alternative for evaluating any of the
above three financial issues, it shou 1d discuss that alt .rnative
with the appropriate people in the Multimedia Enforcement
Division.
To access the models, select the Agency LAN Services or
ALSMenu option on your local LAN menu. Next, select INFORMATION
sERVIcES. ABEL, BEN AND CASHOt T are located under
LEGAL/REGULATORY category. For those Regional personnel who
already have the models on your local LAN’S, OU should request
your respective LAN a .miniStratcrS to remove those versions of
the models. From now on you should just use the models on the
Agency LAN services or ALSMenU opt .cn as only the Nat .onel LAN
platform will be periodically updated. In fact, the first updats
is scheduled for mid—December.
E IQ 1 ___
r \ -— — —
—_a —

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2
There are user manuals for all three models. They ex lain
how to use the models and bow to understand their outputs.
copies can be obtained from Jonathan Lib er of the Xultimedia
nfcrcement D v .sion at (202) 564—6011, although they should be
available through a lan or bulletin board .in the near future.
All the models and their respective’ user manuals are available to
the public through the National Technical Information Service
(NTIS).
The B Model
The economic benefit or “BEN” model, developed in 1984,
calculates bow much violators save when they delay or avoid
compliance with environmental req iirements. Agency personnel
should only use BEN in settlement negotiations. Should a case
appear headed for a trial or hearing, the litigation team should
obtain an expert to calculate the economic benefit. The expert
will conduct his or her own evaluation based upon his or-her own
expertise, not upon the model’s.
The ABEL Model
‘The’ ability to pay or “ABEL” model, developed in 1986,
evaluates for—profit violators’ claims of inability to afford
penalties, clean-up costs or compliance casts. Violators raise
the issue of inability to pay in most of our enforcement actions
regardless of whether there is any hard evidence supporting the
claims. ABEL was designed to permit our enforcement -
professionals to quickly determine if there is any validity to
those claims.
In order to simplify the analysis for ou enforcement
professionals, the ABEL model focuses only on cash flow. Because
it ignores such sources of funds as assets, inflated/unnecessary
expenses, and. corporate manipulatio! it is biased heav-i .y in
favor of defendants. Thus if the litigation team finds a
negative or indefinite ABEL analysis, the team must look at these
other sources. For that effort, the litigation team may need
expert assistance.
• Should a case appear headed for trial or hearing, the
litigation team should obtain an expert to perform this
evaluation. The expert will conduct his or her own evaluation
based upon his or her own expertise, not upon the model’s.
The CAS C Model
The CASHOCT model, developed in 1992, determines in current
year dollars what all the future costs of a Superfund site will

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3
be. Since those costs could be as much as 50 years in the
future, this allows the enforcemeBt professionals in the
Superfund program to quickly determine what the total current
cost of a clean—up would be. Then they áan use that n1 ber to
‘cash out” of the case the small contributors. They just pay an
appropriate portion of the CASEO’DT number, and then they are o t
of the case. The major contributors have to stay-in the case.
But this allows the enforcement staff .to focus their efforts on a
more manageable number of potentially responsible, parties.
As with the BEN model, CASEOUT prompts the user for costs,
dates and certain interest and tax rates. And as with the other
two models, if the case appears headed for trial, the litigation
team should obtain an expert to perform this evaluation. The
expert will conduct his or her own evaluation based upon his or
her own expertise, not upon the model’s.
Expected User Community
The projected users of these three models are the
environmental enforcement professionals in EPA, the Department of
Justice, State and local’ government environmental enforcement
professi9nals and. State Attorneys.General. There are currently
‘about 600 users of the models who access them through the EPA ’s
mainframe computer. This includes users from EPA Headquarters,
the Depa ent of Justice, the 10 regional offices and over 40’
-States.
Eciii ment Needed
No special equipment is needed to operate the models. Any
IBM compatible mainframe computer will work as long as it is
connected to a LAN containing the computer model.
Trainin
All three models are very user friendly, and users need not
know anything about corporate finance, accounting or computers to
be effective at using the models. OECA will be making available
video tape courses on. the BEN and ABEL models to all governmental
personnel. Users are encouraged to contact Jonathan Libber
should they have any questions or concerns about the models’
operation, or effective use in enforcement actions.
Uodatir
OECA updates the models a.nnually, usually some time in the
late summer. The Agency LAN’s will be updated shortly after the
I

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4
updates are completed. For further information about the models,
contact Jonat! an Libber of the Nultimedia Enforcement Division at
(202) 564—6011.
Addressees
Director, Office of Compliance
Director, Office of Site Remediatjon Enforcement
OR.! Division Directors
Regional Counsels
Water Division Directors-
Kazardous Waste Division Directors
Air and Toxics Division Directors
IRN Branch Chiefs

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VIRONMENTAL PROTECTION AGENCY
OFFICE OF ENPORCE T AND COMPLIANCE ASSURANCE
NATIONAL ENFORC NT INVESTIGATIONS CENTER
BUILDING 53, BOX 25227, DWVER FEDERAL C TER
DENVER, COLORADO 80225
< f4y ‘
DATE: 1996
M NORANDtYM
SUBJECT: Financial Analysis / General Synopsis
Electron .c File Name is NEICFAO1.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 transactions 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.;
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.

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4. Provide awareness to EPA personnel of the importance
of, acting as a team, and continuing coIr tunication
throughout the enforcementprocess.
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, co ents, or questions with
respect to the attached document, please contact Kimberly Zar’±er
at (303) 236—3636 ext. 555.
Attachment -
I ( n( c zi .- 6, ’a .ecki. ?-3&-S,’(

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FORC NT CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
/127195 -
GENERAL CO NTS
This worksheet is provided as a guide arid reflects only
ceneral 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 case 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 DOCU NTATION TO BE PROVIDED BY ATTORNEY
A. Request memo detailing the following:
• Synopsis of the case (complete history)
• Inspection date
• Program personnel involved - names and prione
nu mbers
• Violation details
• Penalty amount
• Current status of case
• Description of business activity, type of ent:ty
(individual or corporation)
1
;‘ 15

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ENFORC T CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORC T. 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 conies
• Attorneys 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 w.th
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.

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FORC T CONFIDENTI
FINANCI AN LYSIS/GENE SYNOPSIS
NATIONAL ENFORC T INVESTIGATIONS CENTER
II. WHEN CASE IS RECEIVED
A. Review package, and pre-plan case.
Make sure you have only COPIES ; originals are to be
maintained by attorney.
Make sure all requested information has been
received. -
• Review synopsis of case to get general idea of
status of case.
• Read through complaint, answer, rehearinc
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.
ID. 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 inforrnaticn
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:

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ENFORC NT CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
N? TIONAL ENFORC T 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
I. 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.)
J. If any lawsuits discovered, review synopsis and possibly
order copies of complaint and decision.
K. 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.
L. Review applicable penalty policies.
M. Develop organizational chart and time line.
N. Discuss up-to-date status with attorney. Outline
alternatives, etc.
O. Develop document request.
P. Develop initial interview questions.
Q. Schedule initial interview through the attorney.
III. CONDUCT TEE INITIAL INTERVIEW
IV. REQt EST ADDITIONAL DOCU NTS
NOTE: EPA has the burden to prove the penalty is appropriate.
A bility TO Pay is one element to be considered in evaluating
the appropriateness of the penalty.
A. Voluntary document request submitted
4

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ENFORC T CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENFORC T INVESTIGATIONS CENTER
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 CONFER CE CALL OR SETTLENENT ETING
A. Discuss conclusion with respondent; ask additional
questions to further support our case and answer any
questions they may have.
B. Depending Ofl the course of the case, this may be the tine
to identify to whom we may need to issue subpoenas if
conflicting or missing information.
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ENFORC NT CONFIDENTIAL
FINANCIAL ANALYSIS/GENERAL SYNOPSIS
NATIONAL ENPORC ’T INVESTIGATIONS CENTER
VIII. ISSUE SUBPOENAS FOR ANY ADDITIONAL INFOBN TION REQUIRED
TO SUPPORT OUR CASE IN COURT
A. Make sure we have ALL the necessary evidence to support
our case/rebut their position.
IX. SETTLE m CASE.
OR
X. GO TO COURT
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ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE
NATIONAL ENFORCEMENT INVESTIGATIONS CENTER
BUILDING 53, BOX 25227, DENVER FEDERAL CENTER
DENVER, COLORADO 80225
DATE: August 2, 1995
MEMQRANDUM
SUBJECT: Financial Analysis Memorandum #2
Obtaining Financial Documentation/Discovery Motion
Electronic File Name is NEICFAO2.DIS
FROM: Kimberly A. Zanier, CPA 1<’.
Senior Financial Analyst
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.
BACKGROUND
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.

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THE MOTION AND ATTACHMENT
As stated, the attached Discovery Notion 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 writin’g, 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.
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LISTING OF DOCUMENTS INCLUDED IN DISCOVERY MOTION/ATTACHMENT
DATED JUNE 19, 1995
GENERAL DOCUMENTS
1. Year-End Trial Balances
2. Chart Of Accounts
3. General Ledger
4. Tax Returns
5. Financial Statements
6. Depreciation Schedule
SPECIFIC DOCUMENTS
1. 1099s, 1098s, and W-2s
1099-Div.
1099-B
1099-S
1099-MISC.
1098
W-2
2. Lease Agreements
3. Financial Institutions Identification and Disclosure
Authorization (see sample form attached )
4. Assets - sold or transferred
5. Assets - bought
6. Bank statements
7. outstanding loans to
8. Shareholder loans to
9. Mana ementS representation letter
10. Other investments
11. Liabilities
12. Interest income
13. I. ses
[ Underlined Items represent new updat 1
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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 o.f 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 Nay 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.
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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
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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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 REOUESTED
EPA requests the following financial documents:
PROVIDE A LISTING OF THE DOCUMENTS ONLY, EXPLAWATIONS INCLUDED IN
ATTACE”IENT
CONCLtJS ION
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
Offlcs of R.gionai Coun
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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
GENERAL FINANCIAL RECORDS - Please provide copies of the
following documents :
TAX RETURNS
1. ‘ s tax return for the fiscal year ending June 30, 1994, or,
if this return has not vet been filed, a copy of the
preliminary draft
(decided an explanation was unnecessary; however, in next issuance
will provide)
FINANCIAL STATEMENTS
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-end trial balances for the fiscal years ending
June 3O 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
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statements. For example, a company may maintain numerous contract
labor accounts, including contractor dollars paid to outside
entities, contractor dollars paid to ‘s corporate officers and
or shareholders, 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 heading “cost of labor” and
included in ‘S cost of goods sold. To analyze ‘s ability to
pay the proposed penalty, knowledge of the components which make up
each of the specific accounts listed on the tax return is necessary
so that the relevant assets, expenses, and liabilities may be
evaluated to determine the necessity and appropriateness of each.
The trial balance must be reviewed first to identify those accounts
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 and EPA with respect to an ability to
pay analysis.
‘s year-end trial balances have been requested f or 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 3O
1993 and June 30, 19 j
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 account description
associated with the account number is unknown, a proper analysis of
the accounts and substantiating documents cannot be performed 1
since the analyst will be unable to determine which accounts are
relevant. Thus, ‘s chart of accounts will be used to facilitate
the financial analysis by making the process as quick and efficient
as possible.
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GENERAL LEDGER
5a. ‘ s general ledger for the month ending June 30 1993
5b. ‘ s aeneral ledger for the time period January 1. 1994
through June 30, 1994
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).
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The depreci.atlon schedule has relevance in an ability to pay
analysis for a number of different reasons. The depreciation
schedule:
(a) Will show if any assets have recently been purchased and
the associated cost of the asset. If the corporation
paid cash for these assets, the assets may be used to
secure a new loan. The proceeds from the loan could be
used to pay the penalty.
(b) Will show if there are unnecessary or luxury items being
paid for by the corporation. (Please note, other areas of
the financial statement or tax return may also indicate
additional luxury 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. continued operation of
the business, these nonessential assets could be sold to
generate additional cash which could be used to pay the
penalty.
(C) 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. 1 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 shareholder 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 would 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 of. the same
controlled group... among others. Indirect ownership includes ownershiP
through family members and oth Treasury Regulation 1.267.
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a minimum represent a receivable to .the corporation. The
receivable would provide the corpQration 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 1099k 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 l099-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!
off icer 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
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between the actual payments and the fair r€.ntal value of
the payments represents a receivable, to the corporatjo
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
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declare dividends, it is a clear indication that the corporation is
experiencing growth and is in.a strong financial position.
Please note, if the above scenarios do not pertain to this
corporation then the documents outlined above will not exist and,
therefore, understandably will not be provided.
LEASE AGREEMENTS
8. Provide copies of lease agreements for all property rented by
Inc. since 1991. Include any amendments to such lease
agreements
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 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
penalty.
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 AUTHORIZATION FORKS
9. Please identify all financial institutions which Inc .
and the Corporate Group have done business with over the
past 5 years 1 and sign the attached disclosure authorization
form for each institution
The disclosure authorization form allows the financial
institutions to release information concerning liabilities, credit,
and additional loans. The authorization form will allow EP to:
(a) Verify the accuracy of liabilities to financial
institutions included on the tax return. The tax return
may reflect greater liabilities than actually exist. If
the actual liabilities are less than the amount reported
on the tax return, it would indicate that the corporation
2’
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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. These assets may be sold or
leveraged to pay the penalty.
ASSETS SOLD OR TWSFE.RRED
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.
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ASSETS BOUGHT
11. If any assets have been bought by , Inc. or the
Corporate Group within the past 5 years provide copies of the
sales agreement, bill of sale, deeds transferred and any
other information pertaining to such purchase -
The analysis of these documents in conjunction with loan
information requested will provide:
(a) Verification of the accuracy of 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 sheet and depreciation schedule,
it is an indication that the corporation is in better
financial condition than appears because the value of the
corporation’s assets would be higher than reported.
(b) Information as to whether the assets were purchased with
cash, in which case the 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 STATEMZNTS
12. Provide copies of all bank statements for the past 3 years for
all bank accounts of Inc. and the Corporate
Group
Bank statements detail all banking activity during a
particular month for each of the different types of accounts an
entity maintains including, but not limited to, deposits.
withdrawals, checks written, and balances. An analysis of the bank
records may:
(a) Uncover unreported income. Unreported income is
additional income available to the corporation to pay the
penalty.
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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 prbvide 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 ap lications 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.
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SHAREHOLDER LOANS TO
14. For any loans from a shareholder of Inc. or the
Corporate Group, provide copies of the cancelled check
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 corporation with additional capital to
pay the penalty.
MPJJAGEMENT REPRESENTATION LETTER
15. Copies of documents and documentation of communication
addressing any information provided by — or to the
Independent Auditor with regard to the 1993 and 1994 Audits
re arding: (a’i any litigation invo1vin the company which
could have a material impact on the company’s financial
statements 1 and (b) the going concern of and
Prof essional auditing standards recommend that the Independent
Auditor request of a company’s management its representations
regarding many issues, including: loss contingencies; litigation,
claims, 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 Au it. r is advised to direct inquiries
to the corporation’s legal cou ccl.
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arid assert in tlie Affidavit that both
companies may have difficulty 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.
OTHF R I.NVESTMENTS
16. OTHER INVESTMENTS
a. With reference to the “Other investments” in the arnount
of $103,259, listed in 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 priced the purchase date, arid
the name and address of the broker who initiated the
purchase .
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 incorn
received by since January 1, 1993
c. If there are any brokerage firms and/or individuals whom
has dealt with since June 1 1992 which have not
provided statements 1 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 Couns.l
16 ° —‘

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remained the same. In any event, it is necessary to estimate the
fair market value of s assets because the value of these assets
represents a source from which would have the ability to pay
the proposed penalty.
The brokerage statements and broker identification information
requested will be used to verify if has provided a complete
list of its other investments and to verify that assets owned by
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 penalty), 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, l993 indicates outstanding loans as follows:
Mortgages notes bonds payable in less than 1 year - S4,324:
and Mortgag es 1 notes, bonds payable in 1 year or more -
SL260. 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 th e
following information
a. All loan documents. settlement sheets, closing
statements and other documents pertaining to each loan
b. An explanation as to why the loan was necessary and wh&t
the proceeds were used for
These documents 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 ‘ 5
ability to pay the proposed penalty.
Office of Regional CounS

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INTEREST INCOME.
18. INTEREST INCOME - Please provide copies of all IRS Forms 1099
reflecting any interest income earned by in 1993 and 1994 .
The Form 1099-INTs 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 aareement pursuant
to which rents property from the officers of
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.
Office of Regional Counsel
18

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UNiTED STATES EN VIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
4
JAN?4 19 9Q
r ; . j
.‘ ‘ I.:
MEMOP NDtJM
SUBZCT: Use of Stipulated ?enalties in EPA Settlenent
Agreenents
FROM: James N. Stroc
Assistant Adninistrator
Addressees
This nenorandun provides quidance on the use of
stipulated penalties in settlenent of enforcenent actions.
For each issue discussed, a preferred approach is stated
along with its rationale. These preferred approaches should
be followed ‘absent unusual circunstances dictating an alter-
native approach. The guidance applies to judicial settle-
nents except that it does not supersede the Septenber 21,
1987 Guidance on the Use of Sti ulated Penalties in Hazardous
Waste Consent Decrees. It also applies to adni istrative
cases where EPA has legal authority to assess stipulated
penalties.
Stipulated penalties are penalties agreed to by the
parties to a settlenent agreenent for violation of the agree-
nent’s provisions. These penalties are then nade a part of
the agreement, and are enforceable if it is violated. In EPA
setti-enent agree ents, the prinary goal of a stipulated
penalty is to act as an effecti’ &e deterrent to vio ting the
settlenent agreement.
I. Tv es of Reauirenents to Which Sti ulated Pe lt eS
Should A 1y
Any clearly definable event in a settlenent agreernent
nay be appropriate for stipulated penalties in a given case.
Such events include testing and reporting reguirener.tS,
interin and final nilestones in conpliance schedules, and
final denonstration of conpliarice. The governner.t 1itigat
teen assigned to a case should carefully consider which

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—2—
consent agreernent provisions are appropriate for sti u ated
penalties and be prepared to vigorously enf orce tlie . Stipu-
lated enalt es can even be attached to consent agreenent
prov sions requiring paynent of up—front penalties so long as
the stipulated penalties are higher than the interest, -
ccncuted at the statutory interest rate, onthe underlying
anount. Every consent agreenent reguirenent to which sti u—
lated penaitles are attached should be drafted to ensure that
the standares for. deternin ng conpliance are clear and objec-
tive, and that any ir.fornation required to be subnitted to
EPA is clear and unequivocal.
:n general, stipulated penalties are Particularly incor—
tant for requirenents of the consent agreenent which do not
represent regulatory or statutory violations for which the
agency could potentially get statutory naxinun penalties.
Such rovisicns nay include a requirene t to install specific
control ecu±pnent where the regulations and statute involved
recuire only corpliance with a discharge or enissior.s stan-
dard, or environnental auditing or nanagenent recuirenents
designed to ensure future conpilance. Without stipulated
penalty provisions, penalties for violation of such provi- -
sions in judicial cases are only available at the judge’s
discretion in a contenpt action under the court’s inherent
authority to enforce its cwn order.
Attaching stipulated penalties to violations of consent
agreenent provisions which are also violations of a statute
or regulation with a specified statutory naxinun penalty has
adva’ geS and d s dvantageS which Agency attorneys should
consider carefully in the context of a particular case. he
advantage is ease of enforcenent. - The Agency can pursue
violations without having to bring a new enforcenent action
or, 1n the judicial context, a contenpt action. The disad-
vantage is where stipulated p9nalties for such violations are
set at less than the statutory naxinun, parties may argue
that the government has bargained away some f it
enforcement discretion.
If a particularlY egregious statutory or regulatory
violation Occurs for which the government feels the appl C
able stimulated penalties are not adequate, sources nay cla:m
the government is equitably estopped from pursuing other
enforcement resmoflSeS. sources nay argue in the context, of a
contenmt action or new enforcement action that the govern-
ment has already conceded in the consent agreement tha a
f air menaltv for this type of violation is the stipulated
er.alty, an therefore, the court should not require any

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additional penalty. •Sources may make this argument even if
the government has reserved all rights to.pursue various
enforcement responses for consent agreement violations .
II. Level of Stimulated Penalties
Because the statutes EPA is charged with enforcing vary
so widely, penalty schedules for all media or types of viola-
tions are not practical. There are, however, several impor-
tant criteria which should always be considered in setting
stipulated penalty amounts. Each program office., in concert
with the appropriate OEcN 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 t o setting the levels of
all stipulated penalties for violation of a consent greement
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 n a per day basis
than the initial civil penalties imposed. Guidelines for
Enforcing Federal Diszrict Court Orders in Environmental
Cases (GN—27).
The economic benefit acc ing 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 1 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 uantifiable delayed or avoided costs, such as
installation of contzol equipmen, . as part of a compliance
schedule, the minimum stipulated penalty should be t e
economic benefit of noncompliance. However, the recidiViSm
factor will nearly always justify a penalty well above t iis
minimum, which often serves as the point of departure for a
minimum initial penalty.
The source’s ability to pay can be another important
criterion to consider. How much of a deterrent a stipulated
penalty is will depend on how financially significant it is
to the source. . The same stipulated penalty may be
In considering whether to attach penalties to violat C S
uncovered by an environmental audit, the November 14, l9S6n
E?A Policy on the Inclusion of Environmental Auditing ProV.S n5
in Enforcement Settlements (GM—52) should be consulted.

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—4—
financially crippling to one source, while nerely a routine
business expense for another. However, the burderi.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 -
deternined using the ABEL computer program for corporate
Violators and the MABEL computer prograa for municIpal
violatorS.
-
should be emphasized that this factor should not be
consid red a reason for lowering the leve’ of stipulated
penalties below the level equal to the economic benefi
*. ——
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 “pay-to—pollute”
scheme.
Another criterion which should be considered in setting
stipulated penalty amounts is the gravity of the violation,
i.e. , how criti al is t, ie requirement to the overall
regulatorY scheme and how environmentally signif i-cant is the
violation. The environmental significance factor should
include consideration of potential and actual to huan
health and the environment. In general, co sentagreemen
provisionS which are central to a particular regulatory
scheme should have higher stipulated penalties than
provisions that are considered less significant. It is um to
each enforcement program to make judgments about the relative
importance of respective requirements. As previously noted,
some consent agreement requirements such as nbtice provisions
may have little or no associated economic benefit, but nay
nevertheless be critical to the regulatory program in
question and would warrant hi tr& stipulated per.alti e .
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 th length of the
S — —
violation. For example, violations of up to two week . .-
have stipulated -penalties of $1000 per day while violations
of two to four weeks might have stipulated penalties of $2CC
per day, and so on.

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—5—
III. Method of Collection
Settlement agreements should state the method by which
stipulated penalties will be collected. -Two options are for
the settlement agreement to provide that the penalty is -
automatically due upon the pccurrence or no ”n—occurreflce of a
spec .fied 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 othe ise be devoted to making demands
for payment and may put the government in a more advantageQus
position should the source declare bankruDtcy. If payment is
made on demand, the consent agreement should make it clear
t hat 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 d_ue until
demand is made.
Settlement agreements should always state where and how
the penalty should be paidand how the check should be draft-
ed. See EPA Manual on Nonitoring 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.
:v. Timinc of Enforcement Resmonses
Prompt action to collect stipulated penalties due under
aziy 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 eq4i able
defenses such as lache&or estoppel, arguing that the gcver
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
-ecuitable 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 prcblem.
The stipulated penalty would lose its deterrent value once
the cap is reached. Also, the main goal of any enforceme
action must be compliance with the law so that public health
and welfare is protected. If consent agreement proViS .OnS

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are allowed to be violated long enough for a cap to be reach-
ed, serious environnentalconsequences may have occurred.
Providing that stipulated .penalties only apply for a
specific, reasonably. short period of tine in conjunction iith
reserving to the gov ernrent all available enforcement resmon-
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
a dditional penalties, because it can argue that the penalties
in the original consent agreement were not enough to deter
t e defendant from further violations and the possibility of
additional penalties was clearly contemplated.
V. ? ese ration of Ri hts
All consent agreements must contain a provision which
reserves to the government the right to pursue any legally
available enforqeneflt response for violation of any consent
agreement provision. These eflforcement responses would
include civil contempt proceedings and injunctive relief, and
criminal contempt proceedings for particularly egregious
violations. However, for provisions mandated by statute C:
regulation and which have stipulated penalties attached, a
reservation to pursue statutory penalties is suggested but
not required. For model language, see the October 19, 1983
Guidance for Drafting Judicial Consent Decrees (G!4-l7).
vi. Collection of Stipulated Penalties
The government should be prepared to colle t the full
amount of stipulated pena1tie . Ue under a consent agreement.
No agreement should ever anticipate compromise by specifying
instances w1 ere it will be allowed, aside from a standard
force majeure clause. In rare, uriforeseeable circmsta.nCeS,
however, the equities of a case may indicate that the goVern-
rent may compromise the amount it agrees to collect. For
penalties payable on demand, the government may also exercise
proseCUtorial discretion by declining to proffer a demand for
stipulated penalties for minor vjolatjoris of a.consent ag:ee
merit.
It may also be appropriate to provide that stipulated
penalties for violation of interim milestones in a comp1 anC1
schedule will be forgiven if the final deadline for achieVi
compliance is met. This is clearly inappropriate where there
is significant environmental harm caused by the defendant
missing the interim deadlines. If such a provision is used.

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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 ccmpromis
stipulated penalties varies from statute to statute.
Sepal-ate from the process for collecting stipulated
penalties, EPA must keep track of money owed the federal
government ‘(accounts receivable) resulting cut 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 (F! !O). The FMO is
responsible for entering the stipulated penalty as an
accounts receivable into the Agency’s Integrated Financlal
Nanagement System (IFMS). The “appropriate agency official”
who determines the existence of a stipulated penalty account
receivable is responsible for eeping the FMO upda d on the
status of enforcement penalty collection efforts. A more
detailed account of these procedures is included in the
Manual on Monitoring and Enforcing Administrative and J idi
cial Orders.
Addressees:
Regional Administrators
Regions I-X
Deputy. Regional Administrators
Regions I—X
Regional Counsels
Regions I-X

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—8—
E. Donald Elliott
General Counsel
Headquarters Co pl i ance Progra Divisions Directors
Mary T. Smith, Acting Director
Field Operations and Süpport.Division
Office of Mobile Sources
David Buente, C iief
EnvirorLnental Enforcement Section
U.S. Department of Justice
Associate Enforcement Counsels
Workgroup Menbers

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j.4:37
TO 82Ga 2 p, ’
‘.i r u i r PROTECTIO\ ACENCY
____ -. ‘ uI .c;To.. n.e. :e.i.o EC . — 9
JL25
, . • ..... ‘..
...a,- .s.
‘— .
OR DCM
SW : Guic ar ce or. C rti jcation of Co 1ianee rjt
t force ’ent Acree e ts
thomas t... Mars, r. L
Asststant Administrator for riforcement
artd Co p1iance No itoring
TO: Ass st.ant Ad inist:ators
Reqiortal. Ad z1nLstrators
eg ona1 Counse.Ls
I. ! AC POQ?D
Over the past several years, CA has initiated record
rtu bers of civil ud cial and administrative enforcement actions.
The vast majority of such actions have been resolved by ju icia1
consent cecree or administrative consent order.
The t er s of many of these settlements require the violator
to r or specteic tasks neeessary to return to or demonstrate
co o!iance, to accomplish specific environmental ci.eartt p or ether
re e el ste s, and tO take prescribed environmentally beneficial
actior .
Setrl mene agreements typically specify that the viojator
perform certain recuiredáCtivities anc tneceafter report rnei.r
accolishment to EPA. VerificatiQ.1’that the required acr vLties
have actually been accomplished is an essential element’l.nthe
overall success of the Agency’s enforcement program.
ri. P RPOS !
The focus of this advisory cuidance is envetification of
eo pliance with settlefteflt acreementS wruen recuire specific
pecfor 4rtce to achieve or maintain compli4nce with a reculatoty
standard. £P has oncoinc r sponsibt1ity- Ot ensuring tnat
settling parties are in compliance with the terms of their
negotiated acreements. To tnts ert , ttte Agency may require
that a responsible official Las that term is defined herein)
oersonally attest to the accuracy of information Contained in
comoliance documents made available tO EPA pursuant to the
terrts of a settlement agreement.

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• • , — • . - —
—2—
The inspection pro raas of !PA and Other .fedéral r*gulat ,ry
agencies ar, based of necessity on the Concept that a limited
riuaber of c ated f&C1ljtjt will be inspected each year.
Conversely,-th .s means that a large number of regulated parej
can operate eor extended Deriods of time without being the
subject of an en—site ir2.spec j by rPA sea f. ence, it .s
crue al to ensure that all cutre compliance reports are
receivedtr m t e regul.ated facility in a timely mar ner. In
addition—;-and ecually as i ertant--timeiy review of such
reportS muSt be: er:aken by EPA to ensure that the repor:s
are:;dácq te under the terms of the settlement 4greeme t.
£P? experience SNOWS that the a ority of regul.ated parties
t ake cood faith efforts to co ly with their responstbU ties
under th environmental laws and reçulationz. Nevertheless, tne
.i ertcy musts have effective monitoring procedures to detect
instances of noncompliance tn a settlement agreement. A vital.
co wontnt of these orocedures will be to ensure that the environ-
mental reau.Lts obtainec in tiLe enforcement action are indeed
achieved and that criminal sanctions, where appropriate, are
avai1a 1e to respond to instances of intent oriaJ. misrepresentation
or fraud comr 1tted by s uch violators.
E?X will. ensure that all. responsible officials entering
into settlement açreements With the Agency are held accountable
for their subsecuent actions aria the actions of any subo:d nates
respon!ible for the information contained in compliance reports
submLttec to the Agency.
:ii. r sc
. Certification b Resoonsibi, co orat.e _ Cffic1a1
- r e terms of settlement acreements, as well as any certifi-
cation language in subsequent reports to the P gency, should
be draftec in -a anner to erigeer the sanctions of 18 C.S.C.
1/ j tne event that false infoZ atiOtl is knowingly. and
villfuTYy submitted to EPA. Submission of such false info mation
jJ - Cnited—State$ Cede, title 18, SectiOn 1001 provides:
Whoever, in any matter within trie urisdietion
of any department or agency of the Onited States know—
incly and willfully falsifies, conceals r covers up
by trick, scheme, or device a material fact, or ftakes
any false, fictitious or fraudulent statements or
representatiOnS , or makes or uses any false writing
or document knowing the same to contain any false,
fictitious or fraudulent statement or entry, shall be
3
I

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‘ ‘j933 j4:33 FR 1 TO b b 42 p
-3—
m v also expose t1 e defendant(s) in judicial consent -dec:ee
falsification i cide ts to both civil and crja aj, onre pt
roce.dings .j
is provision of law is a key sanctiDn within the federal
criminalcode for discour g1nc any person f tam intentionally
deceiving or misleadinc the te states covernment.
1. $‘icnatcties t Pe ort
Sett e *en: agree Tte ts s ou1d specify that all future tepcrts
by the settling party t : e ncy, h ch purport to document
compliance with the terms of any acree ent, shafl be signed by
a rs onsi ie official. The term resporisibLe of ficial means
as CoUovs: /
a. For a coroo ation a responsible corporate
officer. Are5oonsibl corporate officer means: (a) A president,
secretary, treasurer or vice—president of the corporation in
charge of a prtnetoal business function, or any othet person who
performs similar policy— or decision—making functions for the
corporation, or (b) the anager of one or more man afaetu:ing,
roduction, or operating facilities employing more than 250
persons or hai/ing gross annual sales or ezpenditu:es exceeding
525 ittilion (in 1987 dollars when the consumer Price Index was
345.3), if authority to sign docui ents has been assigned or
delegated to the manager in accordance with corporate procedures.
b. For a Dart ershi or sole _ oro rietorsh : a
cenerai. partner or the proprietor, respe tivei.y.
2. When to pe tre s .rtifiea on _ Statem.nt
The recultement for an attestation by a responsible
offietal. is always useful as a rnatter of sound regulatory
manacernene practice. Such a requirement is more urgent,
( Note I, cont’d) —
fined not more than SlO,OOOor ia prisoned not more Chair
five y Jrs,or both.
There are four basic elements to a Section 1001 offense: (1) a
statement: (23 falsity; (3) tne false :tateent De maoe knOW—
incly end wi1lfu1ly : and (4) the false statement be made in a
matter witnin trie urisaiction of any department or agency of
t te Cnited States”. Cnited States v. Karchisio , 344 £.2d 653,
666 (2d dr. 1965). -
2/ For matters, the de initions f responsible official
and certification, as set fortn in 40 C? 5122.22, may be used
as alternative languace to this guidsne .
4

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—4—
ovevet, where a r u1ated party has a history .of t1QflCompjthr ce
or where priq violations place ones veracity into questjo . 3/
3. Thr sof a rtlcat onStat. er t
An. exanple of an appropriate eertiejcat ion statement foc
jnc sjo n reports suointtte to tne Agency by regulated par es
w o are siqnatorv to a settleme acree ent s as-fol1o s:
“r cQre .fy that t inforaeior contained
in or acco arwjt a this zubmis jon) (document)
is true, ;c rate, an corcplete.
ks to (the) (those) identifIed portion(s)
of thIs ( issjon) (docurnent) for which I
cannot ?erScna.tly verify (its) (their) truth
and accuracy, certify as trie company official
haviric Supervisory responsIbIlity fot the
person(s) wno, act nc under my d .reet instructions,
made t’ e verification, tha -thjs information is
true, accurate, and cc ip1er. . 4/
B. Documentation to Verify Corn 1iance
Typical settlement agreements reauire specific steps to
be ur.de taken by the violator. As £PA starf members encage in
settlement negotiations and the raftinc of settlement documents,
they should identify that docurnentatIon which constitutes t e
./WhHe ersona1 liability Is desirable to promote compliance,
It snould be noted that corpOrat .cr.s may be convicted uri er 18
u.S.C. 51001 as well. A corporation may be held criminally
responsible for the crimInal acts ot.its epLoyees, even if tne
actions of the employees were agairisttorporate policy ar-express
instructions. S?C u.s. _ v. Automated Medical aboratories , 770
P.2d 339 (4th Cir- 1985); U.S.v. iehmond , 700 E.2d 1183 (8th
dr. 1983). Noreover, both a corporation and its agents may
be convIcted—for the same offense. See U.S. V. Basic Construe—
tion co. , 71]. r. d 570 (4th Cit. 1983).
41 it is inevitable thai in negotiating consent agreenents,
Counsel for respondents will seek to insert: iang za e in the
Certification statement as to the truth of the submissions to be
tO tfle best Information or to tne fu1iest understancingw or
‘be1 f of the certifier. Such cualifiers should not be
incorporated, since the provisions of 18 U.S.C. $1001 provice
for prosecution for makIng false statements knowingly and
Vtflrtflly_..not for forming erroneous beliefs, etc.
6

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—5—
ost usetul evidence tt at the action recu .r.d;r as ctuaIly been
undertaken _Ttte most useful evidence wo 1d e that ioatj
or docu .rttaf,ofl that best and cost easily allows tne Agency
to verify com liance wit the terms (including mileseones f
a settlement aqree ent. !xamples of documentation to s bstantjate
como1 ance include, but are not limited to, invoices, work
orcer3,-dl Sposal records, an receipts or Lartifests.
Attac ’ment A s a succested type of checklist that can be
deveLoped tot ze within e Ch procram area. ’ T? e c? eckl s
i c1u e examp ez ee peciE o entary evidence w ic Car. e
required to substantiate that prescribed actions have, in tact,
Deen un erta en.
rv. &c Y
rhiscui ance is o rovjde ssistance to EPA employees
wno negotiate anø ratt settiement documents: It is appropriate
when circumstances so dictate that such documentsconta .n
sufficient certification languace for ensuring, to tb maximum
extent DOssible, that al reports made to EPA, pursuant to the
ter of any settlement agreement, are. true, accurate, and
complete, and that such reports are attested to by a responsible
official.
The Aqertcy i ust incorporate w .thin its overall regulatory
framework all reasonable means for assur nq compliance by the
reculated ommunity Pie inclusion of compliance cert!fication
lartcuaae, su porte by precise docunentation requirements, in
necotiated settlement agree tents may, in appropriate instances,
mean tne cifference between full. compliance with both t e
letter and the spirit of the 2av, and something less than full
ccmolLance . n the case of the latter, the violating party
is hen subiec: to the sanctions of the federal criminal. code.
Attachment i
5/ £PX or a State may be unable to confir$ the accuracy of
rtiftcatiCns for an extended period of time. Therefore,
it is sug5estad that, whenever certification by a respondent!
defendant is cecuired. the order/decree provide that ack up
documentation——S@Cn as Laboratory notes an materials of the
tvpe listed in the exa pies in the text above——be retained for
an appropriate period of time, sucn as three years. See, tor
exa ble, the 3 year retention time in 40 C Sl22.4l.( (2).
( 2

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P$PAP 9 & CPMZP?I* calPt,1ANCE
WITh ( SEtfl CREDiEm’S
Dxamp1e i)
,, I
tnvoLce
* Invoice (or work wit i iotQqraph 1
*Coflt fltIo Is inos Ir.orIn tape
1 perkdfr saffph i sutt
‘Nalntenance of r cocds
*ContLntl j3 monttorinq tapes
IèPerloilc sample resiifls
*Photographs
5tU?r/ report and reco,MendatlonB
personnet records
•Poeitlon deacclptLona
AEJtt(y on kity dates
salary data
*csJmMnta to verily vt content
—: -—.‘
•p.dncatlonal m ter1als and record
I of e rvpkr/ee attendance. at
1—t ning session
an above re: p rs ineI
1’thactec of a xflL gr p,
;
I
( v ólator’i irfic aI
Consent Aqreiei nt - ( errATh I
IXCUmOn .S ? cc ipany$nj
CerttfIcaL ionl
9. )
•purchiise pollut Ion control (‘Iquipnent pirchased
I egulpnent.
I
jnstaflatInn I uiPMflt installed and tested
J Onqoino operation and main— operat1nq an required
tenance I
I I
I I
l 1 Meet dtecharqe Ieve is ‘nlncharge 1eveL have been met
I ‘1 .4bØJ ed t tan8tormers ‘TranS Ormer8 have been Labe Led
I’Oo riak stu!y *Study has been coet Ieted
‘Bhre enI loy( e8 •I loyees have been hired
I Il
I I
1185 c y1ng coatincn ‘Veri(yInq co. IyIng coatlnqs
-k----------- _—--
f *‘ bin en T Fiyees (e.g., work ( i loyee traintnq baa been
4 — L _ __T- H - -----—
I’Sct up envIror enla) au4lttnq J*unlt Ma been eatabllahed
g IbOrlentation and LnatrucUon
p cu plete4
I __. _______________________ --
C
(r )M rs ne*t r ie)
AtIAC1INIWI’ A

-------
(continued tr previc* s paqe)
HEAflS fW CE !’ic CUW 1J1ANC
WVflI ctfISL. 1 & EK1fl 9
tCx Ioa)
* fl$ disposed of in lawful
Iri nnec
lew transforiern installed
*Applfcatot certlUcstton has
been acc(If )1Intued
kflemoval has been accoi liahed
‘Co l lance with asbestos removal
and disposal recj iIatLona on
a jcA-by.-job basis
‘%*tate at ream ban been properly
monitoced
‘Sludgs removed by milestone
deadline
0 Gr( in4 Mter tnanttorln’j acXf
p)Iahed In s proprIate v nner
‘Soil aairlea collected and
analyzed In specified manner
‘Contmnlnated soils remov dand
disposed of in oo(T()ttence
with RUTh ___________
‘Cc ptes of manifests
c pIes of purchase and Instal. .
Mt ion rec Ipt.s
*CopIt of certificates
‘Copies of c rce pondant e aIth
customers and documuntatlos
of removal
Copies of customer Lists for
independent votlfloztlon by
EPA and states
‘Lint of loclbtIons n all obe
•Dthchar e Monitoring Pepoft
‘Copies of invoices on sludge
removal
‘2/A (cuality an LysLe) teeter
certification by laboratocy
êsame as above
‘Copte8 of contr ct docum4nts
W () m ,nif sts
Action nequtrea ft
CO(Lseflt T4 IfltflI
I
- I
-- Vlolator’i official’
Cert1 1 ! That;
I
i ,n ent i
Certification:t
bnylng
I’nIsPose of £CI
I’Heplace rcr ansrqnnere
pesticide certiti—
catIon of applicator.
flemovo cancelled pro .ict frcffi
I the market
rcomly with asbeatoe removal
and disposal re )1latiofl8
-u
‘Nonitor waste stream
I
‘Sltxhe removal
‘CorH JCt qrcxtndwatec monltotlnçl
‘Co1)ect and analyze soil
j’nemovi conte’.Inated soils nd
dIu ose of in oQip) Lance
W i t h PCII.A
15
I.

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— r—ifl’/ç—07
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WAS}-flNGTON,D.c. 20460
MAR 0 3 1995
CFF C C
EN CE N rAN3
CPLi ’ Z A SU ANCE
St ECT: processjnc e tz/ cr sa of Lr.forcenent Discretion
F 0M: Steven A.
Ass stant Adinistratcr
Assistant Adinistrators
Regional Ad inistratc s
General Counsel
Inspector C-eneral
In light of the reorganization arid consolidation of the
Acencv’ s enfcrcerent and cori liance assurance resources
activities at Head arters, I believe that t s useful to
recirculate the attached necrandu regarding “no action”
assurarice& as a reninder of both this policy arid the procedure
for handling such requests. The Agency has long ad.he.red to a
policy a air.st giving definitive assurances outside the. c ritext
of a fornal enforcenent proceeding that the government will not
:cceed with an eriforcenent response for a speèific individual
violation of an enviror ental orotection statue, regulation, or
le;al recuirenent. This policy, a necessary arid critically
iiportant elenent of the wise exercise of the Agency’s
enfcrcenent discretion, and which has been a consistent feature
of the anf rca ent prc ran, was fcalized in 1984 following
Agency—wide review d co erit. Please note that OICA is
rav ew nc the aoo11ca ii tV cf this oolicV to tne C CLA
ecrcenenz rccrar, and will issue additional guidance on this
s jact.
A “no action” assurance includes, but is not 11 1tec to:
s;eci ic or. general requests for the Agency to exercise its
enfcrcenent discretion in a particular nar.ner or in a gIven set
of cjrc tances (i. e., that it will or will not take an.
e crcenent actionT; the deve1op ent of policies or.other
stata ents purpo ing to bind the Agency and which relate to Cr
wculd affect the Acencv’s enforcenent of the ed ral
Grivironoental laws and rec-ulations; and other si i1ar requests
Courtr V M Price, Assistant AamlrllstratOr for- nforcenant
• — :
az c Conoi .ance Mcn tor1flg, Pol cy AgaiflS - O
(Nov. : , 1934) (cc y attached).
c ,
— — • ——.c jn ?*
=_ . Cf 4C ‘ • —

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2
for forbearance or action involving enforcement—related
activities. The procedure established by this Policy requires
that any such written or oral assurances have the advance written
concurrence of the Assistant Ac inistrator for Enforcenent and
Copliarice Assurance.
The 198.4 reaffirtation of this policy articulated well the
dancers of providinc “no action” assurances. Such. assurances -
ercd the credibility of the enforcenent nrogran b creatinc real
or erceived inecuities in the Agency’s treatuent of the
raculated ccnunity. Given linited Agencv resources, this
credibility is a vital incentive for the requlated counity to
corply with existing racuiranents. In addition, a co it ent not
to enforce a legal raquire ent nay severely hanper later,
necessary enforcenant efforts to protect public health and the
environnent, reg ard1ess of whether the action is ac’ainst the
recipient f the assurances or against others who clain to be
sirilarlv situated.
Moreover, these principles are their nost conpelling in the
context Cf rulena cings: good public policy counsels that b1ar et
statanents of enforcanent discretion are not always a
particularly ao rccriate alternative to the ublic notice-and—
co nent rule.na cinc rocess. Where the Agency deternines that it
is attrc;riate to alter Cr nodify its approach in s ecific, well—
defined circzn tances, in y view we nust consider carefully
whether the objective is best achieved through an coen and tublic
process (especially where the underlying requirenent was
established by rule under the A 4 .istrative Procedures Act) / or
trouch ieca eal er ressiens of our enforoenent discretion.
We have recccn!z•ed two ceneral situations in which a no
acticn assurance nay be a rouriate: where it is exoresslv
orovided for by an a licable statute, and in extrenely unusual
cirounstancas where an assurance is clearly necessary to serve
the ublic interest arid which no other nechanien can address
aderuataly. In light of the profound policy irplications of
crantinc no acticn assurances, the 1984 ?olicv recuires- th
advance concurrence cf the Assistant Adninistrator fo : this
office. Over the veers, this a oroach has resulted in the
reasonably consistent and a ro riate exercise of EPA’S
enforcenent discretion, and in a nanner which both preserves the
integrity of the A ency and neets the lecitinate. needs served by
a tjtjc tad e.nfcrcenent rasuonsa.
There nay be situations where the general prohibition cn no
action assurances should not apply under C CLA (or the
Underground Storage Tanks or RCRA corrective action prograns).
Por exarple, at many Su erfund sites there is no violation of
law. OECA is evaluating the applicability of no action
assurances u dar c cLA and Rc A and will issue additional
quidance on the subject.

-------
3
Lastly, an element, of the 1984 Policy which I want to
highlight 1$ that it does not and should not preclude the Agency
from discussing fully and completely the merits of a particular
action, policy, or other recuest to exercise the Ag flCy’S
enforcement discretion in a artidular manner. I welcome a free
and frank exchange of ideas on how best to res ’o nd to violations,
mindful of the Ag ency’s overarching goals, statutory directives,
and enforcement arid cbmpliance priorities. I do, however, want
to ensi re tat all such recuests are handled in a onsistent and
coordinated nanner.
Atta chn ant
cc: OECA Office Directors
Regional Counsels
Re jonal Progran Directors

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I
UNiTED STATES ENVIRONMENTAL PROTECTION AGENCY
2 _____
WASHINGTON. D.C. 20460

EC J N? .&.
c MPuAMc MQ ZP C
M EMO?.ANDtJM
SZJ JECT: Policy AgainstNo ction Assuraces
Courtney M. Price
Ass stant Ad n1strator for En:orce ent
and Cornoliance Monitoring
Ass stant Acrilni.strators
egional Adi inistrators
General Cot.msel
Inspector General
This ie orandux reaffirz s EPA policy against giving
definitive assurances (written or oral) outside the context c
a fc al enforcer ent proceeding that EPA will not proceed with
an enforcement response for a specific individual violation cf
an er.viron ental orotection statute, regulation, or other
legal recuire ent.
No actionR prci ises r ay erode the. credibility of EPA ’s
enforcement program by creating real or perceived icecuities
in. the Agency’s t:eatent of the regulated cour.ity. This
credibility is vital as a continuing incentive for regulated
carties to cor ply with envircr ental protection reçuirements.
n addition, arLy ccc it ent not to enforce a legal
recui:e ent against a articular regulated carey may severely
haer later en:orcement efzorts against that party, who may
cla: gocd—fa!th reliance on that ass nce, or acainst c. e:
parties who claim to be similarly situated.
This policy against definitive no action promises to
parties outside tha Agency applies in all contexts, includ:r.g
assurances re uested:
both orior to and after a violation has been co mitteC;
cn the basis that a State or local government is
responding to the violation;

-------
2
° en the basis. that revis ions to the underlying lecal
recuire ent are being considered; -
C• on the basis that the Agency has determined that the
carry is not liable or has a valid defense;
on the basis that the violation already has been
correctec (or that a’ party, has prQ ised that it will
correct the violation);, or - -
o on the basis that the violation i not of sufficient
crioritv to rnerit Agency action.
The Agency ta:ticularly must avoid no action prnris as
relating either to violations of judicial crders, for which a
court has inde enden’ e fore ent áuthc 4 tv, o to ot a 1
cr n nal vLolatlcns, for which crosecutorial discretion rests
with the United States Attorney General.
As a ceneral r- le, excections to this policy are warranted
only
° where expressly provided by applicable statute cr
regulation (e.c., certain upset or bypass situations)
i extremely unusual cases in which a no action
assurance is dearly neccessarV to se e the public
interest (e.c., to allow action to avoid extreme risks
to ublic health or safety, or to obtain impcrtant
infcation for research purposes) and which no other
mec’ anls can address adeately.
Of course, any exceptions’ which EPA grants must be in an area
in which EPA has discretion nct to act’ under ap 1ioable law.,
This policy in no way is intended to onstraifl the way in
which EPA discusses and coordinates enforcement plans w th
s-tate or local enforcement authorities ccnsistent with r.crmal
working relationships. To the extent that a statement of EPA’S
enforcement intent is necessary to help support cr conclude an
effective state enforcement effort, EPA can employ language
such as the following:
WA encouraces State action to resolve vjolaticns of
Act and supports the actions which _ ateY
S .takjnc to address the violationS at issue. To the exre
that the State action does not satisfaCtorilY resolve t C
EPA ray pursue its own enfcrCe e act: n-

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EC-— P-/ q Q,2
UNITED STATES
ENVIRONMENTAL PROTECTiON AGENCY
WAS14LNGTON. D.C. 20460
M 4ORANDUM
SUBJECT:
FROM:
TO:
Procedures to Improve
Environmental Appeals
Ray Ludwiszewski
Acting General Counsel
Office of General C
(LZ—13 0)
Herbert H. Tate, Jr.
Assistant Administrator
Office of Enforcement (LE-133)
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 ( GC), Office of Enforcement (OE) and the Offices of
Regional Counsel (ORC) on positione taken by each of th se
offices before the Environmental Appeals Board (LAB). These
procedures were developed directly in response to a request from
the LAB and incorporate comments made by Ed Reich on behalf of
the LAB.
These procedures will be effective immediately. We are
requesting that the LAB 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 copieS
of notices to appeal permit decisions to the affected Regional
Counsel, the LAB send copies of these notices to the affected
Associate General Counsel and Enforcement Counsel.
Ce : -I7 p
Coordination before the

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We believe that these procedures will go a lor g way toward
improving coordination among our offices on positions taken
before the EAB. 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 ad iriistrative litigation practice.
Attachment
cc: Regional Counsels
Associate General Counsels
Enforcement Counsels

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASi-IINGTON. D.c. 20460
JAff 25 1993
D!ORANDUM
St3BJECT Procedures to Improve Coordination before the
Environmental Appeals Board
FROM Ray LudwiszewskC #-
Acting General Co s
Off ice of General.1Cou sel
(LE— 130)
Herbert H. Tate, Jr.’
Assistant Administrator
Office of Enforcement
TO: Regional Counsels
Associate General Counsels
Enforcement Counsels
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 ou offices
before the Environmental Appeals Board (EAB). As you will
recall, the LAB requested that we work together to develop these
procedures.
The procedures adopted reflect discussions held at the
OGC/ORC management retreat in October 1992 and incorporate OE’ S
existing policy in this area. In addition, these procedures
reflect comments received from many of you and comments received
from Ed Reich on behalf of the EAB.

-------
These procedures will be effective immediately. Under the
procedures, each of you responsible for matters which go before
the LAB 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 Stiehi (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 LAB. 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 arid 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

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OFFICE OF GENERAL COUNSEL, OFFICE OF ENFORCEMENT AND OFFICE OF
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 LAB are detailed in a final rule published in
the Federal Register on February 13, 1992, 57 Fed. Reg . 5320.
At the request of the LAB, the Office of General Counsel
(OGC), the Office of Enforcement (OL) and the Offices of Regional
Counsels (ORC) have identified ways to improve coordination on
positions taken by each of these offices before the LAB. 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 LAB. Each Regional Counsel, Associate General Counsel
and Enforcement Counsel responsible for matters which go before
the LAB 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 LAB 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 LAB. We will request the LAB to send a copy of
this notice to the affected Associate General Counsel and
Enforcement Counsel, as veil.
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. Arty
disagreements between the Regional Counsels and the Associate

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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 Regions- and their
respective program offices before a response is filed. Upon
receipt of a notice of appeal, the Enforcement Counsel or OL
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
LAB through the monthly OGC/OE/ORC branch chief conference calls.
This will be a standing agenda item for the monthly calls; the
ORC br nch 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
vii ]. be advancing consistent positions. Some of this
coordination needs to be initiated by the program offices and
some by ORC.
B. Enforcement Ap eals
There is less time for the Agency to decide its position on
appeals of enforcement cases. Pursuant to 40 CFR section
2.2.29(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
22.30(a). 1
In a 3 ay 3, 1989 memorandum from then Acting Assistant
Administrator Edward Reich, a process was established to provide
for review of adverse decisions of - iJs as well as fav6.f ble
decisions that are appealed by the respondent. (See attached
memorandum.) That process is still, an appropriate method to
pr vide an efficient way to identify and address important issues
in a case that should be raised to the LAB. 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.
In appropriate circumstances’ agency counsel, however,
may seek leave from the LAB for extensions of time in which to
file such appeals or briefs, if they can satisfy the requirements
of 40 C R 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.
i\L 1

-------
The ORC attorneys will consult directly with the Regio
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 0CC 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 with permit appeals, each case where a decision is made to
proceed with an appeal.will be handled in one of three ways: cij
OE will sign the brief as co—counsel and will have written or
participated in writing the brief; (2) OE will appear as “of
counsel” 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 0 , 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 0CC before a decision is made to seek, or forego,
an appeal of an enforcement case. 0CC agrees to identify any
generic areas where it needs to be consulted on a routine basis
bef ore a decision to appeal or not to appeal is made.
C. Headquarters Assistance to EAB
Subject to the prohibition on 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 EA3
deems it appropriate.
As part of their participation in the review of appeals, 0CC
and CE 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 Regi nal offices.
D. Oral Arquments
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 be
an opportunity for Regional and Headquarters attorneys to arque
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 LAB will, be elevated tO
the appropriate Deputy General Counsel or Director of Civ l
Enforcement.

-------
The Agency attorney(s) presenting oral argu. ex t should be
able to represent to the fullest extent possible that the
positions taken in argument have been coordinated with, and
approved by, CRC, 0CC and CE, 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. Follow-up
Our success in implementing these procedures and
accomp]. ishing our objectives will be evaluated in an ORC/OGC/OE
conference call in approximately six months.
Attach e.nt

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. gI
;Ur41TE1.rSTATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460

MAY 3 1
CO”ii*.r.l
SUBJECT: Strengthening the Agency’s Ad inistratjve
Litigation Capacity
FROM: Edward S. Reich r
Acting Assistant dministr ’td’r
TO: Regional Couxsels
Regions I—X
In my memorandum to you of January 31, 1989, entitled
“Issues Relating to Administrative Litigation”, I asked for
comment on a proposed process for dealing with decisions on
whether or not -to appeal AL. decisions. Your comments were
generally supportive of the proposal. Following discussion of
- this issue at its most recent meeting, the Enforcement Management
Council affirmed the proposal contained in the earlier draft with
the modifications set out below. .Accordingly, we are instituting
a process, beginning July 1, 1989, to provide for the
incorporation of national program and other Regional perspectives
in the decision whether or not to appeal adverse AI decisions.
This memorandum describes the mechanism.
Administrative enforcement is r’significant and dynamic
element of the Agency’s enforcement program. As new programs
develop and mature programs evolve, decisions by the AI..Js and the
Chief Judicial Officer (C3O) mold and influence the direction of
these progra.ms. Adverse decisions can not only cause problems
relative to the specific issue and program giving rise to the
decision but can also, particularly when rendered at the CJO
level, significantly impact enforcement programs outside of the
one immediately addressed in the decision. For this reason it S
important that the Agency’s enforcement managers pay proper
attention to the decisions issued by the ALJs and CJO. As I
noted earlier, the process set out below was affirmed at the
most recent meeting of the Enforcement Management Council. Th .S

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pr cess is also in line With the agree ent’reached at the Atlanta
Regional Coun els’ meeting.
In order to initiate the next phase of this ef fort, please
designate an attorney in your office who will serve as the
standing contact for receipt of materials relating to appeals of
adninistrative decisions. This contact will receive material as
identified below for all media for appropriate distribution and
action in your Region. This person does not necessarily have to
be the person representing the Region on the substantive
conference calls that will take place but will, as necessary,
facilita e the Region’s participation. Please send the name of
your designee to Fred Stiehi (LE—134P), by June 1, 1989. Fred
will prepare a master list and distribute it to all Regions.
Starting in July, the affected Region is to provide to the
relevant Associate Enforcement Counsel in 0EC ( and the designated
standing contacts in the other Regions a notice and an.
opportunity to consult on a].l adverse decisions of the AWs and
all favorable decisions that are appealed to the Chief udicial
Officer by Respondents. This process will allow for
consideration of issues of national interest that may go beyond
the concerns of the involved Region. The process will be
initiated by sending a “fax” of, a copy of the decision and a
brief su mmary of the decision by the Regional Counsel Branch
Chief to the appropriate OEcX Branch Chief, the appropriate OGC
Branch Chief, and the ORC standing contacts within 3 days of
receipt of the adverse decision. That transmission will also
notify all par-ties of the time of an OE —Regional Office
conference call to discuss appeals issues. This call should
take place as soon as possible after receipt of the summary, but
no later than 4 calendar days after the “fax” is sent. 1 ,/
OGC will be invited to participate in this call if they choose to
do so. If your Region wishes to part .cipate in the appê l
decision, your contact should advise the initiating Regional
Counsel Branch Chief of your views prior to the phone call to
OECM and can choose to participate in the call. The Regional
Counsel Branch Chief vii ]. advise OE if a conference operator is
needed to include more than one Region in the call. In the event
of agreement to file an appeal, the discussion will center on
identifying issues for appeal, what support will be available to
A workgroup is considering amendments to the
Consolidated Rules of Practice is lengthen the time for appeal.
Until such time as the rules are changed, however, the Agency has
20 days from service of the order to file this notice of appeal
and Supporting briefs. 40 C.F.R. 22.30.
71

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—3—
assist the lead office, and how the national and regional
perspectives can be incorporated into the briefs. The views of
the Headquarters program offiCe- will be solicited by the
Associate Enforcement Counsel and factored into the discussion
between the Region and Headquarters. In the event there is
disagreement at the Branch Chief level as to whether to appeal,
the question will be elevated to the Regional Counsel and the
Associate Enforcement Counsel for resolution. -
Given the very short time available to file appeals, this
process will assure, at minimum cost, national program input and
regionaL consistency in a timely manner. The process should be
evaluated in light of our experience after one year to see if
adjustments are appropriate.
cc: Deputy Regional Administrators
Enforcement Management Council
Headquarters Enforcement Office Directors
Deputy General Counsel for Legislation, Litigation,
and Regional Operations
Associate Enforcement Counsels

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(
EC- C:,— ‘qq ’-
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY A
WASHINGTON. D.C. 20460 7 Y
JUL 111994
OFF1O OF ENFORCEMZ) T
MZMOR NDtTh
SIJB3tCT: Redelegation of Authority arid Guidance on Headquarters
Involvement in R gul 1 tory Enforcement Cases
FROM: Steven A.
Assistant Ad inist a .cr
TO: Assistant Administrators
Regional. Administrators
Deputy Assistant Administrators
Regional Counsels
OECA Office Directc. s 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
(RITZ) 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 arid extent of Headquarters involvement in
case development and litigation.
A small work group, which incl ed 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 theroles issue in the regulatory enforcemept
context; Phase 2 will examine the issue in the Super-fund context.
Phase 1, 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 RITZ 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; b) multi-regional cases against the same
company; C) national initiative cases. The RITZ Report
encouraged redelegation of authority for matters that are not of
national -import. The relevant portions of the RITZ Report are
attached to this memorandum as Attachment A. Also attached to
—
7 3

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2
this memorandum are supplemental guidance developed by the
follow-up work group (Attachment B), giving further definition to
the concept of “national significance,” 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 civil
regulatory enforcement cases. The effective date for
implementation of this new approach will be October 1, 1994. In
the meantime, we will be developing further the audit±ng 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 CECA is
to provide overall leadership in the enforcement and compliance
assurance arena. This leadership role .. 4 as a number of different
facets, including devising the national strategy for the program-,
addressing matters of national policy and concern, ensuring
national cons istency, 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 EPA’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 nationalconcern.
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—a de 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

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3
further discussion).
o PocuS O “nationally significant” matters 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 ( e.c ., Shell
Oil , where an adverse legal deàision raised major
programmatic concerns under RCRA), or otherwise affect the
overall program. The new approach eliminates the
distinctio ns between administrative and judicial cases, as
cases in either forum can be nationally significant and can
raise issues of national consequence. Atta hment 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
? A/OECA’s review and sign—off in these circumstances adds
value to program implementation and is essential to
effective program implementation and public accountability.
oRedelegatiofl of authority —— Regional civ.l judicial and
administrative cases which seek a bottom line penalty 1 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 hasbeen rede].egated), provided such
settlements adhere to national po’icy and guidance—af d do
not raise issues of national significance. The Regiona3.
Counsel will, in the first instance and in keeping with thi&
guidance, make and document the determination whether such 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
1 lJnder 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 adinjniStrat1 Ie case, cases will be
presumed-to be nationally significant if the proposed penalty
sought in the complaint to be I il is greater than or equal to
$500,000.

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.4
reserved for the AA/OECA’s concurrence. 2
o Flexible imvolvement —- Flexibility is built into the
redelegation. If a nationally significant issue arises in a
case with a bottom line penalty under the S5O0,00a
threshold, the delegation will require the Region to consult
with the appropriate division in the Office of Regulatory
nforcement (ORE) in OZCA; 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 CECA, 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 requiremer ; 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 actions under, e. . , the Clean Water Act
(2—52—A), the Clean Air Act (7—6—A), RCRA Subtitle 3 (8—.. 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.
Eecause the delegations that are currently in place for RCRA
Subtitle C and the Safe Drinking Water Act 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 thó 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 concurrenèe 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
‘here 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 Assista! t Administrator’s
concurrence will be required for ti-P .2ttlement.

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forth below:
o “National Pro gran” cases —— These are cases that arise in
programs that are not implemented at the Regional level,
such as the ) obile 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.c . , -CFC import and expert 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 ( e.a , 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 ( e. . , the pulp and paper
initiative), a geographic area ( e.g. , the Nexican border), a
pollutant ( e.c . , the lead initiative), or a particular kind
of regulatory requirement ( e.ci. , the RCRA non-notifier
initiative). In these circumstances, OECA.personnel will
have a lead role in coordinating 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 redelegatiorL of authority. Thus, in
redelegated cases, Headquarters personnel will ordinarily
4 1n the near term, I will be doing an additional delegation
of authority within OECA for sett entS in cases falling into
this category.

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7
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 AAfOECA 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 wit .
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 AA/OECA. ( e.c. , Love Canal).
CONCLUSION
In sum, this guidance and rede].egation should help the
Agency turn i corner in the Headquarters/Regional relationship in
the enforcement and compliance assura7 e arena. Our ne pproach
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 cf this memorandum we will.
review this guidance and redelegati n to determine whether any
adjustments are needed.
Attachments

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MTA A
REPORT OF THE EPA
REGIONAL ENFORCEMENT IMPACTS
•TASK FORCE
MAY 1994
th —
-11 :1

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v. anc KesponsjbjIjt es
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 bccause 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 managerr ent 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 far 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
precedentiatconcerns, the need to deviate from established policies, or other
matters may warrant the need for greater l adquarters im,olvemerit 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. 1-(eadquarters involvement is
usually limited to administrative cases resulting from national programs that are
managed entirely out of Headquarters ( e c . 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 occisional circumstances when, because of the
- 14

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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 majorit 7
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 mutti-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 arid 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 iead and the extent of the
other office’s participation and/or 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
involveient 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/particip3tion ,- depending on the natti e 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 on the
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 Forcerecommends that the
Assistant Administrator for OECA consider a number of delegations in the context
of overall environmental enforcemeflt case management. These delegations are
15

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V. Roles 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 Regi ns is
essential for consistent and efficient Agency enforcement.
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 not falling within the exceptions to be set forth in guidelines, as noted in
(ii) below.
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.
(iii Consistent with the Administrator’s .desire that EPA speak with one
enforcemei,t 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 case.
whether a case covers facilities or environmental contamination problems in
multiple Regions, whether a proposed settlement is within national norms, whC f
a case is initiated within the context of a national initiative, and whether a case ‘S
consistent with legislative pr posa1s under consideration.

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V. Roles and Responsibilities
(iii) 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 Ib) 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
( L recovery of economic benefit of non-compliance). In addition, the Task
Force recommends institution of systematic oost 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
Based on the above discussion, a number of functions should fall into the
category of Headquarters in the lead with Regional participation. These include
.national priority setting anca 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 develz.pment, 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 i ationaI policy guidance, but the Task Force recognizes that
Headquarters should have an audit function with 1espectto 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
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 rare occasions

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A ITAE 1
Guidelines for Identification of
Nationally SignificantCases 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
determina tion regarding the presence of nationally significant
issues in an enforcement action; indeed, what is “nationally
significant” vii ]. 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 ot1 ier
legislative developments. Regional Counsels are expected to
consult with the appropriate Office of Regulatory Enforcement
Division Director- on any iss: ..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 thdicia 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: -
I) Cases or issues that have precedential character
o Initial use of new authorities
o New use of existing authorit y
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 jl3stice issues)
o Significant political attention
o Major state/local government relationship issues
o Cases against municipalities
o Major environmenta or public health threat
o Shut down of a facility

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o International implications (e.g. trade, import
v .olations, Base). Convention)
o Manor inter—agency implications, including federal
facilities
o - Settlem nts involving cutting edge Supplemental
Env .ror enta1 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)
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 fron the national norm
o Deviation from established policy
o Deviation from established guidance
o Deviation from previous legal positions

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A Ac 1 r C
j UNITED STATES ENVIRONMENTAL. PROTECTION AGENCY
WASHINGTON. D.C. 20460
JUL 8
OFFCE OF ENFO :EMZ
MEMDRANDUM
SUEJECT: Redelegation of the Assistant Administrator for QECA’s
Concurrence Authority in Settlement of Certain Civil
Judicial and Administra ve Enforcement Actions
FROM: Steven A. Herman
Assistant Adminis r to
TO: Assistant Administrators
Regional Administrators
Deputy Regional Administrators
Regional Counsel
OECA Office Directors
OECA Division Directors
This memorandum constitutes the formal redelegat ion of
certain settlement concurrence authorities cur - antly reserved f r
the Assistant Administrator for Enforcement ana Corn liance
Assurance, and serves as an attachment to the July 8, 1994 OECA
memorandum entitled, “Redelegation of Authority and Guidance on
F.eadcuarters Involvement in Regulatory Enforcement Cases The
authorities which are hereby redelegated are listed below, as
well asthe procedure, conditions, and limitations that apply
when such redelegated authorities are exercised by either the
Regional Counsels or the Director of — he Office of Regulatory
Enforcement of OECA.. The July 8, 1994 memoranc im mentioned above
should be consulted for additional clarification on the
procedures to be used to irr lement these redelegations, as well
as the expectations and responsibilities that follow these
settlement authorities.
Authorities
To settl or exercise the Assistant Administrator’s
concurrence in the settlement of civil judicial and
administrative enforcement actions which involve a bottom-line
penalty of less than $500.OOD under the Clean Water Act, the Safe
Drinking Water Act, the C1 an Air Act, the Resource Conservation
and Recovery Act, the Federal Insecticide, Fungicide arid
Rodenticide Act, and the Toxi Substances Control Act.
Pru feø’ 0” PSC

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2.
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 Whotri Redelecated
The Regional Counsels. This authority may not be
redelegated.
Process and Limitations
The Regional Counsels must consult with the Assistan
Adrriinistrator for Enforcement and Compliance Assurance or his
designee prior to exercising this redelegated authority under the
following circumstances: (1) a proposed settlement wot .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
exoected 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 .f or 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
OECA memorandum entitled “Redelegation of Authority and Guidance
on Heada-uarters Involvement in Regulatory Enforcement Cases.”
Particular isst’es of national interes€ or concern may ars be
identified by theD .visiofl Directors in t1 ie• 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, OEC may, at the Division Director
level, determine that concurrence of the Assistant Administrator
is appropriate for the matter at hand, in which case concurrence
wi].]. be recuired.
This redelegation does not extend to Headq-uarters-iflitiaed
cases.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WAS -flNGTQN, D.C. 20460

NV S 4
c QUAME A 3tj &
S3 ECT: OECA Regional Procedures for Civil Judicial and
A ’ .istrative Enforcement Case Redelegation
II r h 4 ALJ/ J l
Re - n & l n, Director
Office of Regulatory Enforcenent
DeDutv Recional Ad inistraters, Reciens I — X
Regional Counsel, Regions I —
Regional Pro an Division Directors, Regions I- X
1. I RODUCTION
Attached for your reference and use are the rocedures for
ilenentinc Steven Eeran’s July 11, 1994 enorandun c i i
edelecation of Authority and Guidance on Eeadcuarters
nvo Ive e t in Reculatorv Enforcenent Cases” (“Redel ecations
Menorandur”). The attached aterials also include edia-s ecif Ic
exarples of nationally significant enforcenent issues, a key
cor.capt in the redelegations. We expect that the redelegations
will result in a substantial net reduction of single Region cases
in which OECA’s Office of Regulatory Enforcenent (OR )will be
sicn.ificantly involved, including a su.bstartial decrease in the
nunber of settlenents recuiring O!CAj R.E concurrence. a
result, we will be able to focus our involvenent on. a far enaler
nun er of truly nationally significant cases.
The attached naterials result fron extensive discussions
ancng the various OR Divisions and regional progran divisIons
and counsel offices. We would like to take this o portunity to
than.k all of the regional persor..nel who worked so cocpe.ratively
with us over the last two nonths to develop both the general
cross—prograrn trocedures and the media—specific lists and
criteria for defining nationally significant issues and cases.
We ex ect these procedures to evolve based on our utual
ex erience with then, and plan to regularly re—exenine and revise
then as necessary.
Our intent through these procedures is to lay out a
consistent process for identifying to OEcA those
regionally—initiated judicial and a iiszrative cases that
G:. _
C b r. ‘.u.j..$.,C....’.
‘-S a — — —

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—2—
present issues of national significance. Specifically, the
procedures reguire regional staff to work with the ORE Divisions
and reach agreement on 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 GECA can add value,
(2) that OECA’s involvement will be reserved for cases and
issues of national -sig ificaric j
(3) that for judicial and administra€ive case that seek a
bottom line penalty of less £han $500,000, the Regional
Counsel will be delegated the Assistant Administrator’s
authority to ccncur on settleme’ rts undertaken by 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) determining the
ap opriat-e 1-eve 1 o ii I ement (e. g., ORE has the
flexibility to opt out of a case with a bottom. line
penalty greater than or egual 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 wit national policy and the
requirements of the redelegations.
Finally, in keeping with the spirit of the redelegations, we
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. St XXARY CZ .RT
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 çuick overview of the general cross—program

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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 • GENERAL PROCEDDRES
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 o’f ‘Regional Counsel and from various program divisions.’
In accordance with Steve Herman’s Redelegations Memorandum, the
procedur es emphasize trust, comon sense and streamlining, while
at the same time ensuring that decisions regarding O 2’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 s ig h1 f icant
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,
With regard to the procedures, I want to thank Tom Oliviex
of Region I, Wilkie Sawyer of Region II, John Ruggero and Mary CO*
of Region III, Nancy Tommelleo and Truly Bracken of Region IV, JOE
Boyle of Region V 1 Pam Phillips of Region VI, Chuck Figur from
Region VIII, Ann Nutt of Region IX and Meg Silver of Region X.
These Regional representatives were critical in develop .ng a
workable process for implementing the redelegations.

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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.
Mor eover, 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-SPECIPIC GUIDANCE AND NATIONALLY SIGIPICANT
ISSUES LISTS
Also attached are memoranda fro each of ORE’S Divisions
that outline media—specific contacts and procedures wh fè
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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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 PACILITI S CASES
As listed in Attachment B to the Redelegations Memorandum,
federal facilities rnatters 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 othex nationally
s1gnific nt 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 out 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 ENPORC T DOCIETS
Because the Redelegations Memorandum applies to a11
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 imi ediately. 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

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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 riot
have near—term, action—forcing events, we ask that by January 3,
1995, the Regions evaluate each case, complete the “Standard Form
to Specify Office of Regulatory Enforcement Involvement in
Cases” 3 , and submit the completed form to the appropriate OB.E
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
Nichael Stahl
OECA Office Directors
John Cr’uden, DOJ
Bruce Gelber, DOJ
Joel Gross, DOJ
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, 199
See the cross-prograi - ;edures (Attachment C) at page 8.
I-)
“1

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Surnviiary of.1s1 A I nforcciuciat Cnsc Ret c1cg&fltou I roccehsrcs
Types

Cases
Jud chil Referral or Admhiistral ve Complaint Stage Post-Filhtg Stages
> No !onnUy $lgnKkiiit Ibsn i (N$ts) No NaUonnlly SlgtiUlcpiit Isuics Newly I mcrglng JSSUN
Judicial

SCS
SOO,0O0
and over
.
0’ When referral I. made, Region will notify OECA of 1SI, in
ISiCfiil ’i litigation report
Q Separate aection in lit report .viil Identify, describe P 1St.
o 30 day. for ORB review
Appuoprlst ORB Division and Region will discus., agree on
ORII invotvenjent
o Menuo from ORB Division Director (DO) to Regional
Counsel (BC) will memorialize agreement
o ORB DO can opt ow of case entirely where approprIate
0 When referral ii made, Region will notify OEC of no
P1st, in re(erral’ litigation report
0 Seperate section in lit report will stats that there .rc no
NSIs, and recommend that OECA opt out
0 30 days for onn review
0 l(OftIi agrees slut there .rc no NS f., ORB will opt out;
if P1st., ORB and Region will discuas, agree on ORB
Involvement
0 Memo from ORB DO to BC will memorIalize
agreemeni
0 Region will notify OECA of new NSIs se soon ii Region
identifies them
0 ln(ornrnl notice (e.g., phone call.)
0 Bxpeditcd ORB review, wilts lirst priority on response to
NSI rather than on memorializing agreement
0 ORB and Region will dh.cu.., egre. on ORB lnvolvem.nt
0 Memo from ORB DO to RC wilt nuemo,ializc agreement,
generally within 30 day.
0 ORB DO can decide where appropriate hat ORB will
hive no involvement
Admin
• CIB

JW ,UUU
and over

,
.

,
Judicial
Cases .
under

•
0. Preferably before filing administrative complaint, L ,uit no titer
him concurrent with filing, Region will notify OECA of NSf
0 One page form signed by BC or designee, identifying NS1
and propoaing level of ORB involvensentin case
0 hO day. (or ORB review
0 ORB and Region wilt discus., agree on ORB involvement
0 ORB Di) or designee will countersign end return form wills
any igrccd•upon amenduutent,; form will be kept in Regional
flies
O ORB DO can opt out of case cntircly where appropriate
.
•
0 When referral I. mad,, RegIon will notify OECA of NSla in
referral’. litigstlon report; Region will send OIICA the lii
report only if the cue contains P1St.
0 Separate section in lit report will identify, describe NS1s
0 30 days for ORB review
0 ORB and Region will discuss, agree on ORB Involvement
0 Memo from ORB DO to PC will memorializ, agreement
0 ORB DD csn opt out of cas, entirely where appropriate

.
0 Preferably before filing administrative complaint, but no
later thsn concurrent with filing, Region will nolIf
OBCA list there are no NSIa
0 One page form signed by BC, stating that there are no
USfs incas. anti recommending that ORB opt out
0 10 day. for ORB review
0 if ORB agree. that titers are no NSIs, ORB will opt out;
If NSf. ORB and Region will discuss, agree on ORB
involvement
9 ORB D I) will countersign and return form with any
,grud-upon amendment.; form will be kept in Regional
flies
0 When referral I. made. Region will make and document
its deternsination thai there sre no USia In the case, but.
no requirement to ln(ónn OECA by providing lii report
0 Separate aection in lii report will stat, dial there ire no
USIa in case
0 flecsusc OECA Is receiving no formal notice Of these
cases, Regions must provide adequate advanc, notice
thunnigh other avenues of communicatIon, such as
weekly RC report., If cases are likely to sttrlct
significant pies, or other public attention
0 ORB Division, will review determinations during
Regional audits
0 Region will noli(y OECA of new NSIs as moons, Region
identitie, them
0 One page form aigned by BC or designee, identifyIng
NSI and proposing level of ORB involvement in c.se
0 tOday. for ORB revIew
0 ORB and Region will discuss, agree on ORB involvement
0 ORB DO or designs. will countenlgn and return form
with any agreed-upon emsnsJnsenu; form will ba kept In
Regional file.
0 ORB DI) can decIde whirs appropriate that OR!! will
have no involvement
0 Region will notify OECA of new USIa as soon.. Region
identifies them
0 tnlormsl notice (e.g., phons cslls)
0 Bapedited ORB revIew, with tint priority on response to
PISI rallier than on memorializing agreement
0 ORB and Region will discu,., agre. on ORB Involvement
0 Memo from ORB DO or designs. to BC wilt
m,motlatiz. agreement, generally within 30 day.
0 ORB DO can decide wher. appropriate that ORB will
have no involvement
.
.
.
0 Ssme procedure. as for administrative csaea of $500,000 or 0 Preferably before tiling admln conlpl.itd, but no later 0 Sims aa (or administrilive casea of 8500,000 or over,
Admin cv. r than concurrent with tiling, Region will makeldocumenl except that ORB Di) or designee can decide wIser.
Cases under • determInation of no NSts, but no requirement to notify spproprlste that ORB will have no involvement
8500 .000 OUCA by providing one page form
0 Ono page fornu sIgned by BC or designee, stating no
lISts in case; form will be kept In R.gionsl file.
0 0911 Divisions will review determinations during
Regional multi

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OUTLINE OP GENERAL PROCED1 RES FOR
REGIONAL E ORCEMENT CASE REDELEGATION
November 1, 1994
I. JVDICIAL CASES WI BOTTOM LINE PENALTY OF $500,000 OR ov
1. Referral Stac e
1. Region identifies case 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 Off ice of
Regulatory Enforcement (ORE) Division within QECA will have
30 days after receipt of notice for ORE review. Within this
tineframe, ORE staff or branch chiefs, as appropriate, will
discuss case with Regional coupterparts and seek agreement
on the extent and duration of CECA involvement, e.g.,
concurrence or consultation, to be followed by letter from
ORE Division Director to Regional Counsel (RC) memorializing
agreement. 2 ORE Division Director can also opt out of case
entirely where appropriate. t Division Directd and. RC
cannot agree, elevation to ORE Office Director.
1 “Case with natiànally significant issues” includes all
nationally significant cases or issues as defined in the
guidelines attached to Steve Herman’s July11, 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 managemert, not•to informal ORE/Regional
communications or activities of other QECA offices (e.g., Office
of Compliance).

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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 rec uest attachments as
necessary. -
Re’ ieW 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 ic 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
Divisiofl Director to RC memorializing agreeme.nt. If
Division Director and RC cannot agree, elevation to ORE
Off ice Director.
3. No nationally sjgniticant.iSsUe, and a categoric opt out
case (for example; Clean Air Act Asbestos N ES AP
demolitiofl/reflomtiom cases).
Timing: At same -tine 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 rio 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
Since after this poirit ORE will no longer be formally
involved in the case unless, a nationally significtnt issue arises
later in the proceedings, CRC will need to provide OECA with as
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.

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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.
Re’viewof Determination: ORE will review c tegoric opt out
determinations during Regional audits.
B. Post-Referral Stages (in cases where OEc , 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 out of a case, there is a
continuing obligation for the RCs to inform OECA of any
nationally significant issues that emerge during th course
of litigation. This approach accords with the Redelegations
Memorandum’s overall insistence on flexibility and common
sense.
Timing: As soon as issues identified.
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 en 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.
Agree e.nt will be memorialized by letter from ORE Division
Director to RC as soon as possfl le, generally within 3. days
after notice; however, first priority will be qjuick response
to new substantive issue. ORE Division Director can also
decide where appropriate that ORE will have no involvement.
If Division Director and RC cannot agree on approach,
elevation to ORE Office Director.

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—.4—
El • ADMINISTRATIVE CASES WITH PROPOSED OR BOTTOM LINE PENALTy
OP $500,000 OR OVER 4 -
Note: Only Toxics and R A cases presently fall into this
categ ry.
A. Pilin Sta e
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
Method: 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 emo
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. No Nationally Significant sues
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 shou].dbe used. If a separate
bottom line penalty has been calculated, it should be used
instead. See Redelegations Memorandum, p.3.
For a few small c-lasses of R RA cases specified in the
RCRA redelegations approach, ORE involvement must occur before
filing to comport with existing R RA delegations or guidance.

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—5—
Method: Same form as above, but will state that there are
no nationally significant issues and recommend. that ORE opt
out of the case. Regiànal Counsel, not designee, must sign
form because CRC is recommending that ORE opt out.
Decision on Exteut of Involvement: Same as : ,ove, except
that ORE Division Director, not designee, must countersign
form if ORE opts out. This parallels the procedure for
optingôut in judicial cases over $500,000 (I.A.2. above).)
B.. Post—Piling Stages (in cases where OECA originally
outed 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 th
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
arid seek agreement on the extent arid 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. -
III. DICIAL CASES WITB BOTTOM Lfl E PE ThLTY DIDER S5 c ø
Note: Both the RedelegatiOnS Mmorandum and the -
redelegatiOn itself make clear that it is the Regional
Counsel’s responsibility to identify nationally signif!cant
issues in all single Region judicial and administrative
enforcement cases below $500,000. “The 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 CRC to formally notify ORE
only if the case contained, a nationally significant issue.
For a case with no such jssueS, RC would ‘still need to make,

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-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 Sta e
i.. 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: Sane 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 r.equirement 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. Region not
required to provide litigation report or other portions of
ref erral. Because OECA is receiving no formal notice of
these cases, ORC must provide adequate advance notice
tbrough 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.

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—7—
3• post—Piling Stages (cases vf no prier CECA involvement )
Timing, method and decision on extent of involvement will be
sane as for judicial cases above $500,000 (I.B. above),
except that letters memorializing ‘agreements could be from
ORE to CRC Branch Chief rather than from OR Division -
Director to RC ORE DD must still sign letter if ORE
decides to have no involvement in case.
V. ADMINISTRATJ V CASES WITK PROPOSED OR BOTTOM LI1 E PENALTY
OP V1 DER $500,000
A. ili stage
i.. Region identifies nationally significant issues.
Timing, method and. decision on extent of involvement same as
for administratiVe cases over $500,000 (II.A.l. above).
2. No nationally significant issues.
Timing: In sane tineframe as for administrative cases over
$500,000, ORC will use one page form to make and document
determination t.hat there are no such issues in case, but no
requirement to provide OECA with form as notification.
Method: Sane 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 aavance notice
through other avenues of communication, including the weekly
RC reports to the Assistant Administrator, of major
litigation milestones (e.g., se tlement, trial) and
significant press or other public attention.
Review of Determination. ORE DiVisionS will review
determinations during Regional audits.
B. post-Piling Stages (cases wI no rior OECA involvementi
Timing, . method, and decision on extent of. involvement could
be sane as for administrative cases over $500,000 (II.B.
above), except that ORE DD or designee can countersign form
if ORE decides to have no involvement.

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—8—
* * * PRIV]LEGED/COMLDENflAIIDO NOT RELEASE UNDER P014 * * *
Standard Form to Specify Office of Regulatory Enforcement.
Involvement in Cases.
Case name:
Location of cili1y City
—, State _____,Region
Forum (ch k one):
ALT (or other presiding officer) — EAB —
District or Circuit Court — (specify District/Circuit
Status of case (check all that apply):
PreEling, in development
Filth and pending
Filed and stayed
Filed and active
Dispositive p1 dings imminent
Trial or hearing imminent
Settlement negotiations ongoing
Primary Violations (narrative or listing of sections):
Nationally significant issue(s):
Regional legal aT id program staff contacts (names, phone numbers, FAX numbers):
Nature of Office of Regulatory Enforcement involvement/assistance proposed by Region
Signature:
Concur:
Appropriate Regional. M2n2ger
Date Signed
Appropriate ORE Manager
Date Signed

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S7 4 ,
UNiTED STATES ENV1RONMENT PROTECTION AGENCY
WA5HINGTO D.C. 204S0
\
i JG a
.-i9 3
OFFrCE OF
OR DtTM _______________

SZJBJZCT: Documenting Penalty Calculations and Justifications in
EPA Enforcement
FROM: James M.
Assistant Administrator
TO: Addressees
This memorandum institutes a uniform system for documenting
penalty calculations arid explaining how they are consisfent with
the applicable penalty policy in all EPA enforcement actions. t
expands on the September 14, 1937 Guidance on Processing of
Consent Decrees (GM—64) and requirements .iri several media
specific penalty policies. The system will allow regional arid CE
management to assure that EPA settlement agreements comply with
applicable penalty policies, arid 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, str .ctly enforcement confiderttial
workproduct, should be c1ea ly labeled as such and should not be
released.
Effective iediately, every settlement package transmitted
from the Regional Administrator or egional Counsel to
eadguarterS for concurrence must include, a written Pe nalty
Justification.” This should include an explanation of how th.
penalty . including the economic benefit and gravity compoTi flt ,
was calculated. The Region should then discuss in detail the
justification for any mitigation of either component. In
particular 1 reference should be made to the’ factor or language in
the penalty policy that is relied upon to justify the mitigation.
and a discussiOfl ,must be included oetailing why mitigation is
warranted in the part.icular case. For administrative cases, a
Penalty Justification should be prepared for circulation within
the Office of Regional counsel with a final consent agree eflt O
order. It may riot be circulated to the agency official who signs
the final order as the presiding agency official, usually the
Regional Administrator, because it could constitute ic art4
comnunicationuhiCh would have tO be shared with defendarL S under
40 C.F.R. Part 22.
F3 251393 ___
0. ’ ‘

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—2—
When the factor relied upon to justify mitigation is
litigation risk, the Region should state the probable outc ne of
litigation al ng 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 before the
Assistant Administrator for Enforcement reviews a consent decree
for signature.
In addition, each Office of Regional Counsel case f ii. and
all OE files in cases in which 0! 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. b.g n
with the filing of th. administrativ, complaint. For civil
judicial cases, this will begin with the litigation report, wPtic!
should includ, the penalty proposed by the Region initially. .
litigation report should clearly indicate how th. 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
furt4er mitigation should also be identified.
The 0! attorney assigned to the case will then determine if
0! concurs with the. penalty proposed by the Region in reviewing
the referral. o* concurrence will be documented in writing,
plac.&ia.th. OR case file and provided to the Region. If 0!
does i -concur with the penalty proposed by the Region in the
ref.rr* th assigned 01 attorney will prepar. a memorandum to
the R f stating with specificity the basis(es) of the
nonconcurrencs.•
OnCe the .nforca it action is initiat.d or pr,—filinq
negotiations begin, tbs litigation team should document any
agreed upon c cc to the bottom line penalty based upon r
informatiort o rcuUtlmCSs wbich aris, during th. course of the
enforcement action • This docttaentati on must, at a minimum,

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—3—
include a memorandum to the file recording how both the gravity
and economic benefit Components were calculated, the basis in the
applicable penalty policy and in the specific facts of the case
for any mitigation, and the changed circumstances or new
information which justify modification of the bottom line. This
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 enfçrcement programsoverall. It also
will ensure that every regional case file arid all CE 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 Co p1iance Progra DiViSiOfl DirectOrS .
Associate Enforcement Counsels
Richard B. Stewart
Assistant Attorney General .
Environment and Natural Resources Division
u.s. Department of ustice

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From In the Matter of Ceiltech 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 Prehearing 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. Ill. 1977).
It is improper for a witness to present “evidence” on legal
issues in an evidentiary hearing. See Adalinan 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 dr. 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 witness’ testimony
superfluous._); McCormick on Evidence , § 12 at 26-27 (Such
testimony “amounts to no more than an expression of the
[ witness’ ] general belief as to how the case should be
000164

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decided.”). Any challenges to Complainants 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.
Complainants 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 l4(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, FIFBA 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
000165

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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
FIFRk 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
000166

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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-Geigy 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
000167

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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 persons 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
000168

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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
000169

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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. . ..“
000170

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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.
1. 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(I). 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
OOO 71

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WipeOuts 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
000172

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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
000173
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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: “Nay 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 N. Tuberculosis and N.
bovis...”; “Wipeout activated solution may be diluted 1:1 with
water...After activation, the WipeOut solution will maintain 100%
efficacy for 45 days...”; and ttFor use on all hard non—porous
surfaces....” 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 pesticide 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 used 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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Inisformulation 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. This 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 Respondent_s 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 Respondent_s
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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2. 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 Neditox 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. Respondents 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 FIFP . Enforcement Response Policy
1.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
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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
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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
action’; 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 an 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 in that case. An ad
hoc approach would not meet minimum standards of fairness and
rationality, and would be more subject to challenge as arbitrary
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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 DIC 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.
DIC 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 Criteria’ 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-i, 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-i, 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 violators 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)(1) 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 Adiustments to Base Penalty
The fourth step is to adjust the base penalty for the
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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—i, 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. 8-1, CX 83; Enforcement Case
Reviews, CX 12B, 30B, 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, 308, 49C, 51C; Penalty Worksheet, CX 82)
For the fourth criteria, _compliance history, Respondent
000186

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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)(l) 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 violators 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 Neditox
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
000187
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sale or distribution of an unregistered pesticide, which is a
Gravity Level 2 violation. (FIFR ERP, p. A-i, 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 ER?, p. 19, CX 83; Penalty Worksheet,
CX 82A) Gravity adjustment factors are the same as used in FIFRA
93-11-02, 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 ER?
and reflects penalty calculations under the 1974 penalty policy.
The above discussion of the penalty calculations in FIFRA 93-11-02
and FIFRA 95-11—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
000188

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1974 penalty policy, Coii plainant 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. F. & R. VIII—90—279C.
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_r _.t
UNITED STATES ENVIRONNENTAL PROTECTION AGENCY •1
CS,2i: 994
REGION VII . .•..•- t n icyf
726 MINNESOTA AVENUE \ I
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, goveri ing 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 S’ection 313(f)
of EPCRA and 40 C.F.R. § 372.25 during the calendar year, to
EXHIBIT
OOO191 T _____

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CEC 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 Nay 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 Trichioroethane in excess of 10,000 pounds.
12. 1,1,1 Trichioroethane 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,
Trichioroethane to the Administrator of EPA and to the State of
Kansas by July 1, 1993.
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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
Trichloroetharie 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 EPCR ar 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 1, 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 EPCR , 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 1, 1992.
33q 000193

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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
(NEK) 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 (NEK) 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.
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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 Rec uest 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 a1legation in the Complaint
334 000195

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GEC Precision Corporation
EPCRA Docket No. VII—94-T-381—E
Page 6 of S
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.
33 7 000196

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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 Opportinity 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
/ / g / I TW
Dat Bonnie Aridrews
000198

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GEC Precision Corporation
EPCRA Docket No. VII—94-T-38l-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 _________ _____________
William A. Spratl n, Director
Air and Toxics Division
Anne E. Rauch
Attorney
Off ice 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 EPCPA
000197

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PENALTY CALCULATION FOR
GEC Precision Corporation
Wellington, Kansas
EPCRA Docket No. VII-94-T-381—E
COUNT I
VIOLATION : Failure to report toxic chemical release
inventory emissions for 1,1,1 Trichioroethane
in a timely manner during reporting year
1992.
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; greater than $10 million
annual sales; greater than 50 employees
CIRCUMSTANCE : LEVEL 1 - Description: Failure to submit
1992 Form R report for 1,1,1 Trichioroethane
by July 1, 1993
GRAVITY BASED
PENALTY : $l7,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
COUNT II
VIOLATION : Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1992.
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; greater than $10 million
annual sales; greater than 50 employees
CIRCUMSTANCE : LEVEL 1 - Description: Failure to submit
1992 Form R report for methyl ethyl ketone
(MEK) by July 1, 1993
GRAVITY BASED
PENALTY : $17,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
000199

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ç O S7 4 ,
‘3
____ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION VII
726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
PAY 24 199k
MEMOR ,ANDtThI
SUBJECT: Penalty Calculation for GEC Precision Corporation,
Wellington, Kansas, CRA Docket No. VII-94-T-381-E
FROM: Mark A. SInith ,-.
Environmental Sci ist
Toxic Substances Con \ol 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 ER? 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.
000201

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2
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 E?CRA 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—Trichioroethane (TCA), a listed chemical under EPCRA
Section 313, for calendar year 1992.
Penalty Calculations
Circumstance Level: According to the ER?, 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 ER? 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 ER?, 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 i 1,1 Trichloroethane
in a timely manner during-reporting year
1992.
000202

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3
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
CIRCUMSTANCE : LEVEL 1 - Description: Failure to submit’
1992 Form R report for 1,1,1 Trichloroethane
by July 1, 1993
GRAVITY BASED
PENALTY : $17,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
COUNT II
VIOLATION : Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1992.
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
CIRCUMSTANCE : LEVEL 1 - Description: Failure to submit
1992 Form R report for MEK by July 1, 1993
GRAVITY BASED
PENALTY : $17,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
COUNT III
VIOLATION : Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1991.
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
CIRCUMSTANCE : LEVEL 1 - Description.: Failure to submit
1991 Form R report for MEX by Tu1y 1, 1992
000203

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GRAVITY BASED
PENALTY : $17,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
COUNT IV
VIOLATION : Failure to report toxic chemical release
inventory emissions for methyl ethyl ketone
(MEK) in a timely manner during reporting
year 1990.
EXTENT : LEVEL B - Description: Less than 10 times
reporting threshold; $10 million or more
annual sales; 50 employees or more
CIRCtJNSTANCE : LEVEL 1 - Description: Failure to submit
1990 Form R report for MEK by July 1, 1991
GRAVITY BASED
PENALTY : $17,000 + Adjustments: None
PROPOSED
PENALTY : $17,000
TOTAL PROPOSED PENALTY: $68,000

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S 4
____ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION VII
726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
JUN 16 19 5
ENORkNDUN
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 SCi3
Toxic Substances Con’ rol 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 arid local governments, the U.S. Congress
and EPA to assess major opportunities for reducing Fisks to
public health and the environment. TRI data have helped industry
identify and analyze areas where source substitution may be
000204 RECYCLE
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2
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-Trichioroethane, 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 ThI 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 EPCR . 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.
000205

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49
1 mandatory road map rather than a guideline. It
2 again goes back to the purpose of the document
3 which is to ensure that EPA has broken it out
4 into ten different regions and all ten regions as
5 well as the headquarters office are complying in
6 assessing penalties in the same manner.
7 THE COURT: Ms. Rauch, do you have any
8 follow-up in light of my few questions to
9 the witness?
10 MS. RAUCH: No.
11 THE COURT: Ms. Hoffman?
12 MS. HOFFMAN: No.
13 THE COURT: Mr. Smith, thank you.
14 MS. RAtTCH: We have one more witness.
15 If there’s no objection, Ms. Fain will do
16 the direct questioning of this witness.
17 THE COURT: Good morning, Ms. Fain.
18 MS. FAIN: Good morning. On behalf of
19 EPA this morning, Your Honor, I would like
20 to call Mr. James Hirtz, please.
21
22
23
24
25
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1 JAMES F. HIRTZ,
2 having been first duly sworn, was
3 examined and testified as follows:
4
5 DIRECT EXAMINATION
6 BY MS. FAIN:
7 Q Mr. Hirtz, will you please state your full name
8 for the reporter, please.
9 A My name is James Francis Hirtz.
10 Q Would you please state your place of employment
11 and the address.
12 A I’m employed with United States Environmental
13 Protection Agency, Region VII, at 726 Minnesota
14 Avenue, Kansas City, Kansas, 66101.
15 Q Mr. Hirtz, what is your position at the
16 Environmental Protection Agency?
17 A I’m an Environmental Engineer.
18 Q How long have you been in that position?
19 A I’ve been employed with the Agency for nine years
20 in that position.
21 Q Do you have any formal education?
22 A I received a Bachelor of Sciences Degree from the
23 University of Missouri-Rolla with a degree in
24 Chemical Engineering.
25 Q Do you have any training beyond your degree in
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1 relation to what you do at the Environmental
2 Protection agency?
3 A Yes, I have.
4 Q Can you tell us what that is, sir?
5 A I received training at the Federal Law
6 Enforcement Training Center in Lithgow, Georgia,
7 as well as training in estimating techniques as
8 well as training in negotiation skills.
9 Q Can you tell us what your duties and
10 responsibilities are as an environmental engineer
11 at the EPA?
12 A I’m the TRI Coordinator, Toxic Release Inventory
13 Coordinator for Region VII as well as the TSCA 5
14 and 8 Coordinator in the Toxic Substances Control
15 Act. I also perform inspections and case review.
16 for both Acts.
17 Q Are there any other duties and responsibilities
18 that you have?
19 A I’m also a member of several national work
20 groups.
21 Q Sir, can you tell us some things about national
22 work groups as they apply to your duties at the
23 Environmental Protection Agency?
24 A I’m a member of the National EPCRA 313
25 Enforcement Response Policy work group as well as
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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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1 Q Can you tell us why you would take those factors
2 into account?
3 A The first responsibility as far as the
4 Enforcement Response Policy is actually to
5 determine if a violation exists. It’s basically
6 broken down into three considerations whether or
7 not the company is in compliance with the
8 existing Act, whether or not the violations
9 warrants a notice of non—compliance for minor
10 deviations of the rule, and the third one is a
11 policy to establish an administrative action in
12 which the heart of the Enforcement Response
13 Policy is about.
14 Q Now, Nr. Hirtz, I would like to go through the
15 statutory factors and just would like for you to
16 explain how was the nature of the violation
17 considered when the work group assessed the
18 penalty?
19 A The nature was basically setting up that an
20 administrative action or civil penalty is
21 warranted, and then we developed the use of the
22 circumstance levels and the extent levels to
23 develop the gravity penalty matrix for the final
24 establishment of determining a penalty for the
25 appropriate violations of the Act.
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1 Q How was circumstances of the violation
2 considered?
3 THE WITNESS: Do you mind if I stand?
4 THE COURT: Please.
5 A For the circumstances we basically broke it down
6 into six different levels, and these were the
7 levels that we were looking at. As far as
8 Level 1 is a failure to report in a timely manner
9 which is a Category 1. It’s principally that
10 companies fail to submit a TRI report or a Form R
11 as required under EPCRA. And the reason that
12 this is the most significant of the violations is
13 that this is a chemical specific reporting
1.4 requirement if they meet the conditions of the
15 law.
16 This information is used by both EPA in
17 the local communities for purposes of emergency
18 planning and right-to-know. And emergency
19 planning at least on the federal side we use it
20 for initiatives like the environmental justice,
2]. we use it for purposes of pollution prevention
22 planning, and the community has the opportunity
23 to gather chemical specific information on the
24 chemicals themselves as well as the emissions for
25 their community so they themselves can take an
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1 active role in exercising change or identifying a
2 dialogue with industry itself to make hopefully
3 useful changes that are occurring in the
4 community.
5 Level 2 is failure to supply
6 notification. And this is the primary avenue
7 that we use to help the manufacturers who use
8 toxic chemicals in a process to know that they’re
9 required to report under EPCRA 313.
10 It requires that if you receive a
11 product from a manufacturer as far as a raw
12 material that you’re using in your process that
13 identifies that chemical that’s within that
14 product as subject to reporting under the
15 EPCRA 313 provisions. So we have requirements in
16 which we can enforce the manufacturers to notify
17 their customers that these chemicals are indeed
18 regulated by law.
19 Level 3 deals with data quality
20 violations. It is the responsibility of EPA as
21 well as for the industry to submit a Form R and
22 take a look at making sure that the emission
23 estimates are performed correctly. If emission
24 estimates are done incorrectly, basically you’re
25 making a faulty data base with information that
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1 may be skewed. So we also perform data quality
2 inspections at sites to ensure that the
3 information submitted by industries are correct.
4 And the last one is a Level 4, failure
5 to report in a timely manner, and this is a
6 Category 2. Category 2 is basically when the
7 information, which is the Form R, is submitted
8 within the course of a year to EPA. It is still
9 late after the deadline reporting date of
10 July 1st.
11 The relevance for a Level 4 versus a
12 Level 1, if the information is submitted after a
13 year, EPA is not able to put this information
14 into the toxic release inventory which is the
15 computer system. This computer system is used to
16 help organize and identify information associated
17 with the submissions from industry. Now, this
18 organization is used to help develop national
19 reports as well as state diskettes which the
20 communities as well as the general community use
21 to help identify the emissions in their
22 geographical location.
23 Now if the information is submitted
24 within the year, EPA has the ability to help
25 speed along getting this information into the
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1 national report, so the harm is much less if we
2 receive it shortly after the deadline reporting
3 date, but as the days extend getting closer to a
4 year it impedes the EPA by trying to get that
5 information into the system. So that’s why
6 that’s set up as a Level 4.
7 Level 5 and Level 6 are pretty much
8 voluntary disclosure violations in which EPA has
9 been notified by the facilities that they should
10 have submitted Form R’s and they are making the
11 step forward by giving the information to the
12 EPA.
13 Q Okay. Thank you. Mr. Hirtz, can you also
14 explain to us how the extent of the violation was
15 taken into consideration by the work group?
16 A For the extent, we’re looking at three primary
17 issues as far as the amount of chemicals that are
18 otherwise used or processed at the facility for
19 setting up thresholds. For otherwise used
20 there’s a 10,000-pound threshold and for
21 manufacturing and processing it’s a 25,000-pound
22 threshold. So we’re looking at whether or not
23 ten times or more of that threshold of that 313
24 chemical substance was handled by the facility.
25 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 the
ii. 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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1 Q Now, you heard the testimony provided by
2 Mr. Smith concerning other factors that is part
3 of the statute. Did the work group consider
4 those other factors, adjustment factors?
5 A Yes, they did. Those factors were put into place
6 to help the EPA look at the conditions associated
7 with those factors to aid the EPA in settling
8 cases.
9 Q Do you mind just going through each one of the
10 factors we’re talking about, culpability, ability
11 to pay.
12 A Factors that we looked at were primarily the
13 attitude. As far as other adjustments, we also
14 looked at the culpability, whether or not the
15 chemical involved was a de—listed chemical.
16 Also, the other adjustment factors included SEPs
17 as far as supplemental and environmental
18 projects.
19 MS. FAIN: Your Honor, I have no other
20 questions.
21 THE COURT: Ms. Hoffman?
22 MS. HOFFMAN: I have two questions,
23 Mr. Hirtz.
24
25
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CROSS EXAMINATION
BY MS. HOFFMAN:
Q First of all, I wanted to ask you, are you
familiar with the National Emission Data System
maintained by the USEPA?
A As required under the Clean Air Act? Is that the
one you’re referring to?
Q I’m referring to the data system referred to in
correspondence from the State of Kansas received
by the respondent.
A I have a general familiarity with that data base.
Q Assuming that the chemical reported to the State
of Kansas were in fact the same chemicals
subsequently reported on Form R, is the
information available —— or the information in
both systems that’s available to the community,
is it fair to say that that information is
identical?
A No.
Q Is it fair to say that the information is
summarized in such a way so that the community in
which the business is located has an indication
of the chemicals that are being used by the
facility?
A No.
CouA IQepor/in Service
MIDCITY PLACE
115 EAST DOUGLAS
WICHITA, KANSAS 67202
TELEPHONE (316) 267-1201
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1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION VII
2 726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
3
BEFORE THE ADMINISTRATOR
4
In the Matter of: )
5
GEC PRECISION CORPORATION ) EPCRA Docket No.
6 WELLINGTON, KANSAS ) VII-94-T-381-E
Respondent.
7 _________________
8
9 February 29, 1996
10 9:30 a.m.
11 Wichita, Kansas
12 APPEARANCES
13 Appearing as Administrative Law Judge,
14 Carl C. Charneski, United States Environmental
15 Protection Agency, 401 M Street, S.W., Washington,
16 D.C., 20460.
17 Appearing on behalf of the United States
18 ‘Environmental Protection Agency, Anne E. Rauch,
19 Assistant Regional Counsel, and I. Pearl Fain,
20 726 Minnesota Avenue, Kansas City, Kansas 66101.
21 Appearing on behalf of GEC Precision
22 Corporation, Patricia A. Hoffman, A. B. Dick Company,
23 5700 West Touhy Avenue, Niles, Illinois 60714—4890.
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Court Ieeporuin Service
MIDCITY PLACE
115 EAST DOUGLAS 000245
WICHITA. KANSAS 67202
TELEPHONE (316) 267-1201
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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?
B 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 iphenyls
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 Polychiorinated 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 Polychiorinated Biphenyl Penalty
B 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 Penaltyand adjustment factors to the
17 Gravity Based Penalty.
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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refer to the matrix on Page 9 you see that major extent,
level 1 is a $25,000 penalty.
JUDGE LOTIS: What about the one you previously
referred to, this major disposal is that also in the
matrix?
THE WITNESS:
you look there on Page
types of violations.
JUDGE LOTIS:
viewed this as a major
THE WITNESS:
JUDGE LOTIS:
THE WITNESS:
to be the most serious violations at level 1 and there is
really no alternative for disposal. There is a minor
disposal in which a PCB article has a small leak on the
surface.
JUDGE LOTIS: This was a level 1 for what
reason?
THE WITNESS: Because PCB oil was taken out of a
transformer and shipped for disposal to a facility that
was not designed to handle PCB disposal.
JUDGE LOTIS: It would be level 2 if what had
happened?
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In the matrix it says level 1, if
10. Level 1 lists a number of
Level 1 relates to —— I see. You
disposal.
Yes.
That was because why?
All PCB violations are considered
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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 All 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 0 What were your considerations with regard to
24 culpability as an adjustmept factor?
3 4
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Culpability did not change the Gravity Base
of $25,000.
Did you consider any ——
JUDGE LOTIS: (interrupting) Excuse me, what
mean? What you just said I just don’t
culpability?
THE WITNESS: It did not change the penalty.
JUDGE LOTIS: What does that mean in terms of
their culpability?
THE WITNESS: Well, okay, I can explain that.
If you look on Page 14 there are three levels of
culpability. Level 1 is a willful violation and level 2
is the violator had knowledge or control and that’s where
the penalty stays the same. Level 3 is, lack knowledge,
lack control and still the violator was reasonably prudent
and responsible. Then there’s an opportunity for lowering
the penalty as much as 25%.
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Penalty
Q
does that
understand.
THE WITNESS:
penalty, then you look
should be increased or
JUDGE LOTIS:
THE WITNESS:
JUDGE LOTIS:
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When you calculate the $25,000
at these other factors to see if it
decreased.
Or stay the same.
Or stay the same.
And what did you say as to
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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 0 So it was impossible for you to consider
7 increasing this penalty.
8 A That’s correct.
9 0 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 PCB transformer on his property.
17 0 Would those be the two letters you just. earlier
18 identified in your testimony?
19 A Yes.
20 0 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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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 PCB 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 ycu identify that for us, please?
20 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 0 Did you consider that adjustment factor in
24 Wausau’s penalty?
3( 1
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I 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 toclose. 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—
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 0 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?
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.
Q Why did you determine not to make any reduction
19 for attitude?
20 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 0 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 0 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 0 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 0 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 0 With regard to the Gravity Base of the penalty
24 for that particular violation. For the record, I would
37
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1 just that would be Count 6 of the complaint, violation for
2 unlawful dsposal. 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 ailege in the Group Eight complaint,
13 Count 1, 2, 3, 47 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 PCB 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 0 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 s gnificant because, as you see on Page 4 of the Penalty
13 Policy, the gallonage of P09 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
15 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—i. Can you indicate how you calculated the
23 gravity base of that violation?
24 A Certainly. Storing PCB articles in a storage
31
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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 indicatehow 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
B PCS 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 siçnificant 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 isof 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 PCB transformer involves the one transformer.
14 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 PCB 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
5 tested for PCB’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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1 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 0 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 0 I’d now like 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 acjustment factor.
22 0 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 0 f 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 d-isclos’ire?
17 A To my recollection, Group Eight did not disclose
18 these violations to the EPA.
19 0 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,Iwas.
8 Q Is the penalty proposed in that complaint the
S 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. Mywatch 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
_____ WASHINGTON, D.C. 20460
.4 PRO
MAY 2 8
OFFICE OF
ENFORCEMENT AND
COMPLiANCE ASSUS NCE
MEMORANDUM
SUBJECT: Interim Guidance on Administrative and Civil Judicial Enforcement Following
Rec nt Amendments ,o the Equal Access to Justice Act
K - LI,,
FROM: R b rt Van ed irector
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 II
Director, Comp 1 iance Assurance & Enforcement Division, Region VI
Director, Office of Enforcement, Compliance & Environmental Justice,
Region VIII
Regional Erifoccement Coo dinators, Regions I-X
A. INTRODUCTIGJ
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 Act’ (“EAJA”) to allow the awarding of attorneys fees to non-prevailing parties in an
administrative or civil judicial er fbrcement action.
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 EPAAdministrativê
3 O O276
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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 Rernediation Enforcement (OSRE).
Attaàhed to this memorandum isa summary of some of the other provisions of SBREFA
that are significant for enforcement purposes (see Attachment 3). As we work tifrough 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 Previsions 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 SBR.EFA amend the E.AJA to allow the award of attorney’s fees to a non-prevailing party 2 in
an administrative or civil enforcement action where “the demand by the agency is substantially
in excess of the decision of the adjudicative officer’ and is unreasonable when compared with
such decision, under the facts and circumstances of the case.” “Demand” is defined inboth
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 defmes an adversary adjudication as “an adjudication under
section 554 of this title” 4 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).
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. 142 Cong. Rec. S3242 (daily ed. March 29,
1996)(statexnent 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.
5 U.S.C. § 504(b)(1)(C).
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reçufred to be brought using procedures subject to § 554 of the Administrative Procedure Act -
(APA), 5 as well as io any civil judicial complaint filed on or after March 29, 1996.
SBREFA may allow a party which has been adjudged ftzlly 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 inpreparirig for litigation, drafting a complaint, and responding to EAJA claims.
C. ADMINISTRATIVE ENFORCEMENT
1. Maintain Consistency With Current Procedures
Implementation Of SBREFA, and the changes to EAJA, are not incompatible with strong,
fair and effective enforcement. As noted above, we are confident thatour 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 SBREFA. In this regard, we urge the Agency’s litigation teams and managers to
craft complaints and develop litigation strategies with an awareness of the changes, 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 Unceitain
As a general practice, we re ommend that the litigation team idehtif 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 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 may be subject to an EAJA claim.
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a. Issue a Pre-fihing “Show Cause “orSeztlemem Letter Seeking Additional
Information on Penalty Issues.
Prior to filing a complaint, issue a pre-flling “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 adv se practitioners to
be cautious about including specific’penalty proposals in these pre-fihing 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 arid Regional offices have adopted this practice, and it
appears to work well., ‘A model letteris attached for your consideration at Attachment 1.
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 hi 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 fill 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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3. Adjust the Penalty Proposal as Necessary
In the event of an EAJA claim, the Agency may be able to successftilly 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-flhing proposal. In all cases,
attorneys should ensurethat the respondent receives a written proposal containing a specific
penalty amount based on the most currerit ssessment 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.
D. CIViL J1JDICIAL ENFORCEMENT
When referring a civil judicial action to the Department of Justice (DOJ), any proposal
made by EPA in a pre-fihing 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 tp 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 Garnson
(202-564-4047) or David Hindin (202- 564-6004). If you have questions about other aspects of
SBR.EFA 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
6 See ft. 3, supra., regarding the relationsflip between “demand” under SBREFA and
injunctive relief sought.
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Aftachmentl
EXAMPLE PRF-F}LTNG LETTERS
Example I
Dear
This is to notify you that the U.S. Environmental Protection Agency is prepared to bring a
civil administiative or judicial enforcement proceeding against [ name] for violations of the [ statute].
The complaint will allege that [ name] has violated [ section] of the [ statute], arid [ regulation section],
in that [ name] [ describe violation]. The complaint will seek civil penalties for these violations.
Before filing the àomplaint, 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__
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(aXl)(C).
Urider § 12(aXl)(C) of FIFRA, 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.
FIFRA § 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 (havingso received) deliver or offer to deliver....”.
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
00081.
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gives new powers to the Small Business Ombudsman. Specifically, the SBA ombudsrnaii will
provide a “means to comment on the enforcement activity” by EPA personnel which are onducung
an enforcement action An “enforcement action” includes an “audit, on-site inspection, ompliance
assistance effort, or other enforcement related commumcation “ This does not appear to be limited
to past and/or completed actions, but applies at any point in the enforcement process — including
while the case is in active litigation There is also a provision made for a business which is currently
being enforced against to make a confidential referral to the Inspector General “regarding agency
employees conducting compliance or enforcement activities “ The legislative history indicates
that this is intended to address instances where Agencjpersonnel are not followingestabhshed
policies, or where a policy is, in effect, allowing the Agency to enforce too zealously’
The SBA’s regional boards are to report to the SBA Ombudsman on those “exces ive -
enforcement actions” and recommend changes to “enforcement policy or practice” -The boards are
also to “rate” the “enforcement activities” of agency personnel in reports to C&ngress The
legislative history likens this to a “customer satisfaction” index The boards must be established by
the SBA withm 180 days after enactment
3 Rights 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 requirements) Accordingly, while this section directs that each covered Federal
agency to establish a pro gram within one year to implement this section,, EPA has already done this,.
although a final version of the Interim Policy will be issued shortly Iii addition, the Policy on
Incentives for Self-Policing (the Audit Policy) also appears to satisfy the critena in this section of the
new law
4. Other Enforcement Impacts
Because the Act is still being analyzed, the full extent of its impact remains to be determined..
Howevei, the provisions of more immediate concern are, hopefully, noted above. There are other
provisions which raise enforcement concerns — such as the tei-minationunder 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 affeting
enforcement seem to be focused on changes to the rulemaking process, provisions for legislative veto
of new rules, etc.
Attachment 3 - Page 2
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registration. Specifically, it has come to the Agency t 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. 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,
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 [ jpesticide 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 l Page 2
• OOO 28.2
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Attachment 2
• EXAMPLE NOTICE PLEADING LANGUAGE
Example 1:
CW . PENALTY. .
Section 14(a)(1) of FERA, 7 U.S.C. Section 1361(a)(l), autflonzes the assessment of a civil
penalty of not more than $5,000 for each violation of FIFRA. The penalty assessed must reflect the
size 6f the business of the person charged, the effect on the person s ability o continue in business,
and the gravity of the violation.
Example 2:
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 eaci
day aviolation continues shall constitute a separate violation of TSCA. The penalty assessed must
reflect the nature, circumstances, extent and gravity of the violations, ahd, with respect to
Respondent, ability to pay, effect on ability to continue to do business, any histoxy of prior such
violations, the degree of culpability and such other matters as justice may recuire.
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 statutoty 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 $125,000.
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. § 13 19(gX3), assess a civil
penalty against Respondent of up to $10,000 per day for each day during which a violation(s) cited in
this complaint continues. . .. •:
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Attachment
OTHER PROVISIONS OF SBREFA
SBREFA has a very broad reach, and will likely apply toa sizable percentage ofthere ulated
community. It applies to all “small entities,” as that term is defined in 5 U.S.C. § 601, 15 U.S.C. §..•
632, and mSEA 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 100-employee limit The SBA regulations
define “small” by reference to either a company’s number of employees (e g , up to 1500, or greater)
or a company’s annual receipts (up to $25,000,000), depending on the company’s SIC code The
Act’s definition of “small entitiás” also includes “small governmental jurisdictions” (sthaller than
50,000 persons), and “small organizations” (e.g., non-profits), further expanding the reach of this
• Act. SBREFA rec uires the Agency to establish within a year of enactment a numberof programs
benefit this segment of the community, some of which are summarized below
1. Prograñisto Provide Advice and Guidance to a “ Small Entity”— Potential Evidentiarv Impaèt
Section 313 of SB .EFA requires each department and agency of the Federal governthent t
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 vhich are already commonly used by the Agency to -.
provide this kind of information, including the use of hothnes However, the effect of this kind of
guidance in an enforcement action may have been given greater weight by a provision specii thig 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 beconsidered 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-base), 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 evidentiaiy weight than already afforded under cul-rent 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 Headq uarters 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 guida±ice 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 by the SBA -
Section 322, on “Oversight of Regulatory Enforcement” by the Small Business
Administration, establishes regional boards chaired/mn by the Small Business Administration, and
- . • . •
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