Enforcing the Clean Water Act Authority, Trends, and Targets

Size: px

Start display at page:

Download "Enforcing the Clean Water Act Authority, Trends, and Targets"

Russell Henry
6 years ago
Views:

1 Enforcing the Clean Water Act Authority, Trends, and Targets Texas Wetlands Conference January 30, 2015 Jennifer Cornejo Vinson & Elkins LLP

2 Agenda Common Clean Water Act Violations Enforcement Authority under the Clean Water Act Civil Actions and Penalty Calculation Criminal Actions Citizen Suits Enforcement Trends Enforcement Goals 2

3 Common Clean Water Act Violations

4 Common CWA Violations Failure to comply with the terms or conditions of an NPDES or Section 404 permit Discharging dredged or fill material into waters of the United States without a permit Source: 4

5 Enforcement Authority under the Clean Water Act

actions EPA and Corps jointly determine the appropriate lead agency for discharges

6 Enforcement Authority Corps is lead agency on Corps-issued permit violations State agencies with delegated authority and oversight responsibilities may pursue enforcement actions EPA and Corps jointly determine the appropriate lead agency for discharges without a permit Private citizens and public interest groups may sue under citizen suit provision 6

7 Civil Actions and Penalty Calculation

8 Potential Civil Penalties Civil administrative penalties ( 309(a), (g)) Class I: $16,000 per violation; $37,500 maximum Class II: $16,000 per day of violation; $187,500 maximum Administrative orders Civil judicial penalties ( 309(b),(c), (d), and 404(s)) Injunctive relief Court determines penalty 8

9 Civil Penalty Factors 309(b), (g) Economic benefit (if any) resulting from violation Seriousness of the violation History of violations Any good-faith efforts to comply with applicable requirements Economic impact of the penalty on the violator Such other matters as justice may require 9

10 Economic Benefit EPA recovers at least this amount Necessary to level the economic playing field by preventing violators from obtaining an unfair financial advantage over competitors who made the necessary expenditures for environmental compliance. BEN model analyzes economic benefit based on: Delayed costs capital investments or one-time expenditures required to comply with regulations Avoided costs operation, maintenance, annually-recurring costs BEN also accounts for after-tax cash flows, inflation, and time value of money 10

11 Seriousness of Violation Frequency and severity of the violations Impact on environment and public health Absence of material environmental harm may mitigate penalties Courts have imposed significant penalties even absent proof of actual harm 11

12 History of Violations Prior lawsuits for CWA violations Past settlements in administrative actions Violations of consent decrees Reported pollution incidents Duration of a defendant s current violations 12

13 Good Faith Efforts to Comply Did the defendant take any actions to decrease the number of violations or try to mitigate the impact? Examples of efforts to comply: Voluntary internal audits Hiring environmental consultants 13

Economic Impact on Violator Goal is not to seek a penalty that would bankrupt the violator or hinder its efforts to achieve compliance To determine

14 Economic Impact on Violator Goal is not to seek a penalty that would bankrupt the violator or hinder its efforts to achieve compliance To determine economic impact, courts will consider: Violator s total assets and liabilities Company size Market share Financial status of parent corporation (if any) 14

15 Other Matters as Justice May Require Courts have equitable powers to adjust penalties Final penalty tied closely to economic benefit rather than statutory maximum Smithfield Foods: $175 million max penalty, history of noncompliance, solid financial health, few good faith efforts Economic benefit = $ 4.2 million Court assessed $12.6 million fine (7% of statutory maximum) Gulf Park: $46 million max penalty, long history of serious violations, few efforts to comply Economic benefit = $600,000 Court assessed $1.5 million fine (3% of statutory maximum). 15

16 EPA s Settlement Penalty Policies Policy formulas produce the lowest penalty that the government may accept in settlement Settlement Penalty Formula for 402 Violations: Penalty = Economic Benefit + (Gravity Factors +/- Adjustment Factors) Litigation Considerations Ability to Pay SEPs Settlement Penalty Formula for 404 Violations: Penalty = Economic Benefit + (Preliminary Gravity Amount +/Gravity Adjustment Factors) Litigation Considerations Ability to Pay SEPs Only used in settlement 16

17 Gravity Component 402 Violations To deter and punish defendants Reflects the perceived seriousness of the violation For 402 violations, EPA calculates this component for each month during which the violation occurs, based on four factors: A: significance of the monthly effluent limit violation B: actual or potential harm to the public health and the environment C: number of monthly effluent limit violations D: significance of monthly non-effluent violations Monthly gravity component = (1 + A + B + C + D x $1,000) 17

18 Gravity Component 404 Violations For 404 violations, EPA calculates the environmental and compliance significance of the violation(s) at issue Preliminary Gravity Amount = (sum of A factors + sum of B factors) x M M = $500 for minor violations; $1,500 for moderate violations, and $3,000-$10,000 for major violations A factors for Environmental Significance: (1) harm to human health or welfare; (2) extent of aquatic environment impacted; (3) severity of impacts to the aquatic environment; (4) uniqueness/sensitivity of the affected resource; (5) secondary or off-site impacts; and (6) duration of violation B factors for Compliance Significance: (1) degree of culpability; (2) compliance history of the violator; and (3) need for deterrence Assign value of 0 to 20 for each factor The more serious the violation, the higher the assigned value 18

19 Gravity Adjustment Factors Penalty adjusted up for past recalcitrance History of non-cooperation, including actions taken in bad faith or unjustified delays in preventing, mitigating, or remediating the violations Penalty adjusted down for Quick settlement Inability to pay Litigation concerns (e.g., troublesome facts, weak case) Supplemental Environmental Projects No specific adjustment factor for environmental audits, but EPA may eliminate or substantially reduce the gravity component and elect not to recommend criminal prosecution of disclosing entities 19

Supplemental Environmental Projects Projects willingly undertaken to receive favorable penalty consideration in an enforcement action EPA must be involved in planning Cannot begin until after EPA

20 Supplemental Environmental Projects Projects willingly undertaken to receive favorable penalty consideration in an enforcement action EPA must be involved in planning Cannot begin until after EPA issues notice of violation, administrative order, or complaint Otherwise, project may only mitigate penalties as proof of good faith efforts Cannot be part of any injunctive relief issued by EPA, a court, or a state or local government 7 categories of qualifying SEPs 20

21 Supplemental Environmental Projects SEP Policy for determining settlement penalty amount in cases where violators opt to undertake SEP Five-step process for determining penalty 1. Calculate minimum settlement penalty allowed without SEP 2. Determine greater of economic benefit + (Gravity x 0.1) OR (Gravity x 0.25) 3. Calculate net present after-tax cost of SEP 4. Determine SEP mitigation percentage and mitigation amount by weighing 6 factors (benefit to public/environment; innovativeness; EJ; community input; multimedia impacts; and pollution prevention) 5. Subtract SEP mitigation amount from Step 1. The greater of Step 2 is the minimum final settlement penalty amount allowable. 21

22 Criminal Actions

Criminal Enforcement For negligent or knowing violations of a permit or unauthorized discharges $2,500 - $50,000 per day of violation up to 3 years imprisonment For knowingly making false material

23 Criminal Enforcement For negligent or knowing violations of a permit or unauthorized discharges $2,500 - $50,000 per day of violation up to 3 years imprisonment For knowingly making false material statements related to a permit up to $10,000 up to 2 years imprisonment Strict penalties for knowing endangerment up to $250,000 (individuals) or $1 million (organizations) up to 15 years imprisonment Fines and prison terms double for repeat offenders 23

24 Citizen Suits

25 Citizen Suits CWA 505 authorizes private citizens to bring enforcement actions against persons who violate a permit EPA/Corps for failure to perform a non-discretionary duty Citizens may seek injunctive relief to enforce a standard and civil penalties payable to the federal government Only available for continuing or intermittent violations May not proceed if regulators are currently prosecuting violation 25

26 Enforcement Trends

27 Civil Enforcement Case Initiations and Conclusions 27

28 Administrative and Civil Judicial Penalties Assessed 28

29 Estimated Value of Administrative and Civil Judicial Injunctive Relief 29

30 Supplemental Environmental Projects 30

31 Civil Enforcement and Compliance Activities Referrals of Civil Judicial Enforcement Cases to DOJ Civil Judicial Complaints Civil Judicial Enforcement Case Conclusions Administrative Penalty Order Complaints 1,760 1,407 1,336 Final Administrative Penalty Orders 1,780 1,440 1,340 Administrative Compliance Orders 1, Cases with SEPs Inspections/Evaluation s 19,835 18,000 15,600 Region 6 Cases Opened Region 6 Cases Closed Source: EPA Office of Enforcement and Compliance Assurance 31

32 Civil Enforcement and Compliance Activities Administrative and Civil Penalties Assessed $207,561,881 $1,148,000,000 $100,000,000 Value of Injunctive Relief $9,135,543,769 $7,300,000,000 $9,738,000,000 Value of SEPs $43,606,036 $22,000,000 $17,000,000 Source: EPA Office of Enforcement and Compliance Assurance Limited number of cases drive figures Penalties attributed to primary statute underlying the actions Stipulated penalties not included 32

33 Civil Enforcement Trends Declining enforcement figures overall Use of SEPs on the decline Inspections/evaluations rapidly decreasing Regional enforcement cases rapidly declining 33

34 Criminal Cases Opened, Defendants Charged, and Sentencing Results 34

35 Criminal Fines, Restitution, and Court Ordered Environmental Projects 35

36 Criminal Enforcement Activities Criminal Cases Opened Defendants Charged Years of Incarceration Fines and Restitution $44,000,000 $1,500,000,000 $63,000,000 Value of Court Ordered Environmental Projects $14,000,000 $3,000,000,000 $16,000,000 36

37 Criminal Enforcement Trends Limited number of cases drive figures Modest decline in criminal cases initiated Decrease in number of defendants charged Slight decrease in years of incarceration Large decreases in fines, restitution, and value of court ordered environmental projects 37

38 Enforcement Goals

39 Clean Water Act Action Plan Issued October 15, 2009 no updates Outlines how EPA will strengthen the way it addresses water pollution challenges, including: Concentrated animal feeding operations Sewer overflows Contaminated water flow from industrial facilities Construction sites Runoff from urban streets Goals Target enforcement to the most significant pollution problems Improve transparency and accountability by providing the public with access to better data on the water quality in their communities, and Strengthen enforcement performance at the state and federal levels 39

40 EPA National Enforcement Initiatives FY List of most important environmental problems on which federal enforcement resources will be focused Reevaluated every three years FY initiatives continued for another three years: Keep raw sewage and contaminated stormwater out of nation s waters Prevent animal waste from contaminating surface and ground waters Reducing pollution from mineral processing operations Assuring energy extraction sector compliance with environmental laws 40

41 EPA Fiscal Year Strategic Plan Charts five-year objectives and methodologies for EPA Goals 1. Address climate change and improve air quality 2. Protect America s waters 3. Clean up communities and advance sustainable development 4. Ensure the safety of chemicals and prevent pollution 5. Protect human health and the environment by enforcing laws and assuring compliance 41

42 EPA Fiscal Year Strategic Plan Continued focus on most important environmental problems Pursuit of largest, most complex cases requiring significant investment and long-term commitment Necessarily means fewer cases overall Focusing inspection efforts on largest facilities and violations Anticipates a 10-20% reduction in projected number of inspections and enforcement cases over next five years Continued focus on most serious criminal pollution violations across all media that involve serious harm or injury; hazardous or toxic releases; ongoing, repetitive, or multiple releases; serious documented exposure to pollutants; and violators with significant repeat or chronic non-compliance or prior criminal conviction 42

43 EPA Fiscal Year Strategic Plan EPA investing in Next Generation Compliance Design regulations and permits for clear and effective implementation Use advanced monitoring technologies to find and take action on pollution problems Shift to electronic reporting Expand transparency of pollution and compliance information Use innovative enforcement strategies to improve compliance NextGen will take years to implement 43

44 EPA Fiscal Year Strategic Plan By 2018 (five-year cumulative), conduct 79,000 federal inspections/evaluations initiate 14,000 civil judicial and administrative enforcement cases conclude 13,600 civil judicial and administrative enforcement cases maintain review of the overall compliance status of 100% of open consent decrees increase percentage of criminal cases having the most significant health, environmental, and deterrence impacts to 45% maintain 75% of criminal cases with an individual defendant increase the percentage of criminal cases with charges filed to 45% maintain an 85% conviction rate for criminal defendants Each year through 2018, support cleanups and save federal dollars for sites where there are no alternatives by (1) reaching a settlement or taking an enforcement action before the start of a remedial action at 99% of Superfund sites having viable responsible parties other than the federal government; and (2) addressing all cost recovery statute of limitation cases with total past costs greater than or equal to $500,000 44

45 EPA FY 2015 Budget Reduced for the fifth year in a row Total budget of $8.1 billion $60 million below FY 2014 level $2.2 billion below FY 2010 level Does not include White House proposal to spend $66 million on new or expanded EPA regulatory programs Provides $2.35 billion in grants to states for local drinking water and sewer construction projects through State Revolving Funds Reduction in Agency staff to lowest level since 1989 Anti-regulatory sentiment in new Congress Even Obama Administration request for EPA was nearly $310 million below the Agency s FY 2014 budget (4% cut) 45

46 Takeaways Expect more of the same Fewer inspections/evaluations State role unlikely to decrease Continued focus on largest environmental problems/violators New Congress not likely acting in EPA s favor 46

Clean Water Act Section 404 Enforcement

Clean Water Act Section 404 Enforcement Texas Wetlands Conference January 9-10, 2014 Jennifer Cornejo Vinson & Elkins LLP jcornejo@velaw.com Common CWA Violations Failure to comply with the terms or conditions