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 of an NPDES or Section 404 permit Discharging dredged or fill material into waters of the United States without a permit Source: www.galvbaydata.org
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
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
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
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
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
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
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
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)
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).
EPA s Settlement Penalty Policy BEN produces the lowest penalty that the government may accept in settlement: Penalty = Economic Benefit + (Gravity Factors +/- Adjustment Factors) Litigation Considerations Ability to Pay Supplemental Environmental Projects Only used in settlement
Monthly Gravity Component To deter and punish defendants Reflects the perceived seriousness of the violation 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)
Gravity Adjustment Factors History of non-cooperation, including actions taken in bad faith or unjustified delays in preventing, mitigating, or remediating the violations Ability to pay Litigation concerns (e.g., cost, time, quick settlement) 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
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
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
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
Questions?