The Department of Justice (DOJ) will no longer allow companies to reduce their fines by footing the bill for supplemental environmental projects (SEPs), putting an end to a tool that’s been popular with both industry and government agencies.
On March 12, 2020, Jeffrey Bossert Clark, Chief of the DOJ Environmental and Natural Resources Division (EDNR), issued a memo stating the program violates the Miscellaneous Receipts Act, which requires money acquired by the government go to the U.S. Treasury. The DOJ argued that SEPs could only legally be allowed with express authorization from Congress.
This shift in policy stems from an announcement in August 2019 and follows a series of steps taken since 2017 to curtail the use of SEPs. On August 21, 2019, the DOJ had announced that it would limit the use of SEPs in settlements with state and local governments while reviewing the overall program.
Background
SEPs are projects that defendants agree to undertake to improve the environment either through projects outside of facility fence lines or by going “above and beyond” existing regulatory requirements. SEPs credit 80 percent of project expenses as a discount on whatever civil penalties have been imposed by the government. They’re often included in consent decrees as a penalty reduction mechanism. Historically, SEPs were commonly used in both settlements negotiated by the DOJ and Environmental Protection Agency (EPA).
Rationale for Change
The agency said the special projects have been “controversial for decades,” and suspended their use “both in light of their inconsistency with law and their departure from sound enforcement practices.” Former officials from the DOJ and EPA criticized that characterization.
Impact
The policy change to end SEPs will likely result in settlements requiring higher financial penalties to be paid to the U.S. Treasury, rather than allowing a company to achieve a mix of financial penalty paired with a SEP. The new memorandum supersedes DOJ’s previous January 9, 2018 policy regarding third party settlements and appears to be immediately effective without regard to potential impacts on ongoing settlement negotiations.
Feel free to give us a call with any questions on environmental compliance support.
Contributed by:
Isaac Smith
District Manager, Mobile, AL Office
(251) 990-9000