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DOJ Prohibits Polluters From Lowering Penalties With Environmental Projects

DOJ Prohibits Polluters From Lowering Penalties With Environmental Projects

Last week, a new environmental policy change marked the end of Supplemental Environmental Projects (SEPs), a controversial, nearly 30 year-long settlement practice.

In its memo, the Department of Justice (DOJ) announced the suspension of SEPs. This means polluting businesses will no longer be able to reduce civil penalties by paying for environmental projects.

Assistant Attorney General for the Environmental and Natural Resources Division, Jeffrey Bossert Clark, said this would take effect immediately.

What are Supplemental Environmental Projects (SEPs) and How Do They Affect the Environment?

The Environmental Protection Agency (EPA) defines SEPs as environmental settlement projects that “provide a tangible environmental or public health benefit.” Some projects entail installing solar panels at schools, whereas others just involve a monetary donation to an environmental nonprofit.

SEPs are not a legal obligation. Still, many violating businesses voluntarily opt for this settlement. The government credits 80% of what businesses spend on their project. This money serves as a discount on civil fines.

However, the DOJ’s announcement states that this program violates the Miscellaneous Receipts Act. This statute states government-obtained money must go directly to the U.S. Treasury. The DOJ concluded Congress must authorize SEPs for them to be legal. This federal decision follows the DOJ’s decision back in August, which prohibited SEPs at the local and state level.

In defense of this decision, Clark wrote that “this practice has been “controversial for decades.” He added SEPs were “as problematic as direct cash payments to third parties.”

Reactions to DOJ’s New Environmental Policy Change to Settlement Procedures

According to Cynthia Giles, the Obama administration’s assistant administrator of the EPA‘s Office of Enforcement, “Everybody likes these [SEPs] for a reason.”

Giles told The Hill that industry had oftentimes asked her to offer more SEPs.

“Communities like them because they are the people who have been harmed— this is their way to get redress. Companies like them — yes, because it helps them improve their public image but because it gives them a chance to give something back,” she said. “And government likes them because they help to resolve these cases in a way that benefits everyone.”

Environmental lawyer and former EPA acting general counsel, Kevin Minoli, echoed this sentiment. SEPs, he pointed out, aren’t just “money savers” for companies. He added there were measures in place to ensure businesses performed SEPs corresponding to their violation. Businesses also cannot falsely advertise why they decided to launch their project.

“There’s a long history of SEPs making meaningful differences in the environmental space,” Minoli told Bloomberg Environment. “It’s unfortunate that those are not going to be an option for the companies and the federal agencies.”

On the other hand, in Clark’s memo, he said SEPs currently didn’t need to “directly remedy the actual harm caused by the violation in a manner that can be seen as ameliorating in some way the consequences of the underlying offense.”

See Also

Yes, will be some exceptions to this new policy. But, the DOJ emphasized SEPs will only be used “as a matter of last resort.”

Takeaways

Last year when the DOJ was performing a policy review on SEPs, Frank X. Lyon said the elimination of SEPs would be the “worst case scenario.”

“In other words, if your company finds itself as a defendant in a federal environmental enforcement action led by the DOJ,” Lyon told Bloomberg Environment.

He added businesses will have a lot less flexibility to pay back their fines. More substantial out-of-pocket costs may also be warranted.

Now, Lyon says this decision will be a “disappointment” to federal enforcement teams and regulated communities.

So, it seems, almost overwhelmingly, this decision has been met by protest by many former EPA staff. It will be interesting to see whether or not this new environmental policy change was indeed the wrong call.

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