Negotiating EPA Penalties: EPA's Penalty Policies and the 2013 Civil Monetary Penalty Inflation Adjustment Rule

• Date: 01 September 2014

9-2014 NEWS & ANALYSIS 44 ELR 10757

Negotiating EPA Penalties:

EPA’s Penalty Policies and the

2013 Civil Monetary Penalty

Inf‌lation Adjustment Rule

by Matthew urlow and Douglas Bushey

Matthew urlow and Douglas Bushey are attorneys at Latham & Watkins LLP. Matt urlow was a trial

attorney in the U.S. Department of Justice Environmental Enforcement Section from 2008 to 2011.

On December 6, 2013, the U.S. Environmental

Protection Agency (EPA) increased the statu-

tory maximums for 20 of the 88 civil penalties

it administers. At the same time, EPA also revised its civil

penalty policies a nd increased the gravity-based compo-

nent of all penalties by 4.87% for violations occurring after

December 6, 2013.1 ese recent increases are an impor-

tant reminder that EPA has the statutory authority to pur-

sue signicant, and in some ca ses enterprise-threatening,

penalties for environmental violations.2 But in assessing

civil penalties in environmental enforcement ca ses, EPA

case managers and attorneys do not simply apply statutory

maximums; instead, t hey are guided by EPA’s well-estab -

lished penalty policies, which require the Agency to assess a

number of aggravating and mitigating factors before deter-

mining an initial penalty demand.3

Pursuant to the Debt Collection Improvement Act

(DCIA) of 1996,4 ever y four years EPA must conduct a

review of the civil monetar y penalties under the statutes it

administers and adjust these penalties for ination. Because

this adjustment in civil monetary penalties is accomplished

1. See Federal Civil Penalties Ination Adjustment Act of 1990, 28 U.S.C.

§2461, as amended by Debt Collection Improvement Act of 1996, 31 U.S.C.

§3701; Civil Monetary Penalty Ination Adjustment Rule, 40 Part 19, 78 Fed.

Reg. 66643 [hereinafter Ination Adjustment Rule]. See also C G,

U.S. EPA, A  EPA’ C P P  A

 I (2013) [hereinafter G M], available at

http://www2.epa.gov/sites/production/les/2014-01/documents/guidance

toamendepapenaltypolicyforination.pdf.

2. See R E, C. R S., F P

C L: H A T E (2013) (providing overview of

federal environmental enforcement).

3. See G M, supra note 1 (attaching a complete list of EPA’s

penalty policies).

4. Debt Collection Improvement Act (DCIA) of 1996, 31 U.S.C. §3701.

using EPA’s statutory rulemaking authority, these changes

not only alter EPA’s administrative process for pursuing

penalties, they also modify t he amount that a cour t could

assess in the event of litigation. Although not required by

the DCIA, EPA also administratively adjusted the gravity

component of all civil pena lties in its penalty policies on

December 9, 2013, as it has done following DCIA penalty

adjustments in the past.5

EPA’s penalty policies apply two primary criteria in cal-

culating penalties: (1)the economic benet of noncompli-

ance to t he violator; and (2) the gravity of the violation.

e policies also provide signicant discretion to case man-

agers and attorneys to adjust penalties based upon enumer-

ated, case-specic criteria including the violator’s degree of

negligence or willfulness, its cooperation with the Agency,

its past violations, and EPA’s (or the U.S. Department of

Justice’s (DOJ’s)) perceived litigation risks in the ca se. Fol-

lowing an explanation of EPA’s recent changes to the civil

penalty maximums and its penalty guidance, this Article

describes EPA’s general pena lty policy, provides ex amples

of how the penalty policies work under dierent EPA pro-

grams, and identies instances in which the Agency’s pen-

alty calculations may be negotiable.

I. The 2013 Civil Monetary Penalty

Inf‌lation Adjustment Rule

On November 6, 2013, EPA promulgated a rule increas-

ing the civil monetary penalties that may be assessed under

many of the statutes it administers.6 Pursuant to the DCIA,

5. G M, supra note 1, at 2 (“While not required specically

by the Act, we believe revising our civil penalty policies to account for

ination is consistent with the Congressional intent in passing the DCIA

and is necessary to implement eectively the mandated penalty increases set

forth in 40 C.F.R. Part 19.”).

6. Ination Adjustment Rule, supra note 1.

Authors’ Note: e opinions expressed herein are the authors’ own

and do not necessarily reect the views of the U.S. Department of

Justice or Latham & Watkins LLP or any of its clients.

Copyright © 2014 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.