Clean Water Act violators sometimes get a chance to turn enforcement actions into beneficial projects.

By Lynn Merrill

It can happen at any time: Someone makes a mistake that results in a violation of federal environmental laws and regulations, an investigation occurs, and EPA assesses a civil penalty against the violator through a civil or administrative enforcement action. The violator not only faces a hefty penalty but also must prevent further environmental damage and remediate the damage already done. Without intending to, the violator gets a public-relations black eye and a large dollar outlay.

Although violating the federal environmental laws is a serious matter, violators can redeem themselves and turn what would be a costly fine into an opportunity to make significant amends to the environment and the community. Since 1990, EPA's policy is to examine ways that will further the agency's goals to protect and enhance public health and the environment by including environmentally beneficial projects, known as Supplemental Environmental Projects (SEPs), as part of a settlement of a violation.

The Basics of SEPs

The Beyond Compliance brochure is put out by EPA's Office of Enforcement and Compliance Assurance (www.epa.gov/oeca/sep).

EPA's SEPs policy, effective May 1, 1998, defines a SEP as an "environmentally beneficial project which a defendant/respondent agrees to undertake in settlement of an enforcement action, but which the defendant/respondent is not otherwise legally required to perform." Three key elements exist within this definition. The first element is the term "environmentally beneficial," which means that a SEP must improve or protect public health or the environment at large. The second element is "in settlement of enforcement action." This means that EPA has the opportunity to help shape the scope of the project before it is implemented and that the project does not begin until after EPA has identified that a violation has occurred. The third element is that the project is one the violator is "not otherwise legally required to perform." Thus, the project or activity being proposed is not required by any federal, state, or local law or regulation, nor does it include actions the violator might be required to perform.

The Pollution Prevention Act of 1990 (42 USC Section 13101 et seq., November 5, 1990) identifies an environmental management hierarchy that places pollution prevention or reduction activities at the top of the pyramid, followed by pollution recycling and environmentally safe disposal. There also is a stated concern relating to environmental justice issues acknowledging that low-income and/or minority populations receive a greater-than-average exposure level to pollution. SEPs that emphasize pollution reduction or that address environmental justice are favorably looked upon by the agency.

It is important to note that SEPs do not replace or substitute for penalty payments. EPA seeks substantial monetary penalties to deter noncompliance with environmental regulations, with the understanding that without these penalties, regulated parties may delay compliance until they are caught and ordered to comply. According to EPA policy, penalties "help ensure a national level playing field by ensuring that violators do not obtain an unfair economic advantage over competitors who have done whatever was necessary to comply on time." Although EPA takes into account a variety of factors when determining penalties for environmental violations, all other factors being equal, the final settlement penalty "will be lower for a violator who agrees to perform an acceptable SEP compared to a violator who does not."

A violator can expect to pay up to 25% of the total penalty in cash, once a penalty amount has been calculated. Determining the final penalty is a five-step process that includes calculating a settlement amount without a SEP, a minimum penalty amount with a SEP, the cost of the SEP, the SEP mitigation percentage and the mitigation amount, and then a final settlement penalty. Further information regarding calculation of a penalty can be found in EPA's SEPs policy.

EPA has identified seven categories of projects that may qualify as SEPs. These categories include:

1. Public Health. A project in this category provides diagnostic, preventive, and/or remedial components of human health care and is related to the actual or potential damage to human health caused by the violation.
2. Pollution Prevention. Reduces pollution through source reduction. It may include substitution of technology, modifications to processes, or improvements to a facility's manufacturing, operation, or maintenance activities.
3. Pollution Reduction. Decreases the amount and/or toxicity of any hazardous substance, pollutant, or contaminant being released into the environment. This may include installation of treatment, disposal, or containment technologies or recycling activities that take the pollutant and turn it into a feedstock for an offsite production activity.
4. Environmental Restoration and Protection. Enhances the condition of the ecosystem or immediate geographic area adversely affected. One of the legal tests for a SEP includes a nexus between the location in which the environmental damage occurred and the location of the proposed SEP. A SEP that proposes to restore a streambank where the environmental damage occurred is preferable to one proposed for a streambank in a different geographic area.
5. Assessments and Audits. These include pollution-prevention assessments, environmental-quality assessments, and compliance audits. A pollution-prevention assessment is a systematic internal review designed to identify opportunities to reduce the use, production, and generation of toxic and hazardous substances. An environmental-quality assessment is an investigation of a site either owned or not owned by the defendant and can include investigations of levels or sources of contamination in any environmental media at the site. A compliance audit is an independent evaluation of the defendant/respondent's compliance status with environmental requirements.
6. Environmental-Compliance Promotion. Provides training or technical support to other members of the regulated community to identify, achieve, and maintain compliance with applicable requirements and to go beyond compliance by reducing the generation, release, and disposal of pollutants beyond legal requirements.
7. Emergency Planning and Preparedness. Provides assistance in the form of data processing equipment, communication equipment, HAZMAT response equipment, and training to a responsible state or local emergency response or planning entity.

Projects that usually do not qualify as SEPs include general public educational or environmental awareness projects, contributions toward environmental research at colleges or universities, and contributions toward projects unrelated to environmental protection. In almost all cases, the determination of whether a SEP qualifies will be a negotiated process between the defendant and the appropriate EPA staff assigned to the project.

A National Perspective on SEPs

Although the legal policies relating to SEPs have been well defined over the course of nearly a decade, the nuts-and-bolts details of negotiating a SEP fall back on EPA and its regional offices. "SEPs only come about when we have a fairly significant violation and either we're bringing somebody into court or we have decided that we are going to look at assessing or seeking a court to assess penalties," explains Brian Maas, director of the Water Enforcement Division at EPA's Washington, DC, headquarters. "Essentially it gets at the fact that stormwater discharges have caused some harm to the environment. That harm is often difficult to quantify. It's also difficult to remediate."

Violations of environmental laws relating to stormwater usually involve the movement and dispersion of some offsite constituent, such as sediment, that becomes difficult to clean up in a watershed. "That sediment has probably caused some kind of problem," says Maas. "What we very often look for in SEPs is some other way to attempt some environmental improvement. For example, it could be wetlands creation or conservation. It also might work to filter pollutants that were going into that same watershed. The first concept is trying to redress the harm that has been done from the violation." Currently EPA is focusing closely on construction and construction management, as well as salvage yards because of the pollutants that they can release to the environment.

EPA staff notes that proposals for SEPs come from the defendant/respondent themselves. "We do not tell the defendant/respondent which projects we want them to do," points out Beth Cavalier, program analyst with EPA in Washington, DC. "If they ask for suggestions, we can certainly provide those. There are fairly common types of projects that are done, and then there are those that are more unique. We have different factors that we look at when evaluating a project. We make sure that the SEP is related to the violation–there has to be a connection. In the context of a stormwater violation, there's been a discharge, and it's caused some damage downstream that may need wetlands remediation or damage repair. If the damage is irreparable at the site, [the defendant/respondent] may purchase land to develop new wetlands somewhere else. But it is something that is related to the violation."

A common SEP approach for stormwater violations includes the purchase of greenways to filter out various constituents from runoff. "Greenways work very well because most of the contaminated stormwater runoff is oil and grease, metals, or sediment," notes Maas. "Greenways filter out some of that. So if you are in the same watershed and you set up a greenway farther down, the idea is that you are somewhere going to make up for the pollutants you put in that we can't find and [remove]." Yet Maas emphasizes that SEPs aren't an evasion or an easy way out of being penalized. "It is important to remember that this is part of a settlement of either a lawsuit or an administrative action. We always insist that the violator fix the violation. If there are immediate problems, like sediment in the stream that we think they can get out, they have to do that. The injunctive relief is making sure that they have fixed their problem and it won't occur again. That's very important for future preventive aspects. Also we make sure that they pay a penalty that is appropriate so that they don't end up being better off than one of their competitor builders who does have the sediment controls and has the money."

When a defendant/respondent suggests a SEP as a mitigation measure for a violation, the proposal must be evaluated thoroughly to determine if it will work. A team located in the EPA regional offices handles these cases. "The case team will take a look at the proposal," explains Cavalier. "If they need additional information, they will collect that from the company or the facility. They will review it for several different factors, for benefits to public health and the environment. They may call in specialists from within the region to look at it if it's a technical proposal or an innovative project. They'll look at whether the community involved has an environmental justice issue. That is kind of a big push. We like to see the defendant or respondent involve the community and work with them to develop a project that is helpful. And we look at whether there are multimedia impacts of the project. All those things are weighed to see whether it makes a good project. If we think it is, we will begin looking at the costs and savings to the violator. We don't want a project that is going to turn a profit for the violator immediately. We look at things like that and then run [all these factors] through a computer model to give us a value of the SEP. All of that is factored into the settlement discussions."

Of course, although a SEP might result in net environmental improvement, EPA staff would prefer that no violations occur that require SEPs. "I hope that none of them is in a position where they are contemplating a Supplemental Environmental Project, because that means they have a serious problem in compliance," states Maas. "We would prefer to not have the SEPs and to have the law complied with. To the extent there is a problem, we want them to fix it as quickly as they can, and we do want them to step forward and try to address some of the harm that they've done. Companies remember that this is a voluntary program and we don't require a SEP. But to the extent that we have a problem and somebody wants to do one of these projects, it goes into the whole settlement package–that package will be the dollar value of the SEP in addition to any cash penalty that's also paid. A SEP is a very good solution for a company looking to change its image from violator to good neighbor. We think community relations and environmental issues should be first and foremost in these companies' minds, which would lead them to want to come forward to do a SEP when they know that they have had a problem at their facility or otherwise violated the law or harmed the environment."

Improving Water Quality Along the Charles River

Charles River Watershed Association's Web site (www.crwa.org) gives information about Charles River currents, the watershed, and water quality.

An example of a typical SEP can be found in a recent settlement of a case involving the Massachusetts Institute of technology (MIT) and EPA's Region 1, located in Boston, MA.

As part of EPA's Charles River watershed enforcement initiative, EPA notified MIT of its intent to conduct an inspection of the Cambridge campus. In May 1998, EPA performed an inspection that revealed 18 alleged violations of various environmental statutes, including the Clean Water Act, the Resource Conservation and Recovery Act, and the Clean Air Act. Although some of the violations could have been dangerous–resulting from failing to keep containers of hazardous waste closed, storing incompatible wastes together, and other violations–EPA's inspectors did not find any release or actual damage to the environment. EPA's enforcement action prompted MIT to come into compliance with the violated regulatory requirements, to hire personnel to better manage its environmental compliance program, and to start working on its environmental management program. MIT went further by initiating several activities that went beyond compliance and was very cooperative during settlement negotiations.

According to Catherine Smith, senior enforcement counsel with EPA's Region 1 (who handled the MIT case), the actions taken against MIT were part of a larger initiative by EPA. "The Charles River is fairly degraded, and EPA has an initiative to get the Charles River fishable and swimmable by the year 2005. As part of that initiative, EPA decided they would make sure all the facilities up and down the Charles River were in compliance, not just with the Clean Water Act but with other environmental statutes as well. We announced a compliance enforcement initiative that basically gave the facilities advance warning, which is rare for us to do. MIT was one of the facilities that we inspected, and it turned out that their Clean Water Act problems were not very serious. They just had one violation, and that was for the oil-spill prevention-plan requirements; they had a plan but it just wasn't adequate. Their biggest violations were [related to the] Resource Conservation and Recovery Act."

The MIT case was the biggest case to come out of the Charles River initiative and was the only one that involved a SEP. The case was settled in April 2001, resulting in MIT paying a $150,000 cash penalty and spending at least $405,000 on three SEPs.

"Sometimes companies are sophisticated and have sophisticated counsel," remarks Amelia Katzen, senior enforcement counsel with EPA Region 1. Katzen works as the pollution-prevention coordinator for the legal office and participates in EPA's national working group that develops SEP policies nationwide. "They come in with a list of projects that they already know they want to do. Sometimes they say, ‘Gee, we have no idea what to do'; then we can make suggestions based on either the ecosystem in which they are located or on the type of processing that they've got going on in their plants that sort of cry out for pollution prevention." Ideas for SEPs also come from the community. "I maintain a SEP idea bank in the region, and I talk to nonprofit groups, watershed associations, and environmental justice groups," adds Katzen. "I tell them that they can make submittals to the SEP bank and then case teams will look in the bank and see if there are any proposed projects that might be appropriate."

MIT came up with its own proposals for a SEP, says Smith, and they included a stormwater management component. "MIT has been doing some work with green building initiatives on their own campus, and stormwater control is obviously one aspect of having greener buildings. It was great for us and for the community because that particular area of Cambridge was very prone to flooding." Stormwater from this area flows into combined storm and sanitary sewers that discharge to the Charles River during heavy rain. MIT proposed developing an innovative stormwater management system for its new Stata Center. Runoff from this area will drain to a biofiltration swale, filter through vegetation, and enter an underground chamber of plastic pipes. Outflow from the galley chamber will be discharged at a controlled and reduced rate of flow. The system has been designed to reduce total suspended solids by 80% and to reduce peak storm runoff by 50% or more compared to predevelopment levels. "This particular SEP would really deal with some sticky stormwater issues," observes Smith.

A second component of the SEP includes the development of a virtual campus compliance assistance tool. EPA has found widespread compliance problems at universities and colleges, and the MIT tool could assist universities and colleges all over the United States in complying with environmental laws. "The virtual campus SEP was one that a consortium of universities around the Boston area really wanted to do," states Smith. "MIT is actually part of that consortium, and once we told MIT that this was something the other universities wanted, it was hard for MIT to resist because it's so up their alley. So they were really the right ones to develop that. There is a very big need for it because universities have had major compliance problems."

The final component of the SEP program proposed by MIT includes an urban-focused collaboration on education for the environment. Under this program, MIT will collaborate with the Cambridge public school system to develop and implement three different environmental projects over the course of one or two academic years. The projects will focus on water quality, pollution prevention, remediation, or energy use and will have an urban theme. Each project must include a field component designed to help improve the urban environment and may also include curricular enhancements, laboratory materials, case studies, or research experiences for public school students. "We strongly felt that something from the settlement should go back to this community, and MIT agreed," says Smith. "That one was actually the hardest to develop because we had to come up with several different ideas before we came up with that particular project." According to MIT information, 57% of the Cambridge public school students who will benefit from this SEP are minorities, and all live in an urban environment. Although MIT is required to fund the SEP for only one year, MIT hopes to offer it for many years.

Not Just for the Federal Government

EPA's Supplemental Environmental Projects Web site aids in the settlement of environmental enforcement actions.

Although SEPs are primarily a tool used by USEPA, many state agencies have adopted similar programs to cover water-quality issues in their regions as well. For example, in Ohio's EPA, the state uses SEPs as part of the resolution of enforcement cases. "There isn't an agencywide policy or position on the use of supplemental environmental projects," points out Randy Bournique, enforcement coordinator for Ohio EPA's Division of Surface Water. "It's pretty much left up to the individual program divisions. In the division of surface water, we rely heavily on the federal Supplemental Environmental Project policy, but were not restricted by it. A lot of the cases where we have done this have been related to NPDES [National Pollutant Discharge Elimination System] permit violations. We think it's a good way to get some direct environmental benefits back into the community that was impacted."

Similar to the way USEPA operates, Ohio EPA looks at each SEP proposal individually. "We look at the project that has been proposed and try to assess what we believe the environmental benefit of the project will be," says Bournique. "We then incorporate that project into a final order that would be the end result of our enforcement action, whether it is an administrative order signed by the director of our agency or a judicial order signed by the court."

California's Regional Water Quality Control Boards use a similar program. "We began using SEPs in 1991," says Wil Bruhns, senior water-quality-control engineer with the San Francisco Regional Water Quality Control Board. The responsibility for implementing the state's water-quality regulations falls to various regional boards that manage specific watersheds as the enforcement arm for the State Water Resources Control Board. "The program that we use was essentially invented by us. We do it rather simply. Under the law where the board can assess fines, the discharger has the option of waiving a hearing. They sign a paper that says, ‘I agree to pay the fine.' If we want to do a project, we will amend the complaint. You have to pay us part of the fine now, and in the next two years you will do [a project]. If you do it in such time and verify that you did it properly, then the rest of the fine is suspended."

Bruhns solicits ideas for SEPs from various not-for-profit agencies and organizations to establish a data bank. "We have a list, and when we send out a complaint, we attach a letter with a list of potential projects. Most companies are thinking about whom they are going to support in terms of a project, and there is no requirement that you have to choose off the list. You can pick any project you want that we agree to." Organizations such as Marin County Audubon Society have used this program to acquire new wetlands within the San Francisco Bay Area.

The program has its drawbacks, notes Darrin Polhemus, senior engineer with the California State Water Resources Control Board. "The projects require a lot of time, and we have to be careful how they are structured so that they don't require extra monitoring on the state's part to make sure they are actually finished." The use of SEPs is a growing trend within California, and this has prompted a review of the state's policies toward the projects. Such issues as third-party monitoring of SEP compliance are of concern to the state. "Not all the regions do that, so in some regard we are struggling with how to keep them from being too big of a burden on us while, at the same time, being responsive to local needs. We are grappling with that in our revised enforcement policy," says Polhemus. The revised policy is slated for adoption early this year.

It is important for any company, agency, or organization facing a violation of either a state or federal water-quality law or regulation to realize that it can propose performing a SEP as part of the settlement agreement. Although the federal policies governing SEPs are well defined, programs at state and regional levels might be less defined and possibly more flexible. Whether the monetary cost of performing a SEP turns out to be more or less than only paying a penalty, it allows violators to redeem themselves by doing something good when they've done wrong.

Guest author Lynn Merrill is director of public services for the City of San Bernardino, CA.

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