On May 12, 2022, the US Department of Justice (DOJ) published an interim final rule that revokes a Trump-era prohibition against its attorneys’ use of payments to third parties, including via “supplemental environmental projects (SEPs)”, in settlements with violators of federal environmental laws. (I discussed Trump Administration policies several times, most recently HERE). In these cases, DOJ acts as the attorney for the agencies, such as the Environmental Protection Agency (EPA), that enforce laws and regulations allegedly violated. This rule change would codify policy changes presented in a memorandum from Attorney General Merrick Garland to US attorneys. This change is designed to restore flexibility to DOJ’s US attorneys to trade penalty dollars for more rapid commitments by wrongdoers to undertake actions to offset harms caused by their violations.What procedural mechanisms are being revived?
The new DOJ policy memo addresses “Guidelines and limitations for settlement agreements involving payments to non-governmental third parties.” These payments can include payments or loans, in cash or in-kind contributions, to any non-governmental person or entity not a party to the case. The new memo provides the following limitations and directions:
Any such settlement agreement shall define with particularity the nature and scope of the specific project or projects that the defendant has agreed to fund.
All such projects must have a strong connection to the underlying violation or violations, … [and] … be consistent with the underlying statute [and its] objectives …. The project should also be designed to reduce the detrimental effects of the underlying violation or violations at issue to the extent feasible and reduce the likelihood of similar violations in the future.
The Justice Department and its client agencies shall not propose the selection of any particular third party to receive payments to implement any project carried out under any such settlement … , [or to] be the beneficiary of any projects carried out under any such settlement, although the Department and its client agencies may specify the type of entity. The Department and its client agencies may also disapprove of any third-party implementer or beneficiary that the defendant proposes for consideration, … based upon objective criteria ….
Any such settlement must be executed before an admission or finding of liability …, and the Justice Department and its client agencies must not retain post-settlement control over the disposition or management of the funds or any projects carried out under any such settlement, except for ensuring that the parties comply with the settlement.
No such settlement shall be used to satisfy the statutory obligation of the Justice Department or any other federal agency to perform a particular activity, [nor to provide them] with additional resources to perform a particular activity for which [they receive] a specific appropriation.
No such settlement shall require payments to non-governmental third parties solely for general public educational or awareness projects; solely in the form of contributions to generalized research, including at a college or university; or in the form of unrestricted cash donations.
These restrictions are designed to avoid the risk of favoritism that could easily result if DOJ or related environmental agencies directed payment to specific recipients. Although many such payments have traditionally been applied in environmental cases, the memo does not define SEPs. Instead, each of the agencies represented by DOJ’s attorneys creates its own definition for SEPs. For example, Environmental Protection Agency (EPA) enforcement policy (which I discussed HERE). distills the following criteria:
Project must be “environmentally beneficial”
Must be undertaken as part of a settlement to an enforcement action
Must not otherwise be legally required by the settling party
Must be sufficiently related to the violation being prosecuted (“nexus”), and must not be inconsistent with the thrust of the law involved (CWA, Clean Air Act, etc.).
The new enforcement memo is effective, but can’t really take effect until the regulation it rejects has been repealed. DOJ considers its interim final rule to be effective upon publication in the Federal Register on May 10, but has asked for comments by July 11, 2022. It’s safe to assume that DOJ will finalize the change, and that agencies led by President Biden’s appointees will be willing to consider SEPs during settlement negotiations. However, it’s also possible that some entities may seek to block the change by arguing that more extensive rulemaking activities are required.
Is the organization subject to formal enforcement action by a federal agency, involving environmental violations, and in which the agency is represented by the US DOJ?
Is the organization subject to formal enforcement action by a state agency, involving environmental violations?
If so, has the organization entered into settlement discussions with the prosecuting agency and its attorneys?
If so, have the terms of such settlements involved supplemental environmental projects?
Where Do I Go For More Information?
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: firstname.lastname@example.org