Audit, Compliance and Risk Blog

For many years, federal and state environmental enforcement agencies have been willing to negotiate settlements in which defendants agree to conduct “supplemental environmental projects (SEPs)” as a way to reduce formal penalties for the noncompliance that led the agency investigation and enforcement. Proponents see SEPs as a way to promote environmental and health values by encouraging defendants to undertake projects that wouldn’t occur otherwise in order to reduce or eliminate civil and/or criminal liability. Opponents see them as rogue efforts in which prosecutors substitute their own judgment for the statutory and regulatory directives that are supposed to guide their actions.

U.S. Attorney General (AG) Jeff Sessions is one such opponent. On June 5 he sent a memorandum to US Attorneys and Department of Justice (DOJ) management directing them NOT to agree to SEPs that include payments to third parties. Because DOJ acts as federal agencies’ attorneys in criminal prosecutions, which often involving overlapping civil claims, this new policy will affect major prosecutions by the US Environmental Protection Agency (EPA) and other federal agencies.

What’s a SEP?

Each agency has its own working definition for SEP, often recorded in formal enforcement policies. For example, EPA has administered policies favoring SEPs since 1991; the present (2015) version emphasizes that “SEPs are projects or activities that go beyond what could legally be required in order for the defendant to return to compliance, and secure environmental and/or public health benefits in addition to those achieved by compliance with applicable laws.

EPA’s policy distills the following three criteria:

• Project must be “environmentally beneficial”

• Must be undertaken as part of a settlement to an enforcement action

• Project must not otherwise be legally required by the settling party

EPA requires that SEPs be sufficiently related to the violation being prosecuted (“nexus”), and must not be inconsistent with the thrust of the law involved (Clean Air Act, Clean Water Act, etc.). Given the range of EPA responsibilities, it recognizes a broad range of potentially-appropriate SEPs, involving:

• Public Health.

• Pollution Prevention.

• Pollution Reduction.

• Environmental Restoration and Protection.

• Assessments and Audits.

  • Pollution Prevention Assessments.

  • Environmental Quality Assessments.

  • Environmental Compliance Audits.

• Environmental Compliance.

• Emergency Planning and Preparedness.

• Other Types of Projects.

EPA also requires the defendant to agree not to seek tax deductions for what might otherwise be considered a voluntary donation.
States also have SEP policies. For example, the California EPA issues guidelines that are generally consistent with the federal EPA’s approach, to be followed by CalEPA’s constituent agencies.

What is DOJ’s New National Policy?

Until now, DOJ’s US attorneys have administered policies like those described above. Now however, AG Sessions has taken a narrower view of prosecutors’ duty – to enforce specific provisions against specific defendants. The key policy passage in his memo provides the following:

The goals of any settlement are, first and foremost, to compensate victims, redress harm, or punish and deter unlawful conduct. It has come to my attention that certain previous settlement agreements involving the Department included payments to various non-governmental, third-party organizations as a condition of settlement with the United States. These third-party organizations were neither victims nor parties to the lawsuits. The Department will no longer engage in this practice.

Instead of the policy he revokes, AG Sessions directs his personnel to do the following:

The AG directs that the U.S. Attorneys' Manual, which provides guidance to US attorneys in the prosecution of their cases, be revised to reflect this new policy.

Readers should note that this policy change does not apply to states, so organizations should review applicable state policies.

Self-Assessment Checklist

• 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?

Where Do I Go For More Information?

Information available via the Internet includes:

• Attorney General Jeff Sessions, memorandum: Prohibition on Settlement Payments to Third Parties (6/5/17) 

• EPA SEP webpage 

• CalEPA SEP webpage 

Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. These include: