Handout for EPA’s Mitigation Policy in Civil Enforcement: A Sleeping Giant? August 3, 2016 Carrick Brooke‐Davidson Guida, Slavich & Flores, P.C. 816 Congress Avenue, Suite 1500 Austin, Texas 78701 Direct Dial: 512‐476‐6326 E‐Mail: brooke‐davidson@guidaslavichflores.com
This expansion of mitigation as a remedy in E PA’S MIT IGAT ION ME MORANDUM: NE W enforcement cases creates new challenges for CHAL L E NGE S IN CIVIL E NF ORCE ME NT parties seeking to resolve alleged environmental Ca rric k Bro o ke -Da vidso n violations. This will become more apparent as the policy is examined. Under the policy espoused in On November 14, 2012, the Environmental the Mitigation Memorandum, mitigation is another Protection Agency (EPA) issued an enforcement form of injunctive relief. Its purpose is to remedy, memorandum entitled Securing Mitigation as reduce, or offset past harm. Unlike traditional Injunctive Relief in Certain Civil Enforcement injunctive relief, which is used to address and Settlements (2nd edition) (“Mitigation correct ongoing violations, mitigation is designed Memorandum”) (https://www.epa.gov/ to address possible harm due to past violations. enforcement/2nd-edition-securing-mitigation- memo). The Mitigation Memorandum directs Under this approach, mitigation is viewed as a government enforcement case teams to consider remedy that ultimately could be ordered by a court mitigation as an aspect of the case resolution. This against a liable defendant, and could be sought policy has significantly changed the landscape on against a defendant that has already corrected civil enforcement but appears to have flown under the underlying violations that gave rise to the the radar of many environmental practitioners. enforcement action. Thus, even in a “penalties- only” case, i.e., a case in which no ongoing Traditionally, civil enforcement settlements have violation exists, the Mitigation Memorandum consisted of penalties, usually with an economic directs that the government consider injunctive benefit component designed to recapture the relief in the form of mitigation for past violations. economic benefit due to noncompliance, and a gravity component to provide a deterrent effect. In In looking at mitigation in both theory and practice, addition, many settlements include injunctive relief it bears a strong resemblance to SEPs. As the to correct violations. previous discussion suggests, however, there are key differences between mitigation and SEPs. In addition to these traditional components, First, as noted above, mitigation is viewed as a supplemental environmental project (SEP) form of injunctive relief that, in the final instance, policies have been developed to encourage settling can be a remedy ordered by a court. Contrast this parties to undertake environmentally beneficial to SEPs, which are voluntary and involve projects projects that are not otherwise required by law or that are not legally required. Second, under EPA’s regulation. SEPs are particularly attractive because Mitigation Memorandum, mitigation remedies part of the cost to implement the SEP can be must have a closer nexus to the underlying applied to offset the civil penalty. violation. This derives from the underlying legal bases for mitigation, i.e., providing redress for the The EPA Mitigation Memorandum adds a new past violation. SEPs, on the other hand, have less element to civil enforcement cases—mitigation. stringent nexus requirements. While the concept of mitigation has been around under several specific statutory programs— Third, and perhaps most importantly, because for example, the Clean Water Act (CWA), the mitigation is viewed as a form of injunctive relief, Comprehensive Environmental Response, there is generally no penalty reduction given for Compensation, and Liability Act (CERCLA), and the cost of mitigation. Just as the government the Resource Conservation and Recovery Act will generally not reduce penalties to secure (RCRA) ( see Mitigation Memorandum at note 3)— compliance, so it will not reduce penalties to secure the Mitigation Memorandum expands mitigation as mitigation. The memorandum does, however, allow a remedy into new areas, most notably in Clean Air the government to consider various aspects of Act (CAA) enforcement. 4 E nviro nme nta l E nfo rc e me nt a nd Crime s Co mmitte e , July 2016
��������������������������� litigation risk, including those relating to penalties, mitigation project is required to have a nexus to injunctive relief, and mitigation, when determining the underlying violation, a review of mitigation whether to accept a settlement. See Mitigation settlements does not demonstrate that the Memorandum at 8. mitigation remedies are necessarily proportional to the alleged environmental harms. This presents As set out in the Mitigation Memorandum, the opportunities for disagreement over both these legal bases for mitigation are derived from both issues, i.e., the magnitude of the harm and the the inherent equitable power of courts and the appropriate mitigation approach to address that broad statutory language in most environmental harm. This seems particularly likely to occur statutes giving courts authority to “award any other under the CAA, where both elements may be appropriate relief.” The underlying case support hard to quantify. Third, mitigation projects create for expansion of mitigation into areas such as the more potential for extended-term consent decrees CAA is somewhat sparse. For example, United with commensurate oversight and third-party States v Cinergy Corp. , 582 F. Supp. 2d 1055 (S.D. compliance certifications, even for cases that in Ind. 2008), is the only case cited in the Mitigation the past would have been resolved by payment of Memorandum as support for the availability of penalties. mitigation under the CAA, and even in that case the remedy was not actually ordered by the court. In conclusion, EPA’s Mitigation Memorandum The Cinergy decision has been questioned by has significantly altered the landscape on other courts. See United States v. EME Homer City enforcement negotiation. Attorneys involved in Generation, L.P. , 823 F. Supp. 2d 274, 289–90 such cases should be familiar with the Mitigation (W.D. Pa. 2011). Memorandum and be prepared to address it in negotiating settlement of EPA enforcement actions. Nonetheless, mitigation has been a significant Ca rric k Brooke - Da vidson is a share ho lde r in the component of government settlements. A review of Austin, T e xas, o ffic e o f Guida, S lavic h & F lo re s. He EPA settlements through 201 4 reveals at least 60 c an be re ac he d at bro o ke -davidso n@ g sfpc .c o m. settlements that included mitigation. Many of these settlements involved CAA violations. The costs of mitigation remedies run into millions of dollars. In addition, mitigation projects have Register Today dovetailed with EPA’s next generation enforcement initiative. In particular, a mitigation project is the type of activity for which EPA has indicated it will seek third-party compliance verification. Under this approach, the settling party will be required to pay the cost for an independent third party to verify compliance with activities required under a settlement, whether injunctive relief, SEPs, or mitigation. This has already occurred in recent settlements and can be expected to continue. The Mitigation Memorandum thus presents several challenges to address during settlement. First, as noted, agreeing to undertake mitigation does not result in a reduction in penalty. Mitigation thus becomes a separate, potentially expensive issue to address in settlement. Second, while a 5 E nviro nme nta l E nfo rc e me nt a nd Crime s Co mmitte e , July 2016
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