A little-publicized section of the federal Bipartisan Budget Act of 2015 has led to the U.S. Environmental Protection Agency (EPA) promulgating new interim regulations that increase by unprecedented amounts the civil penalties the EPA is authorized to pursue for violation of federal environmental laws.
How EPA’s Civil Penalty Enforcement Authorities Are Affected
Increases in statutory civil penalty amounts for EPA-administered statutes to reflect inflation are not a new development. EPA has implemented those increases periodically pursuant to the requirements of the Federal Civil Penalties Inflation Adjustment Act of 1990 (the 1990 Act), which applies to civil penalty authorities administered by all federal agencies, not just EPA. For example, over a 25-year period, statutory provisions in the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act enacted to authorize EPA to pursue civil penalties in court for up to $25,000 per day per violation had increased in steps to a per-day per violation maximum of $37,500.
EPA has now promulgated its latest set of regulations establishing the inflation-based increases in authorized civil penalty levels for all statutes EPA is charged with enforcing administratively or in court. This time, however, the increases were governed by revised criteria included in a section of the 2015 Budget Act titled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Improvements Act).
The 2015 Improvements Act required federal agencies such as EPA to promulgate annual, rather than quadrennial, inflation-based adjustments to authorized civil penalties for all federal statutes. More significantly, however, the 2015 Improvements Act also called for an initial catch-up adjustment to reflect inflation-based increases from the time the civil penalty amount was most recently set in the underlying statute. The 2015 Improvements Act capped this initial catch-up adjustment at 250 percent of the civil penalty amount applicable as of the date of enactment of the 2015 Improvements Act.
As a result, under the Clean Air Act, EPA applied inflation-based adjustments to the $25,000 per day civil penalty maximum most recently authorized in that statute in 1977 for enforcement actions pursued in federal court to calculate the initial catch-up adjustment. That calculation exceeded 250 percent of the $37,500 maximum amount set through prior inflation adjustments and applicable as of the date of enactment of the 2015 Improvements Act. Consequently, EPA's interim regulation sets the new maximum authorized amount to be 250 percent of $37,500, or $93,750.
Comparable adjustments set by the interim regulation under other major environmental statutes are not necessarily as extreme, but are still substantial. For the Clean Water Act, where the maximum $25,000 per-day per-violation civil penalty level was enacted in 1987, EPA's new calculated maximum civil penalty level in judicial enforcement proceedings is $51,570. For the Resource Conservation and Recovery Act, whose $25,000 maximum civil penalty level at 42 U.S.C. 6928(g) was enacted in 1980, EPA’s new regulation set the corresponding maximum civil penalty level at $70,117. Many other maximum civil penalty amounts (including civil penalties imposed by EPA in administrative enforcement proceedings brought under these and other environmental statutes) are increased in a variety of amounts from the more typical initially prescribed levels of $5,000, $10,000, or $25,000, frequently applicable on a per-day per-violation basis.
The 2015 Improvements Act specifies that these new maximum civil penalty levels are to apply to violations occurring after November 2, 2015 (the date of enactment of the 2015 Improvements Act) for civil penalties assessed on or after August 1, 2015 (the effective date of EPA's interim final regulations establishing these new levels).
Potential Practical Implications
EPA states in the preamble summary to its interim rule that the rule does not necessarily change the total penalty amount that EPA may seek in a given enforcement case pursuant to its current civil penalty policies. Indeed, EPA's pre-existing statutory civil penalty authorities already have frequently empowered EPA to pursue penalty amounts well beyond levels that EPA determined to be warranted in particular cases. Nevertheless, these large increases may induce EPA to revisit and recalibrate its penalty policies and practices. Beyond that, these newly scaled amounts could very well lead plaintiffs in citizen enforcement suits to seek imposition of higher civil penalties, and for judges hearing cases that do not settle to impose higher penalties as reflective of legislative intent.
Neither the 1990 Act nor the 2015 Improvement Act have any direct impact on civil penalty enforcement authorities adopted under state law to enforce state environmental programs subject to EPA oversight and approval. EPA did not impose any significant changes to its oversight programs as a result of the 1990 Act. Whether the agency takes the same approach in light of the 2015 Improvements Act remains to be seen.
EPA promulgated its inflation adjustment regulation as an "interim final rule" to comply with the 2015 Budget Act’s requirement to take that approach, and for this initial adjustment to take effect by August 1, 2016 (and annually thereafter by January 15), without proposing the changes for public comment. In promulgating its interim final rule, EPA further found good cause to forego public comment because of the statutory deadline to act by July 1, 2016, and because the 2015 Budget Act did not provide discretion to vary from the required adjustment formula. Whether this approach can successfully withstand a legal challenge for any given anomaly that may exist also remains to be seen. The same can be said about the overall impact of these civil penalty "adjustments" on EPA's civil enforcement program generally.
