On Friday, U.S. Department of Justice’s Environment and Natural Resources Division withdrew nine memoranda and policy documents issued by the previous administration related to environmental enforcement. Among those were several relating to the resumed use/reintroduction of Supplemental Environmental Projects (SEPs) in settlements of civil enforcement matters. In agreeing to perform SEPs, companies commit to undertake environmental projects not otherwise required by law, in lieu of paying some penalties to the government. Over the past four years, DOJ first restricted, and then completely eliminated SEPs in DOJ settlements with private parties. Friday’s withdrawal opens the door to a resumption of the use of this tool in settlement negotiations over environmental violations.
Criticized by some as expanding de facto regulation without agency authority or Congressional direction, SEPs have been a common part of environmental litigation and enforcement for many years. As a result, though the last Administration disfavored them, SEPs remained in use at the state level and have to be considered by companies facing federal enforcement action and litigation.
In fact, SEPs may be attractive to some companies facing civil enforcement for a variety of reasons. Given the significant discretion that agencies have with respect to the range of civil penalties available under environmental laws, SEPs can be a necessary or important settlement tool under the right circumstances. Through ongoing work in communities they serve, companies may already be in a good position to identify projects that can serve existing needs. In the context of settlement negotiations, the right projects can build good will with enforcement authorities by demonstrating a commitment to provide concrete and potentially popular benefits in specific communities. Moreover, companies may prefer spending money on tangible projects rather than simply providing cash to the government. That said, SEPs may generate both additional agency oversight and significant public interest. Companies considering proposing or entering into SEPs should carefully evaluate the full range of potential implications.
With respect to settlements for violations of the Clean Air Act, for example, reinstituting the use of SEPs will help align the federal enforcement approach with that of California, which has continued to approve settlements that contain SEPs despite the Trump administration’s policy. If they are already in settlement negotiations with California and the federal government, companies may now be able to expand SEPs to include a federal component as well. This could lead to greater efficiencies and economies of scale.
Companies should familiarize themselves with the EPA SEP policy, which lays out the categories of acceptable SEPs as well as some limitations on their use. Companies should consider whether and how SEPs may help them resolve open issues, while also recognizing that the use of SEPs may be subject to challenge and push back in negotiation.