Selection of leadership at EPA (OECA) and DOJ (ENRD)
To head the U.S. Environmental Protection Agency (“EPA”), President Biden has selected (subject to Senate confirmation) Michael Regan, who currently leads the North Carolina Department of Environmental Quality. The new administration will also get to select the leadership — subject to Senate confirmation — for two key enforcement offices at EPA and the Department of Justice (“DOJ”): the Office of Enforcement and Compliance Assurance (“OECA”) at EPA and the Environment and Natural Resource Division (“ENRD”) at DOJ. Within EPA, OECA sets and oversees EPA’s administrative, civil and criminal enforcement priorities. For more significant civil cases, as well as all criminal cases, OECA will typically work with ENRD attorneys to investigate the matters, settle them, or bring them to trial. Thus, the leadership of each office can significantly affect the shape and emphasis of federal environmental enforcement. Indeed, resource constraints mean that the federal government can never investigate and pursue every environmental violation. Thus, these leaders will necessarily influence enforcement efforts, where those resources are directed over the next four years. These leaders also sign off on the specifics of particularly large or high profile cases and settlements, meaning that their views will affect the final terms that EPA and DOJ are willing to reach in these larger cases.
ENRD’s Enforcement Directives Including for the Use of Supplemental Environmental Projects (“SEPs”)
SEPs are projects that defendants in environmental enforcement cases often have agreed to undertake to improve the environment, usually in exchange for some penalty relief or reduction. A defining characteristic of a SEP is that it is a measure not required for ongoing compliance with existing regulatory requirements. In March 2020, the head of DOJ’s ENRD issued a memorandum prohibiting almost all use of SEPs in ENRD negotiated civil settlements, notwithstanding that including such SEPs was a long-standing practice in civil settlements and SEPs were thought by many to often provide a means to help bridge divides that emerged during settlement talks. This directive analyzed certain statutory provisions, and concluded that SEPs de facto unlawfully diverted penalty dollars from the U.S. Treasury to private purposes, violating the Miscellaneous Receipts Act, among other statutory provisions.
In addition to prohibiting most SEPs, the Trump DOJ had ban the use of “third-party payments” in settlements, and ENRD had issued separate guidance further explaining this policy. Unlike a SEP, which involves the defendant directly spending money on a project, third-party payments were provisions where a defendant agreed to pay money to a non-governmental entity that was not the victim of the crime as part of a settlement resolution. The then-head of ENRD released several additional memos just days before the end of the Trump administration regarding the use of third-party payments in environmental settlements, the Division’s enforcement principles and priorities, and further recommendations on the use of enforcement discretion.
Because of their widespread use, the ENRD directive seemed to find few friends, however correct it may have been as a matter of law. It seems very likely that an early act of the incoming head of ENRD will reverse the “no SEPs directive,” freeing ENRD lawyers to return to seeking SEPs as a routine element of environmental consent decrees. In addition, the Biden administration included the DOJ-wide prohibition on third party payments in settlements on its first day list of agency actions to review, indicating that these prohibitions will be revisited. The new head of ENRD is likely to also set his own policies for environmental enforcement.
Potential Changes to EPA’s National Compliance Initiatives
EPA regularly specifies and publicizes its national program priorities, called National Compliance Initiatives (“NCIs”), that are used to focus and guide its staff in executing their enforcement and compliance assurance responsibilities. In essence, the NCI areas represent areas for particular focus and heightened effort, but live alongside various day-to-day “core” enforcement activity. The current NCI strategy runs through September 2023, and includes six focus areas. The new administration might not wait until 2023 to put its own stamp on the NCIs and might consider moving the following regulatory programs from the day-to-day “core” enforcement program into a national initiative.
- Energy sector enforcement. A Biden EPA — like the Obama EPA — will likely target the energy sector specifically, seeking to achieve multi-media pollution reductions. An energy sector initiative has the potential to include a focus on coal combustion residue, compliance with the mercury air toxics standard, compliance with Clean Water Act discharge requirements at coal mines, compliance with air quality requirements at upstream and midstream oil and gas operations, and major and minor new source review permitting requirements in the oil and gas and power sectors.
- Climate-based enforcement. A Biden EPA is likely to develop a strategy focused around enforcement of federal and state greenhouse gas (“GHG”) emission regulations. Such a strategy is likely to be broad, given that GHG emissions are controlled through a variety of statutory mechanisms, affecting a range of industries, including the following programs: federal GHG reporting, federal vehicle and engine GHG standards, federal new source review GHG permitting, federal new source performance standards compliance, federal ozone depleting substances, renewable fuels standards, and emerging state CO2 and methane regulations that have been included in state implementation plans under the Clean Air Act.
EPA has brought around 250 criminal, civil, and administrative enforcement cases in the past decade that relate specifically to GHG requirements under the Clean Air Act. These cases relate to the following requirements: renewable fuel standards requirements (204 cases), ozone depleting substance requirements (45 cases), light-duty vehicle GHG standards (1 case), and GHG new source review requirements (1 case). Other cases — like aftermarket defeat device enforcement, enforcement of flare performance requirements, and VOC leak detection and repair enforcement — have had the indirect effect of reducing GHGs along with non-GHG pollutants.
A Biden EPA will likely view these enforcement cases as a good start, but insufficient to ensure that existing — and upcoming — GHG regulations actually deliver on the administration’s GHG reduction goals. We expect to see continued or increased climate-related enforcement in the following areas:
- Federal GHG reporting. EPA has not brought enforcement cases under the federal GHG reporting rule but may turn to this if it concludes that current reporting is not producing a GHG inventory that is complete and correct.
- Federal vehicle and engine GHG standards. EPA has already entered into settlements with vehicle and engine manufacturers for circumventing GHG emission standards. We expect to see more investigations to enforce these standards.
- Federal new source review GHG permitting. The GHG Prevention of Significant Deterioration (“PSD”) permitting program has been in place for a decade. We expect a Biden EPA to investigate the regulated community’s compliance with the GHG-triggered PSD permitting requirements.
- Federal new source performance standards compliance. The latest New Source Performance Standards programs for the oil and gas and power sectors are currently being challenged in court. Once the litigation concludes, appeals are resolved and any additional rulemakings are complete, we would expect to see an emphasis on enforcing these standards.
- Federal ozone depleting substances. We would expect to see ongoing and perhaps accelerated enforcement of the leak detection and repair requirements for refrigerants — which can have high carbon dioxide-equivalents — under Clean Air Act Title VI.
- Renewable fuels standards. We would expect to see ongoing policing of the renewable fuel production sector, as well as enforcement against fuel suppliers who fail to correctly use renewable fuel credits.
- Enforcement of emerging state CO2 and methane regulations. Many states are developing emission standards for methane and VOC emissions in the oil and gas upstream and midstream sectors. To the extent these new requirements are included in a state implementation plan under the Clean Air Act, the EPA can take enforcement action. As these standards emerge, they will become a significant new area for EPA enforcement.
Renewed Focus on Environmental Justice (“EJ”)
EPA has long had an EJ program, but the incoming Biden administration has strongly and consistently signaled that it plans to prioritize and heighten the focus on EJ, which is defined by EPA as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” The goal of EJ is to provide everyone with “the same degree of protection from environmental and health hazards, and equal access to the decision-making process to have a healthy environment in which to live, learn, and work” and this principle is likely to guide EPA’s enforcement focus during the next four years. The DOJ climate transition memo for the incoming administration has even proposed a new DOJ division to be known as the Environmental and Climate Justice Division, which would contain authorities and expertise currently housed in ENRD and DOJ’s Civil Rights Division. Such a reorganization will face hurdles, including potentially Congressional approval, but even the discussion of creating such a new division signals a future strong focus on EJ issues, even if this organizational proposal is not ultimately implemented.
In the short term, we expect the greater impact of EJ to be on the types of enforcement matters that are given priority, on the manner in which they are resolved and on facility siting and permitting issues not directly connected to enforcement. In particular, we expect to see a focus on environmental compliance, facility siting, and facility permitting issues that impact poor, minority, or Tribal communities. For example, candidates for close scrutiny, either by way of an enforcement investigation or permitting restrictions, would be facilities that are located in close proximity to such a community, especially if unauthorized emissions are believed to be reaching such a community. We would also expect the resolution of these cases to involve settlement terms designed to support the future health and welfare of such communities or to resolve harms to the health of community members from past exposure. While certain DOJ policies (such as the SEPs policy discussed above) currently limit the flexibility that ENRD has to craft settlements including such terms, the new administration is likely to revise any formal policy restrictions and to informally push where no firm policies are in place.
Implementation of Executive Order 13924
President Trump issued an Executive Order in May 2020 requiring that all executive branch agencies “consider the principles of fairness in administrative enforcement and adjudication.” The Office of Information and Regulatory Affairs (“OIRA”), within the White House Office of Management and Budget, issued in August 2020 a memorandum to further carry out the Executive Order, by directing all executive branch agencies to amend their rules and policies related to administrative enforcement in consideration of, among others, the following general “best practices”:
- Accepting the government’s burden of proof;
- Accepting the “rule of lenity,” such that ambiguous rules are construed against the agency’s enforcement power (analogous to construing contracts against the drafter);
- Cases should be brought and resolved quickly, with limits on the length of investigations and on tolling periods, and notice provided to the party being investigated when an investigation has been dropped;
- Enforcement staff should be separated from those assigned to administrative adjudications, and neither those bringing cases nor those adjudicating them should have professional or financial incentives that prejudice their judgments.
The head of EPA’s OECA later issued a memo providing assurances that EPA satisfies these requirements and affirming EPA’s commitment to them. While these orders and memos reflect somewhat inarguable principles, and it is possible that the new administration will not see benefit in expressly disavowing them, these broad principles leave substantial “room in the joints” in day-to-day application and new leadership may feel less commitment to the strictest levels of fidelity.
The Endangered Species Act (“ESA”) is designed to protect and recover at-risk species and the habitats on which they depend and includes criminal penalties for “taking” (which includes the harassment, killing, or capture) of listed species. Likewise, the Migratory Bird Treaty Act (“MBTA”) criminalizes the “taking” of migratory birds. There has long been friction about whether the MBTA prohibits only intentional conduct (such as hunting), or also applies to “incidental take” (such as birds harmed from wind turbine blades, electric transmission lines, or oilfield pits and evaporation ponds but where the point of the activity was not to achieve the “take”). The central question is what such laws require project developers and operators must do, if anything, to minimize or fully prevent incidental take. In short, the interpretation of this law and whether it prevents only “deliberate take” or also “incidental take” has serious implications for the risks associated with certain projects. Courts that have considered the question have split, and the regulatory pendulum may continue to swing in the new administration.
Two weeks prior to the start of the Trump administration, the Obama administration’s Department of the Interior issued a memorandum concluding that the MBTA prohibits incidental take. The Trump administration withdrew that opinion and issued a new one, generally siding with and relying on opinions from the courts that concluded otherwise. Nevertheless, in August 2020, a court vacated this Trump opinion, a decision the government currently is appealing. In the meantime, the U.S. Fish and Wildlife Service finalized a rule in early January 2021 clarifying its regulations and applying the prohibition on take only to intentional conduct. The new rule goes into effect on February 8, 2021.
The Biden administration is likely to explore ways to go through the rulemaking process to withdraw it and finalize a new rule or may potentially use a vote of both houses of Congress under the Congressional Review Act to overturn the rule. Indeed, the Biden administration has already indicated in it a memo issued on its first day that this rule is among the agency actions it plans to revisit. Whatever course this rulemaking takes, the Biden administration is also likely to then put in place solicitor’s opinion similar or identical to the Obama administration opinion applying the MBTA to incidental take. However, even with such a solicitor opinion and a formal abandonment of the Trump rule on “take” enforcement being limited to deliberate take, that change would not alter judicial precedent in those circuits that have limited the MBTA’s prohibition to intentional acts, including the Fifth, Eighth, and Ninth Circuits. Ultimately, resolution of the proper reach of the MBTA is likely to require involvement of the U.S. Supreme Court.