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30 ELR 11031 | Environmental Law Reporter | copyright © 2000 | All rights reserved How to Minimize Civil Penalties in Environmental EnforcementBill S. Forcade and Elizabeth D. AndersonBill S. Forcade received his J.D. degree from the John Marshall Law School in 1976, and his B.S. degree in biology and chemistry from the University of Illinois at Chicago in 1971. Since 1993, he has been a Partner in the Environmental Law Department of Jenner & Block in Chicago, concentrating on air pollution issues and enforcement. Prior to that he was a member of the Illinois Pollution Control Board for 10 years, Illinois' regulatory entity and primary environmental civil tribunal. Earlier, he was General Counsel for Citizens for a Better Environment, and a research chemist for several Chicago chemical companies. Elizabeth D. Anderson received her J.D. degree from the University of Iowa College of Law in 1998, and did her undergraduate work at the University of South Dakota. After law school, she was a clerk for the Missouri Supreme Court, before becoming an associate at Jenner & Block. Overview No one voluntarily chooses to become a defendant in environmental litigation. Unfortunately, sometimes bad things happen to good people. Despite a company's excellent commitment to environmental protection, a government agency may threaten it with litigation and possible civil penalties for noncompliance with pollution control requirements. The conflict may arise because of disagreements with regulatory agencies about what pollution control obligations exist, because of an accident, or it may happen because someone in the company simply did not do their job adequately. Whatever the reason, you face litigation expenses, statutory civil penalties, and other unpleasant consequences. The underlying conflict may be considered a very minor problem, but the potential litigation poses a significant risk. Managing that potential litigation toward a successful conclusion requires an understanding of the relevant enforcement process, the risks involved, and the likely outcome. Each step in this process will present opportunities to minimize adverse consequences, and it is up to the company to use those opportunities wisely. This Article discusses enforcement and civil penalties as they relate to the traditional environmental regulatory programs controlling air emissions, water discharges and waste disposal.1 In most such conflicts, the substantive pollution control and permitting issues are resolved with the environmental agency reasonably and quickly. New controls are installed, records are kept, or permits sought as required of all other similarly situated sources. Frequently, it is more difficult to decide what to do about claimed past noncompliance. Will the agency file litigation or not, and if so, what civil penalty is appropriate? How can companies minimize the risk of litigation and the amount of any potential civil penalty? Both before and after a conflict arises, choices can be made that will reduce the likelihood of litigation or that will reduce financial exposure if litigation does arise: (1) implementation of prudent pre-litigation information management strategies, (2) adoption of particular approaches to communicating information to the government, (3) reasonable appraisals of whether alleged noncompliance will lead to litigation, and (4) accurate estimation of potential civil penalties for claimed violations. If environmental enforcement does occur, these methods may be used to decide when, and for how much, to settle a case by balancing the anticipated financial risks of litigation against a business' needs and general risk tolerance. What Prompts an Enforcement Action, Who Is Being Sued, by Whom, and for What? Environmental litigation may result when a government agency acquires information that discloses potential noncompliance. This information disclosure can be initiated by the company or it can be initiated by the government as part of its investigative functions. Company-initiated information disclosure of potential noncompliance includes the expected reports that the company files with regulators, such as quarterly noncompliance reports or monthly monitoring reports. Company-initiated disclosure, however, may come from some unexpected sources as well. The U.S. Environmental Protection Agency (EPA) may discover unpermitted production changes or the installation of equipment by reviewing company annual reports or press releases. EPA may learn a lot about a company from public sources.2 The second form of disclosure comes from government-initiated investigations. Environmental permitting agencies conduct a certain number of routine or random inspections. Traditionally, those inspections involve only one media—air, water, or waste—and include a brief physical inspection of relevant parts of the facility and a limited record review. Less frequently, government agencies conduct more extensive investigations, such as EPA's multimedia inspections, which involve a host of inspectors conducting an extensive multiweek inspection of a facility. Multimedia inspections essentially put all facility operations and records under a microscope. Targeted inspections may arise because of citizen complaints lodged against the company at the regulatory agency. These complaints may be filed by neighbors, disgruntled [30 ELR 11032] employees, or even competitors acting anonymously. Targeted inspections may also arise where local ambient environmental or health data suggests a problem that points to a specific source or group of sources. Or, targeted inspections may arise where government launches an initiative to review a specific industrial category. In the past, EPA's Office of Enforcement and Compliance Assurance has launched targeted inspection programs against several industrial sectors, including: agricultural practices/concentrated animal feeding operations, automotive service and repair shops, coal-fired power plants, dry cleaning, industrial organics, chemical preparations, iron and steel, municipalities, petroleum refining, primary nonferrous metals, and pulp mills.3 If enforcement does happen, the most likely prosecuting entity will be the state agency. Nearly all of the traditional environmental regulatory control programs contemplate that the state, rather than EPA, will be the primary compliance and enforcement agency. Statistically, most environmental enforcement actions have been initiated by the states. COMPARISON OF ENVIRONMENTAL ACTIONS INITIATED4
While citizen-initiated litigation may not be prevalent, citizens can have a dramatic impact by prompting government agencies to initiate investigations and litigation that otherwise might not have occurred. Moreover, government is likely to seek substantially higher civil penalties where there are citizen complaints or media attention. Clearly, there is a much higher probability that the state will initiate any given enforcement action in a state court or state administrative agency, rather than EPA initiating an action in a federal forum. But it is possible to face multiple litigation, one action filed by the state enforcement agency and a subsequent action involving the same events filed by the EPA if they are dissatisfied with the initial state enforcement result—a concept called overfiling. Recently, in Harmon Industries, Inc. v. Browner,6 the U.S. Court of Appeals for the Eighth Circuit concluded that where a state is pursuing an enforcement action against a putative violator under the Resource Conservation and Recovery Act (RCRA), EPA cannot file an enforcement action based on the same violations.7 EPA now argues that Harmon only applies to RCRA, and only in the Eighth Circuit; industry argues it has far broader application. Currently pending federal litigation may extend the Harmon rationale to preclude EPA overfiling under the Clean Water Act (CWA) and the Clean Air Act (CAA).8 How Does the Enforcement Process Work? There are three general parts to the enforcement process. A flow chart of the enforcement process is attached as Figure 1. During the first part the government agency gathers facts (or receives them by voluntary disclosure) related to the situation. During the second step the agency evaluates that information and determines what type of enforcement, if any, is appropriate and which agency, EPA or the state, should initiate that enforcement. During the last stage of enforcement, the lead agency will pursue the enforcement action, seeking to obtain the best possible result under the circumstances. [SEE ILLUSTRATION IN ORIGINAL] Obviously, government can forego many of these steps and move directly from first information discovery to filing a formal complaint very rapidly where the environment or health are at risk. In other cases, the process may languish for years from initial discovery to filing the complaint. For the information-gathering stage, environmental agencies have many tools at their disposal. First, the agency can simply scrutinize all of the information that it already has on file regarding the facility. Certainly, the agency reviewed this information, perhaps minimally, at the time each document was submitted. However, the facility's information may not have been extensively (perhaps microscopically) [30 ELR 11033] reviewed and compared with all other information on file. A comprehensive and meticulous review of all agency data relating to a facility could identify overlooked past noncompliance, data inconsistencies from one document to another, missing submissions, or other potential problem areas. Also, environmental agencies have a tremendous amount of information on how similar facilities are operating, what equipment they have, and what quantity of emissions or discharges is normal for various production levels. The facility's data can be compared with this industrywide information to see if potential discrepancies appear. Agencies may evaluate local environmental conditions and ambient data to see if they can attribute any problems to the operation of the facility. All of the facility's data submissions can be checked with public databases for undisclosed operations, production increases, or similar issues.9 The facility may never know that the environmental agency is conducting this information review and analysis. At the next level of information-gathering, environmental agencies may ask to be provided with specific factual data. This may be an informal verbal request, an informal written request, or a formal legal request pursuant to specific statutory authorization. Most environmental statutes empower the agency to compel facilities to produce information in a manner similar to the process of litigation discovery.10 Site inspections are the next level of government scrutiny. Most environmental agencies conduct a certain number of random or routine inspections each year. They also conduct targeted inspections where there is a particular enforcement initiative or a suspicion of noncompliance. These inspectors will usually visually inspect the facility to look for unpermitted equipment, ensure that plant operations are consistent with applicable requirements, and ensure that operations are properly described in documents submitted to the agency. They also will check to see that the facility is keeping all mandated environmental records, that those records are internally consistent, that they are consistent with other records the facility keeps, and that those records do not disclose potential noncompliance. Agency inspections may include sampling of air, water, or waste streams for subsequent analytical analysis. At the conclusion of the inspection, the agency may or may not allow for an exit interview between agency and facility personnel to discuss any problems they identified. Nearly all environmental agencies will prepare an internal written report of the results of the inspection. That report may identify specific noncompliance issues, may identify certain issues for further investigation, or may find no problems. The initial agency information requests and inspections may be focused on one particular issue at one plant. If those activities indicate that other problems exist at that facility or indicate that problems are more widespread within the company's other locations, the cycle of information requests and inspections may continue until all agency concerns are resolved. Problems identified atone type of facility may prompt investigations at similar facilities in the same industrial category. At some point during the investigative stage, the environmental agency may send formal documents, such as compliance inquiry letters or notices of potential noncompliance, asking for information about specific compliance issues at a particular unit. Once the agency has acquired the information it deems necessary to act, it will evaluate any problems and plan a course of action. If the identified problems pose an environmental risk, or if the company appears recalcitrant, the agency may take aggressive action quickly. If the problems are less severe and the company seems to be making good-faith efforts to resolve the problems promptly, the agency may inform the company of the noncompliance, but wait until the company identifies solutions to the problems before deciding whether to pursue litigation. In effect, if the company can identify and agree to implement an acceptable remedial plan to bring the company into compliance, then the difficult issue of "what must be done to comply" need not be resolved through expensive (and potentially conflicting) expert testimony in subsequent litigation. Once the compliance question has been answered, the environmental agency must decide whether to pursue enforcement, and if so, whether EPA or the state should take the lead. If enforcement is selected, EPA and most states have the option of pursuing judicial or administrative enforcement processes.11 Usually, statutory or regulatory prerequisites mandate that the agency send some type of formal notice to the subject facility before the agency may commence litigation. Sometimes preenforcement procedures are quite detailed and specific.12 After any necessary, preliminary notices, the agency may proceed under the judicial or administrative procedural requirements. If the parties do not agree on a negotiated settlement, the matter will be tried as a contested case, the adjudicator will render a decision, and the appropriate appeal rights will attach. There are opportunities for negotiation and settlement at nearly every step in this enforcement process, from initial investigation until the conclusion of the contested trial. How Does a Prosecutor Decide When to Prosecute and When to Disregard Potential Violations? When will an environmental enforcement agency exercise prosecutorial discretion to disregard past noncompliance that has been brought into compliance and when will it choose to pursue litigation? The answer to that question is difficult and involves highly subjective concepts, such as the seriousness of the event and the reputation and responsiveness of the putative violator. Generally, government [30 ELR 11034] agencies are more likely to initiate litigation under four circumstances: (1) where the violations are more serious or cause environmental damage, (2) where the violations are discovered by the government agency rather than voluntarily disclosed by the company, (3) where the violator has not been aggressive in addressing the problems to achieve prompt compliance, and (4) where violations are accompanied by citizen complaints or media attention about the source. These factors make sense and seem related to environmental protection. EPA has policies that attempt to memorialize these ideas into specific procedures relating to specific media programs. For example, under CAA enforcement, EPA issued The Timely and Appropriate Enforcement Response to High Priority Violations, a guidance document that categorized certain violations as high priority violations (HPVs) that deserve special enforcement evaluation.13 The HPV policy creates an extensive decision matrix for determining when a violation is an HPV and sets objectives and deadlines for specific subsequent agency enforcement actions.14 Other acts have similar or related policies. These policies can provide useful guidance on whether specific types of noncompliance are likely to result in formal enforcement. However, the specificity of such guidance seems to imply that enforcement decisions are made only by objective, analytical criteria. This is not true. Both EPA and state agencies will not pursue many cases that meet the articulated criteria for enforcement for a variety of reasons, including limited enforcement resources, questions regarding the likelihood of success in the litigation (especially the potential for an outcome with widespread adverse implications for the agency), and the inability of the violator to pay a substantial civil penalty. Unfortunately, there are also many reasons why a case will result in formal enforcement, even though it is not that important when measured against specific enforcement policy criteria. These other factors have little to do with environmental protection. As with all governmental agencies, environmental enforcement agencies are subject to management oversight. The most common metrics for measuring enforcement program success are the number of enforcement cases filed and the dollar amount of civil penalties recovered. If a noncompliance situation arises at a time when enforcement statistics are low or when enforcement resources are high, there is greater chance that litigation will result. A second factor influencing the likelihood of litigation is the probability that the prosecution will prevail easily. Enforcement actions claiming substantive environmental violations may be difficult and expensive for the prosecutor to win because they require complex and expensive scientific or technical testimony. If no complex scientific testimony is required, the enforcement action still may require extensive trial time to present witnesses to describe the violation accurately. Both of these alternatives require substantial prosecutorial resources and present the danger that something unexpected will happen in the courtroom that will cause the case to be lost. Enforcement actions that claim simple violations, such as construction of an unpermitted source or failing to file reports in a timely manner, require far less of the limited prosecutorial resources. The agency need only establish that a permit report was required but that no permit was issued or that a necessary report was not filed. There is no adverse environmental impact where a report is not timely filed or a pollution producing device installed without a permit, but using all necessary pollution controls. In those circumstances, there may be a mere paperwork violation. Nonetheless, this less significant event may be far more likely to prompt litigation because it is easy to win at a low cost. In an effort to bolster enforcement statistics, a prosecutor may pursue cheap and easy victories, regardless of whether those actions significantly improve environmental quality. Recently, both EPA and many state agencies have tried to move away from the simple number of cases filed/number of cases won statistic as an indicator of enforcement success. At least with EPA, today's statistics are far more likely to show a high ratio of complaints claiming substantive environmental violations. If the environmental enforcement agency does decide to pursue litigation, it must decide which forum is appropriate, judicial, or administrative. As with most other aspects of the enforcement process, there are EPA policies on that issue.15 The policies list a variety of factors, such as the novelty of the legal issues or the expected amount of discovery, that would encourage filing in one forum or another. What Is the Relationship Between EPA and the State in the Enforcement Process? In evaluating the enforcement process, it is important to keep in mind the close communication and shared decision making between EPA and the states. This partnership extends to monitoring the compliance status of all relevant facilities, identifying those relevant facilities that are in noncompliance, initiating enforcement and compliance assurance activities where appropriate, and determining what constitutes a minimally acceptable resolution to those individual conflicts. EPA and the state may not agree at all steps along this path, but they will have extensive communications about the facts and issues involved. Because EPA has the oversight role in this partnership, and because EPA provides federal funding to state environmental programs, there are many EPA-mandated formal memorandums of agreement (MOA), policy goals, statistical objectives, and communication procedures that influence or control this enforcement partnership.16 An EPA-state MOA is a formally signed document that is very comprehensive and has a surprising level of detail. For example, the Louisiana MOA with EPA requires, for point source water dischargers, that: . the state will provide EPA with Quarterly Non-Compliance Reports and provide EPA with a written description of all past state enforcement attempts against each non-complying facility, . within 2 weeks of receiving the Quarterly Report, EPA will identify, in writing, those actions where EPA intends to pursue legal action because the state enforcement action was inadequate, . within 30 days of EPA's report, the state will respond in writing, describing past, present, and planned enforcement action against that particular discharger and why the state action is appropriate to the circumstances, and . within 10 days, EPA will respond in writing stating either that state action is sufficient to deter EPA enforcement or stating that EPA will proceed with formal enforcement.17 In addition, MOAs frequently specify that state-initiated enforcement actions must adhere to EPA civil penalty policies. The Louisiana MOA requires the state to employ EPA's February 11, 1986, Civil Penalty Policy, and any subsequent amendments, in state enforcement actions.18 Regardless of the environmental program (air, water, waste), and regardless of the language in the MOAs, it is common in the EPA-state enforcement partnership for the two agencies to have frequent, detailed communication regarding all aspects of noncompliance and enforcement in that state. Any company planning to defend potential litigation should keep in mind this close EPA-state communication and shared decisionmaking. EPA also has direct oversight of state enforcement programs. For example, Region VII has prepared and released a Unified Oversight System (UOS)—a differential system of oversight designed to evaluate state enforcement and compliance program performance.19 The UOS evaluates state enforcement and compliance efforts in 4 core performance areas, using 19 criteria for each media program. How Do Government Agencies Decide What Penalties to Seek? The starting point for any discussion on civil penalties is what does the statute allow? All traditional environmental statutes provide maximum civil penalties of $ 10,000 to $ 25,000 per day per violation.20 Civil penalty exposure for violating a single parameter for 90 days could be $ 2.25 million. Violating two or three separate parameters for that time period could double or triple that amount. In theory, environmental agencies would seek such a penalty only for the most egregious conduct. In practice, environmental agencies seek far lower penalties on average. The discussion below relates to the civil penalties the prosecuting agency is likely to ask for in initial negotiations with the alleged violator. Later, we discuss a statistical evaluation of civil penalties actually agreed to after negotiations or imposed after litigation. As with other aspects of the enforcement process, environmental agencies have established a large number of civil penalty policies to determine what penalty is appropriate for a given factual circumstance. There are different civil penalty policies for each statute, and different policies for various circumstances under each statute. The large number of such policies, and their overlapping nature, means that one noncompliance scenario can be subject to several civil penalty policies. For example, assume that a small, financially challenged paper coating operation in an ozone nonattainment area changes its coating material to a similarly priced coating that emits methanol, without securing the necessary permits. Once informed of its noncompliance, the company immediately switches back to the original coating. In any enforcement proceeding, EPA might need to consider several federal civil penalty policies.21 In any state enforcement proceeding, adherence to those federal civil penalty policies may be required under the EPA-state MOA. Also, the state may have its own statutory22 or administrative23 civil penalty policies. Regardless of the complexity and detail of the civil penalty policies, several themes are common. First, the civil penalty policies attempt to quantify the amount of economic benefit the source realized by not achieving compliance in a timely manner. Second, the policies attempt to assess a monetary value for the gravity of the violation by evaluating the size of the violator, the degree of noncompliance, any identifiable adverse impacts, and other factors. Last, the penalty policies attempt to adjust the sum of these two factors, either upward or downward, by a variety of factors including the degree of negligence or willfulness of the violation, the cooperation or lack of cooperation from the pollution source, the history of compliance from the source, and similar factors. The sum of the gravity component and the economic benefit component, as adjusted by the other factors, then becomes [30 ELR 11036] the minimum civil penalty that the environmental agency will accept to settle the case without litigation. Each of these factors deserves discussion. The economic benefit component of the civil penalty policies assumes that the violator has had an economic benefit (presumably over its complying competitors) by use of the funds that would have otherwise been expended long ago to purchase and operate a pollution control device or engage in other costly activities to maintain compliance. Usually the economic benefit models estimate the initial capital cost of the equipment and add the expected annualized operation and maintenance (O&M) expenses. The model then calculates the present value of this expense using the highest rate of return reflecting either: (1) the annual inflation rate, (2) the rate of return on investment for that company, (3) the rate that company paid to borrow money, or (4) some other factor. EPA has specific, approved computer models for this calculation, such as the economic benefit (BEN),24 model that evaluate the corporation's marginal tax rate, the rate of inflation, the weight-averaged cost of capital, and other factors. The environmental agency may not release (or may not have) the precise computer code or the specific algorithms employed in their BEN-type computer model.25 Environmental agencies favor the BEN model approach where past capital expenditures and O&M expenses are high, because this model produces high economic benefit numbers. For example, using BEN 4.2, a 72-month delay in installing a $ 1 million pollution control device, with $ 10,000 annual O&M costs, using standard values, produces a $ 605,000 economic benefit. In other scenarios, the BEN model is less favored. Consider an example where for two years an automobile manufacturing line has used a small drop of adhesive with volatile organic compound levels above environmental limits to glue the inside mirror to the center of the front windshield. When informed of its noncompliance, the company investigates and finds there is an available compliant adhesive that actually is less expensive. Using a BEN-type approach, or using common sense, you would conclude that there is a negative economic benefit, i.e., the company lost money by not using a complying adhesive. This problem occurred with sufficient frequency that EPA adopted a separate civil penalty policy to cover the situation.26 Under this EPA policy, the economic benefit component of the civil penalty cannot be estimated using the BEN model. Instead, EPA must employ a formula to recover the "wrongful profits"—the total industry average profit (the average return on sales multiplier)—for this type of product27 multiplied by the total dollar sales from the products made on the noncomplying line. If these policy dictates are accepted, the facility could have to pay a civil penalty with an economic component equal to the total industrywide profit per car times the number of cars manufactured at that facility over the last two years. While that may seem unrelated to the economic benefit of noncompliance, the theory of recovering wrongful profits has some judicial support. In United States v. Municipal Authority of Union Township,28 the U. S. Court of Appeals for the Third Circuit affirmed a civil penalty against Dean Foods that employed a recovery of wrongful profits calculation. In addition to the economic benefit aspects, civil penalties have a gravity component. This component is intended to estimate the seriousness of the event and the potential adverse impact on the environment. Some civil penalty policies employ a matrix to determine the gravity component, assigning a range of values to each factor. As examples of the gravity component factors, under the CAA policy the length of the violation will vary the penalty from $ 5,000 for one month of violation to $ 55,000 for 60 months, and the penalty for the sensitivity of the surrounding area will vary from $ 10,000 in an attainment area to $ 18,000 in an extreme nonattainment area. The gravity factor for the size of the company will vary from $ 2,000 for corporations with a net worth less than $ 200,000 to a penalty of $ 70,000 for corporations with a net worth of $ 100 million.29 In effect, the policy establishes a minimum gravity component of about $ 85,000 ($ 70,000 for size; $ 15,000 for the other factors) for a large company violating any substantive emissions limitation for one day in an attainment area. For many larger corporations, a short-term, minor violation in an uncontaminated area will produce a substantially higher penalty under the gravity matrix than will a severe, long-term violation by a smaller company in an extremely contaminated area. A company's size is very important for determining the magnitude of potential civil penalties. Ultimately, however, the penalty policies may not be enforceable if they provide results contrary to the statutory penalty factors. While the economic benefit component and the gravity component are fairly objective parts of the penalty calculation, the adjusting factors are the most subjective. How willful or negligent was the violation? How cooperative was the violator? These factors can be viewed favorably or unfavorably depending on the sensibilities and predispositions of the government employee doing the calculation. EPA policy makes clear that mitigation factors can never be greater than the total gravity component. Stated another way, the civil penalty always must recover the full economic benefit flowing [30 ELR 11037] to the violator, regardless of how innocent the violation and how cooperative the violator. There are two additional economic factors that are sometimes considered separate from the penalty calculation: natural resource damages and inability to pay. Also, there are ways to mitigate potential civil penalties, supplemental environmental projects, and environmentally beneficial expenditures, that are usually considered after the initial penalty is calculated. One of the fastest growing areas in civil penalty policy is the recovery of natural resource damages. Under these statutes, regulations, or policies, the environmental agency attempts to calculate and recover the economic value of any damage noncompliance caused to natural resources.30 The method of valuation for such costs is controversial, especially because they may include the value derived from people who never intend to use the resource.31 Natural resource damages usually are calculated independent of the civil penalty provisions and are not restricted by any caps or maximums on civil penalties. For some time, EPA policy has recognized that some entities are simply too poor to pay the civil penalties derived from generalized penalty calculation formulas.32 EPA's current policy employs a computer model (ABEL) to evaluate financial data from the past five years' income tax returns and project the company's financial ability to pay. A Phase I ABEL analysis calculates various financial ratios and provides a narrative conclusion on the company's financial health. A Phase II ABEL analysis estimates internally generated cash flow at seven different probability ratios over the next five years, as well as the company's projected ability to pay civil penalties.33 Any entity asserting inability to pay as a mitigating factor must assume that the enforcement agency will look closely at several sensitive financial issues, such as compensation of corporate officers and expenses. The enforcement agency may wish to place future limits on some of those items in exchange for reduced civil penalties. One philosophical objection to the current enforcement structure has been that the environment receives no benefit from environmental civil penalties. Most civil penalties are paid to the general revenue fund of the state or federal government. Environmental agencies have attempted to address this discord by providing two mechanisms to return financial benefit to the environment as part of the enforcement process. First, EPA and various states have accepted supplemental environmental projects (SEPs) as mitigation of the civil penalty amount. A SEP is an environmentally beneficial project that a company agrees to undertake in settlement of an enforcement action, but which the company is not otherwise legally required to perform. SEPs must be planned, negotiated with EPA, and implemented after the notice of violation. SEPs must have sufficient nexus with the alleged violation and must advance the goals of the environmental statute forming the basis of the litigation. EPA cannot play any role in managing the funds of the SEP or controlling the project. The SEP cannot be viewed as supplementing EPA appropriations. Typical categories of SEPs include: public health, pollution prevention, pollution reduction, environmental restoration and protection, assessments and audits, environmental compliance promotion, and emergency planning and preparedness.34 Once accepted, the SEP can offset no more than 75% to 90% of the gravity component of the civil penalty, but the agency must recover all of the economic benefit as part of the penalty. EPA has its own computer model, PROJECT, for calculating the value of a SEP.35 The second reduction mechanism is the environmentally beneficial expenditure (EBE). The EBEs are far less well defined. Essentially an EBE is any financial expenditure that a company makes, and that EPA will accept, in mitigation of part of the civil penalty amount. The EBEs may be a project that meets most, but not all, of the criteria for a SEP. States may not have specific statutes, regulations, or policies for addressing SEPs or the EBEs. They may, however, accept such projects as part of prosecutorial discretion to fashion a remedy. The presence of so many civil penalty settlement policies, with so much detail in each one, tends to encourage the idea that agencies simply will not settle for an amount less than the mathematical formulas generate. As explained earlier, this is not true because a large number of unwritten factors influence the decision to settle, such as potential challenges to the application of a particular penalty policy or the availability of agency resources. It is important to know and understand these penalty policies and to submit documents to the agencies that speak in terms of those policies as a settlement amount is negotiated. If case settlement negotiations fail, it is important to know what civil penalty policies and calculations the trial level adjudicator would employ in setting the penalty if the matter was litigated, and what penalty theories are allowed on appeal from that trial decision. These issues are discussed in the next section. Finally, from a very practical aspect, know what civil penalties agencies are actually achieving on a day-to-day basis as part of stipulated settlements, after contested cases, and after judicial appeal. A statistical evaluation of such stipulated penalties, which is discussed later in this Article, is more relevant to the decisions made about how to proceed with a case. How Do Courts Decide What Penalties to Impose? Unlike environmental agencies, the judicial and administrative courts do not have highly detailed, mathematically precise policies for determining the correct civil penalty to impose in environmental litigation. Courts generally rely on the language in the controlling statute regarding how to assess civil penalties, as interpreted in subsequent case law. This statutory language is usually quite vague and allows for many different interpretations regarding the specific method for calculating civil penalties. At trial, the government environmental agency, or other complaining party, must present the court with an adequate legal theory to support the proposed method of calculation for a particular civil penalty and provide the court with all necessary factual data to prove each element of that theory. The role of the court is to determine whether the plaintiffs have provided adequate legal theories and facts in the particular case to support imposition of the requested civil penalty against the defense arguments and facts. There are great similarities between the federal system and that of the various states in the way the courts approach civil penalties. In both the federal and state systems, many of the same penalty factors are considered and applied and the same methods used. There are also, however, some differences between the federal and state systems. Some of these differences relate to the differences in federal and state statutory language. Some of the differences may lie in the fact that the more troublesome and contentious cases are frequently brought by the U.S. government in the federal forum, while the vast majority of the cases, and the more routine cases, are brought by a state enforcement entity in a state forum. It is possible to generalize on the factors both federal and state courts use to determine civil penalties by reviewing specific cases which discuss these factors in detail. This section first will look at federal court and administrative cases that discuss federal penalty factors in some detail and, thereby, provide an avenue for insight into federal court penalty policy considerations. Next, this section will consider two states' approaches to civil penalty determinations to highlight the similarities between federal and state civil penalty analysis. Most federal environmental statutes provide EPA with the right to file enforcement actions in the federal courts to secure civil penalties, and there are many decisions on civil penalties in those courts. There are no U.S. Supreme Court cases that discuss the manner of calculating civil penalties or how the statutory factors should be applied to penalty determinations. There are several U.S. Courts of Appeals and U.S. District Court cases that discuss penalties at length; nearly all of them rely heavily on the statutory language of the CAA, the CWA, and other federal environmental statutes regarding factors to consider in setting the penalty. For example, § 309(d) of the CWA states that, in setting a civil penalty, a court shall consider: the seriousness of the violation or violations, the economic benefit (if any) resulting from the violation, any history of such violations, any good-faith efforts to comply with the applicable requirements, the economic impact of the penalty on the violator, and such other matters as justice may require.36 Similarly, the CAA provides that: the Administrator or the court, as appropriate, shall take into consideration (in addition to such other factors as justice may require) the size of the business, the economic impact of the penalty on the business, the violator's full compliance history and good faith efforts to comply, the duration of the violation as established by any credible evidence . . . payment by the violator of penalties previously assessed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation.37 Many court decisions simply recite the statutory penalty factors, describe the evidence that bears on those factors, and then leap to a seemingly arbitrary dollar amount for that factor. Other courts attempt to ascribe a particular dollar amount per day, per violation based on those factors, and then multiply that amount times the number of days of violation. There is no clear pattern among the courts. One of the more common approaches was used in both Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc.38 and United States v. Smithfield Foods, Inc.39 In Laidlaw, the District court considered the CWA § 309(d)'s penalty factors to assess a penalty for violations of the national pollutant discharge elimination system (NPDES) permit limits for mercury discharges and for violations of monitoring and reporting requirements. In Smithfield, the district court considered CWA § 309(d)'s penalty factors to assess a penalty for violations of NPDES permit limits for phosphorus and other pollutants relating to defendant's swine slaughtering operations. In both cases, the courts applied each of the five CWA factors to reach its penalty: (1) the seriousness of the violations, (2) the economic benefit obtained from noncompliance, (3) the violation history of the alleged violator, (4) good-faith efforts made toward compliance, and (5) the economic impact of the penalty on the violator. Economic Benefit of Noncompliance Though the economic benefit factor is listed second after the seriousness of the violation factor in the CWA and other statutes, we begin with a discussion of this factor because it is often a starting point for courts making a civil penalty determination. When making a civil penalty determination, most courts attempt to provide an approximation of the amount of money a company has gained over its competitors by failing to comply with the law.40 Two relatively common methods that courts use to arrive at this figure are the "cost-avoided" method and, (as discussed above), the "wrongful profits" method. Whatever the method used to calculate present value economic benefit of noncompliance, the guiding principle in the courts' calculations is "to remove [30 ELR 11039] or neutralize the economic incentive to violate environmental regulations."41 Under the cost-avoided method, courts recognize that when a company delays or avoids costs of operations and maintenance necessary for environmental compliance, the company is able to use those funds for other income-producing activities, such as investing that money in their own company.42 Therefore, a court first will determine the amount of money a company has saved through noncompliance, and next will apply an interest rate to determine the present value of that amount. Many courts use the weighted average cost of capital (WACC) as a discount/interest rate. The WACC rate represents "the average rate of return a company expects to make for its investors, in order to maintain its current level of investors and its current level of business operations."43 Bear in mind, however, that the cost-avoided method is not the only method of calculating economic benefit. As discussed above, a violator's economic benefit can also be calculated using a "wrongful profits" determination. For example, in Union Township,44 the Third Circuit calculated a violator's economic benefit by determining the "wrongful profits"—the income that the company would have lost ($ 417,000 per year) in revenues from a customer it would have had to drop in order to reduce production enough to comply with its permit.45 Regardless of the method used, you can be sure that an essential aspect of a court's penalty determination will be consideration of the economic benefit obtained by the violator as a result of noncompliance. The determined economic benefit often is used as a base figure from which courts adjust up or down based on the court's evaluation of the other statutory penalty factors.46 Thus, the economic benefit figure is crucial to any penalty determination, and artful arguments designed to minimize that magic number are key to the defense of any case. Courts almost always consider the "seriousness" of a violation in reaching a penalty determination. The goal of this factor is to somehow measure the amount of harm that the violation caused to the environment and the public. Another aspect of this factor involves consideration of the frequency and severity of the violations.47 In some cases, EPA has provided documents that help courts measure the seriousness of the violation. When such a document is not available, courts usually discuss generally the health risks or environmental damage created by the violation, for example, the toxicity level of a given air or water pollutant and the health hazards caused by that pollutant. In Laidlaw, the court turned to an EPA document for guidance on the seriousness of the violation: EPA's March 1995 Interim Clean Water Act Settlement Penalty Policy, which discusses how health and environmental harm should be evaluated in setting a penalty. The policy contained four possible ranges of gravity of harm. The Laidlaw citizen plaintiffs selected the lowest possible gravity range for the alleged mercury discharges and violations of monitoring and reporting requirements.48 The court concluded, based on the plaintiff's position, that under this statutory factor, "the NPDES permit violations at issue in this citizen suit did not result in any health risk or environmental harm."49 As for the monitoring and reporting violations, the court noted that "monitoring violations are not considered serious unless they are found to have been in bad faith."50 The court recognized that the reporting and monitoring deficiencies were not the result of a failure to install proper monitoring equipment or to submit timely reports, but instead occurred because of monitoring device malfunctions and technical errors on the reporting forms. The court therefore concluded that the monitoring and reporting violations were not "serious."51 The Smithfield court's discussion of this factor provides a good example of what courts will do absent an EPA guidance document to help them measure the seriousness of the violation. Here, the court took into account the fact that the alleged phosphorus, total Kjeldahl nitrogen, and ammonia limit violations occurred very frequently. In fact, the defendants exceeded phosphorus limits about 70% of the time they were in operation. The difference between the actual emission amount and the permitted emission amount helped the court find that the violations in this case were serious.52 Considering also the aspect of impact on the environment and the public, the Smithfield court noted that the defendant's effluent discharges accounted at times for as much as 50% of the freshwater flow into a local river. Though the Smithfield court, unlike the Laidlaw court, applied this factor without use of an EPA guidance document, the analysis in both cases, and in many, many other cases, remains essentially the same. The court in most cases will consider the impact the alleged violation had on the environment and the public, and will take into account how frequent and extreme the violations were. Preparation for this type of analysis should be achieved by consulting with an environmental specialist to obtain a complete understanding of the effects of the alleged violations. Being armed with information is the best way to ensure the ability to craft arguments that will point out the amount or types of violations that did not adversely affect the public or the environment. Courts considering this factor apply a rather clear cut analysis. Many courts consider the "duration of defendants' current violations, whether defendants have committed similar [30 ELR 11040] violations in the past, and the duration and nature of all of the violations, including whether the violations are perpetual or sporadic."53 Other courts do not take into account circumstances surrounding the current alleged violations when considering this factor.54 Maintaining a low violation count is the best way to avoid a court's use of this factor to raise a civil penalty. Federal courts recognize that "whether defendants took any actions to decrease the number of violations or made efforts to mitigate the impact of their violations on the environment must be also considered when the court is determining the appropriate penalty . . . ."55 Upon consideration of this factor, federal courts attempt to break down the complaint into its various alleged violations, and apply a factual analysis based on the record to determine whether the defendant attempted to mitigate the violations or their impact.56 The federal cases discussing this factor make one thing clear: if you are notified that you may be in violation of certain environmental statutes or regulations, you immediately should begin the process of researching your possible violations and potential solutions to the problem. Federal courts look very favorably upon a defendant who takes steps to prevent harm to the environment before that defendant is dragged into court and forced to comply. Economic Impact of the Penalty on the Violator As a guiding principle, this factor ensures that the "main purpose of the penalty is to deter the violator and others from committing future violations."57 Thus, in considering the economic impact of the penalty on the violator, federal courts examine "appropriate economic indicators of a company's financial status," such as the stockholder equity.58 In Smithfield, for example, the court examined the defendant's stockholder's equity and determined that a penalty representing 6.4% of the stockholder's equity would have a "material, but not detrimental, financial effect on the company's financial condition."59 The court noted that had the penalty been based solely on the defendant's economic benefit from noncompliance, the penalty would only represent 1.7% of the stockholder's equity, and would possibly not have enough of an effect on the company's financial condition. In contrast to the Smithfield court's application of this factor, the Laidlaw court noted that for the economic impact factor to apply, "the defendant must establish that a penalty should be reduced because of its economic impact."60 The court relied on the testimony of the plaintiff's economic expert establishing that the defendant could pay the sought penalty without suffering "economic bankruptcy," and found that this factor should not apply to reduce the amount of the penalty.61 Not all federal courts will wait for "economic bankruptcy" before they will reduce a civil penalty if they find that the proposed penalty will have too harsh an effect on a defendant's finances and future operations. It may be prudent to have an independent expert examine the economic impact that a proposed penalty would have on a company. Though this section focuses on courts' determinations of civil penalties, another governmental entity warrants mention. Federal environmental statutes also provide EPA with the ability to file administrative agency complaints to secure civil penalties. Instead of being filed in state or federal court, those complaints are filed before administrative law judges (ALJs) (also called "presiding officers" in the particular case) of the various EPA regional offices. An ALJ will hear the evidence in a case and render a decision regarding a civil penalty amount much like a state or federal judge would do. Decisions of the ALJs can then be appealed to the EPA Environmental Appeals Board (EAB). Generally, the EAB follows the above-discussed statutory civil penalties factors when reviewing penalty determinations made by the ALJs.62 However, in addition to statutory factors, EPA regulations require the ALJs to consider civil penalty guidelines and policies issued by the Agency: (b) Amount of civil penalty. If the Presiding Officer determines that a violation has occurred, the Presiding Officer shall determine the dollar amount of the recommended civil penalty to be assessed in the initial decision in accordance with any criteria set forth in the Act relating to the proper amount of a civil penalty, and must consider any civil penalty guidelines issued under the Act. If the Presiding Officer decides to assess a penalty different in amount from the penalty recommended to be assessed in the complaint, the Presiding Officer shall set forth in the initial decision the specific reasons for the increase or decrease. The Presiding Officer shall not raise a penalty from that recommended to be assessed in the complaint if the respondent has defaulted.63 The EAB usually does not discuss the specific penalty policies issued by the Agency; rather the EAB simply reviews the ALJ's application of those policies. The standard of review applied by the EAB is that when the [ALJ] assesses a penalty that falls within the range of penalties provided in the penalty guidelines, the Board generally will not substitute its judgment for that of the [ALJ] absent a showing that the [ALJ] has committed an abuse of discretion or a clear error in assessing the penalty.64 The EAB's position is somewhat muddled on what weight the Presiding Officer should assign to the civil penalty policies in setting the actual penalty in any given case. [30 ELR 11041] The Board concedes that these policies do not have the force and effect of law: While Steeltech is correct that the [Civil Penalty Policy] has not been promulgated as a regulation and, therefore, does not have the force of law, pursuant to the applicable regulations, the Presiding Officer was required to consider the [enforcement response policy's] guidance. 40 C.F.R. § 22.27(b) (stating that the presiding officer must consider any civil penalty guidelines or policies issued by EPA under the applicable statute). Although required to consider the ERP's guidance, we have stated that "the EPA's adjudicative officers must refrain from treating the [penalty policy] as a rule, and must be prepared 'to re-examine the basic propositions' on which the policy is based in any case in which those 'basic propositions' are genuinely placed at issue." In re Employers Ins. of Wausau, 6 E.A.D. 735, 761 [ADMIN. MAT. 40596] (EAB 1997) (citation omitted). Further, "this Board has repeatedly stated that a Presiding Officer, having considered any applicable civil penalty guidelines issued by the Agency, is nonetheless free not to apply them to the case at hand." Id. at 758, citing DIC Americas, 6 E.A.D. at 189.65 Nonetheless, the EAB seems to treat these policies as binding and sufficient to support adoption of a specific penalty. EPA ALJs must consider the civil penalty policies in setting the appropriate penalty. The ALJ must provide a rationale for any deviation from the civil penalty policy.66 If the ALJ fails to provide a rationale for deviating from the penalty policy, the EAB will remand the decision for such an explanation.67 And finally, when the ALJ assesses a penalty that falls within the range of penalties provided in the guidelines, the Board will not overturn that decision absent an abuse of discretion or a clear error in assessing the penalty.68 EPA may assert that these policies do not have the force and effect of law to avoid some significant due process concerns in enforcing a policy that has never been subject to notice-and-comment rulemaking. But, EPA certainly treats these policies as a rule. If it walks like a duck and quacks like a duck, perhaps, to an appellate court on review, it is a duck. No appeals court has addressed whether EPA's use of the nonregulatory civil penalty policies is appropriate. In B.J. Carney Industries, Inc. v. U.S. Environmental Protection Agency,69 the court was asked to address this issue, but it determined that the appeal was untimely. However, in Appalachian Power Co. v. U.S. Environmental Protection Agency,70 the court invalidated an EPA guidance document on periodic monitoring of air pollutants because the guidance document significantly broadened the rule it was interpreting and because the practical effect of the guidance was to create a new requirement. It is well-established that an agency may not escape the notice and comment requirements (here, of 42 U.S.C. § 7607(d)) by labeling a major substantive legal addition to a rule a mere interpretation. See Paralyzed Veterans v. D.C. Arena L.P., 117 F.3d 579, 588 (D.C. Cir. 1997); American Mining Congress v. MSHA, 995 F.2d 1106, 1109-10 (D.C. Cir. 1993). "We must still look to whether the interpretation itself carries the force and effect of law, . . . or rather whether it spells out a duty fairly encompassed within the regulation that the interpretation purports to construe." (citations and internal quotations omitted). See Paralyzed Veterans, 117 F.3d at 588.71 If faced with an EPA complaint before an administrative tribunal rather than in federal court, first priority should be to discover whether EPA has a civil penalty policy that applies to the alleged violations. If there is such a policy, and the policy's results are favorable, arguments should be based on the factors in the policy that increase the ability to minimize penalty amount. Otherwise, object to use of the policy to preserve appellate arguments. The above federal statutory factors and their application by the courts are similar to many state statutory directives and state court application of those directives. Most state courts will apply the same fact-sensitive analysis to factors very similar to those considered in federal courts. Many states rely heavily on the seriousness of the violation and economic benefit factors. Some states consider several statutorily enumerated factors with equal force in order to find the appropriate penalty amount. All state courts invariably will follow the mandates of a statutory penalty policy if one exists in that state. If in a state court facing alleged environmental violations, determine whether that state's environmental protection statute provides any factors for the court in setting a civil penalty. Examine existing case law to understand how the court applies the statutory factors, or, in the absence of any statutory guidance, what considerations feed the court's penalty determination. While it is impracticable to present an analysis of each state's civil penalty case law here, a random sampling of two states' approaches to penalty determinations will illustrate the similarities between federal and state court approaches to penalties. Louisiana courts and agencies consider essentially the same factors as the federal courts and agencies, although in Louisiana some of the factors are broken down into more specific inquiries. In assessing a civil penalty, the Louisiana courts and agencies must evaluate nine specific statutory penalty determination factors, including the gross revenue generated by the alleged violator, the degree of culpability or indifference to regulations or orders, whether the violation and surrounding circumstances were immediately reported to the department or were concealed, and the costs to the agency of bringing and prosecuting the enforcement action.72 A good example of application of Louisiana's general penalty factors can be found in In the Matter of Town of Grand Isle Dump.73 In that case, the Louisiana Department of Environmental Quality (DEQ) administrative tribunal, [30 ELR 11042] after adjudicatory hearing, assessed a civil penalty of $ 75,000 against Grand Isle for open burning and other violations committed during operation of its waste disposal facility. The tribunal recognized the above nine factors were applicable to reach the penalty determination and conducted an analysis virtually identical to the federal courts' regarding the seriousness of the violation and the company's history of violations. However, the tribunal limited its consideration only to those factors for which the DEQ in its complaint provided ample evidence and discussion. For example, the DEQ failed to offer evidence that would have explained how much money Grand Isle saved in landfill fees by burning the waste instead of transporting it to a landfill. Because the DEQ did not present evidence on this issue, the tribunal refused to apply that penalty factor in making its penalty determination.74 Like federal and other state courts, Louisiana tribunals consider the evidence on the record to make a fact-sensitive penalty determination using some variation of the common five federal CWA factors described above. To design an effective defense to large civil penalties in state as well as federal courts, each factor must be addressed individually and applied to the facts of the situation, using prior case law from the jurisdiction to flesh out the factual analysis. Like the tribunal in Grand Isle, state administrative tribunals and courts will apply this type of fact-sensitive analysis to reach a penalty amount. In Illinois, the Illinois Environmental Protection Act (IEPAct)75 provides a framework for penalty determinations to be used by the enforcing agency and by the appellate courts upon review of those agency determinations. Section 33(c) of the IEPAct states that the agency should take into account several factors when imposing a penalty: the character and degree of injury; the social and economic value of the pollution source; the suitability or unsuitability of the source to the area in which it is located; the technical practicability and economic reasonableness of reducing or eliminating the emissions; any economic benefits accrued by noncompliance; and any subsequent compliance.76 Once a penalty determination is made using § 33(c)'d factors, § 42(h) of the IEPAct provides additional mitigating factors whereby the court or agency can make adjustments to the penalty amount.77 These factors are the duration and gravity of the violation; any diligent efforts on the part of the violator to comply; any economic benefit accrued by the violator; the penalty amount that would deter further violations by that violator or others; and the number, proximity in time, and gravity of previously adjudicated violations. These Illinois factors closely resemble factors used by federal courts when making a penalty determination. In light of these factors, the long-standing guiding principle articulated by the Illinois Supreme Court is that civil penalties should aid enforcement of the IEPAct and that punitive considerations should be secondary.78 Illinois appellate courts are instructed to bear this principle in mind when reviewing agency penalty determinations. Nevertheless, when the Illinois Pollution Control Board (IPCB) applies the § 33(c) factors to reach a penalty determination, its order will not be disturbed upon review by an appellate court unless it is clearly arbitrary, capricious, or unreasonable.79 If before the Illinois environmental administrative adjudicator, the IPCB, or an Illinois state court, it is essential that the factors in § 33(c) and § 42(h) are carefully analyzed and applied to the case. Examine decisions of the IPCB, many of which are available online, to find similar cases. In all jurisdictions, the best approach for minimizing the civil penalty amount is to craft arguments, based on the listed penalty factors as interpreted by prior cases, to show that the penalty should be low. Trial tactics should be different than preenforcement negotiation tactics. Enforcement agencies employ specific policies to guide the negotiation and settlement of cases. Frequently, the best negotiating strategy with the agency is to argue within the policy, i.e., to explain why the various policy factors do not lead to a high civil penalty in your case. Courts have not adopted a uniform penalty approach, rather they accept particular penalty methodologies on a case-by-case basis. This case-by-case approach allows for substantial variability before the courts, a concept that the prudent litigator can exploit. The fact that a court has accepted or rejected a particular penalty calculation methodology in one case does not mean the court necessarily will reach the same result in a later case where the facts or opposing legal arguments are different. What Civil Penalties Are You Likely to Face? There are many statutory, regulatory, and policy documents that attempt to explain what civil penalty an environmental agency should assess in a given situation, and those factors should be reviewed to determine potential liability and what the prosecutor may request in preliminary negotiations. But a much better decisionmaking tool for case management is a statistical review of the actual level of civil penalties that have previously been assessed at each litigation level. History is a reasonably good predictor of future conduct. Some jurisdictions have civil penalty statistical documents that distill the relevant information. Others will require review of each matter separately so that the information can be summarized in a meaningful way. It is important to evaluate data over several years to see what penalty trends are evident. The best statistical data would be information tailored to the specific factual circumstances of a particular case, i.e., determine the average negotiated stipulation before a state administrative tribunal regarding a medium-sized company constructing a new source emission unit without a permit where the short-term violation was discovered by the agency, but the company cooperated fully and complied quickly. Where information this specific is not available, or such research is not warranted, employ the results of generic average enforcement penalty surveys to make better decisions [30 ELR 11043] than could be made without such data. Take this step with some reservations, i.e., the facts of the case may be neither average nor similar to the statistical results. Most EPA environmental enforcement is conducted by the regional offices. National civil penalty statistics, therefore, are less useful in predicting outcomes in a case initiated by a specific region. EPA compiles national enforcement statistics each year in their Enforcement and Compliance Assurance Accomplishments Reports. This annual document provides an excellent overview of enforcement activities and upcoming initiatives, but is not well suited to determining mean, median, and highest penalties in the various categories. At least one EPA region, Region V, provides significant enforcement and penalty statistics, in a clear, meaningful manner (see Table 1).80
State statistical information on civil penalties is particularly important because most environmental enforcement is state-initiated. Illinois has an enforcement process particularly well suited to gathering enforcement statistics. Illinois' relatively structured enforcement process begins with a notice of violation, and the process contains several specific opportunities to meet with government officials to resolve the issues. If the preliminary efforts at negotiation do not fully resolve the issues, the matter is referred to the Illinois Attorney General's office for enforcement. If the Attorney General's office feels that an appropriate violation has occurred, it usually initiates an enforcement proceeding before the IPCB. If the parties reach agreement on what additional pollution control efforts are required and what civil penalty is appropriate for past violations, the case can be resolved by memorializing those agreements in a stipulated settlement and submitting it to the IPCB for approval. If agreement cannot be reached, the parties may proceed to adjudicate the matter before the IPCB in a contested case. Either side can appeal to the Illinois Appellate Courts if they are unhappy with the IPCB's final decision. In the period from January 1990 to December 31, 1999, the IPCB issued more than 2,000 opinions or orders involving enforcement under RCRA. These cases included more than 600 separate traditional enforcement cases, of which about 500 were initiated by the state. Of these state-initiated cases, more than 400 were resolved by stipulation and settlement, 34 resulted in IPCB-contested case opinions and orders, and the remaining proceedings were dismissed or have not yet been decided. Illinois courts reviewed five IPCB penalty decisions in that time period. Companies can gain a better understanding of their potential enforcement exposure by comparing the results of civil penalties at the negotiated settlement stage, the contested case stage, and after appeal. Since January 1990, the IPCB's approximately 400 stipulations and settlements assessed a total of more than $ 4.5 million in civil penalties, with a median penalty value of $ 7,500 and an arithmetic mean of about $ 11,500. The highest stipulated penalty was $ 232,800. Eight cases had penalties from $ 50,000 to $ 100,000. Twenty-two cases had penalties from $ 30,000 to $ 45,000. These results are described in Table 2.
The IPCB's 34 contested cases since 1990 assessed a total of almost $ 3 million in civil penalties, with a median penalty value of $ 21,800 and an arithmetic mean of slightly more than $ 86,000. The highest penalty was $ 655,200. Eight cases had penalties from $ 100,000 to $ 500,000. Six cases had penalties from $ 30,000 to $ 99,000. This information can be helpful in making decisions regarding whether to settle or litigate. Assuming a routine environmental violation before the IPCB, any negotiated settlement for less that $ 15,000 in 1999 dollars is reasonable. If a settlement that low cannot be negotiated, consider the potential costs of litigation before the IPCB. Litigation before the IPCB is likely to cost $ 20,000 to $ 85,000 in civil penalties plus legal fees. Assuming legal fees of $ 25,000, your total estimated exposure is $ 45,000 to $ 110,000. If the minimum penalty demand from the Attorney General's office is over $ 110,000, it may be to your economic benefit to litigate. If the minimum penalty demand is under $ 45,000, you are unlikely to improve your economic situation by litigating. Again, this evaluation is far more reliable when using data derived from historical cases with similar factual situations, rather than all cases. Also, this analysis assumes that a violation occurred. If there are strong arguments that no violation occurred, the economic comparison must be adjusted based on the probability of success. When someone prevails on the merits, the civil penalty is zero. If the probability of winning is high, litigation may be advisable whenever the minimum penalty demand exceeds the legal fees associated with litigation. Litigants can appeal to the Illinois Appellate Courts if they are dissatisfied with the contested case outcome before the IPCB. There were no Illinois Supreme Court cases between January 1990 and December 1999 discussing civil penalties. There were only five cases decided by the Illinois Appellate Courts in that time period that reviewed statutory environmental civil penalties imposed by the IPCB. All three of the IPCB's post-1994 penalty decisions were affirmed (see Table 3).
Other states provide less functional data regarding penalty analysis, but some meaningful conclusions can still be drawn. The New York Department of Environmental Conservation published its own statistical analysis for all enforcement matters for the years 1993 through 1999. Table 4 was [30 ELR 11044] prepared by the New York department office and includes both contested cases and stipulations.
Louisiana's DEQ adopted 203 civil penalties in the period between January 1977 and June 1999. The Louisiana department's compilation of these civil penalties encompasses all enforcement matters, both contested cases and stipulations. The median civil penalty was $ 10,000, the mean penalty was $ 29,820, and the highest civil penalty was $ 872,080. There were 19 civil penalties of $ 50,000 or more, of which 10 were $ 100,000 or more. A review of the civil penalty factors, or the actual penalties imposed, has relevance only to the extent that such information can be used in an effective manner to persuade the prosecutor to forego litigation or to seek smaller penalties. However, there are other effective mechanisms to achieve the same goal. How to Effectively Avoid Enforcement Litigation or Secure a Lower Civil Penalty Anyone threatened with environmental litigation wants to minimize their enforcement and penalty exposure. There are many ways to pursue that goal, including: (1) becoming involved early in the process, (2) managing information disclosure, (3) responding to government inquiries appropriately, and (4) talking the government's language. In enforcement defense, timing is critical. If the goal is to reduce the risk of formal litigation or minimize the size of any potential civil penalty, become actively involved in defense work as soon as possible, even before the government investigation or mandated information disclosure occurs.81 The enforcement process, like a boulder rolling downhill, is a creature of momentum. The longer it operates and the more government agency people that become involved, the harder it will be to stop or deflect it from formal litigation and high civil penalties. Good defense work starts even before the government inspectors arrive, by properly managing the release of information. Far too often, companies keep mandated environmental records in files that include other documents that need not be disclosed to government inspectors, such as funding requests, internal memoranda, or similar documents. Some of those documents have not been reviewed with government disclosure in mind. They may contain imprudent statements that would attract the attention of government inspectors. In a hectic setting with multiple inspectors seeking large quantities of information in a short time frame, these documents may be disclosed inadvertently. Prudent corporate management should adopt policies that minimize the likelihood of information disclosure leading to enforcement. First, routine corporate information releases can be reviewed for statements identifying potential environmental issues. Second, corporate management can establish specific locations where all mandated environmental records, and only mandated environmental records, are kept. In this way, government inspectors can be directed to one location where there is minimal risk of inadvertent disclosure of ancillary documents. Even discounting inadvertent disclosure, it may be preferable not to have personnel running to various locations within a plant during an inspection searching for documents, leaving the government inspector unsupervised. In addition tomanaging unintended information disclosure, companies need to ensure that necessary information disclosures are appropriate to the circumstances. The response should be complete and adequate to conclude the matter at hand, a response that goes beyond simply answering the questions asked. This is especially true because different parts of an environmental agency may view the same situation differently. Consider for example an inquiry from a permit engineer regarding unpermitted equipment at a facility. That inquiry may be satisfied by a company response that includes a new permit application for that equipment. From the permit engineer's perspective the issue has been resolved, and no more action is required because the equipment has changed status from unpermitted to permitted, i.e., the permit bean has been counted. When the compliance and enforcement section reviews the same file, however, they may conclude that the enforcement bean has not been counted. No one has evaluated the past unpermitted operation against criteria in the relevant enforcement policies and made a formal determination on what action, if any, to pursue. An appropriate response or disclosure should not only answer the relevant inquiry; it should provide clear and convincing reasons why the matter meets criteria for no further action, particularly where the response identifies noncompliance. Crafting that appropriate response requires that you "speak governmental language." The reasons for this are obvious. There will be various EPA-state communications on enforcement issues. Also, the agency permit engineer will have to describe the case to his or her manager before deciding whether to refer the matter for enforcement. During these communications, someone will have to describe the facts of the case and explain why it does or does not meet specific, articulated EPA criteria regarding enforcement policies or penalty policies. The agency representative may not be able to present the case in the light most favorable to the company if he or she is pressed for time, cannot remember all the facts correctly, or is unaware of some beneficial aspects of the facts or the various enforcement policies. The case is more likely to be favorably addressed during those communications if the agency representative has access to a written document that recounts the relevant facts and the beneficial aspects of each enforcement policy in the light most favorable to the company. Many agency managers also read all relevant documents relating to a potential enforcement matter. If a persuasive analysis has been submitted, the manager may read it before making a decision to pursue or forego litigation, thereby receiving the undiluted facts and arguments of the petitioner. If that analysis is not on file, the manager will have to ask subordinate staff to explain the situation and point of view, a far less effective form of advocacy for the petitioner's position. One significant role of defense counsel in enforcement is to become as aware as possible of the many formal and informal policy reasons that would prompt an agency to move this particular matter farther along to the next stop in the enforcement process. Counsel then should present arguments and supporting facts to the agency in writing, as early and as persuasively as possible, addressing each of those issues in the light most favorable to the company. A comprehensive evaluation and response to every government agency inquiry or mandated corporate disclosure could be very time consuming and expensive. It also may be unnecessary, because most day-to-day government agency interactions do not result in enforcement. Choosing which inquiries and disclosures are routine and which require substantial corporate attention is difficult. Companies can draw a reasonable and prudent line between the two extremes by evaluating the risk and choosing their level of risk tolerance. Low risk situations include usual verbal inquiries from agency permit staff and mandated corporate information disclosures where no noncompliance is evident. Agency written requests for information, agency information requests that follow a routine inspection, or standard reports that show compliance but will be filed a little late present slightly more risk. Higher still on the risk spectrum are agency formal requests for information or mandated disclosure of minor noncompliance. The highest risk level occurs when companies receive formal preenforcement documents such as compliance inquiry letters or notices of violation, or where they must file mandated information disclosure that shows substantive noncompliance with control requirements, monitoring requirements, recordkeeping requirements, reporting requirements, or permitting requirements. Obviously the risk of each previously described item can be higher under certain circumstances. If the facility is part of an EPA sector initiative, any mandated information disclosure or agency inquiry should be regarded as potential grounds for litigation. Similar circumstances of concern include facilities with past compliance issues, publically announced enforcement initiatives in the area, enforcement conflicts between the agency and EPA, or similar issues. Generally, the earlier and the more comprehensively government disclosures are addressed, the lower the risk of litigation or high civil penalties. Knowing the risk presented, and risk tolerance, you should be able to choose an acceptable path for the level of oversight and review needed for each mandated disclosure or response to government inquiry. In evaluating the risk of each situation, it is important to view the disclosure as it would be viewed by the agency. The failure to conduct certain monitoring or keep certain records may be viewed by a company as a mere paperwork violation. The agency may view those same issues as major problems, since only those records will demonstrate compliance or noncompliance with applicable substantive control requirements. The response or disclosure provided to the agency should be sufficiently comprehensive and persuasive to address the level of concern the agency may have about the situation, not the level of concern you have. Knowing When to Settle, When to Litigate In the famous song about a poker-playing gambler, Kenny Rodgers proclaimed: "You've got to know when to hold them, know when to fold, know when to walk away, know when to run." The same skills will lead to a successful conclusion in managing environmental litigation. Frequently, the initial emotional response is "millions for defense, but not one cent for tribute."82 Unfortunately, that attitude can precisely define your litigation costs. The threat of litigation, however, can also produce exactly the opposite reaction—a desire to settle the matter before litigation at any cost in order to avoid the conflict, notoriety, and disruption associated with litigation. There are meaningful ways to balance costs and evaluate risks to make a more informed litigation decision on when to settle and when to litigate. First, acquire the relevant factual information to assess financial exposure. Most of the governmental policies require factual information on the type, magnitude, frequency, and duration of the violation. They also evaluate any costs associated with compliance, when those costs should have been expended, and when they were expended. Use this information to estimate, on a very rough basis, exposure. Two estimates are helpful, one based on a realistic assessment of the most likely outcome for civil penalty, and one based on a reasonable estimate of worst-case civil penalties. Next, review the appropriate litigation records for civil penalties in past settlements the environmental agency has accepted under similar factual scenarios, including estimates for the most likely outcome and the reasonable worst-case outcome. Also, review the records from the regional EPA office to establish the most likely and reasonable worst-case penalty estimates they have accepted in settlements of similar cases. Add to these values a reasonable estimate of the litigation costs that would be incurred in moving this matter from its present status through to completion and acceptance of a final settlement. This should provide you with a rough approximation for the upper and lower bound of exposure in settling this case. Compare these values, and your risk to lerance level, to help decide how much time and effort to put into defense. If the range of anticipated settlement values is acceptable, work toward settlement. If the reasonably foreseeable settlement values are unacceptable, move to the next evaluation. Retrieve from the same sources the likely range of civil penalties that would occur if the matter were litigated as a contested case, and add to that the anticipated costs of litigation. Compare the cost differential between settlement options and the litigation options to estimate any monetary benefit retrievable by pursuing litigation. These comparisons only cover the civil penalty and litigation cost components. Obviously, there are [30 ELR 11046] many other factors that bear on the litigation decision which cannot be reduced to a monetary value, such as the risk of criminal enforcement or the threat of bad publicity. However, having some realistic and relevant information to help in decisionmaking is usually better than having no information on that topic. At each stage in the subsequent negotiations with the environmental agency, reevaluate your position. Once the environmental agency first makes a firm settlement offer, the comparisons take on significantly greater importance and are statistically more relevant. There is a wealth of information on civil penalty policies and statistical data on civil penalties. Anyone facing potential litigation can use this information to evaluate their exposure and to plan appropriate case management strategies. Moreover, an understanding of how the enforcement process works will allow the prudent corporate officer to plan effective risk management procedures to reduce the likelihood of enforcement. 1. Regulatory programs under the Clean Air Act (CAA), 42 U.S.C. §§ 7401-7671q, ELR STAT. CAA §§ 101-618; the Clean Water Act (CWA), 33 U.S.C. §§ 1251-1387, ELR STAT. FWPCA §§ 101-607; and the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901-6992k, ELR STAT. RCRA §§ 1001-11011. Other programs and criminal issues are not discussed. 2. "The EPA enforcement world has gone high tech in that with compliance records, geographic studies, required submission, Dunn and Bradstreet . . . 17 major information systems in all—EPA knows more than many companies do about their own compliance—especially those without computers." ENVIRONMENTAL LAW HANDBOOK 42 (Thomas F.P. Sullivan ed., Government Institutes, Inc. 1997) (quotation from interview with Sylvia K. Lowarance, U.S. EPA, Deputy Assistant Administrator for Enforcement and Compliance Assurance, by Thomas A. Adams, conducted on Aug. 13, 1996). 3. OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, ENFORCEMENT AND COMPLIANCE ASSURANCE ACCOMPLISHMENTS REPORT: FY 1998 27 (1999). 4. OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, ENFORCEMENT AND COMPLIANCE ASSURANCE ACCOMPLISHMENTS REPORT: FY 1994, 1995, 1996, 1997, AND 1998 (1998). 5. Statistical analysis of all cases that were reported on the two legal search databases (Westlaw(c) and Lexis(c)) as of December 31, 1999, in the Illinois Pollution Control Board database with a decision date after January 1, 1990. Approximately 100 citizen-initiated general nuisance noise cases were not counted. 6. 191 F.3d 894, 29 ELR 21412 (8th Cir. 1999). 7. Harmon may give the illusion of a welcome judicial action that precludes unnecessary and vexatious EPA litigation, as well as providing certainty and finality to negotiations in state enforcement actions. However, in practice, overfiling has been an extremely rare event; therefore the vexatious litigation harm that will be avoided due to the Harmon decision is very small. Second, as subsequently discussed, EPA and the states have frequent enforcement conferences during which they make decisions regarding which environmental agency will lead on any enforcement issue. Historically, EPA could allow the state to lead on enforcement in any given case, confident that EPA would be able to overfile if it was dissatisfied with the state enforcement result. Harmon may simply tip the balance so that EPA initiates a larger number of cases, so that it can be assured that what it perceives as adequate penalties will be pursued. Harmon's reach could extend to precluding the United States from filing criminal charges for violating federal law where there is an approved state RCRA counterpart. But see United States v. Elias, 30 ELR 20558 (D. Idaho Apr. 26, 2000). 8. In Citizens Legal Envtl. Action Network v. Premium Standard Farms, Inc., 2000 WL 220464 (W.D. Mo. 2000), a citizens group filed against a hog farm for CWA and CAA violations. The United States intervened. On August 19, 1999, defendant moved to dismiss the citizens group raising Harmon-type issues of res judicata and privity from a prior completed state enforcement action. The United States opposed the motion, in part, because those issues might be raised against them. 9. See ENVIRONMENTAL LAW HANDBOOK, supra note 2. 10. For example, § 114 of the CAA authorizes EPA to require facilities (on a one-time, periodic or continuous basis) to provide any "information as the Administrator may reasonably require," whether that information presently exists or must be created by testing, monitoring, or recordkeeping, 42 U.S.C. § 7414, ELR STAT. CAA § 114. Similar provisions exist in § 308 of the CWA, 33 U.S.C. § 1318, ELR STAT. FWPCA § 308, and § 3007 of RCRA, 42 U.S.C. § 6927, ELR STAT. RCRA § 3007. 11. Both EPA and the state also may have "parking ticket"-type procedures for minor infractions, usually with modest, specified fines and little discretion. See, e.g., 42 U.S.C. § 7413(d)(3), ELR STAT. CAA § 113(d)(3). 12. For example, absent an imminent endangerment, § 31 of the Illinois Environmental Protection Act, 415 Ill. Comp. Stat. 5/1 et seq., provides that, prior to commencing formal enforcement, the agency must send three formal notices to the potential violator, provide three opportunities for meetings with the agency, and allow three opportunities for the company to submit responsive documents. Section 31 also sets maximum time frames for these preenforcement events to occur, starting within "180 days of becoming aware of the alleged violation." Failure to follow these procedures precludes statutory civil litigation, in effect a 180-day statute of limitation for agency action. 13. This 22-page policy (with its own glossary) was announced in a December 22, 1998, Memorandum from Eric Schaeffer, Director, Office of Regulatory Enforcement as a replacement for the prior 1992 Guidance on Timely and Appropriate Enforcement Response to Significant Air Pollution Violators and the June 14, 1994, and April 17, 1995, clarifications of the 1992 policy. EPA has distributed a more lengthy "HPV workbook" to guide its enforcement personnel in implementing the policy. 14. As one example under this policy, emissions of nitrogen oxides (NOx) above a 9 pound per hour limitation for more than 15% of the reporting time would be an HPV, but lesser noncompliance generally would not be an HPV. U.S. EPA, THE TIMELY AND APPROPRIATE ENFORCEMENT RESPONSE TO HIGH PRIORITY VIOLATIONS (1998). 15. See, e.g., OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, GUIDANCE ON CHOOSING THE APPROPRIATE FORUM IN CLEAN AIR ACT STATIONARY SOURCE CIVIL ENFORCEMENT ACTIONS (1999). 16. See, e.g., OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, FINAL FY 2000/2001 OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE MEMMORANDUM OF AGREEMENT (1999). 17. Memorandum of Agreement Between EPA and the Louisiana Department of Environmental Quality, Pursuant to 40 C.F.R. § 123.24, Regarding the National Pollutant Discharge Elimination System Permit Program § IV.C.1.a (Mar. 22, 1996) http://www.deq.state.la.us/owr/npdes/moa.htm. 18. See supra note 16, § IV.C.2. 19. EPA Region VIII introduced the Unified Oversight System under a February 25, 2000, cover letter from Carol Rushin, Assistant Regional Administrator, Office of Compliance and Environmental Justice. 20. See 42 U.S.C. § 7413, ELR STAT. CAA § 113; 42 U.S.C. § 6928, ELR STAT. RCRA § 3008; and 33 U.S.C. § 1319, ELR STAT. FWPCA § 309. Other provisions provide for periodic inflation adjustments to raise these levels. 21. Examples of penalty policies that theoretically apply in this situation include: The Uniform Civil Penalty Policy; Clean Air Act Stationary Source Civil Penalty Policy; Volatile Organic Compounds Penalty Policy; Volatile Hazardous Air Pollutant Penalty Policy; Civil Monetary Penalty Inflation Adjustment Rule; Policy on Compliance Incentives for Small Businesses; Clean Air Act Penalty Policy as Applied to Stationary Sources of Volatile Organic Compounds Where Reformulation to Low Solvent Technology Is the Applicable Method of Compliance; and Guidance on Determining a Violator's Ability to Pay a Civil Penalty. All of these documents originate from EPA's Office of Enforcement and Compliance Assurance, and most of these documents have subsequent "interpretive" memoranda. 22. See §§ 33(c) and 42(h) of the Illinois Environmental Protection Act, 415 Ill. Comp. Stat. 5/1 et seq. 23. See Air Quality Bureau Civil Penalty Policy (New Mexico Air Quality Bureau, 1999) http://www.nmenv.state.nm.us.aqb.cppolicy.html and Civil Penalty Policy (Indiana Department of Environmental Management, 1990) http://www.accessindiana.com/idem/oe/cpp.html. 24. The Economic Benefit Model (BEN Model), for Windows calculates a violator's economic savings from delaying and/or avoiding pollution control expenditures. The file can be downloaded from EPA at http://es.epa.gov/oeca/models/benproj.exe. 25. Absent a review of the code or the algorithms, you should not accept the output of a BEN-type program as meaningful for estimating civil penalties. However, you can carry out essentially the same calculation (the future value of money, with recurring investments and a specified rate of return) on most personal computers with any reasonable spreadsheet program. 26. See EPA, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, CLEAN AIR ACT PENALTY POLICY AS APPLIED TO STATIONARY SOURCES OF VOLATILE ORGANIC COMPOUNDS WHERE REFORMULATION TO LOW SOLVENT TECHNOLOGY IS THE APPLICABLE METHOD OF COMPLIANCE. http://es.epa.gov/oeca/ore/aed/comp/bcomp/bapp4.pdf. 27. EPA's Office of Enforcement and Compliance Assurance has a separate division, the National Enforcement Investigations Center (NEIC) that is charged with, among other things, determining the average profit margins on sales for industrial sectors. 28. 150 F.3d 259, 28 ELR 21415 (3d Cir. 1998). 29. See CLEAN AIR ACT PENALTY POLICY, supra note 26. 30. See, e.g., 33 U.S.C. § 1321(f)(4)-(5), ELR STAT. FWPCA § 311f (4)-(5) (discharges of oil or a hazardous substance into the waters of the United States), and § 42(c) of the Illinois Environmental Protection Act, 415 Ill. Comp. Stat. 5/1 et seq. 31. "For at least the last twenty-five years, economists have recognized the possibility that individuals who make no active use of a particular . . . natural resource might, nevertheless, derive satisfaction from its mere existence, even if they never intend to make active use of it." This "existence value" of natural resources "is the major element of what are now referred to as 'non-use' or 'passive-use' values." Report of NOAA Panel on Contingent Valuation, 58 Fed. Reg. 4601, 4602 (Jan. 15, 1993). 32. See U.S. EPA, GUIDANCE ON DETERMINING A VIOLATOR'S ABILITY TO PAY A CIVIL PENALTY (1986). See also Inability to Pay as a Defense to Proposed Civil Penalties Under TSCA, 1 EPA Admin. L. Rep. 273 (Mar. 1993) (penalties acceptable up to 4% of annual gross sales). 33. For additional insight, see Robert H. Fuhrman, Almost Always ABEL: EPA Treatment of Ability-to-Pay Issues in Civil Penalty Cases, Toxics L. Rep. (BNA) (Mar. 12, 1997). 34. OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY (1998). 35. See OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, U.S. EPA, DRAFT GUIDANCE FOR REVISED INTERIM SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY (1995). 36. 33 U.S.C. § 1319(d), ELR STAT. FWPCA § 309(d). 37. 42 U.S.C. § 7413(e)(1), ELR STAT. CAA § 113(e)(1). 38. 956 F. Supp. 588, 601-10, 27 ELR 20976, 20981-20986 (D.S.C. 1997), vacated & remanded on other grounds, 149 F.3d 303, 28 ELR 21444 (4th Cir. 1998), rev'd & remanded, 120 S. Ct. 693, 30 ELR 20246 (Jan. 12, 2000). 39. 972 F. Supp. 338, 343-44 (E.D. Va. 1997), remanded on other grounds, 191 F.3d 516, 30 ELR 20076, cert. denied, __ S. Ct. __ (4th Cir. 1999) [hereinafter Smithfield II]. 40. See, e.g., Smithfield II, 191 F.3d at 530, 30 ELR at 20080. 41. Id. 42. See, e.g., Smithfield, 972 F. Supp. at 349; Laidlaw, 956 F. Supp. at 603, 27 ELR at 20982. 43. Smithfield II, 191 F.3d at 530, 30 ELR at 20080; see also Laidlaw, 956 F. Supp. at 603, 27 ELR at 20982 ("the capital asset pricing model using an interest rate of 15.25% is the preferred method of calculating the economic benefit, if any, of non-compliance"). 44. 150 F.3d 259, 28 ELR 21415 (3d Cir. 1998). 45. Union Township, 150 F.3d at 262-67, 28 ELR at 21416-19. 46. See, e.g., Smithfield II, 191 F.3d at 530-32, 30 ELR at 20080-81. 47. See, e.g., Smithfield, 972 F. Supp. at 343-44. 48. Laidlaw, 956 F. Supp. at 602, 27 ELR at 20981. 49. Id. 50. Id. (citing Public Interest Research Group of N.J. v. Elf Atochem N. Am., Inc., 817 F. Supp. 1164, 23 ELR 21225 (D.N.J. 1993)). 51. See id. 52. Smithfield, 972 F. Supp. at 343. 53. Id. 54. See, e.g., United States v. Roll Coater, Inc., No. 1P89-828 C, 1991 U.S. Dist. LEXIS 8790, *16, 21 ELR 21073 (S.D. Ind. Mar. 22, 1991) ("this Court reads 'any history of such violations' in § 309(d) of the [CWA] to refer to previous violations not related to the instant litigation, and not a continuing violation"). 55. Smithfield, 972 F. Supp. at 349-50. 56. See, e.g., Smithfield, 972 F. Supp. at 350; Laidlaw, 956 F. Supp. at 607, 27 ELR at 20984. 57. Smithfield, 972 F. Supp. at 352. 58. Id. at 353. 59. Id. 60. Laidlaw, 956 F. Supp. at 608, 27 ELR at 20985. 61. See id. at 608-09, 27 ELR at 20985. 62. See, e.g., In the Matter of Ace Envtl., Inc., 1999 WL 504701 (EPA 1999); In re SchoolCraft Const., Inc., CAA Appeal No. 98-3, 1999 WL 504700, ADMIN. MAT. 41170 (July 7, 1999). 63. 40 C.F.R. § 22.27(b). 64. SchoolCraft, at *11-12, ADMIN. MAT. at 41174. 65. In re Steeltech, Ltd., 1999 WL 673227, EPCRA Appeal No. 98-6, ADMIN. MAT. 41201 (Aug. 26, 1999). 66. 40 C.F.R. § 22.27(b). 67. See, e.g., In re Employers Ins. of Wausau, 1997 WL 94743, TSCA Appeal No. 95-6, 6 E.A.D. 735, ADMIN. MAT. 40596 (Feb. 11, 1997). 68. SchoolCraft, at *11-12, ADMIN. MAT. at 41174. 69. 192 F.3d 917, 30 ELR 20113 (9th Cir. 1999), vacated pursuant to settlement, 200 F.3d 1222 (9th Cir. 2000). 70. 208 F.3d 1015, 30 ELR 20560 (D.C. Cir. 2000). 71. Appalachian, 208 F.3d at 1024, 30 ELR at 20563. 72. See In the Matter of Town of Grand Isle Dump, 1997 WL 342627, at *7-9 (La. Dep't Envtl. Quality 1997). 73. Id. 74. See id. at *9. 75. 415 Ill. Comp. Stat. 5/1 et seq. 76. See id. at 5/33(c). 77. See id. at 5/42(h). 78. See City of Monmouth v. Pollution Control Bd., 57 Ill. 2d 484, 313 N.E.2d 161 (1974). 79. See ESG Watts, Inc. v. Illinois Pollution Control Bd., 282 Ill. App. 3d 43, 668 N.E.2d 1015 (4th Dist. 1996). 80. All penalties in dollars. See EPA Region V's webpage at http://www.epa.gov/region5/orc/Reports/1998/ptrends98.htm. 81. One method is to employ environmental audits or environmental management policies to detect problems, and the various audit reporting policies to disclose any noncompliance. See William L. Thomas et al., Using Auditing, Pollution Prevention, and Management Systems to Craft Superior Environmental Enforcement Solutions, 30 ELR 10299 (May 2000). 82. Robert Goodloe Harper, A Toast at a Banquet for John Marshall, in BARTLETT'S FAMILLAR QUOTATIONS (15th ed. 1980). 30 ELR 11031 | Environmental Law Reporter | copyright © 2000 | All rights reserved |