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New DOJ Policy Diminishes Use of SEPs in Federal Settlements with State and Local Governments

On August 21, Jeffrey Clark, the Assistant Attorney General (AAG) for the Environment and Natural Resources Division, issued a memorandum diminishing state and local governments’ ability to use supplemental environmental projects (SEPs)—environmentally beneficial projects that are not otherwise required by law—in settlements of federal environmental enforcement actions. The memorandum allows consent decrees and settlement agreements between the Department of Justice (DOJ) and state and local government entities to include SEPs only under extremely narrow circumstances. It further signals that DOJ is continuing to review whether SEPs may be used at all in settlements resolving civil environmental enforcement actions.

The memorandum specifically applies a November 2018 DOJ policy that restricted the federal government from entering consent decrees and settlements with state and local governments that “achieve general policy goals or []extract greater or different relief from the defendant than could be obtained through agency enforcement authority or by litigating the matter to judgment.” In its latest memorandum, DOJ determined that SEPs generally fall within this prohibition.

In support of its new policy on SEPs in cases involving state and local governments, DOJ raised concerns that SEPs lack direct congressional authorization and threaten congressional prerogatives, as well as those of state and local government entities. DOJ has further determined that America’s Water Infrastructure Act of 2018 (AWIA), Pub. L. No. 115-270, 132 Stat. 3765, did not authorize the use of SEPs in settlements of Clean Water Act enforcement cases brought against municipal entities. The AWIA explicitly authorized the use of integrated plans to coordinate and streamline the Clean Water Act compliance obligations of local entities operating publicly owned treatment works and storm sewer systems, both in permits and in the resolution of enforcement actions. DOJ concluded, however, that the AWIA should not be read to authorize SEPs in settlements with local entities.

Having concluded that SEPs fall within the prohibitions in DOJ’s November 2018 policy, the memorandum indicates that AAG Clark will be conducting a broader review of the availability of SEPs in civil enforcement actions. In the interim, the memorandum requires that SEPs with state and local entities must comply with the following limitations, in addition to those set out in existing policies:

  • “The SEPs must be discrete projects representing a small component of the overall settlement in terms of duration, dollars, and scope of work;”

  • SEPs should only be part of a settlement “as a matter of last resort.” If a SEP was negotiated before the November 2018 policy, a request for settlement authorization must demonstrate that the SEP cannot be removed “without jeopardizing the agreement or harming the interests of the United States.” If a SEP was negotiated after the November 2018 policy, a request for settlement authorization “must demonstrate that the settlement would not be possible without the inclusion of SEPs;”

  • “The SEPs should provide broad benefits to the community, and not individuals;” and

  • “The governmental defendant should certify that the SEPs do not violate any direct or implied restriction imposed by local, state or federal law.”

Even if a SEP meets all of these conditions, AAG Clark cautioned that exceptions “are meant to be rare.”

For over 25 years, SEPs have been used to effectuate productive settlement negotiations and have been a popular and useful mechanism for resolving protracted litigation. While SEPs are not considered penalty payments, nor are they agreed upon in lieu of penalties, the investment in a SEP is considered by EPA and DOJ in exercising their discretion to calculate a penalty. Although SEPs may not always be the most practical choice for a defendant, their use has helped realize significant social and environmental benefits in communities across the country. DOJ’s memorandum not only narrows the scope of settlement options in federal civil enforcement actions, but it also impacts those communities that would otherwise benefit from SEPs. 

© 2020 Beveridge & Diamond PC National Law Review, Volume IX, Number 248

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About this Author

John Cruden Environmental Attorney Beveridge Diamond
Principal

John offers clients the benefit of decades of experience as a top environmental lawyer, a leader of major bar and environmental organizations, and a distinguished military career.

John provides strategic counsel on high-stakes environmental and natural resources litigation, civil and criminal enforcement, and compliance. Working with clients makes the practice of law worthy and valuable to him as they advance strategic needs while protecting human health and the environment.

For more than two decades, John served as a senior leader on environment and natural resource matters...

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Allyn L. Stern Environmental Attorney Beveridge & Diamond Seattle, WA
Of Counsel

Allyn brings over 30 years of insider understanding of government operations.

Her experience as former Region 10 Counsel at the Environmental Protection Agency (EPA) informs her deep policy, regulatory, and enforcement knowledge. Allyn draws on her breadth and depth of expertise to help clients comply with an array of environmental statutes and regulations applicable to their businesses, including Clean Water Act (CWA) and Resource Conservation and Recovery Act (RCRA) permit approvals, risk management under the Clean Air Act 112(r), civil and criminal enforcement, Superfund cleanup and redevelopment, and pollution prevention strategies.

Allyn's in-depth knowledge of EPA policies and Department of Justice protocols enables her to capably advise clients on their interactions with these agencies. She guides clients through environmental issues arising in business operations, real estate development and permitting, or litigation. She has extensive experience with many environmental statutes, particularly the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); RCRA; and CWA.

As Regional Counsel at EPA, she was the senior executive covering litigation strategy and counseling for all matters in the states of Washington, Oregon, Idaho, and Alaska. She also spent over 20 years as an EPA line attorney, then as a managing attorney in EPA’s San Francisco office covering California, Arizona, Nevada, Hawaii, and the territorial islands. She provided legal advice and strategy on hundreds of EPA decisions including tribal treaty rights and consultation, CWA permits, water quality standards, Total Maximum Daily Load allocations, Superfund removal and remedial actions, and many enforcement cases. She also focused on incident response and was selected to be a part of the investigation team following the Gold King Mine release. In San Francisco, she also served as Deputy Director for the regional air program.

Allyn has taught law since 2005, with positions at the University of California Hastings School of Law, Seattle University, and Seattle University Law School. She has taught courses on Negotiation Skills, Environmental Law, and Environmental Enforcement.

206-620-3027
Andrew C. Silton Environmental Litigation Attorney Beveridge & Diamond Washington, DC
Principal

Andrew C. Silton guides clients through complex regulatory issues and high stakes litigation arising under the nation's clean water laws.

His practice focuses primarily on issues arising under the nation’s water quality laws and spans regulatory counseling, enforcement defense, and litigation. He is currently the Deputy Chair of the firm’s Water Practice Group and represents clients from both the private and public sectors in matters arising under the Clean Water Act and state law. Drew advises clients in a variety of sectors, ranging from waste and stormwater utilities to companies...

202-789-6078
Sarah N. Munger Environmental Attorney Beveridge & Diamond Austin, TX
Associate

Sarah’s versatile practice spans numerous environmental media. She assists clients in regulatory compliance, enforcement actions, and civil litigation under major federal and state environmental statutes, including the Clean Air Act and Clean Water Act. In particular, Sarah has worked with clients to respond to developing legal issues related to:

  • Climate change and natural disasters;
  • Plastic waste;
  • PFAS; and
  • Environmental torts

Prior to joining Beveridge & Diamond, Sarah worked at the Lower Colorado River Authority,...

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