September 23, 2021

Volume XI, Number 266

Advertisement

September 23, 2021

Subscribe to Latest Legal News and Analysis

September 22, 2021

Subscribe to Latest Legal News and Analysis

September 21, 2021

Subscribe to Latest Legal News and Analysis

New Memo Doubles Down and Bolsters Justice Department Positions on Limiting Supplemental Environmental Projects

A January 12, 2021 US Department of Justice (DOJ) memorandum extends and provides additional legal analysis to support the government’s increasing drumbeat against settling cases and reducing environmental penalties in recognition of Supplemental Environmental Projects or “SEPs.”  The new memo addresses the limited circumstances under which attorneys in DOJ’s Environment and Natural Resources Division (ENRD), the division of DOJ that represents EPA and other federal agencies in enforcing environmental laws, may include certain mitigation requirements in settlement agreements.  Issued last week by ENRD Assistant Attorney General Jeffrey Bossert Clark on the same day that he announced his departure from the Department, the memo bolsters the previously provided rationale for ENRD’s policy prohibiting SEPs in settlement agreements.  It also distinguishes SEPs from “equitable mitigation,” which the memo defines more narrowly and considers to be both permissible and appropriate.  The memo also lists criteria to guide ENRD attorneys evaluating whether equitable mitigation measures are appropriate in a given civil enforcement case.

Equitable mitigation is a tool ENRD attorneys employ seeking courts to require alleged violators to remedy environmental harms from the violation.  SEPs, by contrast, are an enforcement tool allowing alleged violators to offset some potential penalties by voluntarily agreeing to undertake an environmentally beneficial project that may bear a less direct relation to the subject enforcement, though there has always been a requirement for a nexus between the SEP and the alleged violation.  SEPs have generally been popular with alleged violators, as well as with communities that often benefited from the resulting benefits of those projects.

Under the Trump Administration, the DOJ generally eschewed such measures.  A series of memos curbing their use began in 2017, under then-Attorney General Jeff Sessions, with a memo prohibiting settlement payments to third parties.  Another memo issued by Assistant Attorney General Clark on March 12, 2020, extended that third party payment prohibition to ENRD and expressly barred the use of SEPs in civil settlements with private defendants.  Last week’s memo provides further legal basis aimed at cementing the SEP prohibition, while also ensuring that equitable mitigation is consistent with Congressional intent.

Like its predecessors, the memo reasons that SEPs exceed courts’ equitable authority and instead become penalties—ones not authorized by Congress, at that—because they “do not remedy the specific harm at issue in the case, but rather purport to benefit the environment in a more general way, typically in exchange for a reduction in monetary penalties.”  Equitable mitigation, on the other hand, is an acceptable enforcement tool because it is “closely tailored to restore (in whole or in part) the status quo ante,” remedying the harm done by the violation.  The memo reasons that this is because the authority to require equitable mitigation is based in courts’ authority under various federal environmental laws to award appropriate relief, in conjunction with courts’ general authority to confer equitable relief except when expressly precluded.  That authority is “not a blank check,” the memo explains, implying that SEPs effectively transform that authority into one that Congress did not intend to grant.

The line-drawing exercise of distinguishing acceptable equitable mitigation from unauthorized SEPs in practice can be challenging, the memo acknowledges.  For example, the memo explains how depending on the circumstances, a particular project to address Clean Air Act violations—say, to reduce NOx emissions from a facility—could be acceptable as mitigation—if the underlying violation was based on excess NOx emissions—or it could be an illegal SEP—if the violation involved wrongful emissions of other pollutants with different impacts.  Thus, to aid ENRD attorneys in determining whether equitable mitigation is appropriate in a particular settlement, the memo presents a slate of factors to be considered.

These “auxiliary precautions” that ENRD attorneys are instructed to consider include:

  • Whether the specific legal basis supports mitigation. The Division is directed to make this assessment by evaluating if the mitigation:  (1) “would confer maximum environmental benefit,” (2) is “achievable as a practical matter,” and (3) bears “an equitable relationship to the degree and kind of wrong it is intended to remedy”;

  • Whether the mitigation shares a close geographic connection to the alleged violation and is aimed at addressing the environmental harm from the violation;

  • The costs of a potential mitigation project in relation to the benefits; and

  • Prioritizing imposition of monetary penalties where possible, and reserving mitigation relief for appropriate situations.

The timing of the memo, issued on the eve of Assistant Attorney General Clark’s departure from DOJ and just one week before the incoming Biden Administration assumes DOJ leadership, is unlikely accidental, which has the potential to limit its longevity.  When the Biden-Harris Administration takes office and has its leadership in both DOJ and EPA in place, a resumption of the use of SEPs as settlement tools is likely to be on the agenda.  Even so, the future ENRD leadership will need to contend with the rationale presented in last week’s memo and articulate reasons for withdrawing or amending the policy.

Regulated entities, and particularly those facing potential enforcement, should keep abreast of future developments relating to SEPs and equitable mitigation in environmental enforcement.

 

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XI, Number 20
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Shannon Broome Environmental Attorney Hunton Andrews Kurth Law Firm
Partner

Shannon is the managing partner of the firm’s San Francisco office and leads the firm’s California environmental practice.  Her prior experience as a chemical engineer in the oil and gas industry affords her unparalleled insights into the development of regulations and counsel on environmental, health and safety issues. Shannon also maintains an office in Washington, DC. Splitting her time between these offices allows her to help her clients wherever they may be. Shannon’s work focuses on permitting, enforcement, environmental incident response, and regulatory advocacy and litigation....

415 975 3718
Charles H. Knauss Environmental Attorney Hunton Andrews Kurth
Partner

Chuck Knauss has been repeatedly lauded by clients in Chambers USA. From 2011 through 2016, Chambers USA has reported that Chuck impresses clients with his “extraordinary strategic and analytical capabilities—he finds solutions others just cannot see … and has great understanding of how government agencies work.” For more than 30 years he has been on the frontlines of environmental law, pioneering work on behalf of clients in the US manufacturing and energy sectors. Clients call him a “legend in the field” and an “absolutely superb lawyer, top of [our]...

202-419-2003
Alexandra Hamilton Environmental Hunton Andrews Kurth Washington, DC
Associate

Alexandra focuses on environmental issues involving regulation, compliance, enforcement and litigation.

She represents clients on regulatory matters in federal appellate and district court litigation, advises clients during the rulemaking process for federal environmental regulations under the Clean Air Act and counsels clients on regulatory compliance related to chemical and toxic substances. Additionally, Alexandra has notable experience working on enforcement matters under the Clean Water Act.

Relevant Experience

  • Advises clients on EPA...
202-955-1646
Lauren A. Bachtel Environmental Attorney Hunton Andrews Kurth Washington, DC
Senior Attorney

A former US Department of the Interior and American Wind Energy Association lawyer, Lauren draws on her diverse experience to navigate clients through complex permitting and compliance issues that arise under a host of federal environmental statutes and regulations. She also advocates for clients during related administrative rulemakings and litigation.

Lauren has extensive experience with permitting and litigation under the National Environmental Policy Act (NEPA), Mineral Leasing Act (MLA), Endangered Species Act (ESA), Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle...

202-419-2011
Samuel L. Brown Environmental Practice Hunton Andrews Kurth San Francisco, CA
Partner

A former US EPA lawyer, Sam brings deep knowledge and practical experience to his clients’ environmental and natural resource concerns, helping them navigate the demands of regulatory agencies, ensure facility and corporate compliance, respond to government investigations and defend against enforcement actions.

Sam is experienced in domestic and international environmental and natural resource matters that impact client business and operations. His clients primarily include public and private sector manufacturing, mining, electric utility, oil and gas, municipal drinking water and...

415-975-3714
Advertisement
Advertisement
Advertisement