02/08/89
Revised Guidance Concerning Compliance By Use of Low Solvent>
Technology in VOC Enforcement Cases
MEMORANDUM FEBRUARY 8, 1989
SUBJECT: Attached Revised Guidance Concerning Compliance By Use of Low
Solvent Technology in VOC Enforcement Cases
FROM: /s/ Terrell E. Hunt
Associate Enforcement Counsel
Air Enforcement Division
/s/ John S. Seitz, Director
Stationary Source Compliance Division
TO: Air Management Division Directors
Regions I, III and IX
Air and Waste Management Division Director
Region II
Air, Pesticides and Toxics Management Division Directors
Regions IV and VI
Air and Radiation Division Director
Region V
Air and Toxics Division Directors
Regions VII, VIII and X
Regional Counsels
Regions I-X
Attached is a memorandum revising existing guidance regarding the terms
and conditions under which case development teams may agree to consent
decree language affording sources the option to comply by means of Low
Solvent Technology ( "LST" ), where such compliance would not be achieved
within the ninety-day period otherwise required in the August 7, 1986 policy
on the availability of LST schedules in VOC enforcement cases. This
guidance memorandum supersedes a memorandum on this subject issued by AED
and SSCD on November 21, 1986.
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Background
On August 7, 1986, the Office of Enforcement and Compliance Monitoring
and the Office of Air and Radiation jointly published a policy concerning
the availability of schedules for LST in VOC enforcement actions. This
policy provided that, provided certain conditions were met, such schedules
could be obtained. The policy stated, however, that any such schedule could
not allow for final compliance to be achieved later than ninety days after
the filing of EPA's enforcement complaint.
On November 21, 1986, recognizing that the environment would be equally
served if a source came into compliance by LST prior to the final compliance
deadline of an expeditious schedule for add-on controls, though after the
ninety-day limit, AED and SSCD distributed guidance clarifying the August 7,
1986 policy. This guidance stated that a consent decree containing a
schedule for add-on controls could provide that compliance be achieved by
some alternate means prior to the final compliance date for add-on controls.
The memo went on to specify, however, that any such decrees could not
contain provisions excusing accrued stipulated penalties for missed interim
dates in the add-on control schedule, even if the source complied by LST
prior to the add-on control schedule end date. This restriction was based
on the belief that forgiving interim date stipulated penalties might
encourage sources to unrealistically attempt to comply by LST.
Upon further consideration, it appears that the policy of precluding
forgiveness of stipulated penalties might be counterproductive in some
cases. It is particularly true in the case where a defendant might be
capable of complying by LST as quickly or more quickly than by installing
add-on controls - although not within a ninety-day period - and where
unforgiven stipulated penalties would be very costly. In such
circumstances, the source might view litigation as more attractive than
signing a consent decree providing for unforgivable interim date stipulated
penalties. To avoid forcing costly and environmentally unnecessary
litigation in such situations, AED and SSCD have developed the modification
to the November 21, 1986 guidance set out in the attached revised guidance.
Revisions
The revised guidance continues the availability of "alternate means"
clauses as provided in the memorandum of November 21, 1986. However, a
defendant seeking such a clause
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must agree to either of two preconditions designed to ensure that the
defendant is not embarking on a speculative LST scheme. The defendant may
agree to escrow stipulated penalties which accrue for violations of interim
milestones in the schedule for add-on controls. In such cases, the decree
may provide for the forgiveness of such penalties if the source complies by
the schedule end date. Alternatively, the defendant may agree to post an
appropriate up-front performance bond in lieu of being subject to interim
date stipulated penalties. Should the source comply by LST prior to the end
date, the escrowed penalties or the performance bond are returned to the
defendant.
This revision does not affect other aspects of the August 7, 1986
policy, which remain in effect.
Attachments ( August 7, 1986 Policy and November 21, 1986 Guidance; Revised
Guidance )
cc: Air Division Branch Chiefs
ORC Air Branch Chiefs
David Buente, Chief
Environmental Enforcement Section
Department of Justice
MEMORANDUM FEBRUARY 8, 1989
SUBJECT: Revised Guidance Concerning Compliance By Use of Low Solvent
Technology in VOC Enforcement Cases
FROM: /s/ Terrell E. Hunt
Associate Enforcement Counsel
Air Enforcement Division
/s/ John Seitz, Director
Stationary Source Compliance Division
TO: Air Management Division Directors
Regions I, III and IX
Air and Waste Management Division Director
Region II
Air, Pesticides and Toxics Management Division Directors
Regions IV and VI
Air and Radiation Division Director
Region V
Air and Toxics Division Directors
Regions VII, VIII and X
Regional Counsels
Regions I-X
This guidance specifies the terms and conditions under which case
development teams may agree to consent decree language affording sources the
option of achieving compliance by means of Low Solvent Technology ( "LST" ),
where such compliance would not be achieved within the ninety-day period
otherwise required in the August 7, 1986 policy on the availability of LST
schedules in VOC enforcement cases. This memorandum supersedes a memorandum
on this subject issued by AED and SSCD on November 21, 1986.
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Background
On August 7, 1986, the Office of Enforcement and Compliance Monitoring
and the Office of Air and Radiation jointly published a policy concerning
the availability of schedules for LST in VOC enforcement actions. This
policy provided that if certain conditions were met, such schedules could be
obtained. The policy provided, however, that any such schedule could not
allow for final compliance to be achieved later than ninety days after the
filing of EPA's enforcement complaint.
On November 21, 1986, recognizing that the environment would be equally
served if a source came into compliance by LST prior to the final compliance
deadline of an expeditious schedule for add-on controls, though after the
ninety-day limit, AED and SSCD distributed guidance clarifying the August 7,
1986 policy. This guidance provided that a consent decree containing a
schedule for add-on controls could provide that compliance could be achieved
by some alternate means at an earlier date than the final compliance date
for add-ons. The memo went on to specify, however, that any such decrees
could not contain provisions excusing accrued stipulated penalties for
missed interim dates in the add-on control schedule, even if the source
complied by LST prior to the add-on control schedule end date. The reason
for this restriction was the belief that holding out the promise that
interim date stipulated penalties would be forgiven might unduly encourage
sources to attempt to comply by LST.
Upon further consideration, it appears that there are alternatives to
precluding forgiveness of stipulated penalties which would equally ensure
that defendants proposing to comply by LST in longer than 90 days are not
embarking on speculative LST schemes. The revised guidance expressed in
this memorandum continues the availability of "alternate means" clauses as
provided in the November 21, 1986 memorandum. It requires a defendant
seeking inclusion of such a clause in a consent decree to agree to either of
two preconditions for ensuring that the defendant is not embarking on a
speculative LST scheme, however. The defendant may agree to escrow
stipulated penalties which accrue for violations of interim milestones in
the schedule for add-on controls. In such cases, the decree may provide for
the forgiveness of such penalties if compliance occurs by the schedule end-
date. Alternatively, the defendant may agree to post an appropriate up-
front performance bond in lieu of being subject to interim date stipulated
penalties.
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Revised Guidance Concerning the August 7, 1986 Policy on LST Schedules in
VOC Enforcement Actions
If during negotiations a source offers to comply by LST as soon as, or
sooner than, it would comply pursuant to an expeditious schedule for add-on
controls - although not within a ninety day period from the filing of EPA's
complaint - and the case team determines that there is an adequate basis for
believing that the source can and will so comply, the case team may
negotiate a consent decree affording the source the option of complying by
LST, provided the following are met:
1. The consent decree must contain a schedule providing for expeditious
compliance through the installation of add-on controls. ( In keeping
with the August 7, 1986 policy on LST schedules, the maximum length of
any such schedule will be twelve months from the date of entry of the
consent decree. ) The decree may provide that compliance may
alternatively be accomplished by the use of complying coatings, so long
as compliance occurs within the time period specified for compliance by
add-on controls.
2. As a precondition for EPA's agreement to such an "alternate means"
clause, a defendant must agree to either:
A. Escrow, on at least a monthly basis, any stipulated penalties which
would accrue for failures to meet interim deadlines specified in
the schedule for add-on controls, in which case the decree may
provide that such stipulated penalties will be forgiven if the
source achieves compliance by the final deadline for complying by
add-on controls.
The penalty amounts placed in escrow would be in addition to
stipulated penalties for the add-on control schedule end date,
which would still be required if the source fails to meet the
scheduled final compliance date.
The amount of stipulated penalties for missed add-on control
schedule interim dates for sources seeking alternate means clauses
pursuant to this guidance shall be determined on a case-by-case
basis, depending on such factors as the degree of excess emissions
associated with the source's noncompliance, air quality in the
affected area, etc., but shall in no case be less than the amounts
specified below:
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Violator's Net Worth Minimum Interim Date
Stipulated Penalty Amount
Up to $250,000 $250 / day
$250,000 to $1,000,000 $500 / day
$1,000,001 to $20,000,000 $1,000 / day
$20,000,001 to $50,000,000 $2,000 / day
Over $50,000,000 $2,500 / day
The case team may demand higher stipulated penalty amounts, and may
consider amounts that escalate as the time of violation increases.
The team should also consider establishing a timeframe during which
the source must place the accruing amounts into escrow, e.g.,
within fifteen (15) days following the date the penalties accrued.
B. A defendant may post a third-party performance bond providing for
absolute, non-contingent forfeiture of the face amount in the event
compliance is not achieved by the add-on control schedule end date.
The face amount must be at least equal to the total amount of
interim date stipulated penalties which could possibly accrue and
have to be escrowed assuming the approach specified in Subsection
A, above, were utilized and defendant were to miss all interim
schedule dates. Such a bond would be in lieu of stipulated
penalties for add-on control schedule interim dates, but would be
in addition to stipulated penalties for the add-on control schedule
end date, which would still be required.
Example: A defendant with $5,000,000 net worth desires the option of
complying by LST in greater than 90 days. If convinced that defendant can
and will so comply, the case development team may agree to the inclusion of
a clause affording such an option, providing either:
o The defendant agrees to stipulated penalties for the add-on control
schedule interim milestones required by the August 7, 1986 policy in the
minimum amount of $1,000 per day. The decree may provide that such
penalties will be forgiven if compliance is achieved by the add-on
control schedule end date, provided defendant agrees to escrow accrued
penalties on at least a monthly basis; or
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o The defendant agrees to post an up-front performance bond in an amount
equal to $1,000 per day times the number of days between the add-on
control schedule's first interim milestone and the schedule end date,
such bond to be forfeited if compliance is not achieved by the end date
and to be in addition to whatever stipulated penalties are provided for
failure to meet the schedule end date.
Attachments ( August 7, 1986 and November 21, 1986 Policy Statements )
cc: Air Division Branch Chiefs
ORC Air Branch Chiefs
David Buente, Chief
Environmental Enforcement Section
Department of Justice
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