10/25/91
Clean Air Act Stationary Source Civil Penalty Policy;
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
MEMORANDUM
SUBJECT: Clean Air Act Stationary Source Civil Penalty Policy
FROM: /s/ William G. Rosenberg
Assistant Administrator for Air and Radiation
/s/ Edward E. Reich
Acting Assistant Administrator for Enforcement
TO: Addressees
Attached is the final revised Clean Air Act Stationary Source civil
Penalty Policy. This policy is immediately effective in all civil
enforcement actions, administrative and judicial, in which a penalty offer
has not yet been made to the defendant. Thank you for your comments on
the draft policy.
Many Regions commented that some mitigation of the penalty amount pled
in an administrative complaint should be allowed in appropriate
circumstances. The policy now authorizes the gravity component of the
penalty pled in administrative complaints to be mitigated by up to ten
percent for degree of cooperation where consistent with the discussion of
that factor at Section II.B.4.b. In all cases, administrative or
judicial, total mitigation for degree of cooperation may not exceed thirty
percent.
Many Regions commented that the increases in several of the gravity
component factors ( specifically, the size of the violator, the length of
violation, and level of violation figures ) were not appropriate and could
prevent cases from being pursued administratively because the resulting
penalty would be over the $200,000 statutory cap. The penalty increases
proposed in the draft revision have been retained because it was felt that
an increase in penalty amounts was necessary due to inflation since 1987.
Several commenters suggested that the method for calculating multiple
violations of the same reporting requirement discussed on page 14 was
inappropriate and a separate penalty should be assessed for each
violation. This comment was not incorporated out of concern that this
approach would lead to unrealistically high penalties for notice
violations.
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A section describing the Agency's policy regarding apportionment of
the penalty among multiple defendants was added in response to a comment.
It is based on the position reflected in the Asbestos Demolition and
Renovation Penalty Policy, Appendix III.
Most commenters were supportive of developing a new appendix for
calculating the economic benefit or noncompliance for notice,
recordkeeping, reporting, testing and compliance certification violations.
OAR and OE will be developing such an appendix in the near future.
One commenter suggested that the adjustment factor for history of
noncompliance should consider violations of all environmental statutes
enforced by the Agency. The policy has been revised to require the
litigation team to investigate and consider violations of all
environmental statutes enforced by the Agency. Investigation of this
multi-media compliance history may be done through Integrated Data for
Enforcement Analysis developed by OE. OE has trained staff in all ten
Regional Counsel offices on how to use this capability.
A suggestion was made that the policy allow offsets for penalties paid
in state or local enforcement actions and in citizen suits for the same
violations. This comment has been incorporated and the policy now gives
the litigation team discretion to offset these penalties from the
preliminary deterrence amount.
Several commenters suggested the policy should deal more
specifically with the situation of defendants which are municipalities or
government-owned, contractor-operated facilities. These are both issues
which affect all media and will be considered by the Office of Enforcement
for media-wide guidance.
This policy replaces the March 25, 1987 revision to the Clean Air Act
Stationary Source Civil Penalty Policy and should be filed at Part E,
Document #30 of the Clean Air Act Compliance / Enforcement Policy
Compendium. All appendixes to the policy remain in effect. If you have
any questions regarding this policy, contract Scott Throwe, Stationary
Source Compliance Division of OAR, FTS-398-8699 or (703) 308-8699, or
Elise Hoerath, Air Enforcement Division of OE, FTS or (202) 260-2843.
Attachment
Addressees: Regional Administrators, Regions I - X
Regional Counsels, Regions I - X
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Air Management Division Director
Region I
Air and Waste Management Division Director
Region II
Air, Toxics and Radiation Management Division
Director
Region III
Air, Pesticides and Toxics Management Division
Director
Region IV
Air and Radiation Division Director
Region V
Air, Pesticides and Toxics Division Director
Region VI
Air and Toxics Division director
Regions VII, VIII, IX and X
Scott C. Fulton, Director
Office of Civil Enforcement
Michael S. Alushin, Enforcement Counsel
Air Enforcement Division
Frank M. Covinton, Director
NEIC
John S. Seitz, Director
Office of Air Quality Planning and Standards
John Rasnic, Director
Stationary Source Compliance Division
Bruce Rothrock, OCAPO
Robert Heiss, OCAPO
Jonathan Libber, OCAPO
John Cruden, Chief
Environmental Enforcement Section
U.S. Department of Justice
Bill Becker, STAPPA-ALAPCO
CLEAN AIR ACT
STATIONARY SOURCE
CIVIL PENALTY POLICY
Table of Contents
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Preliminary Deterrence Amount . . . . . . . . . . . . . . . 4
A. Economic Benefit Component . . . . . . . . . . . . . . . 4
1. Benefit from delayed costs . . . . . . . . . . . . . 4
2. Benefit from avoided costs . . . . . . . . . . . . . 5
3. Adjusting the economic benefit component . . . . . . 6
a. Economic benefit component involves
insignificant amount . . . . . . . . . . . . . . 7
b. Compelling public concerns . . . . . . . . . . . 7
c. Concurrent Section 120 administrative action . . 8
B. Gravity Component . . . . . . . . . . . . . . . . . . . 8
1. Actual or possible harm . . . . . . . . . . . . . . 10
a. Level of violation
b. Toxicity of the pollutant
c. Sensitivity of environment
d. Length of time of violation
2. Importance to regulatory scheme . . . . . . . . . . 12
3. Size of violator . . . . . . . . . . . . . . . . . . 14
4. Adjusting the Gravity Component . . . . . . . . . . 15
a. Degree of Willfulness or Negligence . . . . . . 16
b. Degree of Cooperation. . . . . . . . . . . . . . 16
c. History of Noncompliance . . . . . . . . . . . . 17
d. Environmental Damage . . . . . . . . . . . . . . 19
III. Litigation Risk . . . . . . . . . . . . . . . . . . . . . . 19
IV. Ability to Pay . . . . . . . . . . . . . . . . . . . . . . . 20
V. Offsetting Penalties Paid to State and Local Governments
or Citizen Groups for the Same Violations . . . . . . . . . 21
VI. Supplemental Environmental Projects . . . . . . . . . . . . 22
VII. Calculating a Penalty in Cases with More Than
One Violation . . . . . . . . . . . . . . . . . . . . . . . 22
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VIII. Apportionment of the Penalty Among Multiple
Defendants . . . . . . . . . . . . . . . . . . . . . . . . . 23
IX. Examples . . . . . . . . . . . . . . . . . . . . . . . . . . 24
X. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 31
XI. Appendices
I. Permit Penalty Policy
II. Vinyl Chloride Penalty Policy
III. Asbestos Penalty Policy
IV. VOC Penalty Policy
V. Air Civil Penalty Worksheet
VI. Volatile Hazardous Air Pollutant Penalty Policy
VII. Residential Wood Heaters Penalty Policy
VIII. Stratospheric Ozone Penalty Policy
CLEAN AIR ACT STATIONARY SOURCE CIVIL PENALTY POLICY
I. INTRODUCTION
Section 113(b) of the Clean Air Act, 42 USC Section 7413(b), provides
the Administrator of EPA with the authority to commence a civil action
against certain violators to recover a civil penalty of up to $25,000 per
day per violation. Since July 8, 1980, EPA has sought the assessment of
civil penalties for Clean Air Act violations under Section 113(b) based on
the considerations listed in the statute and the guidance provided in the
Civil Penalty Policy issued on that date.
On February 16, 1984, EPA issued the Policy on Civil Penalties
( GM-21 ) and a Framework for Statute-Specific Approaches to Penalty
Assessments ( GM-22 ). The Policy focuses on the general philosophy
behind the penalty program. The Framework provides guidance to each
program on how to develop medium-specific penalty policies. The Air
enforcement program followed the Policy and the Framework in drafting the
Clean Air Act Stationary Source Civil Penalty Policy, which was issued on
September 12, 1984, and revised March 25, 1987. The policy amends the
March 25, 1987 revision, incorporating EPA's further experience in
calculating and negotiating penalties. This guidance document governs
only stationary source violations of the Clean Air Act. All violations of
Title II of the Act are governed by separate guidance.
The Act was amended on November 15, 1990, providing the Administrator
with the authority to issue administrative penalty orders in Section
113(d), 42 USC Section 7413(d). These penalty orders may assess penalties
of up to $25,000 per day of violation and are generally authorized in
cases where the penalty sought is not over $200,000 and the first alleged
date of violation occurred no more than 12 months prior to initiation of
the administrative action. In an effort to provide consistent application
of the Agency's civil penalty authorities, this penalty policy will serve
as the civil penalty guidance used in calculating administrative penalties
under Section 113(d) of the Act and will be used in calculating a minimum
settlement amount in civil judicial cases brought under Section 113(b) of
the Act.
In calculating the penalty amount which should be sought in an
administrative complaint, the economic benefit of noncompliance and a
gravity component should be calculated under this penalty policy using the
most aggressive assumptions supportable. Pleadings will always include
the full economy benefit component. As a general rule, the gravity
component of the penalty plead in administrative complaints may not be
mitigated. However, the gravity component portion of the plead penalty
may be mitigated by up to ten per cent solely for degree of cooperation.
Any mitigation for this factor must be justified under Section II.B.4.b of
this Policy. The total mitigation for good faith efforts to comply for
purpose of
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determining a settlement amount may never exceed thirty per cent.
Applicable adjustment factors which aggravate the penalty must be included
in the amount plead in the administrative complaint. Where key financial
or cost figures are not available, for example those costs involved in
calculating the BEN calculation, the highest figures supportable should be
used.
This policy will ensure the penalty plead in the complaint is never
lower than any revised penalty calculated later based on more detailed
information. It will also encourage sources to provide the litigation
team with the more accurate cost or financial information. The penalty
may then be recalculated during negotiations where justified under this
policy to reflect any appropriate adjustment factors. In administrative
cases, where the penalty is recalculated based upon information received
in negotiations or the prehearing exchange, the administrative complaint
must be amended to reflect the new amount if the case is going to or
expected to go to hearing. This will ensure the complaint reflects the
amount the government is prepared to justify at the hearing. This
pleading policy also fulfills the obligation of 40 CFR Section 22.14(a)(5)
that all administrative complaints include "a statement explaining the
reasoning behind the proposed penalty."
This policy reflects the factors enumerated in Section 113(e) that the
court ( in Section 113(b) actions ) and the Administrator ( in Section
113(d) actions ) shall take into consideration in the assessment of any
penalty. These factors include: 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,
payment by the violator of penalties assessed for the same violation, the
economic benefit of noncompliance, the seriousness of the violation and
such other factors as justice may require.
This document is not meant to control the penalty amount requested in
judicial actions to enforce existing consent decrees. 1/
1/ In these actions, EPA will normally seek the penalty amount dictated
by the stipulated penalty provisions of the consent decree. If a
consent decree contains no stipulated penalty provisions, the case
development team should propose penalties suitable to vindicate the
authority of the Court.
In judicial cases, the use of this guidance is limited to pre-trial
settlement of enforcement actions. In a trial, government attorneys may
find it relevant and helpful to introduce a penalty calculated under this
policy, as a point of reference in a demand for penalties. However, once
a case goes to trial, government attorneys should demand a larger penalty
than the minimum settlement figure as calculated under the policy.
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The general policy applies to most Clean Air Act violations. There
are some types of violations, however, that have characteristics which
make the use of the general policy inappropriate. These are treated in
separate guidance, included as appendices. Appendix I covers violations
of PSD / NSR permit requirements. Appendix II deals with the gravity
component for vinyl chloride NESHAP violations. Appendix III covers the
economic benefit and gravity components for asbestos NESHAP demolition and
renovation violations. The general policy applies to violations of
volatile organic compound regulations where the method of compliance
involves installation of control equipment. Separate guidance is provided
for VOC violators which comply through reformulation ( Appendix IV ).
Appendix VI deals with the gravity component for volatile hazardous air
pollutants violations. Appendix VII covers violations of the residential
wood heaters NSPS regulations. Violations of the regulations to protect
stratospheric ozone are covered in Appendix VIII. These appendixes
specify how the gravity component and/or economic benefit components will
be calculated for these types of violations. Adjustment, aggravation or
mitigation, of penalties calculated under any of the appendixes is
governed by this general penalty policy.
This penalty policy contains two components. First, it describes how
to achieve the goal of deterrence through a penalty that removes the
economic benefit of noncompliance and reflects the gravity of the
violation. Second, it discusses adjustment factors applied so that a fair
and equitable penalty will result. The litigation team 2/ should
calculate the full economic benefit and gravity components and then decide
whether any of the adjustment factors applicable to either component are
appropriate.
2/ With respect to civil judicial cases, the litigation team will
consist of the Assistant Regional Counsel, the Office of Enforcement
attorney, the Assistant United States Attorney, the Department of
Justice attorney from the Environmental Enforcement Section, and EPA
technical professionals assigned to the case. With respect to
administrative cases, the litigation team will generally consist of
the EPA technical professional and Assistant Regional Counsel assigned
to the case. The recommendation of the litigation team must be
unanimous. If a unanimous position cannot be reached, the matter
should be escalated and a decision made by EPA and the Department of
Justice managers, as required.
The final penalty obtained should never be lower than the penalty
calculated under this policy taking into account all appropriate
adjustment factors including litigation risk and inability to pay.
All consent agreements should state that penalties paid pursuant to
this penalty policy are not deductible for federal tax purposes under 28
USC Section 162(f).
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The procedures set out in this document are intended solely for the
guidance of government personnel. They are not intended and cannot be
relied upon to create rights, substantive or procedural, enforceable by
any party in litigation with the United States. The Agency reserves the
right to act at variance with this policy and to change it at any time
without public notice.
This penalty policy is effective immediately with respect to all cases in
which the first penalty offer has not yet been transmitted to the opposing
party.
II. THE PRELIMINARY DETERRENCE AMOUNT
The February 16, 1984, Policy on Civil Penalties establishes
deterrence as an important goal of penalty assessment. More specifically,
it says that any penalty should, at a minimum, remove any significant
economic benefit resulting from noncompliance. In addition, it should
include an amount beyond recovery of the economic benefit to reflect the
seriousness of the violation. That portion of the penalty which recovers
the economic benefit of noncompliance is referred to as the "economic
benefit component;" that part of the penalty which reflects the
seriousness of the violation is referred to as the "gravity component."
When combined, these two components yield the "preliminary deterrence
amount."
This section provides guidelines for calculating the economic benefit
component and the gravity component. It will also discuss the limited
circumstances which justify adjusting either component.
A. THE ECONOMIC BENEFIT COMPONENT
In order to ensure that penalties recover any significant economic
benefit of noncompliance, it is necessary to have reliable methods to
calculate that benefit. The existence of reliable methods also
strengthens the Agency's position in both litigation and negotiation.
This section sets out guidelines for computing the economic benefit
component. It first addresses costs which are delayed by noncompliance.
Then it addresses costs which are avoided completely by noncompliance.
It also identifies issues to be considered when computing the economic
benefit component for those violations where the benefit of noncompliance
results from factors other than cost savings. The section concludes with
a discussion of the limited circumstances where the economic benefit
component may be mitigated.
1. Benefit from delayed costs
In many instances, the economic advantage to be derived from
noncompliance is the ability to delay making the expenditures necessary to
achieve compliance. For example, a facility which
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fails to install a scrubber will eventually have to spend the money needed
to install the scrubber in order to achieve compliance. But, by deferring
these capital costs until EPA or a State takes an enforcement action, that
facility has achieved an economic benefit. Among the types of violations
which may result in savings from deferred cost are the following:
o Failure to install equipment needed to meet emission control
standards.
o Failure to effect process changes needed to reduce pollution.
o Failure to test where the test still must be performed.
o Failure to install required monitoring equipment.
The economic benefit of delayed compliance should be computed using
the "Methodology for Computing the Economic Benefit of Noncompliance,"
which is Technical Appendix A of the BEN User's Manual. This document
provides a method for computing the economic benefit of noncompliance
based on a detailed economic analysis. The method is a refined version of
the method used in the previous Civil Penalty Policy issued July 8, 1980,
for the Clean Water Act and the Clean Air Act. BEN is a computer program
available to the Regions for performing the analysis. Questions
concerning the BEN model should be directed to the Program Development and
Training Branch in the Office of Enforcement, FTS 475-6777.
2. Benefit from avoided costs
Many types of violations enable a violator to avoid permanently
certain costs associated with compliance. These include cost savings
for:
o Disconnecting or failing to properly operate and maintain
existing pollution control equipment ( or other equipment if it
affects pollution control ).
o Failure to employ a sufficient number of adequately trained
staff.
o Failure to establish or follow precautionary methods required by
regulations or permits.
o Removal of pollution equipment resulting in process,
operational, or maintenance savings.
o Failure to conduct a test which is no longer required.
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o Disconnecting or failing to properly operate and maintain
required monitoring equipment.
o Operation and maintenance of equipment that the violator failed
to install.
The benefit from avoided costs must also be computed using methodology
in Technical Appendix A of the BEN User's Manual.
The benefit from delayed and avoided costs is calculated together,
using the BEN computer program, to arrive at an amount equal to the
economic benefit of noncompliance for the period from the first provable
date of violation until the date of compliance.
As noted above, the BEN model may be used to calculate only the
economic benefit accruing to a violator through delay or avoidance of the
costs of complying with applicable requirements of the Clean Air Act and
its implementing regulations. There are instances in which the BEN
methodology either cannot compute or will fail to capture the actual
economic benefit of noncompliance. In those instances, it will be
appropriate for the Agency to include in its penalty analysis a
calculation of the economic benefit in a manner other than that provided
for in the BEN methodology.
In some instances this may include calculating and including in the
economic benefit component profits from illegal activities. An example
would be a source operating without a preconstruction review permit under
PSD / NSR regulations or without an operating permit under Title V. In
such a case, an additional calculation would be performed to determine the
present value of these illegal profits which would be added to the BEN
calculation for the total economic benefit component. Care must taken to
account for the preassessed delayed or avoided costs included in the BEN
calculation when calculating illegal profits. Otherwise, these costs
could be assessed twice. The delayed or avoided costs already accounted
for in the BEN calculation should be subtracted from any calculation of
illegal profits.
3. Adjusting the Economic Benefit Component
As noted above, settling for an amount which does not recover the
economic benefit of noncompliance can encourage people to wait until EPA
or the State begins an enforcement action before complying. For this
reason, it is general Agency policy not to adjust or mitigate this amount.
There are three general circumstances ( described below ) in which
mitigating the economic benefit component may be appropriate. However, in
any individual case where the Agency decides to mitigate the economic
benefit component, the litigation team must detail those reasons in the
case file and in any memoranda accompanying the settlement.
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Following are the limited circumstances in which EPA can mitigate the
economic benefit component of the penalty:
a. Economic benefit component involves insignificant amount
Assessing the economic benefit component and subsequent negotiations
will often represent a substantial commitment of resources. Such a
commitment may not be warranted in cases where the magnitude of the
economic benefit component is not likely to be significant because it is
not likely to have substantial financial impact on the violator. For this
reason, the litigation team has the discretion not to seek the economic
benefit component where it is less than $5,000. In exercising that
discretion, the litigation team should consider the following factors:
o Impact on violator: The likelihood that assessing the economic
benefit component as part of the penalty will have a noticeable
effect on the violator's competitive position or overall
profits. If no such effect appears likely, the benefit component
should probably not be pursued.
o The size of the gravity component: If the gravity component is
relatively small, it may not provide a sufficient deterrent, by
itself, to achieve the goals of this policy. In situations like
this, the litigation team should insist on including the
economic benefit component in order to develop an adequate
penalty.
b. Compelling public concerns
The Agency recognizes that there may be some instances where there are
compelling public concerns that would not be served by taking a case to
trial. In such instances, it may become necessary to consider mitigating
the economic benefit component. This may be done only if it is absolutely
necessary to preserve the countervailing public interests. Such
settlement might be appropriate where the following circumstances occur:
o The economic benefit component may be mitigated where recovery
would result in plant closings, bankruptcy, or other extreme
financial burden, and there is an important public interest in
allowing the firm to continue in business. Alternative payment
plans, such as installment payments with interest, should be
fully explored before resorting to this option. Otherwise, the
Agency will give the perception that shirking one's
environmental responsibilities is a way to keep a failing
enterprise afloat. This exemption does not apply to situations
where the plant was likely to close anyway, or where
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there is a likelihood of continued harmful noncompliance.
o The economic benefit component may also be mitigated in
enforcement actions against nonprofit public entities, such as
municipalities and publicly-owned utilities, where assessment
threatens to disrupt continued provision of essential public
services.
c. Concurrent Section 120 administrative action
EPA will not usually seek to recover the economic benefit of
noncompliance from one violation under both a Section 113(b) civil
judicial action or 113(d) civil administrative action and a Section 120
action. Therefore, if a Section 120 administrative action is pending or
has been concluded against a source for a particular violation and an
administrative or judicial penalty settlement amount is being calculated
for the same violation, the economic benefit component need not include
the period of noncompliance covered by the Section 120 administrative
action.
In these cases, although the Agency will not usually seek double
recovery, the litigation team should not automatically mitigate the
economic benefit component by the amount assessed in the Section 120
administrative action. The Clean Air Act allows dual recovery of the
economic benefit, and so each case must be considered on its individual
merits. The Agency may mitigate the economic benefit component in the
administrative or judicial action if the litigation team determines such a
settlement is equitable and justifiable. The litigation team should
consider in making this decision primarily whether the penalty calculated
without the Section 120 noncompliance penalty is a sufficient deterrent.
B. THE GRAVITY COMPONENT
As noted above, the Policy on Civil Penalties specifies that a
penalty, to achieve deterrence, should recover any economic benefit of
noncompliance, and should also include an amount reflecting the
seriousness of the violation. Section 113(e) instructs courts to take
into consideration in setting the appropriate penalty amount several
factors including the size of the business, the duration of the violation,
and the seriousness of the violation. These factors are reflected in the
"gravity component." This section of the policy establishes an approach
to quantifying the gravity component.
Assigning a dollar figure to represent the gravity of the violation is
a process which must, of necessity, involve the consideration of a variety
of factors and circumstances. Linking the dollar amount of the gravity
component to these objective factors is a useful way of insuring that
violations of approximately equal seriousness are treated the same way.
These
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objective factors are designed to reflect those listed in Section 113(e)
of the Act.
The specific objective factors in this civil penalty policy designed
to measure the seriousness of the violation and reflect the considerations
listed in the Clean Air Act are as follows:
o Actual or possible harm: This factor focuses on whether ( and
to what extent ) the activity of the defendant actually resulted
or was likely to result in the emission of a pollutant in
violation of the level allowed by an applicable State
Implementation Plan, federal regulation or permit.
o Importance to the regulatory scheme: This factor focuses on the
importance of the requirement to achieving the goals of the
Clean Air Act and its implementing regulations. For example,
the NSPS regulations require owners and operators of new sources
to conduct emissions testing and report the results within a
certain time after start-up. If a source owner or operator does
not report the test results, EPA would have no way of knowing
whether that source is complying with NSPS emissions limits.
o Size of violator: The gravity component should be increased, in
proportion to the size of the violator's business.
The assessment of the first gravity component factor listed above,
actual or possible harm arising from a violation, is a complex matter.
For purposes of determining how serious a given violation is, it is
possible to distinguish violations based on certain considerations,
including the following:
o Amount of pollutant: Adjustments based on the amount of the
pollutant emitted are appropriate.
o Sensitivity of the environment: This factor focuses on where
the violation occurred. For example, excessive emissions in a
nonattainment area are usually more serious than excessive
emissions in an attainment area.
o Toxicity of the pollutant: Violations involving toxic
pollutants regulated by a National Emissions Standard for
Hazardous Air Pollutants ( NESHAP ) or listed under Section
112(b)(1) of the Act are more serious and should result in
larger penalties.
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o The length of time a violation continues: Generally, the longer
a violation continues uncorrected, the greater the risk of harm.
o Size of violator: A corporation's size is indicated by its
stockholders' equity or "net worth." This value, which is
calculated by adding the value of capital stock, capital
surplus, and accumulated retained earnings, corresponds to the
entry for "worth" in the Dun and Bradstreet reports for publicly
traded corporations. The simpler bookkeeping methods employed
by sole proprietorships and partnerships allow determination of
their size on the basis of net current assets. Net current
assets are calculated by subtracting current liabilities from
current assets.
The following dollar amounts assigned to each factor should be added
together to arrive at the total gravity component:
1. Actual or possible harm
a. Level of violation
Percent Above Standard 3/ Dollar Amount
3/ Compliance is equivalent to 0% above the emission standard.
1 - 30% $ 5,000
31 - 60% 10,000
61 - 90% 15,000
91 - 120% 20,000
121 - 150% 25,000
151 - 180% 30,000
181 - 210% 35,000
211 - 240% 40,000
241 - 270% 45,000
271 - 300% 50,000
over 300% 50,000 + $5,000 for each 30% or
fraction of 30% increment above
the standard
This factor should be used only for violations of emissions standards.
Ordinarily the highest documented level of violation should be used. If
that level, in the opinion of the litigation team, is not representative
of the period of violation, then a more representative level of violation
may be used. This figure should be assessed for each emissions violation.
For example, if a source which emits particulate matter is subject to both
an opacity standard and a mass emission standard and is in violation of
both standards, this figure should be assessed for both violations.
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b. Toxicity of the pollutant
Violations of NESHAPs emission standards not handled by a separate
appendix and non-NESHAP emission violations involving pollutants listed in
Section 112(b)(1) of the Clean Air Act Amendments of 1990: 4/ $15,000
for each hazardous air pollutant for which there is a violation.
4/ An example of a non-NESHAP violation involving a hazardous air
pollutant would be a violation of a volatile organic compound ( VOC )
standard in a State Implementation Plan involving a VOC contained in
the Section 112(b)(1) list of pollutants for which no NESHAP has yet
been promulgated.
c. Sensitivity of environment ( for SIP and NSPS cases only ).
The penalty amount selected should be based on the status of the air
quality control district in question with respect to the pollutant
involved in the violation.
1. Nonattainment Areas
i. Ozone:
Extreme $18,000
Severe 16,000
Serious 14,000
Moderate 12,000
Marginal 10,000
ii. Carbon Monoxide and Particulate Matter:
Serious $14,000
Moderate 12,000
iii. All Other Criteria Pollutants: $10,000
2. Attainment area PSD Class I: $10,000
3. Attainment area PSD Class II or III: $5,000
d. Length of time of violation
To determine the length of time of violation for purposes of
calculating a penalty under this policy, violations should be assumed to
be continuous from the first provable date of violation until the source
demonstrates compliance if there have been no significant process or
operational changes. If the source has affirmative evidence, such as
continuous emission monitoring data,
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to show that the violation was not continuous, appropriate adjustments
should be made. In determining the length of violation, the litigation
team should take full advantage of the presumption regarding continuous
violation in Section 113(e)(2). This figure should be assessed separately
for each violation, including procedural violations such as monitoring,
recordkeeping and reporting violations. For example, if a source violated
an emissions standard, a testing requirement, and a reporting requirement,
three separate length of violation figures should be assessed, one for
each of the three violations based on how long each was violated.
Months Dollars
0 - 1 $ 5,000
2 - 3 8,000
4 - 6 12,000
7 - 12 15,000
13 - 18 20,000
19 - 24 25,000
25 - 30 30,000
31 - 36 35,000
37 - 42 40,000
43 - 48 45,000
49 - 54 50,000
55 - 60 55,000
2. Importance to the regulatory scheme
The following violations are also very significant in the regulatory
scheme and therefore require the assessment of the following penalties:
Work Practice Standard Violations:
- failure to perform a work practice requirement:
$10,000-15,000
( See Appendix III for Asbestos NESHAP violations. )
Reporting and Notification Violations:
- failure to report or notify: $15,000
- late report or notice: $5,000
- incomplete report or notice: $5,000 - $15,000
( see Appendix III for Asbestos NESHAP violations. )
Recordkeeping Violations:
- failure to keep required records: $15,000
- incomplete records: $5,000 - $15,000
- 13 -
Testing Violations:
- failure to conduct required performance testing or testing
using an improper test method: $15,000
- late performance test or performing a required test method
using an incorrect procedure: $5,000
Permitting Violations:
- failure to obtain an operating permit: $15,000
- failure to pay permit fee: See Section 502(b)(3)(C)(ii) of
the Act.
Emission Control Equipment Violations:
- failure to operate and maintain control equipment required
by the Clean Air Act, its implementing regulations or a
permit: $15,000
- intermittent or improper operation or maintenance of
control equipment: $5,000-15,000
Monitoring Violations:
- failure to install monitoring equipment required by the
Clean Air Act, its implementing regulations or a permit:
$15,000
- late installation or required monitoring equipment: $5,000
- failure to operate and maintain required monitoring
equipment: $15,000
Violations of Administrative Orders: 5/ $15,000
5/ This figure should be assessed even if the violation of the
administrative order is also a violation of another requirement of the
Act, for example a NESHAP or NSPS requirement. In this situation, the
figure for violation of the administrative order is in addition to
appropriate penalties for violating the other requirement of the Act.
- failure to respond: $15,000
- incomplete response: $ 5,000 - $15,000
Compliance Certification Violations:
- failure to submit a certification: $15,000
- late certifications: $5,000
- incomplete certifications: $15,000
Violations of Permit Schedules of Compliance:
- failure to meet interim deadlines: $5,000
- failure to submit progress reports: $15,000
- incomplete progress reports: $5,000 - $15,000
- late progress reports: $5,000
- 14 -
A penalty range is provided for work practice violations to allow
Regions some discretion depending on the severity of the violation.
Complete disregard of work practice requirements should be assessed the
full $15,000 penalty. Penalty ranges are provided for incomplete notices,
reports, and recordkeeping to allow the Regions some discretion depending
on the seriousness of the omissions and how critical they are to the
regulatory program. If the source omits information in notices, reports
or records which document the source's compliance status, this omission
should be treated as a failure to meet the requirement and assessed
$15,000.
A late notice, report or test should be considered a failure to
notify, report or test if the notice or report is submitted or the test is
performed after the objective of the requirement is no longer served. For
example, if a source is required to submit a notice of a test so that EPA
may observe the test, a notice received after the test is performed would
be considered a failure to notify.
Each separate violation under this section should be assessed the
corresponding penalty. For example, a NSPS source may be required to
notify EPA at start-up and be subject to a separate quarterly reporting
requirement thereafter. If the source fails to submit the initial
start-up notice and violates the subsequent reporting requirement, then
the source should be assessed $15,000 under this section for each
violation. In addition, a length of violation figure should be assessed
for each violation based on how long each has been violated. Also, a
figure reflecting the size of the violator should be assessed once for the
case as a whole. If, however, the source violates the same reporting
requirement over a period of time, for example by failing to submit
quarterly reports for one year, the source should be assessed one $15,000
penalty under this section for failure to submit a report. In addition, a
length of violation figure of $15,000 for 12 months of violation and a
size of the violator figure should be assessed.
3. Size of the violator
Net worth ( corporations ); or net current assets ( partnerships and
sole proprietorships ):
Under $100,000 $2,000
$100,001 - $ 1,000,000 5,000
1,000,001 - 5,000,000 10,000
5,000,001 - 20,000,000 20,000
20,000,001 - 40,000,000 35,000
40,000,001 - 70,000,000 50,000
70,000,001 - 100,000,000 70,000
Over 100,000,000 70,000 + $25,000 for every
additional $30,000,000 or
fraction thereof
- 15 -
In the case of a company with more than one facility, the size of the
violator is determined based on the company's entire operation, not just
the violating facility. With regard to parent and subsidiary
corporations, only the size of the entity sued should be considered.
Where the size of the violator figure represents over 50% of the total
preliminary deterrence amount, the litigation team may reduce the size of
the violator figure to 50% of the preliminary deterrence amount.
The process by which the gravity component was computed must be
memorialized in the case file. Combining the economic benefit component
with the gravity component yields the preliminary deterrence amount.
4. Adjusting the Gravity Component
The second goal of the Policy on Civil Penalties is the equitable
treatment of the regulated community. One important mechanism for
promoting equitable treatment is to include the economic benefit component
discussed above in a civil penalty assessment. This approach prevents
violators from benefitting economically from their noncompliance relative
to parties which have complied with environmental requirements.
In addition, in order to promote equity, the system for penalty
assessment must have enough flexibility to account for the unique facts of
each case. Yet it still must produce consistent enough results to ensure
similarly-situated violators are treated similarly. This is accomplished
by identifying many of the legitimate differences between cases and
providing guidelines for how to adjust the gravity component amount when
those facts occur. The application of these adjustments to the gravity
component prior to the commencement of negotiation yields the initial
minimum settlement amount. During the course of negotiation, the
litigation team may further adjust this figure based on new information
learned during negotiations and discovery to yield the adjusted minimum
settlement amount.
The purpose of this section is to establish adjustment factors which
promote flexibility while maintaining national consistency. It sets
guidelines for adjusting the gravity component which account for some
factors that frequently distinguish different cases. Those factors are:
degree of willfulness or negligence, degree of cooperation, history of
noncompliance, and environmental damage. These adjustment factors apply
only to the gravity component and not to the economic benefit component.
Violators bear the burden of justifying mitigation adjustments they
propose. The gravity component may be mitigated only for degree of
- 16 -
cooperation as specified in Il.B.4.b. The gravity component may be
aggravated by as much as 100% for the other factors discussed below:
degree of willfulness or negligence, history of noncompliance, and
environmental damage.
The litigation team is required to base any adjustment of the gravity
component on the factors mentioned and to carefully document the reasons
justifying its application in the particular case. The entire litigation
team must agree to any adjustments to the preliminary deterrence amount.
Members of the litigation team are responsible for ensuring their
management also agrees with any adjustments to the penalty proposed by the
litigation team.
a. Degree of Willfulness or Negligence
This factor may be used only to raise a penalty. The Clean Air Act is
a strict liability statute for civil actions, so that willfulness, or lack
thereof, is irrelevant to the determination of legal liability. However,
this does not render the violator's willfulness or negligence irrelevant
in assessing an appropriate penalty. Knowing or willful violations can
give rise to criminal liability, and the lack of any negligence or
willfulness would indicate that no addition to the penalty based on this
factor is appropriate. Between these two extremes, the willfulness or
negligence of the violator should be reflected in the amount of the
penalty.
In assessing the degree of willfulness or negligence, all of the
following points should be considered:
o The degree of control the violator had over the events
constituting the violation.
o The foreseeability of the events constituting the violation.
o The level of sophistication within the industry in dealing with
compliance issues or the accessibility of appropriate control
technology ( if this information is readily available ). This
should be balanced against the technology-forcing nature of the
statute, where applicable.
o The extent to which the violator in fact knew of the legal
requirement which was violated.
b. Degree of Cooperation
The degree of cooperation of the violator in remedying the violation
is an appropriate factor to consider in adjusting the penalty. In some
cases, this factor may justify aggravation of the
- 17 -
gravity component because the source is not making efforts to come into
compliance and is negotiating with the agency in bad faith or refusing
to negotiate. This factor may justify mitigation of the gravity component
in the circumstances specified below where the violator institutes
comprehensive corrective action after discovery of the violation. Prompt
correction of violations will be encouraged if the violator clearly sees
that it will be financially disadvantageous to litigate without remedying
noncompliance. EPA expects all sources in violation to come into
compliance expeditiously and to negotiate in good faith. Therefore,
mitigation based on this factor is limited to no more than 30% of the
gravity component and is allowed only in the following three situations:
1. Prompt reporting of noncompliance
The gravity component may be mitigated when a source promptly reports
its noncompliance to EPA or the state or local air pollution control
agency where there is no legal obligation to do so.
2. Prompt correction of environmental problems
The gravity component may also be mitigated where a source makes
extraordinary efforts to avoid violating an imminent requirement or to
come into compliance after learning of a violation. Such efforts may
include paying for extra work shifts or a premium on a contract to have
control equipment installed sooner or shutting down the facility until it
is operating in compliance.
3. Cooperation during pre-filing investigation
Some mitigation may also be appropriate in instances were the
defendant is cooperative during EPA's pre-filing investigation of the
source's compliance status or a particular incident.
c. History of Noncompliance
This factor may be used only to raise a penalty. Evidence that a
party has violated an environmental requirement before clearly indicates
that the party was not deterred by a previous governmental enforcement
response. Unless one of the violations was caused by factors entirely out
of the control of the violator, the penalty should be increased. The
litigation team should check for and consider prior violations under all
environmental statutes enforced by the Agency in determining the amount of
the adjustment to be made under this factor.
In determining the size of this adjustment, the litigation team should
consider the following points:
o Similarity of the violation in question to prior violations.
- 18 -
o Time elapsed since the prior violation.
o The number of prior violations.
o Violator's response to prior violation(s) with regard to
correcting the previous problem and attempts to avoid future
violations.
o The extent to which the gravity component has already been
increased due to a repeat violation. ( For example, under the
Asbestos Demolition and Renovation Penalty Policy in Appendix
III. )
A violation should generally be considered "similar" if a previous
enforcement response should have alerted the party to a particular type of
compliance problem. Some facts indicating a "similar violation" are:
o Violation of the same permit.
o Violation of the same emissions standard.
o Violation at the same process points of a source.
o Violation of the same statutory or regulatory provision
o A similar act or omission.
For purposes of this section, a "prior violation" includes any act or
omission resulting in a State, local, or federal enforcement response
( e.g., notice of violation, warning letter, administrative order, field
citation, complaint, consent decree, consent agreement, or administrative
and judicial order ) under any environmental statute enforced by the
Agency unless subsequently dismissed or withdrawn on the grounds that the
party was not liable. It also includes any act or omission for which the
violator has previously been given written notification, however informal,
that the regulating agency believes a violation exists. In researching a
defendant's compliance history, the litigation team should check to see if
the defendant has been listed pursuant to Section 306 of the Act.
In the case of large corporations with many divisions or wholly-owned
subsidiaries, it is sometimes difficult to determine whether a prior
violation by the parent corporation should trigger the adjustments
described in this section. New ownership often raises similar problems.
In making this determination, the litigation team should ascertain who in
the organization exercised or had authority to exercise control or
oversight responsibility over the violative conduct. Where the parent
corporation exercised or had authority to exercise control over the
violative conduct,
- 19 -
the parent corporation's prior violations should be considered part of the
subsidiary or division's compliance history.
In general, the litigation team should begin with the assumption that
if the same corporation was involved, the adjustment for history of
noncompliance should apply. In addition, the team should be wary of a
party changing operations or shifting responsibility for compliance to
different groups as a way of avoiding increased penalties. The Agency may
find a consistent pattern of noncompliance by many divisions or
subsidiaries of a corporation even though the facilities are at different
geographic locations. This often reflects, at best, a corporate-wide
indifference to environmental protection. Consequently, the adjustment
for history of noncompliance should apply unless the violator can
demonstrate that the other violating corporate facilities are under
totally independent control.
d. Environmental Damage
Although the gravity component already reflects the amount of
environmental damage a violation causes, the litigation team may further
increase the gravity component based on severe environmental damage. As
calculated, the gravity component takes into account such factors as the
toxicity of the pollutant, the attainment status of the area of violation,
the length of time the violation continues, and the degree to which the
source has exceeded an emission limit. However, there may be cases where
the environmental damage caused by the violation is so severe that the
gravity component alone is not a sufficient deterrent, for example, a
significant release of a toxic air pollutant in a populated area. In
these cases, aggravation of the gravity component may be warranted.
III. LITIGATION RISK
The preliminary deterrence amount, both economic benefit and gravity
components, may be mitigated in appropriate circumstances based on
litigation risk. Several types of litigation risk may be considered. For
example, regardless of the type of violations a defendant has committed or
a particular defendant's reprehensible conduct, EPA can never demand more
in civil penalties than the statutory maximum ( twenty five thousand
dollars per day per violation ). In calculating the statutory maximum,
the litigation team should assume continuous noncompliance from the first
date of provable violation ( taking into account the five year statute of
limitations ) to the final date of compliance where appropriate, fully
utilizing the presumption of Section 113(e)(2). When the penalty policy
yields an amount over the statutory maximum, the litigation team should
propose an alternative penalty which must be concurred on by their
respective management just like any other penalty.
- 20 -
Other examples of litigation risks would be evidentiary problems, or
an indication from the court, mediator, or Administrative Law Judge during
settlement negotiations that he or she is prepared to recommend a penalty
below the minimum settlement amount. Mitigation based on these concerns
should consider the specific facts, equities, evidentiary issues or legal
problems pertaining to a particular case as well as the credibility of
government witnesses.
Adverse legal precedent which the defendant argues is in
distinguishable from the current enforcement action is also a valid
litigation risk. Cases raising legal issues of first impression should be
carefully chosen to present the issue fairly in a factual context the
Agency is prepared to litigate. Consequently in such cases, penalties
should generally not be mitigated due to the risk the court may rule
against EPA. If an issue of first impression is litigated and EPA's
position is upheld by the court, the mitigation was not justified. If
EPA's position is not upheld, it is generally better that the issue be
decided than to avoid resolution by accepting a low penalty. Mitigation
based on litigation risk should be carefully documented and explained in
particular detail. In judicial cases this should be done in coordination
with the Department of Justice.
IV. ABILITY TO PAY
The Agency will generally not request penalties that are clearly
beyond the means of the violator. Therefore, EPA should consider the
ability to pay a penalty in adjusting the preliminary deterrence amount,
both gravity component and economic benefit component. At the same time,
it is important that the regulated community not sea the violation of
environmental requirements as a way of aiding a financially-troubled
business. EPA reserves the option, in appropriate circumstances, of
seeking a penalty that might contribute to a company going out of
business.
For example, it is unlikely that EPA would reduce a penalty where a
facility refuses to correct a serious violation. The same could be said
for a violator with a long history of previous violations. That long
history would demonstrate that less severe measures are ineffective.
The litigation team should assess this factor after commencement of
negotiations only in the source raises it as an issue and only if the
source provides the necessary financial information to evaluate the
source's claim. The source's ability to pay should be determined
according to the December 16, 1986 Guidance on Determining a Violator's
Ability to Pay a Civil Penalty ( GM-56 ) along with any other appropriate
means.
- 21 -
The burden to demonstrate inability to pay, as with the burden of
demonstrating the presence of any other mitigating circumstances, rests on
the defendant. If the violator fails to provide sufficient information,
then the litigation team should disregard this factor in adjusting the
penalty. The Office of Enforcement policy has developed the capability to
assist the Regions in determining a firm's ability to pay. This is done
through the computer program, ABEL. If ABEL indicates that the source may
have an inability to pay, a more detailed financial analysis verifying the
ABEL results should be done prior to mitigating the penalty.
Consider delayed payment schedule with interest: When EPA determines
that a violator cannot afford the penalty prescribed by this policy, the
next step is to consider a delayed payment schedule with interest. Such a
schedule might even be contingent upon an increase in sales or some other
indicator of improved business. EPA's computer program, ABEL, can
calculate a delayed payment amount for up to five years.
Consider straight penalty reductions as a last recourse: If this
approach is necessary, the reasons for the litigation team's conclusion as
to the size of the necessary reduction should be carefully documented in
the case file. 6/
6/ If a firm fails to pay the agreed to penalty in a final
administrative or judicial order, then the Agency must follow the
procedures outlined in the February 6, 1990 Manual on Monitoring and
Enforcing Administrative and Judicial Orders for collecting the
penalty amount.
Consider joinder of a corporate violator's individual owners: This is
appropriate if joinder is legally possible and justified under the
circumstances. Joinder is not legally possible for SIP cases unless the
prerequisite of Section 113 of the Clean Air Act has been met -- issuance
of an NOV to the person.
Regardless of the Agency's determination of an appropriate penalty
amount to pursue based on ability to pay considerations, the violator is
always expected to comply with the law.
V. OFFSETTING PENALTIES PAID TO STATE AND LOCAL GOVERNMENTS OR CITIZEN
GROUPS FOR THE SAME VIOLATIONS
Under Section 113(e)(1), the court in a civil judicial action or the
Administrator in a civil administrative action must consider in assessing
a penalty "payment by the violator of penalties previously assessed for
the same violation." While EPA will not automatically subtract any
penalty amount paid by a source to a State or local agency in an
enforcement action or to a citizen
- 22 -
group in a citizen suit for the same violation that is the basis for EPA's
enforcement action, the litigation team may do so if circumstances suggest
that it is appropriate. The litigation team should consider primarily
whether the remaining penalty is a sufficient deterrent.
VI. SUPPLEMENTAL ENVIRONMENTAL PROJECTS
The February 12, 1991 Policy on the Use of Supplemental Environmental
Projects in EPA Settlements must be followed when reducing a penalty for
such a project in any Clean Air Act settlement.
VII. CALCULATING A PENALTY IN CASES WITH MORE THAN ONE TYPE OF VIOLATION
EPA often takes an enforcement action against a stationary source for
more than one type of violation of the Clean Air Act. The economic
benefit of noncompliance with all requirements violated should be
calculated. Next, the gravity component factors under actual or possible
harm and importance to the regulatory scheme which are applicable should
be calculated separately for each violation. The size of the violator
factor should be figured only once for all violations.
For example, consider the case of a plant which makes laminated
particle board. The particle board plant is found to emit particulates in
violation of the SIP particulate emission limit and the laminating line
which laminates the particle board with a vinyl covering is found to emit
volatile organic compounds in violation of the SIP VOC emission limit.
The penalty for the particulate violation should be calculated figuring
the economic benefit of not complying with that limit ( capital cost of
particulate control, etc., determined by running the BEN computer model ),
and then the gravity component for this violation should be calculated
using all the factors in the penalty policy. After the particulate
violation penalty is determined, the VOC violation should be calculated as
follows: the economic benefit should be calculated if additional measures
need to be taken to comply with the VOC limit. In addition, a gravity
component should be calculated for the VOC violation using all the
applicable factors under actual or possible harm and importance to the
regulatory scheme. The size of the violator factor should be figured only
once for both violations.
- 23 -
Another example would be a case where, pursuant to Section 114, EPA
issues a request for information to a source which emits SO(2), such as a
coal-burning boiler. The source does not respond. Two months later, EPA
issues an order under Section 113(a) requiring the source to comply with
the Section 114 letter. The source does not respond. Three months later,
EPA inspects the source and determines that the source is violating the
SIP SO(2) emission limit.
In this case, separate economic benefits should be calculated, if
applicable. Thus, if the source obtained any economic benefit from not
responding to the Section 114 letter or obeying the Section 113(a) order,
that should be calculated. If not, only the economic benefit from the
SO(2) emission violation should be calculated using the BEN computer
model. In determining the gravity component, the penalty should be
calculated as follows:
1. Actual or possible harm
a. level of violation - calculate for the emission violation
only
b. toxicity of pollutant - applicable to the emission
violation only
c. sensitivity of environment - applicable to the emission
violation only
d. length of time of violation - separately calculate the time
for all three violations. Note the Section 114 violation
continues to run even after the Section 113(a) order is issued
until the Section 114 requirements are satisfied.
2. Importance to regulatory scheme
Section 114 request for information violation - $15,000
Section 113 administrative order violation - $15,000
3. Size of violator
a. One figure based on the source's assets.
VIII. APPORTIONMENT OF THE PENALTY AMONG MULTIPLE DEFENDANTS
This policy is intended to yield a minimum settlement penalty figure
for the case as a whole. In many cases, there may be more than one
defendant. In such instances, the Government should generally take the
position of seeking a sum for the case as a whole, which the defendants
allocate among themselves. Civil
- 24 -
violations of the Clean Air Act are strict liability violations and it is
generally not in the government's interest to get into discussions of the
relative fault of the individual defendants. The government should
therefore adopt a single settlement figure for the case and should not
reject a settlement consistent with the bottom line settlement figure
because of the way the penalty is allocated.
Apportionment of the penalty in a multi-defendant case may be required
if one party is willing to settle and others are not. In such
circumstances, the government should take the position that if certain
portions of the penalty are attributable to such party ( such as economic
benefit or aggravation due to prior violations ), that party should pay
those amounts and a reasonable portion of the amounts not directly
assigned to any single party. If the case is settled as to one defendant,
a penalty not less than the balance of the settlement figure for the case
as a whole must be obtained from the remaining defendants.
There are limited circumstances where the Government may try to
influence apportionment of the penalty. For example, if one party has a
history of prior violations, the government may try to assure that party
pays the amount the gravity component has been aggravated due to the prior
violations. Also, if one party is known to have realized all or most of
the economic benefit, that party may be asked to pay that amount.
IX. EXAMPLES
Example 1
1. Facts:
Company A runs its manufacturing operations with power produced by its
own coal-fired boilers. 7/
7/ Note that a penalty is assessed for the entire facility and not for
each emission unit. In this example, the source has several boilers.
However, the penalty figures are not multiplied by the number of
boilers. The penalty is based on the violations at the facility as a
whole, specifically the amount of pollutant factor and length of
violation factor are assessed once based on the amount of excess
emissions at the facility from all the boilers.
The boilers are major sources of sulfur dioxide. The State Implementation
Plan has a sulfur dioxide emission limitation for each boiler of .68 lbs.
per million B.T.U. The boilers were inspected by EPA on March 19, 1989,
and the SO(2) emission rate was 3.15 lbs. per million B.T.U. for each
boiler. A NOV was issued for the SO(2) violations on April 10, 1989. EPA
again inspected Company A on June 2, 1989 and found the
- 25 -
SO(2) emission rate to be unchanged. Company A had never installed any
pollution control equipment on its boilers, even though personnel from the
state pollution control agency had contacted Company A and informed it
that the company was subject to state air pollution regulations. The
state had issued an administrative order on September 1, 1988 for SO(2)
emission violations at the same boilers. The order required compliance
with applicable regulations, but Company A had never complied with the
state order. Company A is located in a nonattainment area for sulfur
oxides. Company A has net current assets of $760,000. Company A's
response to an EPA Section 114 request for information documented the
first provable day of violation of the emission standard as July 1, 1988.
II. Computation of penalty
A. Economic benefit component
EPA used the BEN computer model in the standard mode to calculate the
economic benefit component. The economic benefit component calculated by
the computer model was $243,500.
B. Gravity component
1. Actual or possible harm
a. Amount of pollutant: between 360-390% above
standard - $65,000
b. Toxicity of pollutant: not applicable.
c. Sensitivity of the environment:
nonattainment - $10,000
d. Length of time of violation: Measured from the
date of first provable violation, July 1, 1988 to
the date of final compliance under a consent
decree, hypothetically December 1, 1991. ( If
consent decree or judgment order is filed at a
later date, this element, as well as elements in
the economic benefit component must be
recalculated. ) 41 mos. - $40,000
2. Importance to regulatory scheme.
No applicable violations.
- 26 -
3. Size of violator: net assets of $760,000 - $5,000.
$243,500 economic benefit component
+120,000 gravity component
--------
$363,500 preliminary deterrence amount
C. Adjustment Factors
1. Degree of willfulness / negligence
Because Company A was on notice of its violations and,
moreover, disregarded the state administrative order
to comply with applicable regulations, the gravity
component in this example should be aggravated by some
percentage based on this factor.
2. Degree of Cooperation
No adjustments were made in the category because
Company A did not meet the criteria.
3. History of noncompliance
The gravity component should be aggravated by some
percentage for this factor because Company A violated
the state order issued for the same violation.
Initial penalty figure: $353,500 preliminary deterrence amount plus
adjustments for history of noncompliance and degree of willfulness or
negligence.
Example 2:
I. Facts:
Company C, located in a serious nonattainment area for particulate
matter, commenced construction in January 1988. It began its operations
in April 1989. It runs a hot mix asphalt plant subject to the NSPS
regulations at 40 CFR Part 60, Subpart I. Subpart I requires that
emissions of particulates not exceed 90 mg/dscm ( .04 gr/dscf ) nor
exhibit 20% opacity or greater. General NSPS regulations require that a
source owner or operator subject to a NSPS fulfill certain notification
and recordkeeping functions ( 40 CFR Section 60.7 ), and conduct
performance tests and submit a report of the test results ( 40 CFR Section
60.8 ).
Company C failed to notify EPA of: the date it commenced construction
within 30 days after such date ( February 1988 ) ( 40
- 27 -
CFR Section 60.7(a)(1) ); the date of anticipated start-up between 30-60
days prior to such date ( March, 1989 ) ( 40 CFR Section 60.7(a)(2) ); or
the date of actual start-up within 15 days after such date ( April, 1989 )
( 40 CFR Section 60.7(a)(3). Company C was required under 40 CFR Section
60.8(a) to test within 180 days of start-up, or by October 1989. The
company finally conducted the required performance test in September 1990.
The test showed the plant to be emitting 120 mg/dscm of particulates and
to exhibit 30% opacity.
Company C did submit the required notices in November 1989 in response
to a letter from EPA informing it that it was subject to NSPS
requirements. It did negotiate with EPA after the complaint was filed in
September 1991, and agreed to a consent decree requiring compliance by
December 1, 1991. Company C has assets of $7,000,000.
II. Computation of penalty
A. Benefit component
The Region determined after calculation that the economic benefit
component was $90,000 for violation of the emissions standard according to
the BEN computer calculation. The litigation team determined that the
economic benefit from the notice and testing requirement was less than
$5,000. Therefore, the litigation team has discretion not to include this
amount in the penalty consistent with the discussion at II.A.3.a.
B. Gravity component
1. Actual or possible harm
a. Amount of pollutant:
i. mass emission standard:
33% above standard - $10,000
ii. opacity standard:
50% over standard - $10,000
b. Toxicity of pollutant: not applicable
c. Sensitivity of the environment:
serious nonattainment - $14,000
d. Length of time of violation
1) Performance testing: October, 1989 -
September 1990: 12 months - $15,000
- 28 -
2) Failure to report commencement of
construction: February 1988 - November
1989: 21 months ( date of EPA's first
letter to Company ) - $25,000
3) Failure to report actual start-up: April,
1989 - November 1989: 7 months - $15,000
4) Failure to report date of anticipated
startup between 30-60 days prior to such
date: March, 1989 - November 1989: 8
months - $15,000
5) Mass Emission Standard Violation: September
1990 - December 1991: 15 months - $20,000
6) Opacity Violation: September 1990 -
December 1991: 15 months - $20,000
2. Importance to regulatory scheme:
Failure to notify 40 CFR Section 60.7(a)(1) - $15,000
Failure to notify 40 CFR Section 60.7(a)(2) - $15,000
Failure to notify 40 CFR Section 60.7(a)(3) - $15,000
Failure to conduct required performance test 40 CFR
Section 60.8(a) - $15,000
3. Size of violator: Net current Assets -
$7,000,000 - $20,000
$ 90,000 economic benefit component
224,000 gravity component
--------
$314,000 preliminary deterrence amount
C. Adjustment factors
1. Degree of willfulness / negligence
No adjustments were made based on willfulness in this
category because there was no evidence that Company C knew
of the requirements prior to receiving the letter from EPA.
Specific evidence may suggest that the company's violations
were due to negligence justifying an aggravation of the
penalty on that basis.
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2. Degree of Cooperation
No adjustments were made in this category because Company C
did not meet the criteria.
3. History of noncompliance
The gravity component should be aggravated by an amount
agreed to by the litigation team for this factor because
the source ignored two letters from EPA informing them of
the requirements.
Example 3:
I. Facts
Chemical Inc. operates a mercury cell chlor-alkali plant which
produces chlorine gas. The plant is subject to regulations under the
National Emissions Standard for Hazardous Air Pollutants ( NESHAP ) for
mercury, 40 CFR Part 61, Subpart E. On September 9, 1990, EPA inspectors
conducted an inspection of the facility, and EPA required the source to
conduct a stack test pursuant to section 114. The stack test showed
emissions at a rate of 3000 grams of mercury per 24-hour period. The
mercury NESHAP states that emissions from mercury cell chlor-alkali plants
shall not exceed 2300 grams per 24-hour period. The facility has been in
operation since June 1989.
In addition under 40 CFR Section 61.53, Chemical Inc. either had
to test emissions from the cell room ventilation system within 90 days of
the effective date of the NESHAP or follow specified approved design,
maintenance and housekeeping practices. Chemical Inc. has never tested
emissions. Therefore, it has committed itself to following the
housekeeping requirements. At the inspection, EPA personnel noted the
floors of the facility were badly cracked and mercury droplets were found
in several of the cracks. The inspectors noted that the mercury in the
floor cracks was caused by leaks from the hydrogen seal pots and
compressor seals which housekeeping practices require be collected and
confined for further processing to collect mercury. Chemical Inc.
will have to install control equipment to come into compliance. A
complaint was filed in June 1991. The equipment was installed and
operational by June 1992. A consent decree was entered and penalty
paid in February 1992. Chemical Inc. has a net corporate worth of
$2,000,000.
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II. Calculation of Penalty
A. Economic Benefit Component
The delay in installing necessary control equipment from June 1989 to
June 1992 as calculated using the BEN computer model resulted in an
economic benefit to Chemical Inc. of $35,000.
B. Gravity Component
1. Actual or possible harm
a. Amount of pollutant: 30% above the standard
- $5,000
b. Toxicity of pollutant: $15,000 for violations
involving a NESHAP
c. Sensitivity of the environment: not applicable
d. Length of time of violation: Measured from first
provable date of violation in September 1990 until
June 1992 when the source will be in compliance. 22
mos. - $25,000
2. Importance to regulatory scheme.
Failure to perform work practice requirements -
$15,000
3. Size of Violator: net worth of $2,000,000 - $10,000
$ 35,000 economic benefit component
+70,000 gravity component
--------
$105,000 preliminary deterrence amount
C. Adjustment Factors
1. Degree of willfulness / negligence
It is unlikely Chemical Inc. would not be aware of the
NESHAP requirements. Therefore, an adjustment should
probably be made for this factor.
2. Degree of Cooperation
No adjustments made because Chemical Inc. did not meet the
criteria.
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3. History of Compliance
No adjustments were made because Chemical Inc. had no prior
violations.
X. CONCLUSION
Treating similar situations in a similar fashion is central to the
credibility of EPA's enforcement effort and to the success of achieving
the goal of equitable treatment. This document has established several
mechanisms to promote such consistency. Yet it still leaves enough
flexibility for tailoring the penalty to particular circumstances.
Perhaps the most important mechanisms for achieving consistency are the
systematic methods for calculating the benefit component and gravity
component of the penalty. Together, they add up to the preliminary
deterrence amount. The document also sets out guidance on uniform
approaches for applying adjustment factors to arrive at an initial amount
prior to beginning settlement negotiations or an adjusted amount after
negotiations have begun.
Nevertheless, if the Agency is to promote consistency, it is essential
that each case file contain a complete description of how each penalty was
developed as required by the August 9, 1990 Guidance on Documenting
Penalty Calculations and Justifications in EPA Enforcement Actions. This
description should cover how the preliminary deterrence amount was
calculated and any adjustments made to the preliminary deterrence amount.
It should also describe the facts and reasons which support such
adjustments. Only through such complete documentation can enforcement
attorneys, program staff and their managers learn from each other's
experience and promote the fairness required by the Policy on Civil
Penalties.
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