Civil Penalty Policy
JULY 8, 1980
CIVIL PENALTY POLICY
For application of Section 309(d) of the Clean Water Act and Section
113(b) of the Clean Air Act to Certain Water Act Violators and Air
Stationary Source Violators
TABLE OF CONTENTS
CIVIL PENALTY POLICY - CLEAN WATER ACT VIOLATORS AND
STATIONARY SOURCE VIOLATORS OF THE CLEAN AIR ACT
I. Preamble . . . . . . . . . . . . . . . . . . . . . . . . . 1.
II. Statutory Basis for Civil Penalty . . . . . . . . . . . . 3.
III. Types of Violations to Which Policy
Applies . . . . . . . . . . . . . . . . . . . . . . . . 3.
IV. Use of the Penalty Policy in Enforcement
Actions . . . . . . . . . . . . . . . . . . . . . . . . 5.
V. Determining the Amount of the Statutory
Maximum Penalty and of the Minimum Civil
Penalty . . . . . . . . . . . . . . . . . . . . . . . . 7.
VI. Determining the Minimum Penalty Acceptable
for Settlement . . . . . . . . . . . . . . . . . . . . . 9.
VII. Explanation of Factors Considered in
Determining Minimum Amount of Civil
Penalty . . . . . . . . . . . . . . . . . . . . . . . . 10.
A. Harm or Risk of Harm to Health or
the Environment . . . . . . . . . . . . . . . . . . 10.
B. Economic Benefit of Delayed
Compliance . . . . . . . . . . . . . . . . . . . . 11.
8. Violator's Recalcitrance, Defiance,
or Indifference to the Requirements
of the Law . . . . . . . . . . . . . . . . . . . . 12.
D. Extraordinary Costs of Enforcement
Action . . . . . . . . . . . . . . . . . . . . . . 12.
E. Mitigation for Noncompliance Caused
by the Government Itself . . . . . . . . . . . . . .13.
F. Mitigation for Impossibility . . . . . . . . . . . . .13.
G. Other Bases for Mitigation . . . . . . . . . . . . . .14.
H. Specified Clean Air Act Factors . . . . . . . . . . . 14.
VIII. Approved Environmentally Beneficial
Expenditures in Lieu of Payment of
Penalty Sum to State or Federal Treasury
( i.e., "Credits Against Penalty" ) . . . . . . . . . . 15.
A. Use of Credit to Satisfy or
Offset Penalty . . . . . . . . . . . . . . . . . . 15.
B. Criteria for Acceptable Credits . . . . . . . . . . . 16.
C. Constraints on Federal Enforcement
Officials with Respect to Payment
of Penalties and Use of Credits in
Lieu of Penalties . . . . . . . . . . . . . . . . . 18.
D. Discretionary Nature of Credit . . . . . . . . . . . .18.
E. Consideration of After-Tax Effects
of Credit Expenditures . . . . . . . . . . . . . . .18.
IX. Penalty Postponement or Forgiveness Based
Upon Inability to Pay . . . . . . . . . . . . . . . . . .19.
X. Time Period for Application of Civil
Penalty Policy . . . . . . . . . . . . . . . . . . . . . 20.
XI. Application of Civil Penalty Policy to
Different Types of Sources - Private,
Public, Regulated Utilities, etc. . . . . . . . . . . . 22.
A. Privately-Owned or Operated Sources
( other than Regulated Utilities ) . . . . . . . . 22.
B. Publicly-Owned Utilities and Investor
Owned, Regulated Utilities . . . . . . . . . . . . 22.
C. State and Municipal Facilities ( Other
than Utilities ). . . . . . . . . . . . . . . . . . 23.
D. Federal Facilities ( Other than
Utilities ) . . . . . . . . . . . . . . . . . . . . 23.
XII. Federal-State Cooperation in Implementing
this Policy . . . . . . . . . . . . . . . . . . . . . . 24.
XIII. Effective Date of this Civil Penalty
Policy . . . . . . . . . . . . . . . . . . . . . . . . . 24.
XIV. Previous Civil Penalty Policy Superseded . . . . . . . . . 25.
The objective of this civil penalty policy is to assist
in accomplishing the goals of environmental laws by deterring
violations and encouraging voluntary compliance.
The elements of the policy reflect years of experience
by federal, state and local enforcement officials, adapted
to present conditions and needs. The policy has had the
benefit of much informed comment in meetings of federal, state,
and local officials in every region, in written comments, and
in a working group of federal and state enforcement officials.
The policy is based upon the main themes of the Clean Air
and Water Acts, in which Congress required all citizens, private
firms and public bodies to join in a common effort to restore
and maintain the quality of the nations's air and waters, and
to do so consistently in all parts of the country, in accordance
with statutorily mandated time schedules. The theme of national
consistency has been reinforced by the Clean Air Act Amendments
of 1977, which directed the Administrator of the Environmental
Protection Agency to promulgate regulations designed to assure
fairness and uniformity in implementing and enforcing the Act
by the EPA Regional Offices and the states ( Clean Air Act,
Section 301 ).
The national response to the Air and Water Acts is
encouraging. The overwhelming majority of citizens, private
firms and public bodies have met the deadlines and complied
with what was required of them. A minority have not. This
penalty policy will keep faith with those who joined the
common effort. It will help maintain the voluntary compliance
on which achievement of our environmental goals depends.
The Clean Air and Water Acts authorize civil penalties
up to stated maximums. This policy enunciates general principles
for determining appropriate penalties that the government will
seek in individual cases. It is based primarily on four
considerations--the harm done to public health or the
environment; the economic benefit gained by the violator;
the degree of recalcitrance of the violator; and any unusual
or extraordinary enforcement costs thrust upon the public.
The policy recognizes appropriate mitigating circumstances
or factors. Each of these penalty considerations and each of
the mitigating factors is well founded in law and is consistent
with statutory requirements.
- 2 -
While fulfilling its primary objective to deter violations
and encourage compliance, this policy has very significant
additional justifications and benefits as well:
A. The policy is fair:
1. in an ethical sense, because it
will assure that violators of the
law do not economically benefit
from their violation,
2. in an economic sense, because it will
assure that violators do not gain an
economic advantage over others who
incurred costs to obey the law, and
3. in a geographic sense, for it will
assure that no area of the country can
offer lenient enforcement as an advantage
to its industries or a lure to the industries
of other areas.
B. The policy seeks to improve the operation of the
market sector of our economy by more fully
imposing onto polluting firms costs otherwise
thrust upon the public. By internalizing more
of the social costs of producing goods or
services, it makes prices of goods or services
better reflect the resources used in their
production, and allows the market system to
better allocate resources.
C. The policy seeks to compensate the public for
harm done to public health or the environment,
or for unusual or extraordinary enforcement expenses.
D. The policy seeks to make efficient use of government
resources by removing economic incentives to
violate environmental laws, thus maintaining high
voluntary compliance rates. Because there are
hundreds of thousands of pollution sources, even
a small decline in compliance rates brings major
new requirements for enforcement resources.
Because this policy is to be used by many federal, state
and local enforcement officials throughout the country, it has
been drafted in general form. It is a policy for determining
what civil penalties the government will seek when civil
actions are taken, not a policy to determine which enforcement
actions should be taken. Enforcement strategy or priorities
are determined elsewhere, not by this policy.
- 3 -
II. Statutory Basis for Civil Penalty under Water and
Civil penalties are provided for in Section 309(b) of
the Clean Water Act, which subjects violators to civil penalties
of up to $10,000 per day of such violation. The Water Act has
no further statutory criteria for determining the precise
amount of the penalty, leaving that to be determined by the
court. Authority for such civil penalties has been in the
Act since its passage in 1972.
Since 113(b) of the Clean Air Act provides for civil penalties
of up to $25,000 per day of violation and requires courts to "take
into consideration ( in addition to other factors ) the size of the
business, the economic impact of the penalty on the business and
the seriousness of the violation." The authority for civil
penalties was added by the Amendments of 1977. There was no
authority for civil penalties in the Air Act prior to these
amendments, at least for violations such as the ones within the
scope of this policy.
In addition to adding civil penalty authority in Section 113,
The Clean Air Act Amendments of 1977 also established, in Section 120,
mandatory administratively imposed, noncompliance penalties.
Regulations implementing Section 120 noncompliance penalties
have now been promulgated. Such noncompliance penalties are not
covered by this civil penalty policy, and nothing stated in this
policy should be taken to refer to them in any way, except
that provision has been made in this civil penalty to avoid
duplication of penalties based upon the economic benefit of
delayed compliance during the same time period ( see discussion
in part X below. ) 1/
1/ The preamble to EPA's final noncompliance penalty regulation
provides that no notices of noncompliance will be issued, or
penalties assessed, prior to January 1, 1981. For purposes
of determining an appropriate civil penalty, EPA will only
calculate the economic benefit of delayed compliance prior
to this date.
With respect to any emission limitation or other requirement
approved or promulgated by the Administrator after August 7, 1977,
which is either more stringent than those in effect at that time
or which establishes a requirement where none existed before,
Section 120(g) of the Act provides that the effective date for
noncompliance penalties will be the date that full compliance
is required with such limitation or requirement (though not
later than three years from such approval or promulgation, nor
earlier than the effective date that noncompliance penalties
begin with respect to violations of existing limitations).
III. Types of Violations to Which Policy Applies
The civil penalty policy is to be used by federal, state
and local officials in enforcement actions involving certain
violations of the Clean Air Act, as amended, and certain
violations of the Clean Water Act, as amended.
- 4 -
The policy applies to major and minor water pollution
sources which violate those requirements of the Water Act made
subject to civil penalties by Section 309(d), 2 and to major
and minor stationary air pollution sources which violated those
requirements of the Clean Air Act made subject to civil penalties
by Section 113(b). 2/ 3/
2/ i.e., violators of effluent limitations under Section 301
of the Clean Water Act; water quality related effluent limitations
under Section 302; national standards of performance under Section
306; toxic and pretreatment standards under Section 307; monitoring
under Section 308; aquaculture under Section 310; disposal of
sewage sludge under Section 405; violators of permit conditions
or limitations under Section 402 and 404; and violators of orders
issued under Section 309(a).
3/ i.e., violators of an administrative order issued under Section
113(a) of the Clean Air Act; a state implementation plan
requirement approved under Section 110; a New Source Performance
Standard under Section 111; National Emission Standards for
Hazardous Air Pollutants under Section 112; a compliance date
extension issued to a source converting to coal under 119(g)
(as in effect prior to August 7, 1977); a delayed compliance
order issued to a source converting to coal under 113(d)(5);
a nonferrous smelter order under Section 119; certain
requirements relating to monitoring under Section 114; a
requirement imposed in a delayed compliance order under Section
113(d); and attempts to construct or modify a major stationary
source in any area for which the Administrator has found, under
Section 113(a)(5), that the state is not acting in compliance
with applicable requirements for issuance of permits to construct
or modify sources in nonattainment areas.
The application of this civil penalty policy to situations
in which full compliance is required prior to operation ( as,
e.g., under the New Source Performance Standards under Section 111
of the Clean Air Act ) should not be interpreted as suggesting
that noncompliance can be tolerated if penalties are paid.
- 5 -
This policy applies to past and future violations of the
above-mentioned requirements of the Clean Air and Water Acts
where the violation results from the source's failure to make
capital or operation and maintenance expenditures necessary to
bring itself into initial compliance with the requirements ( e.g.,
failure to install equipment, buy and use complying fuel, carry
out a process change, etc. ).
The policy does not apply to violations following initial
compliance or to violations of an intermittent or transient kind,
such as spills, violations of emission or discharge limits through
accidents or when attributable solely to the failure to adequately
operate or maintain pollution control equipment. Civil penalties
are probably desirable in most actions against such violations, but
the appropriate amount of such penalties is not set by this policy.
This policy does not apply, of course, to penalties for
criminal violations, nor for violations of court decrees. In
most cases that are settled, it will be desirable to include
stipulated contempt penalty amounts in the consent decree. Such
amounts are not subject to the civil penalty statutory limits and
are not covered by this policy.
While this policy has been limited at this time to circumstances
where its application is clearly appropriate, experience will
undoubtedly indicate other circumstances to which it should be
extended. Such situations will be considered on a case-by-case
basis. Penalties appropriate for other violations under the Clean
Air and Water Acts, and under other Acts, will be the subject of
IV. Use of the Penalty Policy in Enforcement Actions
This civil penalty policy is intended to be used by
federal and state enforcement officials and, in appropriate
cases, by local officials ( e.g., local air pollution control
agencies operating under authority of state air pollution
laws ). It is to be used in civil actions in state and
federal courts, and in state and local administrative
Enforcement actions must seek both expeditious compliance
and adequate civil penalties. The penalties to be sought in
accordance with this policy are in no way a substitute for
compliance nor do they preclude injunctive relief or other
- 6 -
The goal of an enforcement action where this policy applies
is both compliance ( including interim controls ) and appropriate
penalties. Compliance and penalties should not be in any way
traded off against each other. Compliance with the law is
mandatory, and whereas details of technology or schedules may
differ, enforcement officials should not bargain for compliance
( or interim controls ) by offering any reduction in penalties.
Even in the period before the statutory deadlines, the
Clean Water and Air Acts required compliance immediately or
as expeditiously as practicable. After the deadline has
passed, it is even more urgent that violators be brought
quickly into compliance.
The penalty policy, moreover, already is structured
to provide a strong economic incentive for rapid compliance,
for the more rapid the compliance the lower the penalties
under this policy. Such an effect is automatically built into
the method of calculating the economic benefit of delayed
compliance, for one of the major factors of the formula is
the length of the period of noncompliance. The penalty factors
of harm to the environment and recalcitrance of the violator
may also lead to penalty reductions as the speed of compliance
increases. In the case of major source violators of the Air Act,
moreover, the requirement of mandatory, administratively assessed
noncompliance penalties adds additional economic incentive for
Additionally, it must be kept in mind that penalties are
authorized and intended to deter violations and encourage
compliance. Penalties are not effluent or discharge fees.
Payment of penalties does not give any right or privilege
to continue operation in violation of law or to slow down
When civil enforcement actions are brought in courts, the
question of penalties will arise in three contexts--filing the
civil complaint, determining the minimum amount acceptable in
settlement, and presenting argument to the court ( and possibly
affidavits or testimony, as well ) for its consideration in setting
penalties at trial.
The Agency is prepared to settle enforcement actions brought
under this policy. Where settlement is not possible, the Agency
is obviously free to claim penalty amounts up to the statutory
maximum, which will generally be the amount claimed in the
- 7 -
The methodology of this penalty policy will be used to
determine a "minimum civil penalty" which would typically be
presented to the court as an appropriate penalty to be imposed.
In addition, the methodology will be used to determine a
lower "minimum civil penalty acceptable for settlement" ( set out
in Part VI ) to be used for settlement negotiations.
This policy will allow enforcement officials to arrive
at fair, consistent and rationally based penalty sums while
providing a lower minimum figure as an encouragement to settlement
if enforcement officials believe that settlement is desirable.
By providing them with a minimum settlement figure, this
policy gives the enforcement officials responsible for the action
a range in which to exercise their discretion to settle or not to
settle ( i.e., between the statutory maximum and the minimum sum
acceptable in settlement as determined by this policy ).
Where the state or local administrative bodies are taking
enforcement actions and have authority to administratively impose
civil penalties, the minimum penalty figure determined for settlement
purposes in civil actions should also serve as the minimum to be
imposed in the administrative action. The administrative body,
however, will want to consider its statutory maximum penalty
authority and the minimum civil penalty and will probably want
to impose penalties above the settlement amount. This is
particularly the case since the administrative body will
probably have already decided the case regarding the violation,
and reductions for settlement will no longer be relevant.
V. Determining the Amount of the Statutory Maximum
Penalty and of the Minimum Civil Penalty
The minimum civil penalty should be determined by the factors
and method set out below. The civil penalty so determined will,
in most cases, be lower than the statutory maximum sum. Where
the civil penalty sum so determined is higher, this information
may be used in settlement negotiations or litigation but the
statutory maximum is, of course, all that may be requested by
the government or imposed by the court.
- 8 -
The amount of the minimum civil penalty should be determined
Step 1 - Factors Comprising Penalty
Determine and add together the appropriate
sums for each of the four factors or elements
of this policy, namely:
. the sum appropriate to redress
the harm or risk of harm to
public health or the environment,
. the sum appropriate to remove the
economic benefit gained or to be
gained from delayed compliance,
. the sum appropriate as a penalty for
the violator's degree of recalcitrance,
defiance, or indifference to
requirements of the law, and
. the sum appropriate to recover unusual
or extraordinary enforcement costs
thrust upon the public.
Step 2 - Reductions for Mitigating Factors
Determine and add together sums appropriate
as reductions for mitigating factors, of
which the most typical are the following:
. the sum, if any, appropriate to
reflect any part of the noncompliance
attributable to the government itself,
. the sum appropriate to reflect any
part of the noncompliance caused by
factors completely beyond the violator's
control ( floods, fires, etc. ).
Step 3 - Summing of Penalty Factors and Mitigating
Subtract the total reductions of Step 2 from
the total penalty of Step 1. The result is
the minimum civil penalty. If no settlement
can be reached with the defendant, this sum
would typically be presented to the court as
an appropriate penalty to be imposed.
- 9 -
In some unusual cases, the penalty amount determined in
this manner may be larger than the violator can reasonably
be expected to pay while bringing itself expeditiously into
compliance and continuing to do business. In such cases,
enforcement officials may recommend that the penalty be postponed
or forgiven in part or in total.
VI. Determining the Minimum Penalty Acceptable for Settlement
Many cases may, of course, be settled prior to trial and
result in consent decrees or orders, rather than being litigated
to conclusion. The objectives of the enforcement action are still
the same, however -- full and expeditious compliance ( including
interim controls ), and penalties. In cases in which enforcement
officials think settlement is appropriate, they may, as an
encouragement to settlement, reduce the penalty below the lesser
of the statutory maximum and the sum determined to be the
minimum civil penalty. This reduction, however, may not be
greater than the percentage which reflects the likelihood of
being unable to establish the violation or violations.
. Assume statutory maximum penalty = $5,000,000
( 200 days of violation @ $25,000/day )
. Assume minimum civil penalty = $2,000,000
. Assume estimate of government's chance of proving
violation at trial = 80% ( or, chance of being
unable to prove violation = 20% )
. The maximum reduction permitted for settlement
is, therefore, $400,000 ( 20% X $2,000,000 )
$2,000,000 - $400,000) ( i.e., range for settlement
negotiation = $5,000,000 to $1,600,000 )
It is assumed that enforcement actions will not be taken
unless the evidence of violation is strong; therefore, in most
cases, the percentage of reduction should not be large--probably
not more than 25%. Unusual circumstances may, however, exist
where larger reductions are appropriate.
- 10 -
It is not required, of course, that enforcement officials
handling an enforcement action reduce the penalty for settlement,
or that they reduce it in any given amount. Defendants who
settle quickly will undoubtedly stand better chances of receiving
such reductions than those who do not.
It should be noted, moreover, that the reduction relates
only to the degree of uncertainty of proving that the violation
or violations resulted from the source's failure to make capital
or operation and maintenance expenditures necessary to bring
itself into initial compliance. It does not relate to uncertainty
as to the court's decision on compliance schedules and penalties.
Enforcement officials should carefully and thoroughly prepare
the facts and reasoning supporting their penalty request, and
should not be reluctant to present these arguments to the court.
Judges are accustomed to deciding such matters, and will
make better decision after receiving well-reasoned recommendations
based on fair principles consistently applied.
There may be extraordinary instances where the minimum
settlement penalty amount is more than the violator is able to
pay. In such cases, it may be appropriate to agree to a
postponement of the penalty or payment over time, or, in an extreme
case, to a further reduction of the penalty. Further guidance
on handling these extraordinary instances is set out below.
VII. Explanation of Factors Considered in Determining
Minimum Amount of Civil Penalty
A. Harm or Risk of Harm to Health or the Environment
The extent that the violation harms or poses risks
of harm to public health or the environment must be carefully
considered in setting the appropriate penalty, for violations
which involve such harm or risk are certainly very serious.
For example, a violation involving discharges of toxic chemicals
into waters which enter or threaten to enter public drinking
water supplies certainly causes or threatens serious harm to
public health. It may also destroy or threaten valuable
fishing or recreational resources.
Similarly, a violating air pollution source in an area
which has not attained the primary ( i.e., health protective )
ambient air standard is contributing to a health hazard or is
actually causing harm to residents of the area.
All pollutants introduced into the environment create
some harm or risk, of course, and it will be difficult in many
cases to precisely quantify the harm or risk caused by the
violation in question. The penalty amount attributable to
such public harm or risk will have to be determined on the facts
of each specific case.
- 11 -
Estimated costs of environmental restoration may be
useful in quantifying harm to the public, and traditional
personal injury damage concepts may be helpful in quantifying
injuries to public health. It may also be possible to use
the recreational values developed by various public agencies
to assist in quantifying environmental harm.
B. Economic Benefit of Delayed Compliance
Violations which are the subject of this policy
usually consist of a failure to install and operate required
pollution control equipment within time limits set by law,
or a failure to utilize fuels or raw materials with lower
Delaying the purchase and operation of pollution
control equipment results in economic savings or gains to
the owner or operator of a facility. These savings or gains
arise from two distinct sources:
. the opportunity to invest capital
funds not spent to purchase and install
pollution control equipment during the
period of noncompliance, and
. the avoidance of the operation and
maintenance expenses associated with the
pollution control equipment during the
period of delayed compliance ( labor,
materials, energy, etc. ). These costs
avoided represent a permanent savings
to the owner or operator; they may, of
course, also be invested in income-producing
The economic benefits attributable to delaying capital
expenditures and avoiding operation and maintenance expenses have
been combined in a single formula. Because these benefits occur
over a period of time, both past and future in some cases, the
formula reduces these benefits to a present dollar value by
standard accounting methods, and also takes into account tax
effects, and other appropriate economic factors. The formula
is further described in a technical support document dated
September 27, 1978, subject: Computation of Economic Benefit
of Delayed Compliance under Civil Penalty Policy. The formula
described in that memorandum should be utilized in calculating
economic benefit for the purpose of arriving at appropriate
penalty amounts. It is recognized, however, that there may be
unusual circumstances in which a different method of measuring
economic benefit may be appropriate. The acceptability of any
such method will have to be determined on a case-by-case basis.
- 12 -
C. Violator's Recalcitrance, Defiance, or Indifference
to the Requirements of the Law
Good faith efforts to obey the law are expected of
all subject to its jurisdiction. Except as provided below
in Sections E and F ( pp. 13 and 14 ) assertions of "good
faith" should not be considered as a basis for reducing the
otherwise appropriate penalty. Courts traditionally consider
the degree of the violator's recalcitrance, defiance,
purposeful delay or indifference to its legal obligations
in setting penalties. Enforcement officials should do so also,
and should not hesitate to include a sum in the civil penalty
to reflect such factors where they exist.
Care should be exercised, however, not to seek to
add such an element of penalty on a person, firm, or entity
for exercising, without purpose of delay, its lawful rights
to challenge agency determinations in administrative or
court proceedings. A violator which has complied with all
requirements that were not disputed while challenging the
rest has not been, on these grounds alone, recalcitrant,
defiant or indifferent. Such a violator is on a different
footing from one which used a challenge of one aspect of its
compliance requirement to delay all compliance, or which
made frivolous challenges for purposes of delay. This latter
mode of behavior may indeed constitute recalcitrance, defiance,
or indifference so as to justify adding an element of penalty.
If a violator, in good faith, did challenge agency
determinations without purpose of delay, but did not prevail,
and by virtue of the litigation has missed a deadline, or other
wise failed to comply, it is nevertheless in violation, and
subject to the civil penalty factors other than the one related
to the recalcitrance, defiance, or indifference of the violator --
i.e., harm or risk to public health or the environment, economic
benefit of delayed compliance, and extraordinary enforcement
costs. When a source decides to challenge an agency requirement,
it assumes the risks of not prevailing in its challenge. Violators
"litigate on their own time" U.S. Steel v. Train, 556 2d 822,
( 7th Cir. 1977 ).
D. Extraordinary Costs of Enforcement Action
Although attorneys fees and court costs cannot be
recovered by the federal government in civil enforcement actions,
there are situations when it is appropriate to consider unusual
expenses incurred in detecting the violation, defining its
extent, and in bringing the enforcement action.
- 13 -
Where, for example, a source has disregarded its
obligation to identify its own pollutant discharges and apply
for a permit, and the government, as a result, must undertake
such work, the governments costs in identifying the discharges
may be included in the amount sought. Or, for example, where
the violator's sampling and analytical procedures are so
deficient that the government must conduct significant sampling
on its own to confirm discharge levels, the expense of such
sampling may be added to the sum of civil penalties sought.
Those costs which are routinely incurred by state and federal
enforcement officials need not, however, be sought as part of
a civil penalty.
E. Mitigation for Noncompliance Caused by the
When failure to comply or compliance delay was caused
by, requested by, or attributable to the government, civil
penalties are not appropriate. When the failure to delay
was partially caused by the government, the penalties may
be reduced in proportion to the relative share of government
responsibility or in proportion to the period of delay caused
by the government. It is expected that mitigation on this
basis will only be permitted when the government was clearly
responsible for the delay, as, for example, it may have been
in a small number of cases under the Water Act. In these
instances, a discharger challenged conditions of an NPDES
permit, requested an adjudicatory hearing, prosecuted its
request expeditiously and in good faith, and may have been
delayed by the Agency's lack of resources to provide prompt
hearings for all those who challenged their permits.
States and the federal government are not bound by
the acts of the other, but they will, of course, want to be
informed of and consider carefully the acts of the other in
connection with penalty decisions.
F. Mitigation for Impossibility
Where delayed compliance was, in fact, attributable
to causes absolutely beyond the control of the violator ( such as
floods, fires, and other acts of nature ) and was not due to
fault or negligence, a civil penalty is not required--even in
instances where as a result of the impossibility the violator
has enjoyed an economic benefit. If only a portion of the
period of delayed compliance is attributable to such factors
beyond the violator's control, a civil penalty should be
sought only for that period of noncompliance that was not
attributable to such factors.
- 14 -
G. Other Bases for Mitigation
There may also be other unforeseeable mitigation
circumstances because of which all or a part of the otherwise
appropriate civil penalty should not be sought, as, for example,
when it was not technically possible to comply. Acceptability
of such a situation as a mitigating circumstance will have to be
considered on a case-by-case basis, keeping in mind also the
"technology forcing" aspects of the laws. Another instance
in which all or part of an otherwise appropriate civil penalty
might not be sought would be where emergency needs require that
sources be operated even though they fail to comply with discharge
or emission limitations. Obviously, situations involving unusual
mitigating circumstances must be looked at individually since the
full range of such circumstances cannot be predicted.
Since the Water Act and the Air Act impose absolute
duties of compliance, requiring sources to take whatever measures
are possible to come into compliance by the legally established
dates, the burden in clearly upon the violator to establish a
compelling reason why a civil penalty should be mitigated. This
burden should only be considered satisfied where urgent efforts
are made to comply but actual impossibility or government conduct
alone precluded compliance, or there a similar mitigating circumstance
caused the delay. Only in these instances have violators really
made what should be considered a "good faith" effort that excuses
noncompliance. All dischargers must be held to a standard that
requires careful and diligent planning and an urgent, serious
effort to come into compliance in a timely manner.
H. Specified Clean Air Act Factors
The civil penalty policy factors described above
include consideration of the three factors specified in Section 113
of the Clean Air Act. The "size of the business" is reflected
in the economic benefit of delayed compliance since less expensive
control equipment is typically required for smaller businesses
and the benefit of delaying installation of such equipment is
correspondingly less. The "economic impact of the penalty on
the business" is considered by the penalty deferral or reduction
that is allowable where violators lack the ability to immediately
pay the full amount of the penalty ( see section IX below ). The
third factor, the "seriousness of the violation," is taken into
account by looking at the harm done to public health and the
environment ( violations may, though, be considered as serious,
even though they do no measurable or quantifiable harm to the
environment ) and the violator's recalcitrance, defiance or
indifference to the requirements of the law.
- 15 -
VIII. Approved Environmentally Beneficial Expenditures
In Lieu of Payment of Penalty Sum to State or
Federal Treasury ( i.e., "Credits Against Penalty" )
A. Use of Credit to Satisfy or Offset Penalty
Occasions have arisen in enforcement actions where
violators have offered to make expenditures for environmentally
beneficial purposes above and beyond expenditures made to comply
with all existing legal requirements, in lieu of paying penalties
to the treasury of the enforcing government. Courts have
sometimes accepted such payments, and in some circumstances
such arrangements are acceptable under this penalty policy.
For ease of reference ( but without characterizing them for
any other legal purposes--e.g., tax deductability ) such
alternative ways for a violator to satisfy the penalty instead
of paying the penalty sum to the federal, state, or local
treasury are referred to herein as "credits" against the
Examples of possible credits against a penalty
(1) construction and operation of approved
pollution control equipment in addition to that
required for compliance with existing requirements
which will achieve a significant further increment
of environmental benefit above all present
requirements of federal, state or local law.
(2) financial contributions to a private or
governmental body or agency for environmentally
approved uses--e.g., restoring fish and wildlife
resources, carrying out environmental studies or
research of a high priority need, improving the
ability of citizen or public interest groups
to monitor and assist in enforcing the law.
Credits, however, will not be given for expenditures
that would properly be required as part of
equitable relief being sought for the violations,
such as cleaning up the pollution, restoring the
areas affected, or reimbursing the government's
costs of doing so, unless these costs have been
included in the penalty sum. In all events, the
financial contributions must be acceptable to the
enforcing agency. Credits for high priority research
are desirable, but the research must be closely
scrutinized to insure it is beneficial from the
point of view of the enforcing agency, not merely
from the point of view of the violator.
B. Criteria for Acceptable Credits
In determining whether a proposed expenditure is
creditable against the penalty, the following criteria must
(1) The penalty sum itself will generally be
stated in the order, decree or judgment as
determined, before any credits are allowed, and
this amount should be clearly identified as a
(2) The expenditure proposed for credit must
be approved by enforcement officials in advance
of the entry of the decree, order, or judgment
in the case, must be clearly delineated therein, and
must be enforceable along with other elements of
the decree, e.g., subject to stipulated contempt
penalties or to the court's continued contempt authority
for the full length of time over which expenditures
are to be made.
(3) The item to be acquired by additional
expenditure for which credit is given must be described with
sufficient precision to bind the violator to the agreed
expenditure level. Where the credit is for the construction
and operation of additional pollution control equipment that
will bring about a greater degree of control than that required
by law ( and a considerable reduced discharge or emission level )
an agreement should be obtained from the violator that it will
treat the reduced discharge or emission, in all respects, as a
requirement of law for the period that it has agreed to operate
(4) The proposed expenditure must be clearly for environmental
benefits above and beyond the requirements of law. Interim
controls and expeditious compliance are required by law ( not
just waiting for the last day before the statutory deadline )
and are not appropriate for credit.
(5) Environmental laws require compliance at all times. Good
engineering practice, therefore, includes design of pollution
control systems with sufficient capacity and reliability to
provide a margin of safety to ensure such continuous
compliance. Expenditures for this margin of safety are to
assure compliance with the requirements of law and are not
eligible for credits.
- 17 -
(6) If in accomplishing the required level of
pollution control, the violator necessarily
will accomplish a higher level of control, there
can be no credit for such incidental benefit.
( e.g., to accomplish 80% removal of a pollutant,
the violator must necessarily purchase and operate
equipment which removes 85% of the pollutant. )
(7) Studies or research and development which are
necessary parts of compliance with legal requirements
are not eligible for credits ( e.t., studies
assessing the feasibility and costs of alternative
methods of compliance or prototype research and
development ). Research and development work
eligible for credit should be work from which
the public in general can benefit. To insure this,
the following measures should be required:
(a) the enforcing agency should insure
that adequate reporting procedures are
required. These procedures should include
an initial research and development plant,
periodic progress reports, and a comprehensive
final report that documents startup and the
first year of operations if a facility was
(b) The enforcement agency or its contractors
should be given the right to obtain first hand
information about the work by inspecting all
documents associated with it and by making
on-site inspections; and
(c) the source should agree that all domestic
patents, design rights and trade secrets that
result from the work will be placed in the
In most instances the research and development should
be related to the violation, but other instances can be considered
on a case-by-case basis. As stated above, credits for research
or studies will be closely scrutinized.
(9) Expenditures accepted for credit may only
be expenditures that the violator agrees it may
not later use ( or sell to anyone else to be
used ) as a credit against any other existing
provisions of environmental law ( such as emission
offset to allow the construction or modification
of a major stationary source in an area where
national air quality standards are not being
satisfied ) and the decree must so provide.
- 18 -
C. Constraints on Federal Enforcement Officials
With Respect to Payment of Penalties and Use
of Credits In Lieu of Penalties
The Air and Water Acts both authorize civil penalties
which are payable only to the United States Treasury. State
statutes may differ, but most provide for payment of the penalties
to the State Treasury.
Civil enforcement actions to enforce the Air or
Water Acts whether settled or litigated to conclusion will
end in orders, decrees, or judgments of a court. In such
actions there are limitations governing the positions to be
taken by federal enforcement officials. In settling cases,
federal enforcement officials may accept proposals for
expenditures as credits against penalties and recite them,
as well as the penalty sum, in the proposed consent decree,
but it must be kept in mind that such provisions as well as
the entire decree are subject to approval by the court.
With respect to credit for proposed contributions
to third parties, federal enforcement officials may not
agree with defendants as to such payments in lieu of paying
the penalty to the United States Treasury, for that prefers
a third party as recipient of the payment over the United
States, and prefers one third party potential recipient over
State and local enforcement officials may or may
not be as constrained with respect to proposing contributions
to third parties. Accordingly, the appropriateness of state
or local government officials proposing credits for contributions
to third parties must be governed by their own policies.
D. Discretionary Nature of Credit
Acceptance of a proposed credit is purely discretionary
with federal, state, and local enforcement officials. Enforcement
officials may, of course, insist on payment of the penalty into
the treasury. The statutes provide for penalties. Violators
have no "rights" to credits against these penalties.
E. Consideration of After-Tax Effects of Credit
The amount of the credit to be given for proposed
expenditures is governed by the rule that it must have the
same after-tax effect on the violator as payment of the penalty
sum would have. Since the penalty sum is immediately payable upon
entry of the order, decree or judgment, any proposed credit which
includes other than immediate payment of the full sum must be
- 19 -
reduced to an equivalent present value by standard accounting
methods. Where the expenditure proposed for credit is construction
and operation of additional pollution control equipment, the formula
for computing economic benefit of delayed compliance ( see paragraph
VII.B. above ) should be used to compute the present value of the
credit. It should be noted that this formula assumes that the
expenditures will receive normal tax treatment ( deductability or
credit against tax ) and accounts for that. The present value resulting
from use of this formula may, therefore, be used dollar-for-dollar
as credit against the penalty.
IX. Penalty Postponement or Forgiveness Based Upon Inability
In some instances, the indicated appropriate civil penalty
may be so severely disproportionate to the resources of the
owner or operator of the violating facility that its imposition
would cause the owner or operator very serious economic hardship.
In such unusual cases, enforcement officials may recommend to
the court that it postpone or forgive the otherwise appropriate
penalty, in part or in total as circumstances may indicate.
While the appropriate civil penalty amount may be postponed
or reduced in such circumstances, no such concession may be
made with respect to the cost of coming into compliance.
Except as the Air and Water Acts may themselves provide,
compliance is required in every case, regardless of cost and
regardless of the violator's financial situation.
Clearly the burden is on the violator to establish its
inability to pay. This burden can only be satisfied when
the violator has produced adequate evidence to establish
its financial condition and when the enforcement officials
involved have obtained a competent review of the violator's
financial condition. Mere statements of inability to pay
are not enough, and a violator making such a claim must be
willing to make full disclosure of its financial affairs to
enforcement officials and the court under circumstances that
assure such disclosure is accurate and complete.
If review by persons competent to assess the violator's
financial condition and prospects indicates that the violator's
resources would not permit it to finance its compliance, and
also pay the penalty, then, if adequate interest can be arranged,
the penalty may be paid over time.
- 20 -
If even payment over time is not possible, then the penalty may be
reduced to an amount commensurate with the resources of the violator
( taking into account the cost of compliance ).
In making a determination of the violator's ability to pay, it is
important to insure that the economic condition of the violator has not
been distorted by transactions with parent companies or shareholders or
by unusual or unconventional accounting practices. Where such
distortion has taken place, parent company and shareholder or other
owners' resources should be considered in determining whether or not the
violator is able to pay the civil penalty. In all cases, review of
financial information by persons competent in financial affairs should
X. Time Period for Application of Civil Penalty Policy
In general, this civil penalty policy would appropriately
apply to violations of the kinds covered which have occurred
since enactment of the Air Act in 1970 and the Water Act in 1972.
In determining the penalty sum, both with respect to the
statutory maximum and the minimum civil penalty, the period of
violation should begin with the earliest provable date of
violation and continue until the violator has installed and
operated the required equipment, made the required process change,
or converted to the complying fuel and thus brought itself into
Under the Water Act, this general rule will be applied
in this civil penalty policy, since authority for civil penalties
has existed since 1972. Consequently, the period covered and
the noncompliance period commence on the date when the schedule
requirements of a National Pollutant Discharge Elimination System
( NPDES ) permit were violated or on July 1, 1977, ( the statutory
deadline for best practicable control technology or secondary
treatment ), whichever is earlier. The period of noncompliance
ends when the violator has brought itself into full compliance
with statutory ( including permit ) requirements.
Under the Air Act, there are other considerations which
as a matter of policy, lead to application of a different rule
regarding the time period for application of this civil penalty
policy. The Air Act has had authority for criminal or civil
injunctive relief since 1970, but general authority for civil
penalties was not added until the amendments of 1977, which
took effect August 7, 1977. Whether, as a matter of law, civil
- 21 -
penalties are authorized in civil enforcement actions commenced
or amended after August 7, 1977, for violations occurring before
August 7, 1977, may be debated, but regardless of that, and
without conceding any issue of law, as a decision of policy, this
civil penalty policy will be applied by federal enforcement
officials only to those violations of the Air Act occurring
after August 7, 1977.
Accordingly, under the Air Act, for purposes of computing
the statutory maximum penalty, the period of noncompliance will
commence with August 7, 1977, or the date of earliest provable
violation, whichever is later. For purposes of computing
the minimum civil penalty, the period of noncompliance used will
also be as stated in the previous sentence, except that when
considering the sum to be included for the violator's recalcitrance,
defiance, or indifference to its legal obligations, the entire
record of the violator should be considered.
When determining a civil penalty under the Air Act a
special consideration also applies concerning the end date of
the period of noncompliance, but only with respect to the
element of the penalty based on removing the economic benefit
of delayed compliance.
As indicated earlier, Section 120 of the Air Act requires EPA to
assess and collect noncompliance penalties against certain categories of
stationary sources. The purpose of these administratively imposed
penalties is to recapture the economic value which a delay in compliance
may have to the source owner or operator. EPA will not issue any
notices of noncompliance or assess and collect any noncompliance
penalties prior to January 1, 1981. While the authority to collect
noncompliance penalties ( Section 120 ) is independent of and additional
to the authority to seek civil penalties ( Section 113 ), federal
enforcement officials will not seek double recovery of any portion of
the economic value attributable to delayed compliance. Accordingly,
when the period of noncompliance will extend beyond January 1, 1981, the
economic benefit element of the civil penalty should be based only upon
the noncompliance that will have occurred prior to that date.
Sources subject to judicial orders or that have negotiated
consent decrees with EPA, will not have their civil penalties
recalculated. Additionally, even if a consent decree has not
been approved by the court, the amount of the penalty need not be
recomputed if it is clear that agreement has been reached on all
material terms, including the penalty amount, and among all parties,
including EPA where it is a party. In all other settlements, the
economic benefit components of the civil penalty will be based
- 22 -
upon noncompliance which will occur up to January 1, 1981, or the
date for final compliance specified in the consent decree,
whichever is earlier. In this way the policy will provide an
incentive for expeditious and fair settlements, while honoring
the Agency's commitment not to seek double recovery of any
portion of the economic benefit element attributable to delayed
In all other respects, however, in Air Act cases, both when
computing the statutory maximum penalty and when determining
the minimum civil penalty ( or the minimum acceptable for
settlement ), the period of noncompliance continues until the
violator has brought itself into full compliance with the
requirements of the law.
Where state or local government civil penalty authority
existed prior to August 7, 1977, then that additional authority
might, of course, be used by the state to extend the period of
XI. Application of Civil Penalty Policy to Different Types of
Sources - Private, Public, Regulated Utilities, etc.
Congress, in enacting the civil penalty provisions of the Air
and Water Acts, and in the Air Act's ( Section 120 ) administratively
imposed noncompliance penalties, made no exemptions or distinctions
for classes or types of violators on the basis of ownership or
form of organization. This civil penalty policy seeks to carry out
Congress' fair, evenhanded, consistent approach, but recognizes
obstacles in a few situations.
A. Privately-Owned or Operated Sources ( other than
Regulated Utilities )
This penalty policy, as described above, applies in
full in civil enforcement actions against privately-owned and
operated sources other than regulated utilities. Extraordinary
situations, if any, can be handled on a case-by-case basis.
B. Publicly-Owned Utilities and Investor-Owned,
Publicly-owned utilities and investor-owned, regulated
utilities are to be treated equally.
Penalties will be sought from utilities whose violations
come within the scope of this policy. The focus of these penalties
will be on deterrence. That is, penalties should be in sufficient
amounts to deter future violations. Penalties should include
appropriate amounts for environmental harm or risk of harm caused
by the source's violations and recalcitrance or indifference of the
source to its legal obligations as well as any extraordinary
enforcement costs which the government has been forced to pay..
- 23 -
C. State and Municipal Facilities
In enforcement actions against state or municipal facilities,
including publicly-owned treatment works, this civil penalty policy
applies, except with respect to the penalty element for economic benefit
of delayed compliance.
Because state and municipal budgeting and financial decisions
are generally concerned with the allocation of tax derived public funds
to provision of public services, rather than the sale of goods or
services for profit, recovering the economic benefit of delayed
compliance is somewhat less applicable. In all such cases, the economic
benefit of delayed compliance should be calculated and considered as a
guide, but in determining the minimum civil penalty and the minimum
civil penalty acceptable for settlement, enforcement officials may
recommend that this factor be discounted or eliminated in cases where
they think it is appropriate. Because the other elements ( harm or risk;
recalcitrance; extraordinary enforcement expense ) are not always
susceptible to precise quantification, the appropriate minimum civil
penalty or the minimum civil penalty acceptable in settlement for such
facilities can only be determined on a case-by-case basis.
The only further guidance with respect to penalties
in such cases is as follows:
1. Enforcement officials should not excuse all
civil penalties except in extraordinary situations,
for that would create a double standard of more
lenient treatment for public agencies than private
individuals or firms.
2. Civil penalties for violations by state or
municipal facilities should be in sufficient amounts
to deter future violations, considering the elements
of this penalty policy, size of the facility, and the
duration of the violation, and in a municipal case, the
size and the resources of the municipality. To
achieve a deterrent effect, civil penalties for
violations by state or municipal facilities should
bear some relationship to the population served by
the violating facility and upon which the burden
of the penalty will fall.
D. Federal Facilities ( Other than Utilities )
Because of recent amendments to the Air Act and
the Water Act and the federal mechanism that exists for the
payment of penalties, federal facilities present a significantly
different problem from other violating sources. Accordingly,
guidance as to them will be provided elsewhere.
- 24 -
XII. Federal-State Cooperation in Implementing this Policy
As part of their efforts to enforce air and water pollution
laws, many federal, state, and local enforcement officials will
be suing this penalty policy. To assist in achieving consistency
in its application, a method of consultation among federal, state
and/or local enforcement officials has been devised to insure
that appropriate penalties will be sought in specific cases.
XIII. Effective Date of this Civil Penalty Policy
Many of the factors comprising this penalty policy have
been used by federal and state enforcement officials for years.
EPA's civil penalty policy has been more fully articulated over
the last year.
On June 3, 1977, guidance was provided to EPA regional
offices by the Office of Enforcement regarding criteria for
settlement of civil penalty aspects of enforcement cases under
the Water Act. This guidance included most of the factors now
more fully explained in this document, including, for example,
recovery of the economic benefit of delayed compliance, harm
to the public, and recalcitrance of the violator. EPA's intention
to take enforcement action against major source violators of
the Water Act and to seek civil penalties, including sums to take
away the economic benefit of delayed compliance, was announced
at a press conference on June 21, 1977, by Assistant Administrator
Thomas C. Jorling.
Further elaboration of this Water Act civil penalty policy
was provided by an Office of Enforcement memorandum to EPA
regional offices dated June 28, 1977.
The Air Act Amendments became effective on August 7, 1977,
including authority for civil penalties, and regions were
advised on September 2, 1977 that civil penalties should only
be sought for violations occurring or continuing after
August 7, 1977.
The first comprehensive version of this consolidated Air
and Water Act civil penalty policy was distributed to federal
and state enforcement officials on November 23, 1977, and took
effect on that date.
In addition to these general communications, this civil
penalty policy was explained at meetings and workshops of
federal, state, and local officials, at press conferences
and other gatherings at Washington, D.C., and in all regions
of the country in the last half of 1977 and early 1978. This
policy has had the benefit of comments, discussion and analysis
over many months.
- 25 -
The civil penalty policy ( including its predecessors as
explained above ) covers all Air and Water Act cases within
its scope, as follows:
. all Water Act cases not concluded prior
to June 3, 1977, and
. all Air Act cases not concluded prior to
August 7, 1977.
The application to Water Act cases concluded after
June 3, 1977 and Air Act cases concluded after August 7, 1977,
but prior to the date of this memorandum, is governed by
the guidance extant and in effect at the time the case was
concluded, including any case-by-case guidance given.
For purposes of this policy, a case was concluded if it
is clear that agreement had been reached on all material terms,
including penalties, and among all the parties, including EPA
where it was a party. Where the agreement had been reduced to
writing so as to memoralize its terms, it was clearly concluded.
Other situations will have to be individually considered.
Enforcement officials aware of civil enforcement actions
which they believe should not be included within the coverage
of this policy or its predecessors should present the facts
or circumstances for consideration.
XIV. Previous Civil Penalty Policy Superseded
This civil penalty policy supersedes all previous Air Act
stationary source and Water Act civil penalty policy, including
the following, but only to the extent that such previous policy
was inconsistent herewith:
(1) U.S. Environmental Protection Agency, Office
of Enforcement guidance letter entitled "Settlement
of Section 309(d) Enforcement Cases for Monetary Amounts"
dated June 3, 1977, signed by Stanley W. Legro, Assistant
Administrator for Enforcement.
(2) U.S. Environmental Protection Agency, Office
of Enforcement guidance letter entitled "Settlement
of Section 309(d) Enforcement Cases for Monetary
Amounts--Policy Background" dated June 28, 1977
signed by Stanley W. Legro, Assistant Administrator
- 26 -
(3) U.S. Environmental Protection Agency, Office
of Enforcement guidance letter entitled "Civil
Penalties under Section 113(b) of the Clean Air
Act Amendments of 1977," dated September 2, 1977,
signed by Richard D. Wilson, Acting Assistant
Administrator for Enforcement.
Jeffrey G. Miller
Acting Assistant Administrator for Enforcement
U.S. Environmental Protection Agency
Return to Enforcement Policies