03/25/87
Revised Clean Air Act Stationary Source Civil Penalty Policy
MAR 25 1987
MEMORANDUM
SUBJECT: Revised Clean Air Act Stationary Source Civil Penalty
Policy
FROM: Thomas L. Adams, Jr.
Assistant Administrator for Enforcement
and Compliance Monitoring
J. Craig Potter
Assistant Administrator
for Air and Radiation ( ANR-443 )
TO: Addressees
Attached is a copy of the revised Clean Air Act Stationary Source
Civil Penalty Policy. Thank you for the comments submitted on the draft.
The offices which submitted comments will receive a separate memo
detailing the disposition of individual suggestions. The policy is
effective immediately for all cases which have been filed or referred to
the Department of Justice in which the U.S. has not yet communicated a
settlement penalty amount to the source owner or operator.
Attachment
Addressees:
. Regional Administrators, Regions I-X
. Regional Counsels, Regions I-X
. Air and Waste Management Division Director
Region II
. Air Management Division Directors
Regions I, III, V, and IX
. Air, Pesticides, and Toxics Management Division Directors
Regions IV and VI
. Air and Toxics Division Directors
Regions VII, VIII, and X
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. Richard Mays
Senior Enforcement Counsel
. Thomas Gallagher, Director
NEIC
. Gerald Emison, OAQPS
. Rich Robinson, LEPB
. Bruce Rothrock, OCAPO
. David Buente, DOJ
. Bill Becker, STAPPA-ALAPCO
CLEAN AIR ACT
STATIONARY SOURCE
CIVIL PENALTY POLICY
March 25, 1987
Table of Contents
I. Introduction.................................................... 1
II. Preliminary Deterrence Amount................................... 3
A. Benefit Component.......................................... 3
1. Benefit from delayed costs............................ 4
2. Benefit from avoided costs............................ 4
3. Settling cases for an amount less than the
economic benefit...................................... 5
a. Benefit component involves insignificant
amount........................................... 5
b. Compelling public concerns....................... 6
c. Litigation practicalities........................ 7
d. Concurrent Section 120 action.................... 7
e. Offset for penalties paid to state of local
agencies......................................... 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........................ 11
3. Size of violator....................................... 11
III. Adjusting the Gravity Component................................. 12
A. Degree of willfulness or negligence......................... 13
B. Degree of cooperation....................................... 14
1. Prompt reporting of noncompliance
2. Prompt correction of environmental problems
C. History of noncompliance.................................... 15
D. Ability to pay.............................................. 17
E. Other unique factors........................................ 18
IV. Calculating a Penalty in Cases with More than one
Violation........................................................ 19
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V. Mitigation Projects............................................. 20
VI. Examples........................................................ 22
VII. Conclusion...................................................... 30
VIII. Appendices
I. Permit Penalty Policy
II. Vinyl Chloride Penalty Policy
III. Asbestos Penalty Policy
IV. VOC Penalty Policy
V. Air Civil Penalty Worksheet
Clean Air Act Stationary Source Penalty Policy
I. INTRODUCTION
Section 113(b) of the Clean Air Act, 42 U.S.C. 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. Since July 8, 1980, EPA has been assessing 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 a new Policy on Civil Penalties and a
Framework for Statute-Specific Approaches to Penalty Assessments. 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
Penalty Policy, which was issued on September 12, 1984. This policy
amends the September 12, 1984 policy, incorporating EPA's experience in
calculating and negotiating penalties during the past two years.
This document provides guidance to be used in calculating the civil
penalty EPA will require in settlement of enforcement actions taken
pursuant to Title I of the Clean Air Act. It reflects the considerations
enumerated in Section 113(b) of the Clean Air Act. It applies only to
initial enforcement actions in district court and is not meant to control
the penalty amount requested in 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.
The required use of this guidance is also limited to proceeds to trial,
EPA attorneys are not bound by this document, except the policy on
mitigation projects in Section IV. In a trial, government attorneys may
find it relevant and helpful to introduce a penalty calculation under this
policy, as a point of reference in a demand for appropriate penalties.
However, once a case goes to trial, they should ask for 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 kinds 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 permit requirements. Appendix II deals with the gravity component for
vinyl chloride violations. Appendix III covers the benefit and gravity
components for asbestos demolition and renovation violations. ( The
general policy applies to other NESHAPs violations. ) The general policy
applies to violations of volatile organic compound regulations where the
compliance plan involves installation of control equipment. Separate
guidance is provided for VOC violators which comply through reformulation
( Appendix IV ).
This penalty policy contains two sections. The first section
describes how to achieve the goal of deterrence through penalty components
that 1) remove the economic benefit of noncompliance and 2) reflect the
gravity of the violation. The second section provides adjustment factors
so that both a fair and equitable penalty will result and there will be a
swift resolution to the environmental problem. Adjustment factors apply
only to the gravity component. Except in extraordinary circumstances, as
described below, the lowest possible settlement penalty will be the
calculated economic benefit of noncompliance.
This guidance tells how to calculate minimum settlement figures for
the internal use of Agency negotiators. Consequently, the penalty figures
in negotiations should not necessarily be as low as the minimum figure.
The final settlement amount should go no lower than the calculated minimum
unless the reasons for the deviation are proper and documented.
All penalties paid pursuant to this penalty policy are not deductible
for federal tax purposes, and should be specifically delineated as such.
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
which have been filed in court or referred to the Department of Justice in
which a penalty offer has not been transmitted to the opposing party.
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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 benefits
resulting from noncompliance. In addition, it should include an amount
beyond removal of economic benefit to reflect the seriousness of the
violation. That portion of the penalty which removes the economic benefit
of noncompliance is referred to as the "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 of the document provides guidelines for calculating the
benefit component and the gravity component. It will also discuss the
limited circumstances which justify settling for less than the benefit
component. The uses of the preliminary deterrence amount will be
explained in subsequent portions of this document.
A. THE BENEFIT COMPONENT
In order to ensure that penalties remove 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 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 benefit component
for those violations where the benefit of noncompliance results from
factors other than cost savings. This section concludes with a discussion
of the proper use of the benefit component in developing penalty figures
and in settlement negotiations.
In enforcement actions against nonprofit public entities such as
municipalities or publicly-owned utilities, the economic benefit should be
calculated. The full economic benefit component need not be automatically
used in computing the penalty, however. Treatment of the economic benefit
component in determining appropriate penalties in actions against
municipalities and publicly-owned utilities is discussed further in
Section II.A.3.b of this policy dealing with settling cases for an amount
less than the economic benefit because of compelling public concerns.
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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 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 lessen
pollution.
o Testing violations, where the testing still must be
done to demonstrate achieved compliance.
o Application of 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 Title I of the Clean Air Act. BEN is a
computer program available to the Regions for performing the analysis.
2. Benefit from avoided costs
Many kinds of violations enable a violator to avoid permanently
certain costs associated with compliance. These include cost savings for:
o Operation and maintenance of equipment that the violator failed
to install.
o Failure to properly operate and maintain existing control
equipment ( or process equipment if it affects pollution
control ).
o Failure to employ a sufficient number of adequately
trained staff.
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o Failure to establish or follow precautionary methods
required by regulations or permits.
o Process, operational, or maintenance savings from
removing pollution equipment.
o Failure to conduct testing which was once necessary
but is not any longer.
o Failure to install, operate, and maintain monitoring
equipment.
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.
3. Settling cases for an amount less than the economic benefit
As noted above, settling for an amount which does not remove 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 settle for less than this
amount. There are three general areas ( described below ) where settling
for less than the economic benefit may be appropriate. However, in any
individual case where the Agency decides to settle for less than the
economic benefit, the litigation team 2/ must detail those reasons int
he case file and in any memoranda accompanying the settlement.
2/ The litigation team consists of the attorneys assigned to the case
from EPA Headquarters, the EPA Region, the Department of Justice
Environmental Enforcement Section, and the U.S. Attorney's Office.
The recommendation of the litigation team must be unanimous. Any
of the litigation team members may defer to the other members of
the team. If a unanimous position cannot be reached, the matter
should be escalated and a decision made by EPA and Department of
Justice managers, as required.
Following are circumstances in which EPA can settle for less than the
economic benefit:
a. Benefit component involves insignificant amount
It is clear that assessing the benefit component and negotiating over
it will often represent a substantial commitment of resources. Such a
commitment of resources may not be warranted in cases where the magnitude
of the benefit component is not likely to be significant, ( e.g., not
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likely to have a substantial financial impact on the violator. ) For this
reason, the litigation team has the discretion not to seek the benefit
component where it appears that the amount of that component is likely to
be 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 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 case
development team should insist on including the benefit
component in order to develop an adequate penalty.
In certain classes of violations, the penalty will contain no economic
benefit component. Most of these classes of violations are handled in the
appendices to this penalty policy. However, in a case of a non-recurring
operation and maintenance violation which is being handled under this
policy, the most appropriate way to settle the matter is often a small
penalty. It makes little sense to assess in detail the economic benefit
for each individual violation because the benefit is likely to be so
small. Therefore, for these violations, the economic benefit component
need not be computed.
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 settling a
case for less than the benefit component. This may be done only if it is
absolutely necessary to preserve the countervailing public interests.
Such settlements might be appropriate where the following circumstances
occur:
o Removal of the economic benefit 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 should be fully explored before resorting
to this option. Otherwise, the Agency will give the
perception that shirking one's environmental
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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
there is a likelihood of continued harmful noncompliance.
o In enforcement actions against nonprofit public entities
such as municipalities and publicly-owned utilities,
assessment of the civil penalty threatens to disrupt
continued provision of essential public services.
c. Litigation practicalities
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 a
day ) multiplied by the number of days of violation for each violation.
Note that for purposes of computing both the statutory maximum penalty and
the minimum settlement amount, the period of noncompliance begins with the
earliest provable day of violation and ends with the projected date of
compliance. The Agency realizes that in certain cases, it is highly
unlikely the EPA will be able to recover the full economic benefit in
litigation. This may be due to applicable precedent, competing public
interest considerations, or the specific facts, equities, evidentiary
issues or legal problems pertaining to a particular case. For example,
although a source is in violation of an applicable standard and is, as
such, legally liable, it could have been working with a state agency in
good faith to pursue a State Implementation Plan ( SIP ) revision, being
told by the State that it would get a SIP revision. Then, the source
learns that EPA will not approve the SIP revision. In such a situation it
may be unrealistic to expect EPA to obtain a penalty settlement which it
could not achieve through litigation. The litigation team may pursue a
lower penalty amount after receiving the approval of the Associate
Enforcement Counsel for Air.
d. Concurrent Section 120 action
EPA will not usually seek to recover the economic benefit of
noncompliance from one violation under both Section 113 and Section 120.
Therefore, if a Section 120 action is pending or has been concluded
against a source for a particular violation and a Section 113 penalty
settlement amount is being calculated for that same violation, the
economic benefit component need not be included for the period from the
date of issuance of the Section 120 Notice of Noncompliance to the date of
compliance. Economic benefit can be assessed from the date of the
earliest provable violation to the date the NON was issued.
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In these cases, EPA should not automatically settle the Section 113
action for less than the economic benefit. The statute allows dual
recovery for the economic benefit, and so each case must be considered on
its individual merits. Thus the Agency may settle for less than the
economic benefit in the Section 113 action if the litigation team
determines such a settlement equitable and justifiable.
e. Offset for penalties paid to state or local agencies
for the same violation
While EPA will not automatically subtract any penalty amount paid
by a source to a state or local Agency for the same violation that is the
basis for EPA's enforcement action, EPA may do so if circumstances
suggest that it is appropriate.
B. THE GRAVITY COMPONENT
As noted above, the Policy on Civil Penalties specifies that a
penalty, to achieve deterrence, should remove any economic benefit of
noncompliance, and should also include an amount reflecting the
seriousness of the violation. Section 113(b) instructs EPA to take these
factors into consideration in setting the appropriate penalty amount.
Factors reflecting the seriousness of the violation are referred to as the
"gravity component." The purpose of this section of the document is to
establish an approach to quantifying the gravity component.
Assigning a dollar figure to represent the gravity of violation is a
process which must, of necessity, involve the consideration of a variety
of factors and circumstances. Nevertheless, the relative seriousness of
different violations can be fairly accurately determined in most cases.
This can be accomplished by reference to the goals of the Clean Air Act to
protect and enhance the quality of the nation's air resources and the
facts of each particular violation. Thus, 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. The objective factors are designed to reflect
considerations listed in Section 113(b) of the Clean Air Act as those
appropriate for the court in determining the amount of a civil penalty.
The considerations set out in the statute are: size of the business,
economic impact of the penalty on the business, and seriousness of the
violation ( as well as any other factors. )
The specific objective factors in this civil penalty policy designed
to measure the seriousness of the violation and reflecting the
considerations of the Clean Air Act are as follows:
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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 or federal regulation.
o Importance to the regulatory scheme: This factor
focuses on the importance of the requirement to
achieving the goal of the Clean Air Act and its
implementing regulations. For example, the NSPS
regulations require owners and operators of new
sources to do 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
requirements.
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 factor listed above, actual or
possible harm arising from a violation, is a complex matter. For purposes
of ranking violations according to seriousness, it is possible to
distinguish violations within a category on the basis of certain
considerations, including the following:
o Amount of pollutant: Adjustments for the amount
of the pollutant are appropriate.
o Sensitivity of the environment: This factor focuses
on the location where the violation was committed.
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 highly
toxic pollutants are more serious and should result in
relatively larger penalties.
o The length of time a violation continues: The longer
a violation continues uncorrected, the greater is the
risk of harm.
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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:
.
0-30% above standard $4,000
30-60% " " 8,000
. 60-90% " " 12,000
90-120% " " 16,000
120-150% " " 20,000
.
150-180% " " 24,000
180-210% " " 28,000
. 210-240% " " 32,000
240-270% " " 36,000
270-300% " " 40,000
.
over 300% " " 40,000 + 4,000 for
each 30% increment
above standard
This factor should be used only for emission violations, and not
procedural violations. Normally 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 the highest documented
level that EPA determines to be representative should be used.
In addition, for sources with high allowable emission rates, the
litigation team may increase this factor based on the gross volume of
emissions, if that volume alone represents a particular threat to public
health or welfare.
b. Toxicity of the pollutant: Violations of NESHAPs regulations not
handled by separate guidance or violations involving other pollutants for
which EPA has announced that it intends to promulgate a NESHAP: $15,000
c. Sensitivity of environment ( for SIP and NSPS cases only )
i. Primary non-attainment area $15,000
ii. Secondary nonattainment area 10,000
iii. Attainment area Class I $ 5,000
d. Length of time of violation
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To determine the length of time of violation, violations should be
assumed to be continuous from the first provable date of violation until
the date of the compliance demonstration if there have been no significant
process or operational changes. If the source has affirmative evidence,
such as Continuous Emission Monitoring data, to show that the violation
was not continuous, appropriate adjustments should be made.
0-6 mo. $ 2,000
7-12 mo. 4,000
13-18 mo. 7,000
19-24 mo. 10,000
25-30 mo. 14,000
31-36 mo. 18,000
37-42 mo. 23,000
43-48 mo. 28,000
49-54 mo. 34,000
55-60 mo. 42,000
2. Importance to regulatory scheme
The following violations are so important to the regulatory
scheme that additional penalties must ensue:
Monitoring, record keeping and reporting requirement
violations: $15,000
( If there is more than one reporting violation, multiply
the number of violations by $15,000. )
Operation and maintenance practices which result in
violations. $15,000
23. Size of violator
Net current assets:
.
under $100,000: $1,000
$100,001 - $1,000,000: $2,000
. $ 1,000,001 - $5,000,000: $8,000
$ 5,000,001 - $20,000,000: $12,000
$20,000,000 - $40,000,000: $20,000
.
$41,000,000 - $70,000,000: $40,000
. over $70,000,000: $65,000
The process by which the gravity component was computed must be
memorialized in the case file. Combining the benefit component with the
gravity component yields the preliminary deterrence amount.
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III. 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 benefit component
discussed above in a civil penalty assessment. This approach would
prevent violators from benefiting 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 treat
similarly-situated violators similarly. This is accomplished by
identifying many of the legitimate differences between cases and providing
guidelines for how to adjust the preliminary deterrence amount when those
facts occur. The application of these adjustments to the preliminary
deterrence amount prior to the commencement of negotiation yields the
initial minimum penalty settlement amount. During the course of
negotiation, the litigation team may further adjust this figure based on
new information learned during negotiations to yield the adjusted minimum
penalty amount.
Nevertheless, it should be noted that equitable treatment is a two-
edged sword. While it means that a particular violator will receive no
higher penalty than a similarly situated violator, it also means that the
penalty will be no lower.
The purpose of this section is to establish additional adjustment
factors to promote flexibility while maintaining national consistency.
This section sets our guidelines for adjusting the gravity component to
account for some factors that frequently distinguish different cases.
Those factors are: degree of willfulness or negligence, degree of
cooperation, history of noncompliance, ability to pay, and other unique
factors. 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 based on these factors.
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For each factor there are three suggested ranges of adjustment. The
first, a 0-30% adjustment of the gravity component, is within the absolute
discretion of the litigation team. The second, a 31-50% adjustment, is
only appropriate in unusual circumstances. The third range, beyond 50%
and up to 100% adjustment is only appropriate in rare circumstances.
Adjustments in the latter two ranges, unusual and rare circumstances, will
be subject to scrutiny in any performance audit. The litigation team may
wish to reevaluate these adjustment factors as the negotiations progress.
This allows the team to reconsider evidence used as a basis for the
penalty in light of new information.
The total gravity component can be adjusted upward or downward by as
much as 50% at the absolute discretion of the litigation team based on one
or a combination of factors. However, if the full 50% adjustment is made
by the litigation team based on less than all of the factors, no further
adjustment to the gravity component may be made based on these adjustment
factors within the absolute discretion of the litigation team. For
example, if the litigation team decides to lower the gravity component 30%
based on a source's extremely cooperative attitude, and 20% based on
ability to pay, there may be no further adjustment to the gravity
component at the absolute discretion of the litigation team. The
litigation team may, however, make a larger adjustment in an unusual or
rare circumstance if the reasons for doing so are documented in the
litigation file and are approved by the Associate Enforcement Counsel for
Air. A detailed discussion of these factors follows.
A. DEGREE OF WILLFULNESS OR NEGLIGENCE
This factor should be used only to raise a penalty. Although 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, this does not render the violator's willfulness or negligence
irrelevant in assessing equitable considerations to arrive at 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:
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o How much 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 Whether 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 downward.
Such adjustments are mandated by both the goals of equitable treatment and
swift resolution of environmental problems. There are two areas where
this factor is relevant.
1. Prompt reporting of noncompliance
Cooperation can be manifested by the violator promptly reporting its
noncompliance. Assuming such self-reporting is not required by law, such
behavior should result in the mitigation of the penalty.
2. Prompt correction of environmental problems
The Agency should provide incentives for the violator to commit to
correcting the problem promptly. This correction must take place before
litigation is begun, except in extraordinary circumstances. 3/
3/ For the purpose of this document, litigation is deemed to begin when
an Assistant United States Attorney files a complaint in court.
But since these incentives must be consistent with deterrence, they must
be used judiciously.
The circumstances under which the penalty is reduced depend on the
type of violation involved and the source's response to the problem. A
straightforward reduction in the amount of the gravity component of the
penalty is most appropriate in those cases where either: 1) the
environmental problem is actually corrected prior to initiating
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litigation, or 2) ideally, immediately upon discovery of the violation.
Under this approach, the reduction typically should be a substantial
portion of the unadjusted gravity component.
In general, the earlier the violator instituted corrective action
after discovery of the violation and the more complete the corrective
action instituted, the larger the penalty reduction EPA will consider.
Swift resolution of environmental problems will be encouraged if the
violator clearly sees that it will be financially disadvantageous for the
violator to litigate without remedying noncompliance.
The Clean Air Act was conceived by Congress as a technology-forcing
statute, and so unavailability of applicable control technology is not an
excuse for not complying with emission requirements. If appropriate
pollution control equipment is not readily available on the commercial
market, a source owner or operator must enlist skilled engineers to devise
new kinds of pollution control equipment that will do the job. The
uniqueness and difficulty presented by the requirement to control the
emissions from a particular source, however, will affect the size of
penalty the Agency deems appropriate. If a source owner has been spending
money and effort in a good faith, documentable program to install
equipment that will control the source's air pollution but the source
remains out of compliance even after these efforts, the litigation team
may decide to reduce the gravity component. The technological efforts
chosen for compliance must be viewed as having a good chance for
compliance in order to have this factor count toward mitigation.
Ordinarily, a contractor's failure to perform as required by the
contract is not considered to be a factor out of a source's control. A
source must bear the responsibility of selecting a contractor reliable
enough to perform the required tasks satisfactorily.
In all instances, the facts and rationale justifying the penalty
reduction must be recorded in the case file and included in any memoranda
accompanying settlement.
C. HISTORY OF NONCOMPLIANCE
Where a party has violated a similar environmental requirement before,
this is usually clear evidence 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, this is
an indication that the penalty should be raised.
- 16 -
In deciding how large these adjustments should be, the case
development team should consider the following points:
o How similar the previous violation was.
o How recent the previous violation was.
o The number of previous violations.
o Violator's response to previous violation(s) in regard
to correction of the previous problem and attempts to
avoid repetition.
Nevertheless 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 that indicate a
"similar violation" was committed are as follows:
o The same permit was violated.
o The same substance was involved.
o The same process points were the source of the violation.
o The same statutory or regulatory provision was violated.
o A similar act or omission ( e.g. same kind of emission
limitation from same piece of equipment. )
For purposes of this section, a "prior violation" includes any act or
omission for which a formal state, local, or federal enforcement response
has occurred ( e.g., notice of violation, warning letter, complaint,
consent decree, consent agreement, or final order ). It also includes any
act or omission for which the violator has previously been given written
notification, however informal, that the Agency believes a violation
exists.
In the case of large corporations with many divisions or wholly-owned
subsidiaries, it is sometimes difficult to determine whether a previous
instance of noncompliance 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
organizational unit had or reasonably should have had control or oversight
responsibility for violative conduct. In those cases where there is a
close relationship between defendants, the violation will be considered
part of the compliance history.
- 17 -
In general, the litigation team should begin with the assumption that
if the same corporation was involved, the adjustments for history of
noncompliance should apply. In addition, the team should be wary of a
party changing operators 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 probably apply unless the violator can
demonstrate that the other violating corporate facilities are under
totally independent control.
D. 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 arriving at a specific final penalty
assessment. ( With regard to the Benefit Component, this consideration is
given under Section II.A.3.b. ) At the same time, it is important that the
regulated community not see 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 financial ability adjustment will normally require a significant
amount of financial information specific to the violator. The litigation
team should assess this factor after commencement of negotiation with the
source if the source raises it as an issue.
The burden to demonstrate inability to pay, as with the burden of
demonstrating the presence of any 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 ( NEIC ) has developed the capability to
assist the Regions in determining a firm's ability to pay. This is done
through the computer program, ABEL.
- 18 -
When it is determined that a violator cannot afford the penalty
prescribed by this policy, a next step is to consider a delayed payment
schedule. 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 three
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 made a part of the formal
enforcement file and the memorandum accompanying the settlement. 4/
4/ If a firm fails to pay the agreed-to penalty in a judicial final
order, then the Agency must follow the Federal Claims Collection
Act, 31 U.S.C. Section 3701 et seq., procedures for obtaining the
penalty amount.
Consider joinder of the 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
prerequisites of Section 113 of the Clean Air Act have been met --
issuance of an NOV to the person and documentation of violation thirty
days after NOV issuance. The circumstances where individual joinder is
appropriate should be considered to be present only when discovery shows
that stockholders have used the corporate form as a subterfuge to avoid
personal liability.
Regardless of the Agency's determination of an appropriate penalty
amount to pursue based on ability to pay considerations, the violator is
still expected to comply with the law.
E. OTHER UNIQUE FACTORS
The litigation team has absolute discretion to adjust penalties up or
down for factors not anticipated here. Adjustments beyond the absolute
discretion range in this category, as in other adjustment categories, must
be approved by the Associate Enforcement Counsel for Air. In addition,
they will be allowed primarily for compelling public policy concerns of
litigation practicalities as discussed in Section II.A.3.c., above. The
rationale for the reduction must be expressed in writing in the case file
and in any memoranda accompanying the settlement.
- 19 -
IV. CALCULATING A PENALTY IN CASES WITH MORE THAN ONE VIOLATION
EPA often takes an enforcement action against a stationary source for
more than one violation of the Clean Air Act. If the violations are
emission violations and the result of separate activities, then separate
penalties should be calculated according to the method set forth in this
policy above and added together to arrive at the total minimum settlement
amount.
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
VOC in violation of the SIP VOC emission limit. The penalty for the
particulate violation should be calculated using 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 calculated using all the factors in the
penalty policy. After the particulate violation penalty is determined,
the VOC violation should calculated in the same manner. The two penalties
would then be added together to arrive at the total penalty.
This penalty calculation should be contrasted with the case where
there is more than one violation, but only one is an emission violation
and the others are procedural violations related in some way to the
emission violation. For example, consider a case where, pursuant to
Section 114, EPA issues a request for information about SO2 emissions to a
source which has a coal-burning boiler. The source does not respond.
Four 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. Six months later, EPA inspects the source and determines that
the source is violating the SIP SO2 emission limit.
In this case, separate economic benefits should be calculated, if
applicable. Thus, if the source enjoyed any 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 SO2 emission
violation should be determined. In determining the gravity component, the
penalty should be calculated as follows:
- 20 -
1. Actual or possible harm
a. level of violation - use only emission violation
b. toxicity of pollutant - use only emission violation
c. sensitivity of environment - use only emission
violation
d. length of time of violation
separate calculation of time for each violation.
Section 114 violation continues to run even after
Section 113(a) order is issued until these requirements
are satisfied.
2. Importance to regulatory scheme
Reporting requirements:
2 reporting requirement violations at $15,000 each
Operation and maintenance violations - if SO2 emission
violation is the result of O&M problems, add $15,000.
3. Size of violator
One figure based on the source's assets.
V. MITIGATION PROJECTS IN SETTLEMENT OF GOVERNMENT CLAIMS
The United States of America has entertained, as part of Clean Air Act
enforcement case settlements in the past, defendants' proposals to
mitigate cash penalty demands in exchange for the performance of
environmentally beneficial projects. This practice of giving
environmental "credits" is expressly discouraged in all cases, and will be
considered a viable settlement option only in exceptional circumstances.
In situations where they are allowed, the acceptance of mitigation
projects for environmentally beneficial expenditures is subject to certain
conditions. The Agency has designed these conditions to prevent the abuse
of this procedure.
Most of the conditions below applied in the past, but some are new. All
of these conditions must be met before mitigation projects may be
accepted:
(1) The activity must be initiated in addition to all regulatory
compliance obligations.
The project may not be an activity which is otherwise required by law.
The project may not be a substitute for full compliance -- it must be
designed to provide an environmental benefit beyond the benefits of full
compliance.
- 21 -
(2) The activity is most likely to be an acceptable basis for
mitigating penalties if it closely addresses the environmental effects of
the defendant's violation.
Preferably, the project will address the risk or harm caused by the
violations at issue. In general, qualifying activities must provide a
discernible response to the perceptible risk or harm caused by defendant's
violations which are the focus of the government's enforcement action.
(3) The defendant's cost of undertaking the activity, taking into
account the tax benefits that accrue, must be commensurate with the degree
of mitigation.
In order to attain the deterrent objectives of the civil penalty
policy, the amount of the penalty mitigation must reflect the actual cost
to the defendant. With consideration of tax benefits, the actual cost of
the project may exceed the value of the mitigation.
(4) The activity must demonstrate a good-faith commitment to
statutory compliance.
One test of good faith is the degree to which the defendant takes the
initiative to identify and commence specific, potential mitigation
projects. In addition, the project must be primarily designed to benefit
the environment rather than to benefit the defendant.
(5) Mitigation based on the defendant's activity must not detract
significantly from the general deterrent effect of the settlement as a
whole.
The government should continue to consider mitigation projects as the
exception rather than the rule. Efforts should be made to eliminate any
potential perception by the regulated community that the government lacks
the resolve to impose significant penalties for substantial violations.
The government should seek penalties in conjunction with mitigation
activities which deter both the specific defendant and also the entire
regulated community. Accordingly, every settlement should include a
substantial monetary penalty component.
(6) Judicially-enforceable consent decrees must meet the statutory
and public interest criteria for consent decrees and cannot contain
provisions which would be beyond the power of the court to order.
A proposed consent decree should not include provisions which would be
beyond the power of the court to order under the particular statute which
had been violated. Additional guidance on the appropriate scope of relief
might be found in the statute, the legislative history or the implementing
regulations.
- 22 -
The Agency should exercise case-by-case judgment in deciding whether
to accept a mitigation project based upon the above criteria and, in
addition, based upon consideration of the difficulty of monitoring the
implementation of the proposed project in light of the anticipated
benefits of the project.
VI. EXAMPLES
Example 1:
I. Facts:
Company A runs its manufacturing operations with power produced by its
own coal-fired 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, 1983, and the SO2 emission rate was 2.53 lbs. per million
B.T.U. A NOV was issued for the SO2 violations on April 10, 1983. EPA
again inspected Company A on June 2, 1983 and found the SO2 emission rate
to be unchanged, in excess of the allowable emission rate. 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, 1981 for SO2 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 primary
nonattainment area. Company A has net current assets of $760,000.
II. Computation of penalty
A. Economic benefit component
EPA used the BEN computer model in the standard mode. To use this
computer model, the Region had to supply values for each of six
parameters. These are:
1. Initial Capital Investment
2. Initial Annual O&M Expense
3. First Month of Noncompliance
4. Compliance Date
5. Penalty Payment Date
6. One-Time Nondepreciable Expenditure
- 23 -
If the company had provided EPA with data specific to it, EPA could
have input additional parameters. However, since the company did not do
so, EPA used standard values for the following parameters:
1. Investment Tax Credit Rate
2. Income Tax Rate
3. Inflation Rate
4. Discount Rate
5. Useful Life
6. Amount Financed with Industrial Development Bonds
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 90-120%
above standard $16,000
b. Toxicity of pollutant: No penalty for this
component.
c. Sensitivity of the environment: $15,000
d. Length of time of violation.
Measured from state order issuance on September 1,
1981 to compliance date in consent decree,
September 1, 1985. ( If consent decree or
judgment order is filed at a later date, this
element, as well as elements in economic
benefit component must be recomputed. )
48 mon. - $28,000
2. Importance to regulatory scheme.
No penalty for this component because violation is
not reporting requirement or operation & maintenance
problem.
3. Net current assets: $2,000.
All the parts of the gravity component are now added to yield the
preliminary deterrence amount:
- 24 -
$16,000
15,000
28,000
61,000
_______
. $61,000
This is added to the economic benefit component:
$243,500 economic benefit
+61,000 gravity
________
. $304,500
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 is increased 20%.
20% of $61,000 = $12,200
2. Degree of Cooperation
No adjustments were made in the category because
Company A was not cooperative.
3. History of noncompliance
Gravity component increased 20% here because Company
A violated state order issued for same violation.
20% of $61,000 = $12,200.
4. Ability to pay
No adjustment here because Company A did not provide
EPA with financial information indicating inability
to pay.
Since each gravity factor was adjusted by no more
than 30% and the total gravity component by no more
than 50%, this adjustment can be made at the absolute
discretion of the litigation team.
Initial penalty figure: $291,500 initial penalty
+24,400 adjustments
________
$315,900
Company A paid the U.S. Treasury $315,900.
- 25 -
Example 2:
I. Facts:
Company B produces charcoal from wood waste at its plant, located in
an attainment Class II area. Company B is a major source of particulate
emissions. It has current net assets of $74,000. Regulations in the
State Implementation Plan limit particulate emissions to 3.39 lbs. per
hour. Company B installed a fume incinerator at its plant in 1978. On
November 1, 1982, EPA inspected Company B and found the particulate
emission rate to be 4.27 lbs. per hour. EPA issued an NOV on January 5,
1983. An EPA inspection on March 10, 1983, showed that Company B
continued to be in violation.
Company B had discovered, when it initially began to try to control
the emissions at its charcoal plant in 1975, that no appropriate control
equipment was available for sale anywhere. It had to design and build all
the pollution control equipment it needed to install. Company B began
doing research and planning and testing various configurations of fume
incinerators to try to find the solution to its particulate emission
problem. In 1978, Company B finally believed it had come up with an
effective control system and that it was in compliance with state
regulations. In 1983, off-the-shelf technology to control emissions from
Company B's charcoal operation still did not exist. As soon as the
Company received its NOV, however, it hired engineering consultants to
design a more effective duct system for the fume incinerator. These
consultants were successful in designing a system which was installed in
January, 1984. Company B performed an EPA-observed stack test on February
1, 1984 which showed a particulate emission rate of 3.05 lbs. per hour.
Company B has been in a very strained financial situation for the last
three years. The company's management has been considering filing for
Chapter 11 bankruptcy protection. Company B has not made a profit for the
past two years.
II. Computation of penalty
A. Benefit component
The economic benefit was calculated by running the
BEN computer model ( See Example 1 for inputs. )
The economic benefit derived from the computer
calculation was: $43,480.
- 26 -
B. Gravity component
1. Actual or possible harm
a. Amount above the standard:
4.27 lbs./hr. is approximately 20% above 3.39
lbs./hr. so this component is $4,000
b. Toxicity of pollutants: No penalty here.
c. Sensitivity of environment; Class II - attainment
area $2,000
d. Length of time of violation
November 1, 1982 - February 1, 1984: 15 months
of violation: $7,000
2. Importance to regulatory scheme
No penalty here because violation not connected
with operation and maintenance practices or
reporting requirements
3. Size of violator
Net current assets - $74,000 = $1,000
Total gravity factors: $14,000;
Preliminary Deterrence Amount
Preliminary Deterrence Amount 43,480
+14,000
_______
$57,380
C. Flexibility - Adjustment Factors
1. Degree of willfulness or negligence
No adjustment upward here for willfulness or negligence.
2. Degree of Cooperation
Because Company B was so prompt in correcting its
problem once it received the NOV, unlike Company
A, and because of Company B's good efforts to
comply, the gravity component was mitigated by
50%.
50% of $14,000 = $7,000
- 27 -
$ 14,000
-7,000
________
$ 7,000
3. History of noncompliance
No adjustment here because Company B had no previous
history of noncompliance.
4. Ability to Pay
Because of Company B's financial situation, the
gravity component was reduced 50%.
$ 7,000
-7,000
_______
$ 0
The gravity component, in this case, is reduced
to 0.
Because the litigation team wanted to mitigate the gravity component
by more than 30%, the EPA headquarters attorney discussed the facts of the
case with the Associate Enforcement Counsel for Air and obtained the AEC's
concurrence on this mitigation before settlement negotiations began.
The initial penalty figure presented at settlement negotiation was
$43,480. If Company B raises its ability to pay during settlement
negotiations, the case development team will consider it at that time in
the context of Section II.A.3.b. That adjustment factor has already been
given full consideration with regard to the Gravity Component.
Example 3:
I. Facts:
Company C, located in a primary nonattainment area, commenced
construction in January 1982. It began its operations in April 1983. It
runs a coal-fired boiler subject to the NSPS regulations for fossil fuel
fired steam generators ( 40 CFR Part 60 Subpart D ). The boiler is a major
source of particulates and SO2. Subpart D requires that boiler emissions
of SO2 not exceed 1.2 lbs. per million BTU. General NSPS regulations
require that a source owner or operator subject to NSPS fulfill certain
notification and recordkeeping functions ( 40 CFR Section 60.7 ), conduct
performance tests ( 40 CFR Section 60.8 ) and conduct specified continuous
monitoring ( 40 CFR Section 60.13 ).
- 28 -
Company C is believed to be in compliance for SO2 based on coal
sampling data and the fact that it has installed the proper pollution
control equipment. However, although Section 60.8 requires Company C to
test within 180 days of startup, or by October 1983, the company had not
conducted performance tests as of September 1, 1984.
Company C also failed to notify EPA of the date it commenced
construction within 30 days after such date ( February, 1982 ) or the date
of anticipated startup between 30-60 days prior to such date ( March, 1983 )
or the date of actual startup within 15 days after such date ( April, 1983 )
( 40 CFR Section 60.7 ). Continuous emission monitoring equipment was
installed, but continuous monitoring certification has never been done,
and so the requirement that it be done within 30 days after performance
testing ( November, 1983 ) was not fulfilled either. Company C is not
sending EPA CEM reports.
Company C ignored two letters from EPA, one dated November, 1983 and
one dated March, 1984 informing it that it was subject to NSPS
requirements. It did negotiate with EPA after the complaint was filed on
September 1, 1984, and agreed to a consent decree requiring all testing
and reporting to be done by December 1, 1984. Company C has assets of
$7,000,000.
II. Computation of penalty
A. Benefit component
The Region determined that the economic benefit component was very
likely to be less than $5,000. Therefore, it was not calculated.
B. Gravity component
1. Actual or possible harm
a. Amount of pollutant: not an emission violation
- 0.
b. Toxicity of pollutant: No penalty for this
component
c. Sensitivity of the environment: $15,000
d. Length of time of violation
1) Performance testing: October, 1983 -
December 1984: 14 months
- 29 -
2) Failure to report commencement of construction
February 1982 - November 1983: 21 months
( date of EPA's first letter to Company )
3) Failure to report actual startup April, 1983 -
November 1983: 7 months
4) Failure to perform CEM certification November
1983 - December 1984: 13 months
Total: 14 + 21 + 7 + 13 = 55 months =
$20,000
The second and third elements are ended in November 1983 even though
the source never sent the notices because, in November, 1983, EPA informed
the source that it had actual notice, which might appear to make notice by
the source unnecessary.
2. Importance to regulatory scheme
Reporting requirements violations: $15,000
3. Size of violator: $12,000
All the parts of the gravity component are now added:
0
0
15,000
20,000
15,000
12,000
______
62,000
This is added to the economic benefit component
0 economic benefit
62,000 gravity
______
$62,000 preliminary deterrence amount
C. Adjustment factors
1. Degree of willfulness/negligence
Because Company C was on notice of its violations
and disregarded the requirements to comply, even
though it would have been easy for them to do
so, the gravity component is increased 30%.
30% of $62,000 = $18,600
- 30 -
2. Degree of Cooperation
No adjustments were made in this category
because Company C was not cooperative.
3. History of noncompliance
No past history of noncompliance
4. Ability to pay
No adjustment here because Company C did not
provide EPA with financial information indicating
inability to pay.
Total penalty
$62,800 preliminary deterrence amount
18,600 adjustment
_______
$80,600 initial penalty figure
Company C paid the U.S. Treasury $80,600.
VII. 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 penalty
amount prior to beginning settlement negotiations or an adjusted penalty
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. 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.
- 31 -
_____________________________
Thomas L. Adams, Jr.
Assistant Administrator for Enforcement
and Compliance Monitoring
_____________________________
J. Craig Potter
Assistant Administrator for Air and Radiation
APPENDIX I
Penalty Policy for Violations of Certain Clean Air Act
Permit Requirements for the Construction or
Modification of Major Stationary Sources of Air Pollution
I. Introduction
EPA's Clean Air Act Stationary Source Civil Penalty Policy applies
generally to stationary sources of air pollution which violate
requirements enforceable under Section 113 of the Clean Air Act when such
violations are the result of a failure to make capital expenditures and/or
failure to employ operation and maintenance procedures which are necessary
to achieve compliance. The general policy does not, however, specifically
address violations of permit requirements related to the construction or
modification of major stationary sources under the prevention of
significant deterioration (PSD) program and the nonattainment area new
source review program.
This document outlines a penalty policy which applies to certain
permit-related violations of the Clean Air Act and provides a method of
calculating a minimum settlement amount for such violations. This "Permit
Penalty Policy" was originally issued in February 1981 to deal with a
subject area not covered by the 1980 penalty policy. It has been revised
for inclusion in the 1987 policy to reflect more realistic penalty
amounts.
As illustrated by the examples, a source may have violated a new
source requirement which makes it subject to this Permit Penalty Policy,
and, in addition, violated a regulation subject to the general policy or
another appendix. If this is the case, the Permit Penalty Policy should
be used to find the minimum settlement figure for the permit violation(s)
and the general policy or applicable appendix should be used to establish
a penalty amount for the other violation(s). These two figures should be
added together to produce an appropriate overall settlement amount. It is
also important to note that the policy outlined in this document, like the
general stationary source civil penalty policy, is used to set a minimum
settlement figure. Therefore, the penalty actually negotiated for can
always be higher than the figure derived through use of this Permit
Penalty Policy.
- 2 -
II. The Permit Penalty Policy
The Permit Penalty Policy covers cases involving sources which begin
construction or operation without first obtaining the required PSD or
nonattainment new source permit, as well as those which construct or
operate in violation of such valid permits. Construction proceeding in
compliance with an invalid permit is considered to be, in the context of
this penalty policy, construction without a permit.
In these cases, when the source is operating and has enjoyed an
economic benefit from noncompliance, that benefit should be calculated as
directed in the general stationary source civil penalty policy. As
directed by the general policy, however, the Regional Office may decide
not to calculate the economic benefit is likely to be below $5,000. The
gravity component is then calculated based on the matrix contained in this
permit penalty policy. Construction in the absence of a permit or in
violation of a permit has been assigned a scale of dollar values on a
matrix. The matrix also provides for the assessment of an additional
penalty for certain specified violations of substantive permit
preconditions or requirements. The appropriate dollar value for a
violation is dependent on an estimate of the total cost of air pollution
control at those facilities of the source for which the permit is
required. 1/
1/ "Total cost of air pollution control" should include, where
relevant, pollution control equipment costs, design costs,
operation and maintenance costs, differential cost of complying
fuel v. noncomplying fuel, and other costs pertaining to adequate
control of the new source. Total cost is to be determined by
examination of what would have been required as BACT (for a PSD
violation) or LAER (in the case of an Offset Policy or Part D
violation). When construction is done in phases, the operative
amount is the total cost of air pollution controls for the entire
project. If a source has installed partial control before the
enforcement action commenced, that part of the cost can be
subtracted from the total costs.
This value is then multiplied by the number of months of violation. 2/
2/ Month-by-month accrual of penalties was selected for purposes
of convenience and for consistency with the general policy. Any
fraction of a month in violation is counted as a full month of
violation unless circumstances present a case for mitigation of
this rule.
- 3 -
When there are multiple permit-related violations, a penalty figure is
calculated for each violation and the individual penalty figures are added
together to produce one minimum settlement figure. In those cases where a
source subject to a valid permit violates only the requirements of Section
173(1) and/or Section 173(3) (requirements for construction permits in
nonattainment areas), the appropriate penalty amount is determined by
reference only to the matrix column(s) citing the violation(s).
The economic benefit component and the gravity component are added
together to determine the preliminary deterrence amount. This initial
amount should then be adjusted, using the general stationary source civil
penalty policy factors which take into consideration individual equitable
considerations ( Part III of the general policy. ) This will yield the
initial penalty figure.
The period of civil penalty liability will, of course, depend upon the
nature and circumstances of the violation. For example, if a source has
begun actual construction without a required permit or under an invalid
permit, the penalty period begins on the date the source began
construction and continues either until the source obtains a valid permit,
notifies the State or EPA that it has permanently ceased construction and
the project has been abandoned, or the State issues a federally
enforceable construction permit containing operating restrictions which
keep the source below the new source review applicability threshold. 3/
3/ The period of liability is not to be confused with the period of
continuing violation for Section 113 notice of violation ( NOV )
purposes. A source which constructs without a valid permit is in
continuing violation of the Clean Air Act for NOV purposes until
it receives a valid permit or it dismantles the new construction.
A temporary cessation in construction does not toll the running of the
penalty period. The Agency may, however, consider mitigation of the
calculated civil penalty if a source ceases construction within a
reasonable time after being notified of the violation and does not resume
construction until a valid permit is issued. If a source violates a
permit condition, the period of penalty liability for purposes of
calculating a settlement figure begins on the first date the violation can
be documented and will cease when the violation is corrected.
EPA realizes that in certain cases, it is highly unlikely that the
Agency will be able to obtain the full amount of the initial penalty
figure in litigation. This may be due to applicable precedent, competing
public interest considerations, or the specific facts, equities, or
- 4 -
evidentiary issues pertaining to a particular case. In such a situation
it is unrealistic to expect EPA to obtain a penalty settlement which it
could not achieve through litigation. The litigation team must receive
the approval of the Associate Enforcement Counsel for Air in order to
propose settling for less than the minimum penalty amount from the matrix
because of litigation practicalities.
- 5 -
PERMIT PENALTY POLICY MATRIX
MINIMUM SETTLEMENT FIGURES
( per month of violation )
PSD SOURCES
CONSTRUCTION OR
TOTAL COST OF AIR OPERATION WITHOUT
POLLUTION CONTROL FOR A PERMIT OR IN
NEW OR MODIFIED VIOLATION OF A INCREMENT
SOURCE ($ THOUSANDS) VALID PERMIT EXCEEDED
less than 50 $ 2,000 $ 7,000 .
50-150 4,000 11,000
150-500 7,000 16,000
500-1,500 11,000 18,000
1,500-5,000 16,000 21,000
5,000-15,000 22,000 25,000 .
15,000-50,000 29,000 31,000
over 50,000 37,000 39,000 .
PART D AND OFFSET INTERPRETATIVE RULING SOURCES
CONSTRUCTION
OR OPERATION
WITHOUT A FAILURE TO
TOTAL COST OF AIR PERMIT OR SATISFY
POLLUTION CONTROL IN VIOLATION SECTION 173(1) OR VIOLATION OF
FOR NEW OR MODIFIED OF A VALID OBTAIN SECTION 173(3)
SOURCE ($ THOUSANDS) PERMIT OFFSETS OR CONDITION 2
less than 50 $ 2,000 $ 3,000 $ 2,000 .
50-150 4,000 4,000 3,000
150-500 7,000 6,000 4,000 .
500-1,500 11,000 9,000 4,000
1,500-5,000 16,000 11,000 5,000 .
5,000-15,000 22,000 13,000 7,000
15,000-50,000 29,000 15,000 11,000
over 50,000 37,000 17,000 12,000 .
( Add numbers when multiple categories apply )
- 6 -
EXAMPLE CASES
The following hypothetical cases illustrate how the matrix is used to
calculate a minimum settlement figure.
PSD SOURCE
I. Facts
On July 1, 1985, an existing major source began construction of a
modification to its plywood manufacturing plant. The modification will
result in a significant net emission increase of particulate matter. The
source had not obtained or filed for a PSD permit as of the date
construction began.
On July 2, 1985, EPA investigators discovered the construction during
a routine inspection of the plywood plant. The EPA Regional Office
determined that the modification was subject to PSD review and issued a
notice of Violation on August 1, 1985. The NOV cited the PSD regulations
and outlined possible enforcement alternatives.
The source received the NOV on August 5, 1985, and contacted the
Regional Office on August 10, 1985. On August 30, 1985, the Region and
the source held a conference at which the source stated that it had been
aware of the need for PSD review and permitting prior to construction.
The source also stated that it would file an application for a permit but
that it would not cease construction during the review process.
On October 1, 1985, the source filed a PSD application. During the
review process the Region discovered that the source had no plans to
install pollution control devices. The Region also determined that
without BACT, the modification's particulate emissions would result in an
exceedance of the particulate matter increment in the source's area of
impact. The source, when informed of the BACT problem, indicated it would
install the necessary controls.
However, throughout the review process the source continued
construction of the modification. On December 1, 1985, the source began
operation of the modified source without the required permit and without
controls.
On January 15, 1986, the source was issued a PSD permit. On February
28, 1986, the source ceased operation of the plywood plant to connect the
pollution control equipment called for in the PSD permit. The source
resumed operation on March 15, 1986, in a manner consistent with the PSD
Permit conditions.
- 7 -
II. Computation of Penalty
A. Benefit Component
The penalty calculation begins with a calculation of the economic
benefit of noncompliance ( using the BEN model ) for the period of operation
without a permit ( December 1, 1985 - January 15, 1986 ). BEN calculated a
penalty of $6,400.
B. Gravity Component
This component of the penalty is calculated by initially assessing the
total cost of air pollution control equipment at the modification. For
purposes of this example, assume BACT costs $140,000.
Next, the PSD Matrix must be consulted and the type and number of
matrix categories determined. In this example the source (1) began
construction without a permit (2) operated the plant without a PSD permit
and (3) exceeded the growth increment for particulate matter. Therefore,
this source is subject to both of the columns of dollar values under the
heading "PSD Sources."
Once the type, number and dollar values of the penalty are determined,
these figures are multiplied by the number of months in violation. The
sums are then added together to produce the matrix penalty amount.
In this example, the source's period of construction without a permit
runs from July 1, 1985, until operations began on December 1, 1985 ( 5
months ). The period of operation without a permit runs from the time the
source began operation ( December 1, 1985 ) to the date the source received
a permit ( January 15, 1986 ) (2 months). The source also exceeded the area
growth increment for particulate matter during the period of operation
from December 1, 1985, to February 28, 1986 ( 3 months ). 4/
4/ It is important to note that some aspects of the matrix do not
necessarily track the statutory provisions regarding violations.
For example, there is no Clean Air Act provision which makes
increment exceedance, in and of itself, a violation by an
individual source. ( The SIP must protect the increment. The
method used is PSD review with permit conditions such as BACT,
fuel use limitations, etc. ) However, as a portion of the gravity
component, considering the seriousness of the violation if a
source operates and thereby violates the increment due to failure
to go through PSD review as required, an added penalty is
appropriate.
- 8 -
The matrix penalty figure for this source's PSD related violations,
based on a $140,000 total cost of control estimate, is:
. - for the 5 month period of construction without a permit,
5 x $4,000 = $20,000
. - for the 2 month period of operation without a permit,
2 x $4,000 = $8,000
. - for the 3 month period of operation during which the
increment was exceeded,
3 x $11,000 = $33,000
. - matrix penalty figure =
$20,000 + $8,000 + $33,000 = $61,000
This is added to the economic benefit component
$ 6,400 economic benefit
61,000 gravity
_______
$67,400 preliminary deterrence
amount.
C. Adjustment Factors
1. Degree of willfulness/negligence
Because the source knew it needed a PSD permit and
commenced construction without applying for a PSD
permit, the gravity component is increased 10%
10% of $61,000 = $6,100
2. Degree of cooperation
No adjustment
3. History of noncompliance
No past history of noncompliance
4. Ability to pay
No adjustment here because the source did not provide
EPA with financial information indicating inability
to pay.
- 9 -
Total Penalty
$67,400 preliminary deterrence amount
+ 6,100 adjustment
________
$73,500 initial minimum penalty figure
The source paid the U.S. Treasury $73,500.
Section 173 and Offset Policy Sources
I. Facts
On December 1, 1984, a plywood manufacturing company began operation
of a modification at its plant which is located in a nonattainment area
for particulate matter. The modification is subject to new source review
permitting and, in fact, the source has obtained a valid NSR permit from
the State. The permit specifies 1) that the applicant has demonstrated
that all other major stationary sources owned or operated by the applicant
in the State are in compliance with the Act, 2) what constitutes required
LAER, and 3) what offsets (internal) 5/ would be required to be obtained
prior to start-up or commencement of operation.
5/ In light of the Supreme Court decision in Chevron U.S.A. Inc. v.
NRDC, ___ U.S. ___, 104 S. Ct. 2778 ( 1984 ), a state may choose to
adopt a plant-wide definition of source in nonattainment areas. In
such instances, sources obtaining internal offsets may be exempt
from nonattainment new source review requirements.
( These requirements are found in Section 173 of the Clean Air Act. )
In March of 1985, the Regional Office learned that the source did not
install controls on a certain piece of process equipment and therefore did
not have LAER as specified in the State permit. On April 1, 1985, the
Region issued an NOV for failure to comply with the terms of the permit by
not installing LAER prior to start-up. At an April 15, 1985, conference
between EPA and the source, the source agreed to meet the terms of its
permit and to demonstrate compliance. On November 15, 1985, the equipment
had been installed and a performance demonstration showed that the source
was in compliance with the LAER limit specified in the permit.
- 10 -
II. Computation of penalty
A. Benefit Component
The BEN model determined that the economic benefit from
operating without LAER controls from December 1, 1984
until November 15, 1985 was $63,400.
B. Gravity Component
First the cost of the pollution control equipment must be determined.
In this case, LAER costs $110,000. Since the plant operated from
December 1, 1984 until November 15, 1985 without LAER, the period
of violation is 12 months. The matrix yields a gravity component
of 12 x 4,000 = $48,000. The other two categories of the NSR
matrix need not be used because there were no violations in these
categories.
The gravity component is added to the economic benefit component
$63,000 economic benefit
+ 48,000 gravity
________
$111,400 preliminary deterrence amount
C. Adjustment factors
1. Degree of willfulness
No adjustment here. At the NOV conference, EPA learned that the
company had serious, but temporary economic reverses that prevented it
from installing the control equipment.
2. Degree of cooperation
No adjustments here.
3. History of compliance
No past history of noncompliance.
4. Ability to pay
No adjustment here because the company had reversed its financial
losses and was currently financially healthy.
- 11 -
Total penalty - initial penalty target figure same as preliminary
deterrence amount.
Because the State had intervened in the case and had gathered
the evidence of violation, the U.S. split the penalty with the
State.
The Company paid $55,700 to the U.S. treasury and $55,700 to the
State.
APPENDIX II
Vinyl Chloride Civil Penalty Policy
The attached chart shall be used to determine the gravity component of
the civil penalty settlement amount for cases enforcing the National
Emission Standard for Vinyl Chloride. It is to be used in lieu of the
scheme for determining the gravity component set forth in the general
Clean Air Act Stationary Source Civil Penalty Policy.
The settlement penalty for vinyl chloride cases, as for other Clean
Air Act cases, consists of a gravity component and an economic benefit
component. Adjustments for degree of willfulness or negligence, degree of
cooperation/noncooperation, history of noncompliance, ability to pay,
"other unique factors," and litigation practicalities should be made, if
appropriate, in accordance with the Stationary Source Civil Penalty
Policy.
The gravity component of the penalty reflects the seriousness of the
violation. A separate scheme was developed for vinyl chloride cases
because several of the factors in the general policy, such as length of
time of violation, whether the area is primary non-attainment, and level
of violation as a percentage above the standard largely do not apply to
vinyl chloride cases. Also, the hazardous nature of the pollutant and the
difficulty in determining economic benefit are reflected by establishing a
substantial gravity component.
The vinyl chloride gravity component is therefore tied to the amount
of vinyl chloride released in a given incident, which is used as a measure
of the seriousness of each violation. Also, for relief valve discharges,
manual vent valve discharges, and 10 ppm violations, an adjustment factor
is to be used to account for excessive frequency of discharges in a given
time, which is a reflection of poor performance regardless of the amount
of vinyl chloride discharged to the atmosphere. The frequency adjustment
factor differs from the adjustment factor for history of noncompliance,
which reflects violations occurring prior to those which are the subject
of the current enforcement action.
The chart is to be applied as follows: For each violation, assign a
dollar amount based on the type and magnitude of violation as described in
the chart. Relief valve discharges, manual vent valve discharges and
violations of 10 ppm standards should then be grouped by calendar years.
If the number of these violations is three or more in any calendar year,
the total penalty for that period should be multiplied by the appropriate
"frequency adjustment factor." The total gravity component for the case
is
- 2 -
the sum of the penalty numbers for each violation, adjusted where
appropriate to account for excessive frequency. The settlement penalty
for the case as a whole cannot exceed the statutory maximum of $25,000 per
day per violation. Sample calculations are attached to this policy.
The economic benefit component may be impractical to determine in
vinyl chloride cases, depending on the nature of the violations.
The benefit component should be determined if feasible, e.g., where a
pattern of violations indicates a need for specific technology equipment,
or procedures, or where the defendant has chosen a "fix" to address a
series of violations.
This revised policy shall apply to all pending and future vinyl
chloride cases.
Relief Valve Discharges, Manual Vent Valve Discharges, Violations of
10 ppm Standards
Emissions
Pounds of VC released Penalty
.
0 - 100 $ 1000
. GT 100 - 2000 2000
GT 2000 - 5000 5000
.
GT 5000 - 7500 10,000
. GT 7500 - 10,000 15,000
. over 10,000 25,000
Frequency Adjustment Factors
# Of Violations in Calendar Year Multiplier
3 1.5
4+ 2
Failure to Report
Size of Release Not Reported ( lbs. ) Penalty
. 0-100 $ 2000
100-500 5000
.
500-1000 10,000
. 1000-2000 20,000
over 2000 25,000
Graduated scale for late reporting ( if not in response to direct
request from State or EPA ) - 10-day discharge reports
( as percentage of penalty for failure to report )
Within 2 months ( from discharge ) 25% of penalty
. 2-4 months 50% " "
. 4-6 months 75% " "
over 6 months 100% " "
Stripping Violations and Reactor Opening Loss Violations
Stripping
Magnitude of Violation Penalty
Suspension/Latex Dispersion
. 400-500 ppm 2000-2500 ppm $ 1000
. 500-600 2500-3000 2000
600-700 3000-3500 3000
. 700-800 3500-4000 4000
800-900 4000-4500 5000
. 900-1200 4500-6000 10000
1200-1400 6000-7000 15000
. 1400-1600 7000-8000 20000
over 1600 over 8000 25000
Reactor Opening Loss
. Penalty = $1000/violation ( for each reactor )
Failure to Measure
Penalty = Maximum penalty amount for each type of violation
.
= $25000 ( stripping )
. = $1000 ( reactor opening loss )
Failure to Submit Complete Semiannual Report
Penalty = $25000
Graduated scale for late semiannual report ( if not in
response to direct request from State to EPA )
. Within 2 months $ 6,250
. 2-4 months 12,500
. 4-6 months 18,750
. Over 6 months 25,000
Example 1
ABC Chemical Corporation owns a polyvinyl chloride plant in Louisiana.
The United States has filed an enforcement action alleging relief valve
discharge violations, failure to report relief valve discharges, reactor
opening violations, and stripping violations. The settlement penalty is
determined as follows:
Gravity Component
Relief Valve Discharges Penalty/Discharge
__
July 6, 1981 446 lbs. $2,000 !
!
August 15, 1981 1250 lbs. $2,000 ! x 1.5 = $7,500
!
November 30, 1981 46 lbs. $1,000__!
__
March 17, 1982 127 lbs. $2,000 !
! x 1 = $12,000
July 15, 1982 6271 lbs. $10,000__! _______
$19,500
Subtotal for Relief Valve Discharges
Failure to Report
Failure to report July 6, 1981 discharge $5,000 .
Report August 15, 1981 discharge 1
month late - 25% x $20,000 5,000 .
______
Subtotal for reporting $10,000 .
Reactor Opening Loss Violations
77 reactor opening loss violations $77,000 .
Stripping Violations ( Suspension )
January 17, 1982 556 ppm $2,000 .
July 10, 1982 421 ppm $1,000 .
August 19, 1982 494 ppm $1,000 .
______
Subtotal for stripping $4,000 .
Total Gravity Component $110,500 .
Benefit Component
None determined
Preliminary deterrence amount $110,500 .
Adjustments
Negligence
Add 30% of gravity component - emission
violations generally due to
repetition of same cause + $ 33,150 .
+ 30% ( 110,500 ) __________
Minimum penalty settlement amount $143,650
Example 2
Polynesian Polymers, Inc., owns a polyvinyl chloride plant in Texas.
The United States has filed an enforcement action alleging relief valve
and manual vent valve discharge violations, reporting violations, and
reactor opening loss violations. The settlement penalty is determined as
follows:
Gravity Component
Relief Valve and Manual Vent Valve Discharges
Penalty/Discharge
__
July 6, 1983 271 lbs. $ 2,000 !
!
July 15, 1983 621 lbs. 2,000 !
! x 2 = 32,000
August 21, 1983 710 lbs. 2,000 !
!
November 1, 1983 6,221 lbs. 10,000__!
__
January 17, 1984 7,721 lbs. 15,000 !
! x 1 = 17,000
November 30, 1984 526 lbs. 2,000__!
__
January 14, 1985 2,771 lbs. 5,000 !
!
July 19, 1985 4 lbs. 1,000 ! x 1.5 = 12,000
!
December 21, 1985 172 lbs. 2,000__!
________
Subtotal for Relief Valve Discharges $ 61,000
Failure to Report
Failed to report Nov. 1, 1984 discharge $25,000
Failed to report Nov. 30, 1984 discharge 10,000
________
Subtotal for reporting $ 35,000
Reactor Opening Loss Violations
214 reactor opening loss violations $214,000 .
Total Gravity Component $310,000 .
Benefit Component
Economic benefit of delay in installing
"clean reactor" technology-deemed
necessary to comply with reactor
opening loss standard ( BEN calculation ) $100,000 .
Preliminary deterrence amount $410,000 .
Adjustments
History of Noncompliance
Add 30% of subtotal for reporting violations;
cited for similar violations at this plant
in action under the Clean Water Act + 10,500 .
No other adjustments
Minimum penalty settlement amount $420,500 .
APPENDIX III
Asbestos Demolition and Renovation Civil Penalty Policy
The Clean Air Act Stationary Source Civil Penalty Policy provides
guidance for determining the amount of civil penalties EPA will seek in pre-
trial settlement of enforcement actions under Title I of the Act. Due to
certain unique aspects of asbestos demolition and renovation cases, separate
guidance is provided here for determining the gravity and economic benefit
components of the penalty. Adjustment factors should be treated in
accordance with the general stationary source penalty policy.
If the Region is referring a civil action under Section 113(b) against a
demolition or renovation source, it should recommend a civil penalty
settlement amount. Consistent with the general penalty policy, the Region
should determine a "preliminary deterrence amount" by assessing an economic
benefit component and a gravity component. This amount may then be adjusted
upward or downward by consideration of other factors, such as degree of
willfulness and/or negligence, history of noncompliance, ability to pay, and
litigation practicalities.
The "gravity" component should account for factors such as the
environmental harm resulting from the violation, the importance of the
requirement to the regulatory scheme, and the size of the violator. Since
asbestos is a hazardous air pollutant, the gravity factor associated with
substantive violations ( i.e., failure to adhere to work practices or to
prevent visible emissions from waste disposal ) should be high. Also, since
notification is essential to Agency enforcement, a notification violation
should also warrant a high gravity component.
Gravity Component
The attached chart sets forth the gravity component of the penalty
settlement figure for notification violations and for violations of
substantive requirements for control of asbestos emissions.
1. No Notice
The figures in the first line of the chart apply as a general rule to
failure to notify, including those situations in which substantive
violations occurred and those instances in which EPA has been unable to
determine if substantive violations occurred.
If EPA does not know whether substantive violations occurred,
additional information may be obtained by using Section 114 requests for
information, such as confirmation of the amount of asbestos in the facility
obtained from owners, operators, or other unsuccessful bidders. If there
has been a recent purchase
-2-
of the facility, there may have been a pre-sale audit of environmental
liabilities that might prove useful. Failure to respond to such a request
should be assessed an additional $15,000 penalty. The reduced amounts in
the second line of the chart apply only if the Agency can conclude, from its
own inspection, a State inspection, or other reliable information, that the
source complied with substantive requirements.
2. Late, Incomplete or Inaccurate Notice
Where notification is late, incomplete or inaccurate, the Region should
use the figures in the chart, but has discretion in circumstances not
addressed in the matrix. The important factor is the impact the company's
action has on our ability to monitor substantive compliance.
3. Substantive Violations
Penalties for substantive violations are based on the particular
regulatory requirements violated. The figures on the chart are for each day
of documented violations. The total figure is the sum of the penalty
assigned to a violation of each requirement: removal, 40 CFR Section
61.147(a); careful handling, Section 61.147(b); wetting, Section 61.147(c);
taking out in sections, Section 61.147(d); keeping wet, Section 61.147(e);
freezing temperatures, Section 61.147(f); emergency removals, Section
61.147(g); collection, packaging, and transporting of asbestos-containing
waste material, Section 61.152(b); and disposal of wastes at an acceptable
site, Section 61.152(a). Apply the matrix for each distinct violation of
sub-paragraphs that would constitute a separate claim for relief if
applicable ( e.g. 61.147(e)(1), (2), and (3) ). The figure also depends on
the amount of asbestos involved in the operation, which relates to the
potential for environmental harm associated with improper removal and
disposal. There are three categories based on the amount of asbestos,
expressed in "units," a unit being the threshold for applicability of the
substantive requirements. If a job involves friable asbestos on pipes and
other facility components, the amounts of linear feet and square feet should
each be separately converted to units, and the numbers of units should be
added together to arrive at a total. Where the only information on the
amount of asbestos involved in a particular demolition or renovation is in
cubic dimensions ( volume ), the amount can be converted to square
dimensions by dividing the volume by the estimated thickness of the asbestos
material. In the absence of a known or estimated thickness, assume that the
thickness is two inches or 1/15 (.066) meters. ( The cubic measure
conversion to square dimensions can be adjusted to account for void space in
the bag. ) Where the facility has been reduced to rubble prior to the
inspection, information on the amount of asbestos can be sought from the
notice, other unsuccessful bidders, depositions of the owners and
-3-
operators or maintenance personnel, or from blueprints if available.
4. Subsequent Violations
Gravity components are adjusted based on whether the violation is a
first, second, or subsequent offense. By "second" or "subsequent" offense,
we mean that the owner or operator has violated the regulations after
previously being notified by the local agency, State or EPA of asbestos
NESHAP violations. This prior notification could range from simply an oral
or written warning to the filing of a judicial enforcement action. A
"second" violation should be determined to have occurred at the same job as
the first one if, after being notified of a violation by the local agency,
State or EPA and having an opportunity to correct such violation, the
company continues to violate the regulations even if different sections are
violated. A violation of a Section 113(a) administrative order ( AO ) is
both a "second offense" and a $15,000 additional penalty for violation of
the AO, since a violation of an AO is normally considered a separate count
in the complaint. However, if the AO violation is technical and de minimis
and does not warrant a separate count in the complaint, it generally will
not deserve an additional penalty. If the case involves multiple potential
defendants and any one of them is involved in a second or subsequent
offense, the penalty should be derived based on the second or subsequent
offense. In such instance, the Government should try to get the prior-
offending party to pay the extra penalties attributable to this factor.
( See discussion below on apportionment of the penalty. )
5. Duration of the Violation
The Region should consider enhancing the gravity component in situations
where the duration of the violation increases the potential harm. This
would be particularly appropriate where the source allows asbestos waste
material to stay on site without any effort to collect and dispose of it
expeditiously.
Since asbestos projects are usually short-lived, any correction of
substantive violations must be prompt to be effective. Therefore, it is
assumed that work practice violations brought to the attention of an owner
or operator will be corrected promptly. This correction should not be a
mitigating factor, rather the failure to promptly correct the environmental
harm should be considered an aggravating factor.
Benefit Component
This component is a measure of the economic benefit accruing to the
operator ( usually a contractor ), the facility owner, or both, as a result
of noncompliance with the asbestos regulations.
-4-
Information on actual economic benefit should be used if available. It is
difficult to determine actual economic benefit, but a comparison of other
unsuccessful bids with the successful bid is an initial point of departure.
A comparison of the operator's actual expenses with the contract price is
another indicator. Since developing this information is so complex, the
attached chart provides figures which may be used as a "rule of thumb" to
determine the costs of removing and disposing of asbestos in compliance with
Section 61.147 and Section 61.152. The figures are based on rough cost
estimates which were developed from current publications and interviews. If
any portion of the job is done in compliance, the economic benefit should be
based only on the asbestos improperly handled. It should be assumed, unless
there is convincing evidence to the contrary, that all removal was done
improperly if improper removal is observed by the inspector.
Apportionment of the Penalty
This policy is intended to yield a minimum settlement penalty figure for
the case as a whole. In many cases, more than one contractor and/or the
facility owner will be named as defendants. In such instances, the
Government should generally take the position of seeking a sum for the case
as a whole, which the multiple defendants can allocate among themselves as
they wish. On the other hand, if one party is particularly deserving of
punishment so as to deter future violations, separate settlements may ensure
that the offending party pays the appropriate penalty.
It is not necessary in applying this penalty policy to allocate the
economic benefit to the parties precisely. The total benefit accruing to
the parties should be used for this component. Depending on the
circumstances, the economic benefit may actually be split among the parties
in any combination. For example, if the contractor charges the owner for
compliance with asbestos removal requirements and fails to comply, the
contractor has derived a savings and the owner has not. If the contractor
underbids because it does not factor in compliance with asbestos
requirements, the facility owner has realized the full amount of the
financial savings. ( In such an instance, the contractor may have also
received a benefit which is harder to quantify - obtaining the contract by
virtue of the low bid. )
There are circumstances in which the Government may try to influence
apportionment of the penalty. For example, if one party is a second
offender, the Government may try to assure that such party pay the portion
of the penalty attributable to the second offense. If one party is known to
have realized all or most of the economic benefit, that party may be asked
to pay for that amount. Other circumstances may arise in which one party
appears more culpable than others. We realize, however, that it
-5-
may be impractical to dictate allocation of the penalties in negotiating a
settlement with multiple defendants. The Government should therefore adopt
a single "bottom line" sum for the case and should not reject a settlement
which meets the bottom line because of the way the amount is apportioned.
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 second offense ), that party should pay those amounts and a
reasonable portion of the amounts not directly assigned to any single party.
However, the Government should also be flexible enough to mitigate the
penalty somewhat to account for the party's relative cooperativeness. If a
case is settled as to one defendant, a penalty not less than the balance of
the settlement figure for the case as a whole should be sought from the
remaining defendants. This remainder can be adjusted upward, in accordance
with the general Civil Penalty Policy, if the circumstances warrant it. Of
course, the case can also be litigated against the remaining defendants for
the maximum attainable penalty.
Other Considerations
The policy seeks substantial penalties for substantive violations and
repeat violations. Penalties should generally be sought for all violations
which fit these categories. If a company knowingly violates the
regulations, particularly if the violations are severe or the company has a
prior history of violations, the Region should consider initiating a
criminal enforcement action.
The best way to prevent future violations of notice and work practice
requirements is to ensure that management procedures and training programs
are in place to maintain compliance. Such injunctive relief, in the nature
of environmental auditing and compliance certification, are desirable
provisions to include in consent decrees settling asbestos violations.
Examples
Following are two examples of application of this policy.
Example 1
XYZ Associates hires America's Best Demolition Contractors to demolish a
building containing 1300 linear feet of pipe covered with friable asbestos,
and 1600 square feet of siding and roofing sprayed with asbestos. Neither
company notifies EPA or
-6-
State officials prior to commencing demolition of the building. Tipped off
by a citizen complaint, EPA inspects the site and finds that the contractor
has not been wetting the asbestos removed from the building, in violation of
40 CFR Section 61.147(c). In addition, the contractor has left a pile of
dry asbestos waste material on site, in violation of 40 CFR Section
61.147(e)(1) and the inspector observes visible emissions in violation of
Section 61.152(b). The contractor has also not deposited the waste in an
acceptable disposal site, in violation of Section 61.152(a). At the time of
the inspection 75% of the asbestos has already been removed from the
building and handled improperly. After discussion with EPA officials, XYZ
Associated hires another contractor to properly dispose of the asbestos
wastes and to remove the remaining 25% of the asbestos in compliance with
the asbestos NESHAP.
Neither XYZ Associates nor America's Best Demolition Contractors has
ever been cited for asbestos violations by EPA or the State. Both parties
have sufficient resources to pay a substantial penalty.
The defendants were in violation of these four sections of the NESHAP
for 20 days, so the statutory maximum penalty is 4 sections x 20 days x
$25,000 / day / violation = $2,000,000 for each defendant.
The penalty is computed as follows:
Gravity Component
No notice ( first time ) $15,000
Violations of Section 61.147(c)
Section 61.147(e)(1), Section 61.152(b), and
Section 61.152(a) (10 + 5 = 15 units of
asbestos (4 x $10,000) $40,000
$55,000 $55,000
Economic Benefit
$20 / sq. foot x 1600 sq. feet + $32,000
$20 / linear foot x 1300 linear feet + 26,000
$58,000
$58,000 x 75% ( % of asbestos
improperly handled ) $43,500
Preliminary deterrence amount $98,500
Adjustment factors - No adjustment
for prompt correction of
environmental problem because that
is what
-7-
the defendant is supposed to do.
Minimum penalty settlement amount $98,500
NOTE: If the statutory maximum had been smaller than this sum, then
the minimum penalty would have to be adjusted accordingly.
Example 2
Consolidated Conglomerates, Inc., hires Bert and Ernie's Trucking
Company to demolish a building which contains 1,000 linear feet of friable
asbestos on pipes. Neither party gives notice to EPA nor to the State prior
to commencement of demolition. An EPA inspector, acting on a tip, visits
the site after the building has been totally demolished. He finds a large
pile of dry asbestos-containing waste material on site. The inspector
learns that the demolition had been completed at least three weeks before he
inspected the site. Thus, there are at least 21 days of violation times two
violations ( Section 61.152(a) and Section 61.147(e)(1) ) times $25,000 per
day, or a statutory maximum of $1,050,000.
Consolidated Conglomerates is a corporation with assets of over $100
million and annual sales in excess of $10 million. Bert and Ernie's
Trucking is a limited partnership of two brothers who own tow trucks and
have less than $25,000 worth of business each year. This contract was for
$50,000. Bert and Ernie's was once previously cited by the State Department
of Environmental Quality for violations of asbestos regulations.
The penalty is computed as follows:
Gravity Component
No notice ( 2nd violation ) $20,000
Violation of Section 61.152(b) ( since $45,000
uncontained asbestos outside of a
building is a visible emission. cf.
U.S. v. Hugo Key ); violation of
Section 61.152(a); circumstantial evidence
of violation of Section 61.147(e)(1)
( app. 3.85 units ) - 2nd violation
(3 x $15,000)
Aggravation of hazard due to duration $11,250
of disposal violation - + 25% of
substantive violations (25% x $45,000)
$76,250
-8-
Benefit Component
$20 / linear foot x 1,000 linear feet $20,000
Preliminary deterrence amount $ 96,250
Adjustment factors - 10% increase for
willfulness 9,625
Minimum settlement penalty amount $105,875
Apportionment of the Penalty
The penalty in this case has been increased by $35,000 ( $5,000 increase
in notice penalty and $30,000 increase in substantive violations penalty )
because it involves a second violation by the contractor. Ordinarily, the
Government should try to get Bert and Ernie's to pay at least that amount of
the penalty. However, Consolidated Conglomerate's financial size compared
to the contractor's will probably dictate that Consolidated pay most of the
penalty.
Asbestos Demolition / Renovation Civil Penalty Policy
Gravity Component
Notification Violations 1st Violation 2nd Violation Subsequent
No notice $15,000 $20,000 $25,000
No notice but probable $ 5,000 $15,000 $25,000
substantive compliance
Late, Incomplete or Inaccurate notice. For each violation, select the
single largest dollar figure that applies from the following table:
Notice submitted after asbestos removal completed $15,000
tantamount to no notice.
Notice lacks both job location and asbestos removal 4,000
starting and completion dates.
Notice submitted while asbestos removal is in progress. 2,000
Notice lacks either job location or asbestos removal 2,000
starting and completion dates.
Notice lacks either asbestos removal starting or 1,000
completion dates, but not both.
Amount of asbestos in notice is missing, improperly 500
dimensioned, or for multiple facilities.
Notice lacks any other required information. 200
Demolition notice submitted late, but still prior to 200
asbestos removal starting date.
Notice not in violation ( e.g. job not done, renovation 0
under cutoff ).
Add the dollar figures determined above for each count. These figures
apply where no previous notice violations have been determined.
Substantive Violations - ( per day of documented violation ).
Total amount of asbestos
involved in the operation 1st violation 2nd violation Subsequent
less than or equal to
10 units $ 5,000 $15,000 $25,000
greater than 10 units but
less than or equal to
50 units $10,000 $20,000 $25,000
greater than 50 units $15,000 $25,000 $25,000
unit = 260 linear feet, 160 square feet or 55 cubic feet - if more than one
is involved, convert each amount to units and add together
Apply matrix separately to violation of each sub-paragraph of Section 61.147
and Section 61.152 - add together
Enhance if duration of offense aggravates hazard - e.g., failure to dispose
of asbestos-containing wastes.
Benefit Component
For asbestos on pipes or other facility components:
$20 per linear or square foot of asbestos for any substantive violation.
APPENDIX IV
CLEAN AIR ACT PENALTY POLICY AS APPLIED TO
STATIONARY SOURCES OF VOLATILE ORGANIC COMPOUNDS
WHERE REFORMULATION TO LOW SOLVENT TECHNOLOGY
IS THE APPLICABLE METHOD OF COMPLIANCE
Introduction
This addendum provides guidance for calculating the civil penalties
EPA will require in pre-trial settlement of district court enforcement
actions, pursuant to Title I of the Clean Air Act ( CAA ), against sources
of volatile organic compounds ( VOC's ) in violation of State Implementation
Plan emission limitations, where low solvent technology ( LST ) is an
acceptable control strategy for achieving compliance. If compliance using
LST is the control strategy chosen by the source and if it can be
implemented expeditiously, the penalty analysis methodology set forth in
this appendix must be used. If compliance using LST is not the compliance
strategy chosen by the source, or if LST cannot be accomplished
expeditiously or is not available, the penalty must be calculated
according to the general Clean Air Act Stationary Source Civil Penalty
Policy, ( hereinafter CAA Penalty Policy ), based on the costs of add-on
controls.
A separate policy for arriving at a penalty figure in VOC cases where
LST is an acceptable control strategy is necessary because penalties
calculated pursuant to the general CAA Penalty Policy in such instances
are insufficient to deter violations. 1/
1/ Penalties must be high enough to have the desired specific
and general deterrent effects. They must also be, to the extent
possible, objective in order to ensure fairness. The general CAA
Penalty Policy, relying on the cost of pollution control
equipment, does not provide such penalties in the case of VOC
sources using LST. Indeed VOC penalties have been much smaller
than the penalties collected in other CAA cases. A sample of VOC
sources, with total sales in the $10,000,000 range, have had civil
penalties ranging from $2,000 to $45,000. By comparison, a
company cited for TSP violations, with sales in 1983 of
$4,656,000, will be asked to pay a minimum of $75,000 in
penalties.
The general CAA Penalty Policy focuses upon recapturing the economic
savings of non-compliance based upon the typically substantial capital
expenditures and operation and maintenance costs of the necessary
pollution control equipment. The capital costs of implementing LST are by
comparison relatively small, and in many cases LST actually results in a
net economic savings. 2/
2/ Although substantial capital expenditures are required for VOC
sources using add-on technology to come into compliance, sources
having the option of using low solvent or water-based technology
derive economic savings by coming into compliance. For example,
reformulation to LST generally involves only minor mechanical and
process modifications costing less than $10,000. ( See note 4
infra. ) These small outlays are recaptured by subsequent cost
savings. For example, water-based coatings are usually less
expensive. Similarly, high solid emulsion-LSTs, although perhaps
mo