Impact of Intermittent Source Operations on Clean Air Act Penalty
JUL - 2 1985
SUBJECT: Impact of Intermittent Source Operations on Clean
Air Act Penalty Calculations
FROM: Michael S. Alushin
Associate Enforcement Counsel
Air Enforcement Division
Edward E. Reich, Director
Stationary Source Compliance Division
A regional Air Director recently asked us to outline: 1) how Sections
113 and 120 penalty calculations of a source's economic benefit of delay
in compliance are affected by intermittent, e.g., seasonal, operations;
and 2) whether these provisions differ in their penalty treatment of
intermittent operators. Although Sections 113 and 120 are very similar,
they do differ somewhat in their penalty treatment of intermittent
Neither the text of Section 120 nor its implementing regulations
provides specific guidance on the question. However, it is important to
bear in mind that the purpose of Section 120 is to recoup the economic
benefit a source enjoys by the act of unlawfully delaying its compliance
with applicable law. The focus of the remedy is the time it takes the
source to achieve compliance, not the periods within that time when the
source is operating. Therefore, the time boundaries that mark the
statute's "period of covered noncompliance," Section 120(d)(3)(C)(ii) of
the Act, 42 U.S.C. Section 7420(d)(3)(C)(ii), are the source's receipt of
the NON and its achievement of compliance. Section 120 measures the
economic benefit attributable to the delay, not to the status of
Accordingly, EPA's Responses to Comments on the Final Section 120
Rulemaking notified sources that:
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EPA...calculates noncompliance penalties for the
entire period from receipt of a notice of
noncompliance until the source actually achieves
final compliance...whether the source operates
for the full 12 months ( of a hypothetical year of
noncompliance ) or some lesser period.
The full text of the two pertinent sets of comments and responses is set
Comment: Some sources operate only intermittently.
Will the penalty be limited to periods during
which the source is actually operating?
Response: EPA will calculate noncompliance
penalties for the entire period from receipt of a
notice of noncompliance until the source actually
achieves final compliance. By failing to make
necessary expenditures to install pollution
controls, the source achieves an economic benefit.
This benefit is enjoyed until these expenditures
are made, whether the source operates for the full
12 months or some lesser period. There may, of
course, be a reduction in the amount of O&M penalty
reflecting the source's intermittent operation.
45 Fed. Reg. 50102 ( July 28, 1980 ).
Comment: The model should take account of fact
(sic) that source (sic) may shut down temporarily
and should recognize that no O&M expenditures are
being avoided in that period.
Response: The model only seeks to recover O&M
expenses which were actually avoided. (Temporary)
(p)eriods of shutdown would presumably reduce the
amount of those expenses and hence reduce the penalty.
EPA Public Docket No. EN-79-01, File No. V-A-1-c, at 19
( microfiche ).
In accordance with the general Clean Air Act Civil Penalty Policy, EPA
determines the minimum acceptable settlement penalty amount in each case
by calculating the economic savings from noncompliance and by making other
additions and subtractions for a variety of other relevant factors. The
question raised relates primarily to the economic savings calculation.
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As with the Section 120 calculation described above, the Section 113
economic benefit calculation focuses on the delay of expenditures needed
for compliance. BEN requires inputs for the date of earliest provable
violation and the date of compliance. This is natural, since the computer
program is determining the value to the polluter of delaying its
expenditure for pollution controls for the amount of time elapsed between
those two dates. It follows logically that the operational status of the
source during this period is irrelevant. In other words, the amount of
money saved is not dependent on whether the source is operating.
The exception to the rule just stated is the same as for Section 120:
we will not try to recover pollution control operating and maintenance
expenses for a period of shutdown, because during that period no O&M
expenditures are being avoided.
Please note that the gravity component of the Section 113 penalty does
contain one factor where an intermittent operation is "excused" for its
period of hibernation. In calculating the amount for "length of time of
violation" ( page 10 of the September 12, 1984 policy ), only months of
actual operation in violation should be counted. This is because this
gravity factor relates to harm from the emissions themselves.
Penalty May Not Exceed Section 113 Recovery Limit
There is one more, overarching consideration. Under Section 113(b) of
the Act, EPA has authority to seek up to $25,000 per day of violation.
EPA interprets this to mean that the Agency can recover penalties for each
day during which we have good reason to believe a violation exists, even
if we do not have evidence proving violations on each day of the period.
However, for sources which can prove that they were not operating for a
significant period of time, the number of days of violation may be
relatively small. Therefore, it is theoretically possible for the
statutory maximum penalty to be smaller than the settlement amount derived
from the Civil Penalty Policy. In such a case under Section 113, the
Agency would be willing to settle the case for the statutory maximum, as
is stated in the policy. When such facts are present, using Section 120
instead would increase the amount of the economic benefit that the
Government could recover.
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We suggest using the following procedure to calculate the O&M
component of either a Section 113(b) or Section 120 penalty for
intermittent operators. First, run the appropriate computer model with
capital costs set at $0, and O&M costs set at their estimated value under
conditions of continuous operations. Second, multiply the resulting
penalty estimate by the percentage of covered noncompliance time the
source actually operated. This procedure provides, for the O&M portion of
the penalty, a dollar figure which reflects the source's intermittent
operation. ( Please note that the capital component of the penalty is
calculated by setting the O&M costs at $0, i.e., the reverse of the first
step of the above procedure. )
Please call Laurence Groner, Esq., of the Air Enforcement Division, at
FTS 382-2820, if you have any legal questions on this issue, or Howard
Wright, of SSCD, at FTS 832-2831, in connection with technical questions.
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