In a move that seems out of step with the Trump Administration’s general (federal) anti-regulatory approach to governance, the US Department of Justice (DOJ) has ended their use of Supplemental Environmental Projects (SEPs).
While this is somewhat surprising, there were hints this change may be coming as far back as June 2017 when the DOJ issued a memo, “Prohibition on Settlement Payments to Third Parties.”
Importantly, this applies to the DOJ’s Environment and Natural Resources Division (ENRD). According to a legal blog by Crowell Moring, “One area of uncertainty is the effect of the ENRD policy on EPA settlements that do not involve ENRD, i.e., settlements undertaken pursuant to EPA’s own administrative enforcement authority.”
ENRD Memo
Jeffrey Bossert Clark, Assistant Attorney General of ENRD, issued a memo in which he states, “…SEPs violate the Miscellaneous Receipts Act.” The memo goes on to state, “Moving forward, they therefore will no longer be part of the suite of relief the Environment and Natural Resources Division seeks in its cases (unless specifically authorized by Congress)…”
Driving the point home further in the discussion section of the memo, the Assistant Attorney General states, “Having completed my broader review of SEPs I conclude that using SEPs in consent decrees and judicial compromise settlements must cease no matter whether the party agreeing to implement the SEPs is a state or local government or whether it is a private party.”
Past Supplemental Environmental Projects have included solar and wind energy projects in communities (Image by seagul on Pixabay)
SEPs Were Viewed Favorably
The regulated community has generally viewed SEPs favorably as they can significantly reduce the dollar amount of the fine by performing community projects. While the SEPs reduced money going to the Department of Treasury, communities were the beneficiary (see examples below). As we understand, there are also tax advantages in the SEPs that are not available when the fine is paid to the Department of Treasury.
The EPA defines SEP as “…an environmentally beneficial project or activity that is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action.” By performing the SEP, the EPA can reduce the fine by as much as 80%.
SEP Examples
Here are some examples of SEPs courtesy of a blog on LEXOLOGY last fall. “Examples of SEPs include a Maryland utility agreeing to install solar panels at schools and a community center; an oil refinery in New Jersey agreeing to install electrical hookups to minimize truck idling; a Colorado gas compression company agreeing to purchase wind power over a five-year period; and a shopping mall owner donating 24 acres of land to be used as a buffer zone adjacent to a nature reserve.”
Moving Forward
For those who have already entered into an agreement involving a SEP, there will be no change. However, if this potentially affects you and a pending settlement, we encourage you to contact your legal counsel.
The current universe of projects this may affect is limited, perhaps limited to ENRD projects. However, with greater need for federal revenues to pay for the $2 Trillion Coronavirus Relief Bill, there may be other unforeseen changes in the coming months.
If you have questions about environmental issues, large or small, we can help. You can contact me at 248-932-0228, Ext. 134, and I’ll connect you with the appropriate technical staff.
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