Every four years, the Environmental Protection Agency is required to review its civil monetary penalties and adjust the penalties for inflation under the requirements in the Debt Collection Improvement Act of 1996. In a final rule, without public comment, EPA announced its adjustments to the penalties that will apply to violations occurring after Dec. 6, 2013. 78 Fed. Reg. 66643 (Nov. 6, 2013). Of the 88 statutory civil penalty provisions implemented by EPA only 20 are being adjusted. In most cases, these adjustments will increase potential penalties by $10,000 to $50,000 for each day of violation. The list of affected statutory sections and the inflation adjusted penalty amounts can be found in Table 1 of the Federal Register notice and will be codified at 40 CFR §19.4.
Although these adjustments are based on a pre-determined process applied equally to all of EPA's enforcement authorities, most of the increased penalties apply to areas of public concern and EPA's enforcement priorities.
The DCIA formula for determining the inflation adjustment is based on a four-step process: 1) determine the cost of living adjustment, which in this case was generally 20.97 percent; 2) calculate the raw inflation increase (multiply the COLA by the current civil penalty); 3) apply a rounding rule; and 4) add the rounded inflation increase.
Potential penalties for just a few of the many affected by the adjustment include:
One adjustment has significantly increased potential penalties. Under Section 311 of the Clean Water Act, civil penalties can be assessed on the discharge of each barrel of oil or each unit of a "reportable quantity" of hazardous substances. Starting Dec. 6, 2013, the potential civil penalty almost doubles from $1,100 to $2,100 per barrel or unit. In the case of "gross negligence" or "willful misconduct" the potential penalty rises by $1,000 to $5,300 per barrel or unit. These changes alone could result in the potential for billions of dollars of additional penalties in the event of a Deepwater Horizon type event.
Bottom Line: As a result of EPA's new inflation adjustment rule, the potential magnitude of civil penalties for a range of environmental violations makes it even more important to assure you are in compliance with environmental laws.
If you have any questions regarding this alert, please contact Partner Frances E. Phillips (firstname.lastname@example.org or 214.999.4803) or another member of Gardere's Environmental Specialty Practice Group.