Enforcement and Inspection, Special Topics in Environmental Management

Supplemental Environmental Projects (SEPs) Welcomed Back by Many

In a move welcomed by many, the use of Supplemental Environmental Projects (SEPs) is back as part of settlement agreements in federal environmental enforcement cases.

Environmental law and regulation, SEPs

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On February 4, 2021, Deputy Assistant Attorney General Jean E. Williams of the U.S. Department of Justice’s Environment and Natural Resources Division (ENRD) issued a memo eliminating several directives from the Trump administration, including the ban on SEPs, effective immediately.

SEP’s were discontinued on March 12, 2020, in a memo that was titled “Supplemental Environmental Projects (SEPs) in Civil Settlements with Private Defendants.” In banning the use of SEPs, the Trump administration stated its belief that “SEPs essentially diverted penalty funds that would otherwise go to the Treasury, to environmentally beneficial projects in violation of the Miscellaneous Receipts Act, which requires penalties received by the government to go to the Treasury,” according to an article in Lexology by New England-based Pierce Atwood LLP.

The recent ERND memo notes that cessation of the use of SEPs was “inconsistent with longstanding Division policy and practice.…”

“For decades, SEPs have been a common tool in federal civil environmental enforcement cases,” according to Pierce Atwood. “They allow private parties to develop and implement (or, in some cases, to fund) environmentally beneficial projects to offset a portion of civil penalties. The projects must have a nexus to the violations alleged by the federal government and there is a limit on how much of the civil penalties can be avoided.

“Many defendants in federal enforcement cases welcome the opportunity to use an SEP, which often generates goodwill in the community (in contrast to simply paying a monetary penalty to the U.S. Treasury),” Pierce Atwood adds. “It was that notion – funding projects benefitting some portion of the community – which the Trump Administration ENRD found to violate public policy.”

This move signifies a significant shift in how the ENRD will approach enforcement cases.

Williams’s memo references President Joseph Biden Jr.’s Executive Order (EO) 13990 as the reason for rescinding the previous administration’s memos. EO 13990 directed federal agencies to “‘immediately review and, as appropriate and consistent with applicable law, take action to address’ certain regulations or other agency actions ‘that conflict with these important national objectives….’”

Williams’s memo also rescinded eight other Trump administration documents that he stated are inconsistent with long-standing division practices and act as an impediment to “the full exercise of enforcement discretion in the Division’s cases”:

  1. “Enforcement Principles and Priorities,” January 14, 2021;
  2. “Additional Recommendations on Enforcement Discretion,” January 14, 2021;
  3. “Guidance Regarding Newly Promulgated Rule Restricting Third-Party Payments, 28 C.F.R. § 50.28,” January 13, 2021;
  4. “Equitable Mitigation in Civil Environmental Enforcement Cases,” January 12, 2021;
  5. “Civil Enforcement Discretion in Certain Clean Water Act Matters Involving Prior State Proceedings,” July 27, 2020;
  6. “Using [SEPs] in Settlements with State and Local Governments,” August 21, 2019;
  7. “Enforcement Principles and Priorities,” March 12, 2018; and
  8. “Settlement Payments to Third Parties in ENRD Cases,” January 9, 2018.