Recent policies and rules adopted by the Department of Justice (DOJ or Department) will impact the pace, focus, and content of ongoing, and future, environmental enforcement cases. On May 5 Attorney General Garland signed a memorandum restoring the use of payments to non-governmental third parties as part of settlements in certain limited circumstances, and Associate Attorney General Gupta signed a strategy to advance environmental justice through enforcement. On May 6, DOJ released an Interim Final rule to restore the Department’s ability to include supplemental environmental projects (SEPs) in settlements, in conformance with the third party payment policy. The SEP restoration rule will be effective May 10, 2022. These DOJ actions were taken in close coordination with U.S. Environmental Protection Agency (EPA) Administrator Michael Regan, who has also emphasized the primacy of environmental justice’s role in EPA’s current regulatory and enforcement agenda.
Both EPA and DOJ are implementing the Biden Administration’s day one Executive Order 14008, which directed a “whole of government” approach to environmental justice and climate change. When taken together, these actions will impact where specific environmental cases are investigated and ultimately brought, as well as the local projects and partnerships that can be a part of case resolution. These actions may also increase the cost of settling enforcement cases where third-party payments and SEPs are utilized.
Involving counsel with deep familiarity with these policies, and with internal EPA and DOJ practices and personnel, can help companies navigate both enforcement actions against them, and resolution of those actions with SEPs and third-party payments as appropriate. Careful planning and discussion with enforcement authorities, under these new policies, may provide companies renewed opportunities to partially address environmental violations with community investment.
Environmental Justice Enforcement Strategy
The Environmental Justice Enforcement Strategy (Strategy), developed by the DOJ’s Environment and Natural Resources Division (ENRD) in partnership with EPA, has four “principles,” each with corresponding actions aimed to “ensure that the entire Department is vigorously and transparently working to secure environmental justice with the full set of legal tools at its disposal, in partnership with EPA and other federal agencies, and in communication with the communities most affected by the underlying violations of federal law.” These principles include:
1. Prioritize cases that will reduce public health and environmental harms to overburdened and underserved communities. A new Office of Environmental Justice (OEJ) will be stood up within the DOJ’s Environmental and Natural Resources Division (ENRD). Modeled on other cross-cutting offices, such as the Office of Tribal Justice, the OEJ will be governed by a steering committee with long-time, respected career DOJ attorney Cynthia Ferguson as its Acting Director. Staffed with attorneys from the Office of Civil Rights and ENRD, the OEJ will refine protocols for assessing environmental justice impacts during agency investigations to help with prioritizing enforcement actions.
The Strategy uses terms that have varying definitions across the federal government and states, such as “underserved communities” which are those “that have been historically marginalized and overburdened, including low-income communities, communities of color, and Tribal and Indigenous communities.” Several tools exist within EPA and states to identify communities that would be considered underserved, such as EPA’s EJScreen and the White House’s beta Climate Justice and Economic Screening Tool – the later of which is open for public comment through May 25.
2. Make strategic use of all available legal tools to address environmental justice concerns. The Strategy emphasizes the importance of “timely remedies” to affected communities and calls for inter-agency collaboration to “make effective and appropriate use” of all enforcement authorities and tools that might remedy environmental violations and contamination, including tools outside of the traditional environmental statutes.In its 2021 annual enforcement results, EPA cited Clean Air Act emergency orders issued in the U.S. Virgin Islands and South Carolina which have been rarely sought in the past, as examples of “aggressive early enforcement” supporting environmental justice goals. The Strategy encourages pairing preliminary or interim relief like emergency orders with the phasing in of longer-term permanent remedies to accelerate relief for communities that have sustained the greatest impacts of environmental violations.
Mitigation for environmental violations may, once again, include “appropriately limited Supplemental Environmental Projects in civil enforcement cases,” when agreed to voluntarily as part of settlement negotiations. This will become official with the May 10th publication of the Department’s Interim Final Rule restoring the ability to use SEPs “in appropriate circumstances as part of settlements with defendants who have violated federal environmental laws.”
Of note is the Strategy’s focus on using other statutes to advance enforcement results in affected communities. These can include violations brought under Title VI of the Civil Rights Act, the Occupational Safety and Health Act, the Consumer Product Safety Act, the Federal Food, Drug, and Cosmetic Act, other provisions of Titles 15, 18, and 49 of the United States Code, and the False Claims Act (FCA). Under the FCA, a company participating in a federal grant program found to make false statements about the environmental and public-health impacts of their federally funded efforts could face treble damages.
3. Ensure meaningful engagement with the impacted communities. Under the Strategy, case attorneys are directed to develop a case-specific community outreach plan as part of their investigation in collaboration with the investigative or referring agency, as well as to coordinate with the community outreach specialists and Tribal Liaisons in the U.S. Attorneys Offices. The goal is to provide the community with a voice in government decisions that affect them.
4. Promote transparency regarding environmental justice enforcement efforts and their results. While acknowledging that enforcement case work “often warrants, and sometimes requires, elements of confidentiality,” the Strategy emphasizes the importance of a culture of transparency, as well as DOJ’s development of performance standards to enhance external accountability and effectiveness of this Strategy.
Companies will want to keep watch on EPA’s concurrent work on cumulative impacts, which could impact which communities DOJ and EPA select for heightened attention going forward. Also relevant will be the impact of the Strategy on the types of cases brought by state environmental agencies, and on any update to EPA’s priority enforcement areas as articulated in its’ National Compliance Initiatives – which are current through September 2023.
Guidelines and Limitations for Settlement Agreements Involving Payments to Non-Governmental Third Parties
As noted above, the Department’s ability to use SEPs is restored under an Interim Final Rule to be published May 10, with a discretionary comment period. While fines and penalties go to the U.S. Treasury, SEPs are frequently tangible community assets addressing public health and environmental stressors such as air quality, water pollution, and waste management. Traditionally, SEPs have been treated as separate and distinct from third party payments, and EPA’s longstanding SEP policies barred the use of third party payments as part of SEPs – and still do.
Going forward, SEPs are subject to the limitations outlined in Attorney General Garland’s May 5 third-party payments memorandum, which states that “[w]hen used appropriately, settlement agreements that provide for payments to non-governmental third parties are critical tools for addressing violations of federal law and remedying the harms those violations cause.” Significantly, the memorandum directs that settlements with third party payments must be approved at the highest levels of the DOJ – by either the Deputy Attorney General or the Associate Attorney General, which are the number two and three ranked officials in the Department. While some large cases would receive this high-level review regardless, this requirement could serve as a deterrent for their inclusion in various other contexts.
The Garland memorandum blurs the distinction between SEPs and third party payments, while outlining factors to ensure that third-party payments (and by extension SEPs that involve third party payments) have a strong connection to the underlying violation and to limit the use of funding for proposed projects with non-tangible benefits. For example:
- Settlement agreements must define with particularity the nature and scope of the project or projects that the defendant has agreed to fund;
- There must be a “strong connection” to the underlying violation of federal law at issue in the enforcement action and the project must be consistent with the objectives of the statute being enforced. This “strong connection” test differs from the prior approach adopted by Attorney General Sessions in 2017 which allowed a third party payment that “directly remedies” environmental harm at issue in the case;
- DOJ staff cannot propose the selection of any particular third party to receive payments to implement any project;
- Any settlement must be executed before an admission or finding of liability in favor of the United States, and DOJ must not retain post-settlement control over the funds or projects;
- A settlement cannot be used to satisfy the statutory obligation of DOJ or any other federal agency to perform a particular activity; and
- A settlement cannot require payments to non-governmental third parties solely for general public education or awareness projects; solely in the form of contributions to generalized research; or in the form of unrestricted cash donations.
These new policies raise questions about their implementation in specific enforcement cases. Navigating the Garland memorandum criteria will require careful consideration by DOJ and EPA enforcement attorneys. Indeed, DOJ’s environment division may be called upon to provide additional guidance to help inform and clarify the use of these enforcement tools. In addition, EPA may need to revise its 2015 SEP policy to provide more clarity on the intersection between third-party payments and SEPs. Congressional scrutiny of so-called “slush fund” payments is also likely to remain a factor. Some in Congress are already sounding alarms over the return to these settlement practices.
While the dust settles on these new changes, integrating enforcement counsel with experience navigating the complexities of all facets of settlement, including the use of SEPs and third-party payments, can lead to better outcomes, both for resolving environmental liability exposure for the corporate defendants and for correcting environmental harms in a way that maximizes value for the community.
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