While’s Clark’s policy change is the final nail in the coffin for federal SEPs, it should come as no surprise. The AAG made clear his view of SEPs in a previous memo that prohibited their use when resolving claims against state and local governments. The new memo expands that prohibition to include all federal SEPs (with a few limited exceptions). Comments made by Clark last week at a Federalist Society forum suggest there may still be more to come on this front, as he indicated DOJ is studying the implications for the new policy on citizen suits.
SEPs, which have been used in environmental settlements since the 1980s, allow a settling party to agree to undertake an environmentally beneficial project—with some nexus to the alleged violation—in exchange for a reduction in civil penalty. Some examples of SEPs in recent federal settlements include energy efficiency projects to replace PCB-containing light fixtures in public schools and the donation of safety equipment to first responders in areas impacted by chemical releases from manufacturing plants.
Because SEPs typically provide tangible community benefits, enhance the environment, and often help bridge gaps in settlement negotiations, they have proven to be very popular among federal law enforcers, states, NGOs, and businesses alike. Regardless of their popularity, however, Clark believes SEPs may violate the law by diverting funds that otherwise would go to the treasury.
What does this mean for environmental settlements going forward?
No more federal SEPs … DOJ will no longer approve consent decrees that contain SEPs except for certain mobile source cases, where the projects are authorized by statute. This prohibition will apply to ongoing negotiations, regardless of how close they are to wrapping up and regardless of their impact on negotiations. The new policy won’t affect consent decrees that have already been signed.
Uncertainty for citizen suits … There is also reason to believe that DOJ may start objecting to settlements in citizen suits that contain environmental projects. Clark’s recent comments to the Federalist Society indicate that DOJ is “studying” whether the logic behind the new SEP policy impacts what should be permissible in citizen suits. It is not clear what actions, if any, will be taken, but DOJ is evaluating the issue.
Different rules for states … The new ENRD policy is silent on the use of SEPs in federal consent decrees that also involve state co-plaintiffs and state law claims. And the policy doesn’t impact the ability of states to include SEP-like projects in separate settlement agreements with private parties who also enter federal decrees. This is exactly what happened in a Clean Air Act settlement entered just a few months ago between DOJ, the State of California, and Kohler. There, California and Kohler entered into a separate agreement under which Kohler agreed to supply $1.8 million worth of solar-battery generators to low-income Californians living in areas subject to frequent power outages to reduce wildfire risks.
Mitigation projects go on … While the new policy applies only to SEPs, there’s an open question as to whether its rationale will impact the use of mitigation projects in settlements. Such projects are similar in nature to SEPs but serve a different purpose: to remediate a specific harm caused by an alleged violation. Because mitigation is a core component of a court’s equitable powers, one would think they would be unaffected by the principles underlying the new SEP policy. And, indeed, the new policy expressly states that it doesn’t apply to projects that “directly remedy” harm to the environment. Clark even explains that the new policy could result in an increase in “classic forms of injunctive relief” like mitigation.
For as long as Clark remains AAG, the only real question is how he views the nexus requirement for mitigation. What he says about nexus for SEPs in the March 12 memo is instructive: such projects need to have a “strict” nexus in terms of (a) the geographic area affected by the violation, and (2) the pollutant(s) at issue in the violation. Look for EPA and ENRD attorneys to continue to seek mitigation in cases where there are practical means of achieving reductions in the pollutants subject to the alleged violations. For violations that have widespread geographic impacts—such as Clean Air Act violations affecting distant downwind communities—examples abound of the types of projects that could satisfy the nexus requirement.
The only constant in life is change … Finally, it’s important to recognize that while the new DOJ policy does reflect a significant departure from existing policy, policy changes like these are not etched in stone. Clark’s new policy reverses the use of a popular settlement tool that had been in use for nearly four decades. It reverses guidance issued just two years ago by the current administration, which found the use of SEPs to be appropriate. When administrations change, so too do their enforcement priorities, and it’s safe to assume that undoing this new policy would be near the top of the list of any new ENRD administration.
We’ll just have to wait and see whether this is a short blip or a long-term change in federal environmental enforcement policy.
PretiFlaherty attorneys Jeff Talbert and James Beers contributed to this article.
PretiFlaherty attorneys Jeff Talbert and James Beers contributed to this article.