The U.S. Environmental Protection Agency recently updated its Supplemental Environmental Project (SEP) Policy.

Most federal actions for failure to comply with the environmental laws are resolved through settlement agreements. As part of a settlement, an alleged violator may voluntarily undertake a supplemental environmental project (SEP), which is an environmentally beneficial project related to the violation in exchange for mitigation of the penalty to be paid.

SEPs are projects or activities that go beyond what could legally be required in order for the defendant to return to compliance, and secure environmental or public health benefits in addition to those achieved by compliance with applicable laws. According to EPA, SEPs generally “further EPA’s goal of protecting and enhancing the public health and the environment.”

SEPs can also help to further the EPA’s mission to protect public health and the environment, which includes, but is not limited to:

  • Improving Children’s Health – SEPs that reduce children’s exposure to, or health impacts from, pollutants, and/or that reduce environmental risks to children in the community impacted by a violation are actively sought and encouraged.
  • Furthering Environmental Justice – SEPs that help promote environmental justice through a variety of projects is an overarching goal of EPA, because environmental justice is one of the six critical factors on which SEP proposals are evaluated. SEPs that benefit communities with environmental justice concerns are actively sought and encouraged.
  • Encouraging Pollution Prevention – Projects that prevent the generation of pollution often provide the chance to utilize new and innovative technologies. Effectiveness in developing and implementing pollution prevention techniques and practices is also a factor in evaluating a SEP, and can be reflected in the degree of consideration accorded to the defendant in the calculation of the final settlement penalty; such projects are actively sought and encouraged.
  • Developing Innovative Technology – SEPs provide defendants with an opportunity to develop and demonstrate new technologies that may prove more protective of human health and the environment than existing processes and procedures. SEPs also provide the EPA with a unique opportunity to observe and evaluate new technologies which might, should they prove effective and efficient, lead to better standard industry practices. Technology innovations may also be a means to assure that future industry and other commercial practices are sustainable, reflect the best available technology, and lead to continued long-term pollution reductions and improved public and environmental health. Innovative technology can take a variety of forms and may be applied broadly across environmental media and commercial, industrial and municipal activities, processes and practices.
  • Preventing Climate Change – Projects that address the causes of climate change and reduce or prevent emissions of climate change pollutants and greenhouse gases, such as carbon dioxide are encouraged as SEPs. In addition, projects that address the impacts of climate change and help increase a community’s resilience in the face of these impacts on ecosystems or infrastructure are also encouraged as SEPs.

The 2015 Update applies to all civil judicial and administrative enforcement actions taken under the authority of the environmental statutes and regulations that the EPA administers. The Update also applies to federal agencies that are liable for the payment of civil penalties.

Under the 2015 Update, to include a proposed project in a settlement as a SEP, Agency enforcement and compliance personnel are expected to ensure:

  1. That the project conforms to the basic definition of a SEP);
  2. That all legal guidelines are satisfied;
  3. That the project fits within one (or more) of the designated categories of SEPs;
  4. That the penalty mitigation amount is appropriate as reflected in the project’s environmental or public health benefits using the evaluation criteria; and
  5. That the project satisfies all of the EPA procedures, settlement requirements, and other criteria.

The 2015 Update notes that “in some cases, strict application of this Policy may not be appropriate…In such cases, the litigation team may use an alternative or modified approach, with advance approval from the Assistant Administrator for the Office of Enforcement and Compliance Assurance (OECA).”

EPA has identified eight board categories of projects that may be acceptable for SEPs:

(1) public health, (2) pollution prevention, (3) pollution reduction, (4) environmental restoration and protection, (5) emergency planning and preparedness, (6) assessments and audits, (7) environmental compliance promotion, or, generally, (8) other types of projects.

EPA has also identified several types of projects that are not appropriate for SEPs including, but not limited to, general public educational or public environmental awareness projects, contributions to environmental research at a college or university, cash donations to community groups or environmental organizations, and projects which are undertaken, in whole or in part, using funds obtained from the federal government.

Seyfarth Shaw has negotiated numerous SEPs with EPA as part of a settlement agreement. If you have questions about SEPs or would like assistance negotiating a settlement with EPA, please contact your Seyfarth Shaw attorney for guidance.

The 2015 Update supersedes the 1998 Policy, and is effective immediately.