One of the largest home builders in the United States has agreed to pay $625,000 in civil penalties for violating federal and state laws to prevent stormwater runoff. On October 11, 2011, the U.S. Department of Justice (on behalf of U.S. EPA) and Indiana, Illinois, Maryland, Nevada, and Virginia filed a lawsuit against Ryland Group, Inc. ("Ryland Homes") alleging Ryland failed to obtain or failed to comply with “general permits” issued for storm water run-off at construction activities. In a consent decree filed the same day, Ryland Homes settled these claims. While the civil penalties will be split among the federal government and 12 states, the complaint does not state whether Ryland Homes failed to obtain or comply with permit requirements in Indiana. However, the consent decree does identify 20 subdivisions in Boone, Johnson, Marion, and Hamilton Counties, where it was alleged that Ryland operated without a permit.
Home builders need a NPDES permit because Section 402(p) of the CWA and existing national storm water regulations at 40 C.F.R. § 122.26 require dischargers engaged in construction activity to obtain a National Pollution Discharge Elimination System (“NPDES”) permit and to implement control measures to manage discharges associated with construction activity. This category is the largest category of dischargers in EPA’s NPDES permit program. Moreover, EPA has long acknowledged that effluent-based storm water regulation is administratively difficult (if not infeasible) due to the variable nature of storm water pollution and the sheer number of dischargers throughout the country. See Natural Res. Def. Counsel v. Costle, 568 F.2d 1369, 1377-82 (D.C. Cir. 1977). To counter the complexity and volume of potential discharges, EPA – and most states – has implemented a general permit program. Under these programs, any person subject to regulation must develop a storm water pollution prevention plan (“SWPP”) that establishes a plan to control and reduce pollutants in storm water discharges at construction sites. In addition, the general permit requires the permitee to select and maintain best management practices (“BMPs”) to reduce or prevent the discharge of pollutants. BMPs include measures to control erosion and capture sediment. See 40 C.F.R. § 122.26(b)(15)(i); 327 IAC 15-5-1.
While the civil penalties Ryland Homes has agreed to pay are substantial, they could have been much worse. The CWA allows EPA to impose up to $27,500 per day, per violation. Here, there were over 200 sites listed where alleged violations occurred. Moreover, under the consent decree, Ryland will also implement a company-wide program for insuring the violations do not occur again. EPA estimates this will prevent millions of pounds of sediment from entering U.S. waterways every year. This case underscores the complexity and broad reach of state and federal environmental laws and regulations and the importance of insuring compliance with them. At the same time, it underscores the importance of cooperation with EPA and DOJ once violations are uncovered in order to minimize business impacts.