Through an interim final rule effective August 1, 2016, the U. S. Environmental Protection Agency (“EPA”) is increasing the maximum daily penalties it may assess for environmental violations that occurred any time after November 2, 2015. Any violation of an environmental statute enforced by the EPA, i.e., Clean Water Act, Clean Air Act, TSCA, RCRA, CERCLA and EPCRA, may now have a penalty that is up to 150 percent higher than the previous daily maximum. For example, a Class I violation of EPCRA carries a statutory maximum penalty of $25,000 under 42 U.S.C. 11045(a). Now, the maximum daily civil penalty for that violation is $53,907.
The increase in maximum penalties is a result of the 2015 amendment to the Federal Civil Penalties Inflation Adjustment Act of 1990 (the “Act”). The amendment requires federal agencies to adjust their civil penalties with an initial one-time “catch-up” adjustment so that the new maximums will take effect by August 1, 2016. Beginning January 15, 2017, agencies will also be required to make annual, rather than quadrennial, adjustments for inflation. The adjustment is calculated by multiplying the originally enacted maximum penalty amount, or the amount last adjusted by statute, by the difference between the Consumer Price Index for all Urban Consumers (“CPI-U”) during the month of October 2015 and the CPI-U for the month of October during the year that the penalty was enacted or last adjusted. The Act does provide, however, that the “catch-up” adjustment shall not exceed 150 percent of the penalty that was in effect on November 2, 2015. If the adjustment exceeds 150 percent, then the 150 percent value will be the new maximum penalty. The results of the EPA’s calculations and new maximum daily penalties can be found in Table 2 of 40 C.F.R. Section 19.4: Civil Monetary Penalty Inflation Adjustments.
This maximum daily penalty increase will undoubtedly impact settlement negotiations, and resolving alleged environmental violations with the EPA will become even more costly and potentially more contested and timeconsuming. The EPA suggests that the new rule will not necessarily change the civil penalties that it chooses to impose, but nevertheless will have the overall impact of making environmental violations more costly and challenging to defend and resolve. Furthermore, state agencies responsible for environmental enforcement may now choose to increase their own maximum penalties to keep pace with the EPA. The potential for substantially higher maximum daily penalties may also cause the EPA to reevaluate how it chooses to enforce environmental statutes, and the agency will certainly have more bargaining power when it comes to assessing penalties.