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Here’s the Deal: New Directions in Environmental Enforcement Under Biden?

Written by Gerald F. GeorgeDavis Wright Tremaine LLP

On December 23, 2020, the federal government published its inflation-adjusted civil penalties for a variety of environmental statutes, including the Clean Air Act (CAA) and the Clean Water Act (CWA). Those $25,000 per day or per violation penalties in the original statutes have now reached substantially higher levels, mostly in the $50,000-$60,000 range, but CAA penalties could reach $100,000.

That is a predictable change. What is less predictable is how enforcement will play out in the coming year with a new administration. Will the annual inflation adjustment to civil penalties be accompanied by greater enforcement?

The Trump Administration ended the year the same way it started its term in 2017, by attempting to roll back the environmental regulations and policies applied previously. The near-term result for enforcement is unclear, in part, because virtually every change made by the Trump Administration has been challenged in court, with a uniquely low success rate for the federal government.

With many of those challenges still pending, one wonders how the Biden Administration will approach these cases. The more important question for the regulated community is the approach the Biden Administration will take toward enforcement in general. Even with the Trump changes, the incoming administration retains a lot of regulatory authority.

Two reactions seem obvious. One is resurrection of an unspoken principle for challenging regulation: be careful. You may win this case, but you will still have to deal with the regulator when the case is over. Taking a hard-nosed approach can backfire if it means the regulators will be hanging on you like a cheap suit for the next four years, or you need agency approval for an essential expansion.

More optimistically, we are almost certain to see a resurrection of Supplemental Environmental Projects (SEPs), environmentally beneficial projects implemented by a violator in connection with a settlement. SEPs have been used in EPA settlements since 1984 to create semi-win-win resolutions for alleged environmental violations.

A violator might pay a penalty, but would offset some, if not most, of that by funding an environmentally friendly project. The community and the environment would benefit from the project; the company might even pay more out of pocket, but will see its money used for something positive, not just dumped into the U.S. Treasury general fund.

While questions about the propriety of SEPs have been raised over the years, the issue had always been resolved in favor of authorizing settlement projects directly related to the violations—part of the remedy, not unappropriated “free money” for boat ramps at the local reservoir. The Trump Administration took a harder line, resulting in the EPA and Department of Justice (DOJ)’s ending the use of SEPs in settlements.

The issue of SEPs then arose in the courts in two contexts. In Michigan, the federal government settled a long-running CAA case with the violator for a civil penalty. The private plaintiff in the case settled separately with the defendant, committing to further steps to improve air quality and to implementation of an SEP. The federal government objected to the settlement, but lost last year in the district court in U.S. v. DTE Energy Co.

In an unrelated case arising in Massachusetts, an environmental group challenged the implementation of the DOJ policy. In Conservation Law Foundation v. William Barr, the federal government argued not that SEPs were barred, but whether or not the government’s acceptance of an SEP in a settlement was within its discretion.

Whether one agrees with the policy, the prosecutorial discretion position makes sense. It also means that a decision favorable to the federal government would not bar it from reverting to its prior policy authorizing SEPs.

SEPs are extremely useful in structuring settlements. A minor loss of income to the U.S. Treasury is more than offset by the environmental benefits to the public, and the parties focus their discussions on addressing environmental problems, not on trying to save a few dollars in penalties.

Further, SEPs are particularly attractive in suits involving public agencies, where cash-strapped facilities can at least put their limited funds to work on real environmental problems important to their constituencies. It is galling to see a municipality paying money into the U.S. Treasury for failure to implement treatment improvements it cannot afford, making the cost of future compliance even more unaffordable.

In any event, fights over the size of penalties are a crapshoot for everyone and may well end up costing more than they save. E.g., Citgo’s effort to defeat a major penalty demand in connection with a spill from its refinery in Louisiana ($8 million penalty at District Court reversed by a Court of Appeals, $81 million penalty imposed on remand).

The next four years of environmental enforcement litigation will be interesting to watch. But aside from the litigation over old and new regulations, I predict enforcement will look more like what existed pre Trump, if not more aggressive.

It would behoove the regulated community to be ready to return to use of the traditional tools for defense of claims involving strict liability statutes. Watch the bottom line of your business, and avoid a hostile relationship with your (we hope) friendly, but ever present regulator.

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About the Author

Gerald George is a seasoned environmental attorney and litigator, with extensive experience in successfully resolving federal and state enforcement actions, natural resource damage actions, and citizen suits. Gerald also advises on regulatory matters involving air, water, waste, and environmental impact review laws. He has more than 40 years’ experience in civil lawsuits, including 30 years of handling major environmental litigation throughout the country.

$20 Million U.S. TSCA/Lead-Based Paint Penalty: Expensive Reminder to Manage and Audit Contractors’ Joint Regulatory Liabilities

Written by Patrick Larkin and Maram T. Salaheldin  Clark Hill PLC 

Renovation of homes built before 1978 frequently disturbs lead-based paint (LBP) and poses significant health risks, particularly for children. For this reason, companies that perform or subcontract renovation services are required to provide very specific, written LBP warnings and education materials to residents. Failure to comply with these obligations can result in significant penalties for non-compliance. The U.S. Environmental Protection Agency (EPA) enforces these rules on all companies that “perform renovations for compensation.” This means that retail sellers of renovation products (e.g., windows or woodwork) can face EPA enforcement for noncompliance even where they subcontract installation to third parties.

On Dec. 17, 2020, U.S. EPA and the Department of Justice (DOJ) announced a nationwide settlement with Home Depot related to home renovations that occurred between 2013 and 2019. The settlement resolves alleged violations of the EPA’s Lead Renovation, Repair, and Painting (RRP) Rule involving renovations performed by Home Depot’s contractors across the country on homes built before 1978. EPA identified hundreds of instances in which Home Depot failed to contract renovations or repairs with certified contractors, as well as instances in which Home Depot failed to establish, retain, or provide the required documentation to demonstrate compliance with the RRP Rule.

EPA’s proposed settlement with Home Depot includes a $20.75 million penalty—the largest such penalty to-date under the Toxic Substances Control Act (TSCA).

Compliance Lessons

Companies in the construction industry and beyond can learn several significant lessons from the Home Depot violations, including the importance of:

  1. Understanding Your Liability: Businesses sub-contracting regulated activities to third parties are not necessarily insulated from liability. Here, since Home Depot contracted with customers and received compensation to perform renovations of pre-1978 housing, it remained liable under the RRP Rule, regardless of its use of subcontractors. Home Depot failed to actively assess and control risk from noncompliance by itself and its subcontractors, resulting in a significant penalty. Understanding your liability, particularly in the context of subcontracting, is an important step towards reducing enforcement exposure for your business.
  2. Being Proactive about Compliance: Another important step to reducing your enforcement exposure is implementing a compliance management system to identify potential issues before they become a problem. A strategic option to reduce such exposure can be the use of environmental self-audit/self-disclosure programs, such as EPA’s Audit Policy. The EPA Audit Policy allows companies to reduce or eliminate penalty exposure from noncompliance at their facilities. In addition, under the LBP Consolidated Enforcement Response and Penalty Policy, renovators may succeed in receiving gravity-based penalty reduction for any RRP Rule violations that qualify for such reduction under EPA’s Audit Policy. While navigating the EPA self-audit program can be challenging, the benefits can often be great for businesses. Small businesses and new business owners, in particular, may wish to take advantage of the tailored incentives potentially available to them, including the ability for new owners to enter into audit agreements with EPA to receive affirmative resolution and negotiated timelines for completing corrective actions.

About the Authors

Pat Larkin practices exclusively in environmental law at Clark Hill PLC, including regulatory compliance, litigation, administrative law, and environmental counseling in business transactions. Pat regularly represents industrial, transportation, real estate and retail clients in air, water and waste permitting, compliance counseling and audits, voluntary site cleanups, government enforcement actions, and in agency rulemaking and associated stakeholder and guidance writing work groups.

Maram Salaheldin is an Associate in Clark Hill’s Washington DC office in the Environment, Energy & Natural Resources group. Her practice focuses on providing environmental management and regulatory compliance support to U.S. and multinational clients, with an emphasis on risks and liabilities arising under environmental, health, and safety (EHS) laws, particularly with regard to solid and hazardous waste management, including transboundary movements under the Basel Convention.

Ontario dry-cleaning company fined $10.5K for violations

Mega City 1 Hour Cleaners, located in east Toronto, recently pled guilty to two charges under the Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirements) Regulations, made pursuant to the Canadian Environmental Protection Act, 1999. The company was fined $10,500 which will be directed to the Government of Canada’s Environmental Damages Fund.

On September 30, 2020, 9626735 Canada Inc. (doing business as Mega City 1 Hour Cleaners), located in Scarborough, pleaded guilty in the Provincial Court of Ontario, to two charges under the

In addition to the fine, Mega City 1 Hour Cleaners (registered in Canada as 9626735 Canada Inc.) was issued a 12-month probation order that proof of payment be provided on three outstanding contravention tickets totalling more than $1,800. Two tickets were for the failure to file annual reports for 2014 and 2015, and the third for the unlawful storage of wastewater. The tickets were issued under the Provincial Offences Act by Environment and Climate Change Canada (ECCC).

In November 2017, Environment and Climate Change Canada enforcement officers conducted an inspection at the Mega City 1 Hour Cleaners in Toronto. Officers found one container of wastewater that exceeded the 12-month storage timeframe permitted under the regulations. Officers also determined that an Annual Report for the 2016 calendar year had not been submitted to ECCC as required by the regulations.

Tetrachloroethylene, commonly known as PERC, is used as a dry-cleaning solvent and is listed as a toxic substance under the Canadian Environmental Protection Act, 1999.  The storage of hazardous waste can pose a threat to the environment and human health, through risk of accidents, spills or leaks. The Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirements) Regulations minimize these risks by imposing the regular removal of waste.

If PERC is released into the air, it can damage plants. Improper handling of PERC and PERC-containing waste can also contaminate ground water.

 

Chedoke Creek spill update: City of Hamilton receives additional Orders from Ministry of the Environment, Conservation & Parks

The City of Hamilton, Ontario recently received an additional Provincial Officer’s Order from the Ontario Ministry of the Environment, Conservation & Parks (MECP) as they relate to a spill into Chedoke Creek.

In 2019, the MECP ordered the City to complete an Environmental Risk Assessment of Chedoke Creek and an Ecological Risk Assessment for Cootes Paradise. These studies both found that it was not possible to attribute environmental impacts experienced in these areas exclusively to the spill.

The most recent Order from the Ontario Environment Ministry requests that the City undertake remedial action for Chedoke Creek and Cootes Paradise. In part, the Order asks that the City develop a plan for targeted dredging in Chedoke Creek and recommends mitigation measures to improve water quality in Cootes Paradise.

The City stated that it is committed to continuing its full cooperation with the MECP’s investigation and staff will be consulting with Council regarding how we can best address the environmental concerns in Chedoke Creek and Cootes Paradise.

To date, in response to the spill, the City has taken a number of actions toward addressing the impacts of the discharge, including:

  • Undertaking clean-up of the creek, including removing 242,000 litres of “floatable material” from the surface and edge of the creek.
  • Initiating regular monitoring of water quality in impacted areas of Chedoke Creek.
  • Initiating and implementing enhanced inspections of wastewater facilities and equipment.
  • Undertaking expert studies to determine what kind of further remediation is appropriate for Chedoke Creek and Cootes Paradise.
  • The approval of four new staff members to increase the City’s ability to perform regular, routine physical inspections and preventative maintenance for City water infrastructure, as well as sampling and analyzing water and wastewater quality in Hamilton.

Background Information

In July 2018, the City of Hamilton informed the public that it had discovered that one of its combined sewer overflow tanks was discharging untreated wastewater into Chedoke Creek. The City immediately stopped the discharge and began clean-up activities in the area.

Over the course of a four-and-a-half-year period, the City estimated that approximately 24 billion litres of combined storm water runoff and sanitary sewage was discharged into Chedoke Creek. This represents approximately four per cent of the annual volume of flow to Hamilton’s wastewater treatment plants.

Investigations have determined that the spill was the result of two separate malfunctions at the Main/King combined sewer overflow tank. First, a station bypass gate in the combined sewer overflow tank that should have been in a closed position appears to have been manually opened to approximately five per cent on January 28, 2014. An error in computer programming showed this as normal operation and, as such, this error remained undetected until July 2018. Additionally, a second gate that should have remained in the open position experienced a mechanical failure in January 2018. The sensor on this piece of equipment did not pick up the failure and was reporting normal operation. Despite extensive investigations, the City has not been able to determine why the first bypass gate had been opened in January 2014.

Two forestry companies court-ordered to pay $40,000 for violating the Species at Risk Act

Débroussaillage Québec and Forestière des Amériques Inc. were recently each fined $20,000—for a total of $40,000—at the Longueuil, Quebec courthouse. Each company pleaded guilty to one count of violating the Emergency Order for the Protection of the Western Chorus Frog (the Emergency Order) in contravention of the Species at Risk Act. The companies pleaded guilty to the charge of carrying out a prohibited activity, namely pruning vegetation— including trees, shrubs, and bushes—in a sensitive area.

On April 23 and 24, 2018, employees of Forestière des Amériques Inc., whose services were retained by Débroussaillage Québec, carried out vegetation-cutting work under high-voltage power lines. The work was done in the enforcement area of the Emergency Order for the Protection of the Western Chorus Frog (Great Lakes / St. Lawrence — Canadian Shield Population) in the municipality of La Prairie, near Montréal.

Vegetation-cutting work in the enforcement area of the Emergency Order requires a permit under the Species at Risk Act. Neither Débroussaillage Québec nor Forestière des Amériques Inc. had a permit authorizing the brush-clearing activities. The Act prohibits killing or harming a wildlife species that is listed as threatened and damaging or destroying the habitat of these species. The Emergency Order prohibits removing, pruning, damaging, or destroying any vegetation such as trees, shrubs, or plants.

Environment and Climate Change Canada’s Enforcement Branch makes considerable efforts to ensure the protection of wildlife species and their habitat is observed by businesses and individuals. They encourage people to report any wildlife-related illegal acts that they witness to the National Environmental Emergencies Centre by calling 514-283-2333 or 1-866-283-2333 or by contacting Crime Stoppers at 1-800-222-8477 (TIPS) to anonymously report crimes related to wildlife species.

Quick facts

  • In Canada, the western chorus frog is found in southern Ontario and in the Montérégie and Outaouais regions of Quebec. The species is divided into two populations. The Carolinian population, in southwestern Ontario, is not at risk. The second population—the Great Lakes, St. Lawrence, and the Canadian Shield population—includes individuals from other regions of Ontario and from Quebec. Since 2010, this population has been listed as threatened in Schedule 1 of the Species at Risk Act.
  • Western chorus frog populations have undergone serious declines in both Quebec and Ontario. Habitat loss and degradation are the main threats to the species. In Quebec, in the Montérégie region, a decrease of over 90 percent in the species’ historical range was noted in 2009, while in the Outaouais region, over 30 percent of inhabited sites have disappeared since 1993.
  • Habitat destruction in suburban areas of southwestern Quebec is happening so quickly that populations may disappear from these areas by 2030. In these regions, the main threats to western chorus frog habitat are rapid residential and industrial development and agricultural intensification, such as the conversion of pastureland to grain crops. Many breeding sites in agricultural areas are also at risk of being contaminated by pesticides or fertilizers.
  • The area covered by the Emergency Order consists of approximately 2 km2 of partially developed land in the municipalities of La PrairieCandiac, and Saint-Philippe, on the outskirts of Montréal, Quebec. The main purpose of the Emergency Order is to prevent the loss or degradation of the habitat that the western chorus frog needs to grow and reproduce.

Two Quebec Companies fined for violations of Canada’s PCB Laws

Two companies based in Quebec were recently fined a total of of $75,000 after each pleaded guilty to a charge of breaching the PCB Regulations made under the Canadian Environmental Protection Act, 1999.

The first company, 150 Montréal-Toronto Inc., was fined $50,000 after pleading guilty to the non-compliant storage of PCBs between February 20, 2015, and January 30, 2018, in breach of paragraph 19(1)(b) of the PCB Regulations.

The second company, Recydem Enviro Inc. was fined $25,000 after pleading guilty to failing to send the PCBs for destruction to an authorized facility on or about March 19, 2016, as stipulated in paragraph 19(1)(a) of the PCB Regulations.

PCBs have been widely used for decades, particularly to make coolants and lubricants for certain kinds of electrical equipment, such as transformers and capacitors. PCBs are toxic, and steps have been taken under the Canadian Environmental Protection Act, 1999 to control the use, importation, manufacture and storage of PCBs, as well as their release into the environment.

As a result of this conviction, the companies’ names will be listed in the Environmental Offenders Registry.

 

 

Town in Newfoundland & Labrador fined $50,000 for illegal discharges into river

The Town of Baie Verte recently pleaded guilty to two offences under the Canadian Fisheries Act in the Provincial Court of Newfoundland and Labrador in Grand Falls-Windsor, and was ordered to pay a total fine of $50,000.

The offences relate to the discharge of water containing elevated levels of chlorine from the town’s potable-water system into the Baie Verte River. The first offence relates to the release of a deleterious substance into water frequented by fish; the second, to a failure to comply with a Fisheries Act direction that ordered the town to take action to remedy the situation or prevent future occurrences.

In August 2017, following a report that chlorinated water was being discharged from the town’s potable-water system into the Baie Verte River, Environment and Climate Change Canada enforcement officers conducted an onsite inspection and took field measurements, which confirmed that the chlorinated water was deposited into the river. On September 5, 2017, officers collected water samples for laboratory analysis. The analysis confirmed that the chlorinated water was a deleterious substance, as defined by the Fisheries Act. Consequently, enforcement officers initiated a formal investigation.

In September 2017, officers issued a Fisheries Act direction, which required the Town of Baie Verte to take all reasonable measures to prevent the deposit or to counteract, mitigate, or remedy any adverse effects that result from the deposit of the deleterious substance into the Baie Verte River. The town was also required to provide a written report documenting the measures taken to comply with the direction.

Fisheries Act direction is a compliance tool that may be issued by Environment and Climate Change Canada’s Enforcement Branch, when there is a deposit of a deleterious substance into water frequented by fish or when there is a serious and imminent danger of such an incident and immediate action is necessary. For example, a direction may be issued to compel a person who has the charge, management, or control of either a deleterious substance or an activity resulting in a deposit or the danger of a deposit to take remedial or preventative action.

Between November 8, 2017, and May 23, 2018, enforcement officers conducted field measurements and collected additional water samples for analysis. Each time, the chlorine concentration detected in the samples was in the range of 120 to 6000 times higher than the recommended limits under the guidelines established by the Canadian Council of Ministers of the Environment.

The Town of Baie Verte failed to comply with the direction and was consequently charged with committing an offence under paragraph 40(3)(g) of the Fisheries Act. In addition, the town was charged for contravening subsection 36(3) by depositing a deleterious substance into the Baie Verte River.

As a result of this conviction, the Town of Baie Verte will be added to the Environmental Offenders Registry.

Although chlorine is frequently used in wastewater treatment and drinking-water systems, high concentrations of chlorine and chlorine residuals can be deleterious to fish. The Canadian Council of Ministers of the Environment’s Water Quality Guidelines for the Protection of Aquatic Life establishes 0.5 µg/L as the recommended limit for chlorine.

Montréal company fined $260,000 for violations of Canada’s PCB Regulations

On September 1, 4422236 Canada Inc. was fined $260,000 after pleading guilty to two counts of violating the PCB Regulations and the Canadian Environmental Protection Act, 1999.

An investigation conducted by Environment and Climate Change Canada (ECCC) enforcement officers revealed that 4422236 Canada Inc., owner of the Baltex Building (in Montréal), was using a transformer containing polychlorinated biphenyls (PCBs) at a concentration greater than 500 ppm, in September 2018. The investigation also found that, as of June 2019, the company had not complied with the environmental protection compliance order issued by an enforcement officer in November 2018, requiring it to dispose of the transformer.

PCBs have been widely used for decades, particularly as refrigerants and lubricants for certain types of electrical devices like transformers and capacitors. PCBs are toxic, and measures under the Canadian Environmental Protection Act, 1999 have been taken to control their use, import, manufacture, storage, and release into the environment.

 

Quebec mining company fined $400,000 for environmental violations

Seleine Mines was recently fined a total of $400,000 in Quebec court after pleading guilty to four counts of violating subsection 125(1) of the Canadian Environmental Protection Act, 1999 (CEPA, 1999).  Under subsection 125(1) of CEPA, 1999, disposal of waste at sea is prohibited without a permit.

The charges and conviction stem from an investigation by Environment and Climate Change Canada (ECCC) enforcement officers revealed that the company had disposed of dredged material on four occasions between August 10 and 14, 2014, outside of the disposal area authorized by the disposal at sea permit issued by Environment and Climate Change Canada (ECCC).

Disposal at sea is prohibited unless a permit is issued by ECCC’s Disposal at Sea Program. Only a short list of non-hazardous wastes can be considered for disposal. A permit’s conditions on quantities of waste, disposal sites, and special precautionary measures are designed to ensure that the disposal is the most practical and environment-friendly option.

U.S. EPA and State of Nebraska reach settlement over alleged environmental violations at hazardous waste incinerator

The United States Environmental Protection Agency (U.S. EPA) and the State of Nebraska recently announced a settlement with the owners of the Kimball, Nebraska hazardous waste incinerator over  alleged violations of the Resource Conservation and Recovery Act (RCRA), Clean Air Act, and Emergency Planning and Community Right-to-Know Act.

The alleged violations included failure to manage and contain hazardous wastes; failure to comply with air emission limits; failure to comply with chemical accident prevention safety requirements; and failure to timely report use of certain toxic chemicals. Under the terms of the settlement, the owner agreed to pay a $790,000 civil penalty and will improve facility practices to protect facility workers and the surrounding community from potentially harmful releases of pollutants.

The Kimball hazardous waste incinerator serves the entire United States as a storage and treatment facility for a variety of industrial waste utilizing a 45,000 ton-per-year fluidized bed incinerator. The state-of-the-art thermal oxidation unit (TOU) is capable of maximum destruction efficiencies of hazardous waste and is able to handle an extremely wide variety of feeds. Delisted ash from the TOU will be placed in an on-site monofill built to RCRA Subtitle C standards.

According to the U.S. Environmental Protection Agency (EPA) and the Nebraska Department of Environment and Energy (NDEE), the Kimball facility has been subject to previous enforcement actions, including penalty assessments, in 1997, 2004 and 2010.

According to EPA and NDEE, improper management of wastes incinerated at the facility led to unsafe conditions that could result in employee injury and/or releases of harmful air pollution outside the facility. For example, the agencies allege that the owner failed to address multiple fire incidents resulting from the company’s mixing of incompatible wastes.

Terms of the settlement include upgraded plans to classify, manage and contain the wastes incinerated at the facility; an updated fire prevention and response program; and the performance of an environmental audit at the facility to identify and address any continuing noncompliance.