The Biden administration is bringing back Supplemental Environmental Projects, a key enforcement mechanism that restores harm communities suffer when industry fails to comply with pollution laws.
Supplemental Environmental Projects (“SEPs”) were created decades ago to address harms to communities caused when polluters violate environmental laws, sometimes for years. When the Trump administration gutted the regulatory framework for SEPs, reversing years of bipartisan and popular support for these programs, it was unclear how communities would receive the support they need to address environmental and health harms caused by industry non-compliance. Last month the Biden Department of Justice (“DOJ”) issued an interim final rule restoring the viability of SEPs in settlement negotiations.
Typically in our legal system, when someone wrongs another, they can be ordered to pay damages for the harm caused. If the wrong is unlawful or criminal, the perpetrator could be prosecuted, resulting in possible penalties and/or prison time, in addition to paying damages or restitution to the victim to make them whole again. For example, if I steal $10,000 from a bank, I could be prosecuted for the theft; on top of paying a fine and going to prison, I will also be ordered to give the bank back $10,000 to make it whole again. This approach is trickier when it comes to environmental violators.
When corporations break environmental laws and pollute more than they are permitted, determining what is needed to bring the company into compliance and properly penalize them can be accomplished. But figuring out how to restore harm to the impacted community is more challenging. If a cement company exceeds its Clean Water Act permit and discharges unlawful toxic waste into a community waterway for years, how do you identify and then quantify the harm to all the people who drank or used unsafe water in that community? If a refinery has been exceeding its air pollution limits for years, including emitting the carcinogen benzene in unlawful amounts, how do you calculate the harm to each person who breathed in these air toxins, especially given the harm (e.g., respiratory disease, increased risk of cancer) may not manifest for years to come? Such calculations are even more challenging if there are multiple pollution sources in a community.
SEPs were created decades ago to address this enforcement issue. SEPs are “an environmentally beneficial project or activity that is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action. 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 and/or public health benefits in addition to those achieved by compliance with the applicable laws.” A key requirement of a SEP is that the proposed project or funding have a “nexus” to the underlying violation. Thus, if a corporation is prosecuted for violating the Clean Air Act, in addition to paying a fine and undertaking mitigation measures to ensure future compliance, the corporate defendant could provide funding for traveling medical vans that treat asthma patients in nearby underserved communities or purchase electric school buses for the community harmed. Since the 1980s, SEPs, also referred to as community service projects in federal criminal cases, have been used in administrative, civil, and criminal enforcement matters.
A Flexible Enforcement Tool
Over my 15 years as a state and federal environmental prosecutor prior to coming to Earthjustice, I saw the good of SEPs firsthand. Indeed, some of the projects that corporate defendants funded in an effort to restore harm to impacted communities are what I was most proud of in the settlements and plea agreements I negotiated. Not only were the SEPs trying to account for the harm caused by negligent or intentional noncompliance (sometimes over many years), but SEPs ensured those most affected by environmental violations benefitted from enforcement settlements. A few examples of SEPs from my years as a federal and state prosecutor include:
- In 2001, following an illegal tire pile fire that caused evacuations due to toxic smoke in one of the most polluted regions in the country, the settlement included a SEP endowing a County Environmental Trust Fund with $65,000 to assist the County with various environmental projects, including managing illegal tire piles.
- In 2009, Shore Terminals LLC pleaded guilty to intentional Clean Air Act violations at its fuel terminal in the Bay Area. As part of the multi-million dollar plea agreement, Shore Terminals paid $750,000 in SEP funding to finance projects that would improve air quality in the surrounding communities.
- In 2013, the U.S. Attorney’s Office in the Northern District of California, where I worked for over ten years, established the San Francisco Bay Estuary Conservation Fund to fund local environmental protection and restoration projects with $8.7 million in initial funding from various federal criminal environmental prosecutions. One of the many contributing funds came from Wal-Mart after pleading guilty and agreeing to pay ultimately over $110 million for violating federal and state laws by failing to properly manage hazardous waste at thousands of stores across the country. As part of the criminal plea, $4 million of the $20 million in national community service projects was set aside to fund relevant projects in the Bay Area where dozens of stores were located.
SEPs are also used in civil environmental enforcement cases brought by communities:
- In 2020, DTE Energy and Detroit Edison settled a Clean Air Act enforcement case with the Sierra Club, represented by Earthjustice, where more than $2 million of the settlement went to community benefits such as replacing diesel polluting school and municipal transit buses with electric buses.
SEPs make the best out of a bad situation. We must always remember that a community has been harmed, and that harm can rarely ever be truly undone. In attempting to address that harm, even if imperfectly, SEPs present the best means currently available and benefit all those involved with the case. The government’s dual goals of deterrence and restitution for harm caused by unlawful behavior are served by both the enforcement action itself and accompanying SEP. Impacted communities receive new resources to address the effects of pollution caused by noncompliant entities. And, defendants get the opportunity to partially repair the harm they caused to the neighboring community. It’s worth noting that they’re also generally unable to seek a tax benefit or public recognition for the community funding under the settlement or plea agreement. It is no surprise, the Reagan EPA observed, that, “[i]n general, the regulated community has been very receptive to this practice.” During my time prosecuting environmental cases at the federal and state level, both civilly and criminally, I found the same reception.
For over four decades, every administration, no matter the political party, valued SEPs as a dynamic enforcement mechanism. For all that time, the question was never how to curtail them, but how to expand SEPs.
The Trump Administration’s Reversal
Then, starting in 2016, the Trump Administration reversed decades of bipartisan and popular support for SEPs, gutting the government’s efficacy in the face of growing environmental dangers.
It began quietly, with broad memos from the political appointees at the DOJ’s Environment and Natural Resources Division regarding payments to third parties that slowly started to erode the use of SEPs in environmental cases. Momentum built, and eventually ENRD banned SEPs in settlements with private parties, such as corporate defendants. After the 2020 election, the Department took the unusual step to codify a ban on SEPs through rulemaking just 35 days before President Biden was sworn in.
The Biden Administration’s Restoration
On Day One of the Biden-Harris Administration, the President issued Executive Order 13,990, “Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis.” The Order directed all federal agencies to review Trump era regulations and actions that are inconsistent with the Biden Administration’s goals, such as “to hold polluters accountable, including those who disproportionately harm communities of color and low-income communities.” The White House specifically called out the last minute Trump DOJ rule against SEPs for review.
Last month, following a petition by Democracy Forward on behalf of the Conservation Law Foundation, Surfrider, and the Sierra Club, the Biden DOJ issued an interim final rule restoring the viability of SEPs in settlement negotiations. Earthjustice and our many partners are submitting comments in support of this announcement as we welcome back this important enforcement tool. We are also urging the Biden-Harris Administration to further develop community engagement best practices so that SEPs live up to their full potential and meet communities’ most urgent needs.
Ideally, of course, there would be no environmental violations in the first place. It is our hope the Biden-Harris Administration will continue to ensure stronger compliance and enforcement of our environmental laws, as some of their recent efforts show. SEPs play a critical role in those efforts, offering an effective way to restore the difficult-to-quantify harm to the communities living in the shadow of industries that flout our pollution laws. It is good to see the return of this critical tool for justice.
Stacey Geis worked at Earthjustice from 2014-2023.
The California Regional Office fights for the rights of all to a healthy environment regardless of where in the state they live; we fight to protect the magnificent natural spaces and wildlife found in California; and we fight to transition California to a zero-emissions future where cars, trucks, buildings, and power plants run on clean energy, not fossil fuels.