Phillips Law Firm Blog

You are the owner of Chromers and Platers, Inc., a business that you started thirty years ago and have grown to employ sixty people on a full time basis. You have diligently tried to comply with the environmental laws over the years, but with the myriad of paperwork associated with the environmental laws, you really are not sure if you have been successful.

Recently, you decided to sell the business, but before listing the business for sale, you decided to have a compliance audit of your facility completed by a local environmental consulting company. After the audit, the environmental consultant revealed that your company was in violation of several different environmental laws. The violations are mostly caused by failure to maintain appropriate records. None of the violations would result in a criminal prosecution, but some of the violations could result in a significant civil penalty if discovered by U.S. EPA. You immediately make plans to ensure that future violations will not occur. However, selling the business with the potential for U.S. EPA to come in and levy large civil penalties against your company will certainly affect the selling price.

Unsure of what to do, you contact an environmental attorney for assistance. The attorney explains that since you are aware of the past violations and the possibility that an enforcement action could be brought against the company because of the violations, you must disclose the violations to any potential buyer. If you choose not to disclose the past violations, the buyer could sue you for fraud if U.S. EPA brings an enforcement action against the company after you sell. The attorney explains that his recommendation is for you to report the violations to U.S. EPA yourself. Your attorney explains that under a new U.S. EPA policy, if you self-report the violations, you may be entitled to a complete waiver of any penalty that would otherwise be assessed against the company.

Your attorney explains that on May 23, 1996, U.S. EPA implemented one of the twenty-five regulatory reform initiatives announced by President Clinton on March 16, 1995. The regulatory reform initiative recently implemented was EPA's Policy on Compliance Incentives for Small Businesses and implements, in part, the Executive Memorandum on Regulatory Reform, issued on April 21, 1995, by President Clinton.

The new policy sets guidelines to reduce or waive penalties for small businesses that make good faith efforts to correct violations under most EPA statutes. The policy does not apply when public health or the environment is seriously threatened, or when the violation involves criminal conduct. Since the violations at your business are unintentional paperwork violations that did not involve criminal conduct, your attorney explains that your case is a good candidate for a penalty waiver under the new policy.

For a facility to be eligible for a penalty waiver, the company must be a "small business." The policy defines a small business as a company that employs one hundred or fewer persons on a company-wide basis. Furthermore, a facility must demonstrate a good faith attempt at complying with the environmental laws. Facilities can demonstrate good faith in two ways: either by conducting a self or third-party compliance audit and promptly disclosing and correcting the violations or by getting on-site compliance assistance from a state, federal or other government-sponsored compliance assistance program. Assuming the company discovered the violation as part of a self-compliance audit, the company must report the violation promptly to U.S. EPA in writing.

The violation itself must be a first time, non-criminal violation that does not pose a significant threat to public health, safety or the environment for the policy to apply. For purposes of a first time violation, within the past three years the facility must not have received or been subject to an information request, warning letter, notice of violation, field citation, citizen suit or other enforcement action or received penalty mitigation pursuant to the new policy for the current violation and, in the past five years, has not been subject to two or more enforcement actions for violations of environmental requirements.

In addition, the company must correct the violation remedy any harm caused to the environment within 180 days of being discovered, or 360 days if the company must install pollution prevention equipment. If a business meets all the criteria but takes additional time to correct the violation or, in the rare event that a business obtains a significant economic benefit from the violation, U.S. EPA will waive up to 100 percent of the gravity or punitive portion of the penalty, but may seek the amount that company saved through its non-compliance. According to U.S. EPA, this will eliminate any economic advantage that violators have over those companies that do comply with the law.

You explain to your environmental attorney that you believe your company meets all the requirements. You employ less than one hundred people, attempt in good faith to comply with the environmental laws, discovered the violations during a self-audit, and have never been party to a prior enforcement action. In addition, your company received no economic advantage from the violation, did nothing criminal, and never harmed the environment, nor did your company pose a significant threat of harm to the environment. Under the circumstances, your company should be eligible to have the entire penalty that would otherwise be applicable to your situation waived by U.S. EPA after you report and correct the violations. You feel relieved; finally, a policy from U.S. EPA that could actually improve your company's profitability.

My advice to clients who are performing self-audits is to be aware of the latest environmental policies coming out of U.S. EPA. U.S. EPA's latest policies are designed to save you money. However, U.S. EPA has no track record under the new policy, and many of the criteria necessary for a company to be eligible for a penalty waiver are subjective. I would never recommend that any company cover-up its violations of the environmental laws. However, proceed with caution when reporting violations to U.S. EPA and remember that you are making admissions that you will be held accountable for if U.S. EPA later decides that your company is not eligible for a penalty reduction. What is more important, if U.S. EPA decides that the conduct is a criminal violation, you may have made the admission necessary to prosecute the case against you.

In addition, policies come and policies go for various reasons such as court challenges, election year campaign promises, and federal budget balancing considerations. U.S. EPA's new policy on Small Business Compliance Incentives is a good idea, in my opinion. However, it has not yet withstood the test of time. As for now, if your company has discovered violations that must be reported, such as in this case due to a pending sale of the business, be aware that President Clinton has promised relief to those small businesses who meet the above criteria. As for large businesses, you may want to write to the President and ask him why his new policy does not apply equally to you.

You own and operate Ace Plating and Painting, Inc. Your company specializes in coating materials for the secondary automotive parts market. You rechrome bumpers and grills, and strip and paint body parts for antique cars. You have been operating the business for over twenty years and have become one of the Midwest's largest secondary automotive refinishing suppliers. Business is good, and your reputation for being a quality supplier keeps it that way.

Your facility has an air permit for the emission of particulates and volatile organic chemicals. Your company has tried to comply with its permit. Occasionally, your company has problems with its air pollution control equipment and there will be times when the facility is not in compliance. However, because you are not required to monitor your results continuously, you take the position that there is no evidence to show that you have violated your air permit. When you are required to monitor, you make certain that all of your pollution control equipment is working before you collect the necessary test date required by your air permit. While the ethical issues raised by this approach could be troubling if you really stopped to ponder, legally, you feel like you are on solid ground. You have operated this way uninterrupted for several years without a problem, until yesterday.

Yesterday, your company, Ace Plating and Painting, Inc. received a Notice of Intent to Sue pursuant to the Citizen Suit provision of the Clean Air Act. You are outraged. "They've got no proof that I ever violated the Clean Air Act," you say to yourself. "There's no definitive evidence that I violated my air permit. A good strong letter from my lawyer should shut these people up," you say, and off you go furiously to your lawyer's office.

Your attorney reviews the notice of intent to sue letter, and asks you to explain the allegations in the letter that your facility emits "obnoxious and hazardous odors," and "particulates that settle on automobiles, sticking thereto and ruining the automotive finish." Your attorney further asks you to explain the photographs that your neighbors were kind enough to enclose with their Notice of Intent to Sue showing your air emission stack belching black smoke. Your response is quick and definitive. "They can't prove a thing. All of my monitoring results show that I am in complete compliance with my air permit," you say. "There is no definitive evidence proving that I have violated any of EPA's laws," you remind your lawyer.

Your lawyer tells you that if he is too defend you, you must be honest with him. You proceed to tell him confidentially that your pollution control equipment does not work all of the time, but that it always works on days when you perform tests to demonstrate compliance with the terms and conditions of your air permit. You admit that occasionally your factory does belch black smoke, but this is just the type of business you own. To install equipment that would capture every such release would be cost prohibitive. Similarly, you explain that the cost of installing new VOC capturing equipment that would work continuously as needed would also be cost prohibitive. Your philosophy has been that if the other side cannot prove the violation, which your data shows they cannot, then you intend to keep operating as you have for the last ten years. When you finish, your attorney sighs and says that you used to be correct. Until February of 1997, the citizens probably could not have pursued a citizen suit without test data showing that Ace Plating and Painting, Inc. violated the terms of its permit. However, in February 1997, EPA changed the law and made it a lot easier for citizens to sue and win in court based on information regarding violations obtained from sources other than your monitoring data.

Your attorney explains that EPA promulgated another regulation in 1997 that will aid citizen suits. On February 24, 1997, EPA promulgated a final version of the "any credible evidence" rule, 62 Fed. Reg. 8314. The any credible evidence rule specifically amends four different parts of the Code of Federal Regulations, 40 C.F.R. Parts 51, 52, 60, and 61, and allows the use of any credible evidence in enforcement actions brought under the Clean Air Act by EPA, state enforcement agencies, or citizens. The key language added by the rule states that nothing in those regulations "preclude[s] the use, including the exclusive use, of any credible evidence or information, relevant to whether a source would have been in compliance with applicable requirements if the appropriate performance or compliance test procedures or methods had been performed." Previously courts applying this rule would only find reference test data admissible as evidence in enforcement suits. The any credible evidence rule establishes that nonreference test data may also be admitted as evidence in an enforcement action, including a citizen suit action.

Your attorney explains that even beyond the basic impact of the rule in changing what constitutes compliance under many standards, certain portions of EPA's preamble to the new rule raises additional concerns about how the new rule may be used in enforcement actions. In particular, Agency officials had previously stated that credible evidence could properly be used to prove a violation only if the plaintiff could demonstrate "a strong correlation between reference test results and the credible evidence in question." In otherwords, the credible evidence had to correlate with test results. However, nowhere in the preamble to the any credible evidence rule is there a statement that the role of credible evidence is limited in this manner. Instead, the preamble refers to the specified reference test method as merely constituting a "benchmark" against which other data or methods may be compared when they are used to establish that a violation has occurred. The preamble emphasizes that "by law the Agency is limited only by general evidentiary rules in what it can use to prove a violation alleged in an enforcement action." 62 Fed. Reg. 8320. Also troubling is the portion of the preamble that states if credible evidence indicates the existence of possible "deviations" from a limit, a source may "be out of compliance with an applicable requirement even though the unit's permit-identified data indicates compliance." 62 Fed. Reg. 8320. In other words, your attorney explains that even if your data indicates that you are in compliance, the evidence to be produced by the citizens indicating that you are not in compliance can be used to prove violations if it is credible. As your attorney looks at the photographs sent by the plaintiffs, he sighs and mumbles to himself, "This could be tough to discredit." Furious, you tell your attorney that you are willing to upgrade your equipment if that will make the lawsuit go away. Unfortunately for you, your attorney explains that the Supreme Court decided this issue in the case of Gwaltney v. Chesapeake Bay Foundation, 484 U.S. 49 (1987). The issue in Gwaltney was whether the citizen suit provisions of the Clean Water Act, permitting private citizens to bring suit against any person alleged to be in violation of the Act, required that a defendant be violating the Act at the time of suit. The Court concluded that the CWA did not permit citizen suits for wholly past violations. However, the Court stated that the provisions required that a citizen plaintiff allege a state of either continuous or intermittent violation. In other words, there must be a reasonable likelihood that a past polluter will continue to pollute in the future. In your case, the attorney explains, simply upgrading the equipment will not be enough unless you can upgrade within sixty days from the Notice of Intent to Sue, and the upgrades guarantee that there is no possible way that the plant could operate in violation of the limits set by your air permit.

You look at your attorney and state, "No system can guarantee that." Your attorney in response simply states, "And that is why you are likely to lose. There is credible evidence of past violations, and no way to insure that future violations will not occur."

Be advised that EPA has lowered the standard to bring citizen suits and win. Under the new "Any Credible Evidence" rule, enforcement actions, including citizen suits, are a lot easier to win. Further, unless it can be demonstrated that the violation will never reoccur, they are even more difficult to stop. The new rule is referred to as the "Any Credible Evidence" rule or ACE rule. The "ACE" rule will undoubtedly become the ace in the hole for citizens pursuing enforcement actions against companies like the one in this article, Ace Plating and Painting, Inc.

Your company, Deep Dutch Metal Finishing Company ("Deep Dutch") operates an electroplating operation in Deep Dutch, Illinois. Deep Dutch's electroplating operation generates wastewater that is treated before discharging into the Publicly Owned Treatment Works, the "sewer system." Your company has operated at its current location since 1969. In 1995, your company learned that the factory across the street was closing. You learn that the closing factory's facility is for lease, and with its less expensive rent, you calculate that you can easily save about forty thousand dollars per year. The cost of moving will be made up in the reduction of the lease payments for the first year.

The move went smoothly, with only a minimal impact on production. You moved your electroplating lines one at a time so that your production was never shut down completely. After the move, you notify everyone that your address has changed from 1953 Industrial Boulevard to 1948 Industrial Boulevard. Your company disassembled and reassembled its pretreatment equipment for its wastewater and moved it across the street as well. Instead of watching the sunrise, you now watch the sunset, and instead of discharging pretreated wastewater on the east side of the street, you now discharge your pretreated wastewater on the west side of the street. Other than that, your operation is exactly as it was before the move. Everything was going according to plan, until yesterday. Yesterday, you received a notice in the mail that your local Water District expected you to upgrade your wastewater pretreatment equipment as a "new source" of pollution. You are stumped, and anticipate that a clerical error has occurred.

The day following receipt of the notice, you notify the Water District to determine why the Water District is demanding that you upgrade your pretreatment equipment. After a rather long and somewhat heated exchange with a technical staff employee of the Water District, you eventually learn that after Deep Dutch's move, the Water District is taking the position that Deep Dutch's operation is subject to more rigorous treatment standards now as a "new source" with respect to its discharges into the sewer system. According to the Water District, as a result of its move to a new location, Deep Dutch's operation became a "new source" under U.S. EPA's regulations rather than an "existing source," which it had been classified as prior to its move. The "new source" classification subjects your manufacturing operation to stricter waste treatment standards than the "existing source" classification. Just before telling the Water District employee exactly what you thought of his opinion, you explained that you believed Deep Dutch remained an "existing source" because it had merely moved its existing equipment from one building to another and this in your opinion should not be considered a "new source."

The Water District immediately initiated a series of administrative actions before the Water District's Board of Commissioners to determine whether Deep Dutch was subject to the Metal Finishing Point Source Category (a pretreatment standard for "new sources"), 40 C.F.R. § 433.17, or instead, as you maintain, to the less stringent Electroplating Point Source Category (a pretreatment standard for "existing sources"), 40 C.F.R. § 413.14. Because the Water District is required by law to enforce U.S. EPA's regulations, U.S. EPA's regional office, Region V, took an interest in the Water District's administrative actions relative to Deep Dutch's Operations and issued a letter in which Region V gave an informal interpretation of the applicable regulations (an "interpretative ruling"). The interpretative ruling indicated how Region V, as opposed to the Water District, would characterize your operation in the course of independent review, such as during an audit of the Water District's enforcement program. In its interpretative ruling, Region V concluded that Deep Dutch became a "new source" as defined by the Clean Water Act and 40 C.F.R § 403.3(k) once it moved across the street.

The Water District, not about to do anything contrary to an interpretive ruling from Region V, immediately concludes that Deep Dutch's new location is a new source and orders that Deep Dutch must meet the new source wastewater standards. This ruling could cost Deep Dutch over five hundred thousand dollars in equipment and operating costs over the next several years. In response, you immediately contact U.S. EPA's Region V headquarters seeking a hearing to reconsider the interpretive ruling from Region V. Region V responded by confirming its initial determination that Deep Dutch's operation at 1948 Industrial Boulevard constitutes a "new source" under the law. When Region V confirmed its interpretive ruling that your move from 1953 Industrial Boulevard to 1948 Industrial Boulevard constituted a "new source" under the law, you decide to hire an attorney and fight Region V's interpretation.

You arrive at your attorney's office and explain the problem. You want your attorney to file suit against U.S. EPA and get Region V's interpretative ruling reversed so that the Water District will allow your plant to be classified as an existing source. You emphatically explain to your lawyer that Deep Dutch is not a "new source" and should not be subject to the more stringent effluent limitations set forth in 40 C.F.R. § 433.17. Your attorney cringes when you tell him the facts and what you want.

Your attorney explains that Congress passed the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387, also known as the Clean Water Act, in order "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251. To this end, Congress established a comprehensive regulatory scheme to control the direct and indirect discharge of waste and pollutants into navigable waters. To curtail indirect discharges into sewer systems and POTWs, U.S. EPA promulgated pretreatment standards for various industrial categories. 33 U.S.C. § 1317. These "categorical" pretreatment standards typically specify the maximum amounts of certain pollutants that a source in a particular industrial category may discharge into a sewer via its wastewater. Generally, "new sources" must adhere to more stringent pretreatment standards than "existing sources," e.g., compare 40 C.F.R § 433.17 (pretreatment standards for new sources) with 40 C.F.R § 433.15 (pretreatment standards for existing sources). According to U.S. EPA's logic, new sources are subject to more rigorous controls because, as a practical matter, it is much easier to design and build new equipment to meet the tougher standards than it is to upgrade existing equipment to meet those same standards.

Your attorney explains that the statute granting a court jurisdiction to review EPA's decisions, Section 509(b)(1) of the Clean Water Act, 33 U.S.C. § 1369(b)(1), does not afford the court jurisdiction to review the agency's informal interpretative rulings such as the one issued in your case. You are astounded, the Water District will not change its position regarding your status as a "new source" unless you can get Region V to change its position, and your attorney is telling you that you can't even sue U.S. EPA to determine the correctness of Region V's position. Your attorney explains that in determining if a court has jurisdiction, the question the court must address is whether Region V's interpretative ruling constitutes a reviewable issue under the law. If it does not, the courts have no jurisdiction. In American Paper Institute v. EPA, 882 F.2d 287 (7th Cir. 1989), Region V issued a policy statement concerning dioxin discharges from pulp and paper mills. The American Paper Institute sought review of Region V's policy statement, believing it to be too onerous. U.S. EPA argued that the court system had no jurisdiction over the matter since the policy statement was not reviewable under Section 509(b)(1)(E) of the Clean Water Act, which at the time provided: "Review of the Administrator's action . . . in approving or promulgating any effluent limitation or other limitation under section 1311, 1312, or 1316 of this title . . . may be had by any interested person in the Circuit Court of Appeals of the United States."

The court agreed that it had no jurisdiction to determine the matter and determined that Section 509(b)(1)(E) did not cover Region V's policy statement. The court reasoned that "promulgation" means issuing a document with legal effect. Region V's policy statements, while issued to warn, threaten and possibly harass, have no legal effect. The court in American Paper Institute went further to hold that Region V's policy statement was not a "limitation" within the meaning of Section 509(b)(1)(E) because it was advisory, and thus it had no independent legal effect. Id. at 289. Your attorney explains that the same reasoning that the court applied to Region V's "policy statement" in American Paper Institute applies with equal force in the present case to Region V's "interpretative ruling." Since Region V's interpretative ruling has not been adopted by U.S. EPA, the ruling cannot be considered the "Administrator's action." Second, like the policy statement at issue in American Paper Institute, Region V's interpretative ruling was not "promulgated." Third, the interpretative ruling is not an "effluent standard, prohibition, or pretreatment standard." Instead, the ruling is Region V's opinion concerning which pretreatment standard U.S. EPA would deem applicable to Deep Dutch based on whether Deep Dutch is a "new source" or an "existing source." Policy statements do not appear in the Federal Register and will not be codified in the Code of Federal Regulations. A policy statement simply tells the regulated community how U.S. EPA's Regional Office thought it might react to particular proposals. However, as stated by your attorney, "Telegraphing your punches is not the same as delivering them." A lawsuit against U.S. EPA to force it to withdraw Region V's interpretive ruling would clearly and quickly be thrown out of court.

You are furious. You tell your attorney that you intend to move your operation back across the street where you were an "existing source." Your attorney sighs and reminds you that after you left, any business relocating in your former location would be subject to the "new source" standards. Your attorney simply looks at you and says, "No matter where you go, there you are." After you moved, you will always be a "new source."

You are the President and owner of Barrel Finisher's Inc., a drum recycling company. Your company has been operating at the same location since World War II. Your company receives metal 55-gallon drums from companies, removes the contents left in the drum and then paints the drums for use again. Your company has its share of environmental problems from the past operating techniques of its founders. Initially, the contents of drums brought into the plant were washed out with a cleaning solution that was discharged to a settling pond where it was treated on site. Naturally, this created a toxic and hazardous waste due to the multiplicity of small amounts of chemicals left in the drums. The groundwater and the soil at your plant are contaminated with solvents, pesticides, metals and petroleum products from the more than fifty years of industrial activity at the site.

U.S. EPA is well aware of your site, and has repeatedly requested that you voluntarily enter into an agreement for the necessary work to protect human health and the environment from the presence of the many contaminants at the site and in the groundwater. However, you view the need to spend money on past environmental problems differently than U.S. EPA. You see the problem as one that strictly happened before the environmental laws and regulations were in effect. Furthermore, your plant is located in an industrial park where all of the land is contaminated, not just your land. In addition, nobody within three miles of your plant uses the groundwater because everyone knows the water is too polluted to drink. The bottom line is, you do not share U.S. EPA's sense of urgency as to any type of environmental restoration project at your plant. You expect that it will be at least another five years before U.S. EPA sues you in court to force you to clean up the property. With all of the court delays in today's legal system, you expect that you will be retired before you have to deal with the removal of any contaminated soil or groundwater from your property. You had everything figured out, until yesterday.

Yesterday, you received via Certified Mail from U.S. EPA something called a unilateral administrative order requiring that you immediately begin the environmental restoration of the contaminated soil and groundwater at your plant site. The order states that if you do not perform the tasks required by the terms of the order, you can be assessed $25,000 per day in penalties, and if you willfully violate the unilateral administrative order, you can be assessed three times the cost of clean up as a punitive fine. You had never heard of such a thing. You thought only a court could issue an order, and you have not been sued so how could you be subject to an order. You decide that this cannot possibly be legal, so you call an environmental attorney to see how best to avoid the U.S. EPA's unilateral administrative order. What you learn is very sobering.

The attorney that you hire to get you out of the unilateral administrative order explains that U.S. EPA prefers to obtain private-party response action through the negotiation of settlement agreements with parties willing to do the work. Your attorney explains that unilateral administrative orders issued under section 106 of CERCLA may be issued if a release or threat of a release of a hazardous substance from a facility may present an imminent and substantial endangerment to public health, welfare, or the environment. The order must include findings on the hazardous substances at the site, the nature of the release or threat of a release, the location of the release, the nature of, and basis for the finding of a possible imminent and substantial endangerment.

Your attorney explains that U.S. EPA uses unilateral administrative orders when viable private parties exist and are not willing to reach a timely settlement to undertake work under a consent order or decree. At that time, U.S. EPA has the authority to compel private-party response through unilateral administrative orders. If the responsible party does not comply with the order, U.S. EPA may refer the case for judicial action to compel performance and recover penalties. Your attorney explains that because of the presence of hazardous wastes in the soil and groundwater at your property, U.S. EPA should have little trouble showing an imminent and substantial endangerment to public health, welfare, or the environment at your facility.

Your attorney's review of the unilateral administrative orders issued by U.S. EPA against your company appear to be legally enforceable. Based upon what your attorney perceives as the validity and enforceability of the orders, your attorney explains that if your company, as a responsible party, does not comply with the unilateral orders, U.S. EPA can perform a cleanup using government money and then seek to recover those costs from your company through the courts. In addition, U.S. EPA can seek to recover punitive damages, and penalties.

You immediately ask your attorney what type of punitive damages and penalties your company might be responsible for if it refused to perform the clean up. Your attorney explains that under CERCLA §107(c)(3), U.S. EPA is authorized to collect punitive damages from one to three times the costs incurred by the government. This means that if the government spends one million dollars performing the clean up, you could be responsible for an additional punitive amount of three million dollars for not complying with the order to clean up the site. Furthermore, your attorney explains that under CERCLA section 106(b)(1), "any person who, without sufficient cause, willfully violates, or fails or refuses to comply" with any order, may be fined up to $25,000 for each day in which the violation occurs or the failure to comply continues. In other words, for every 30 day period that you refuse to comply with the unilateral order, U.S. EPA could recover an additional $750,000 in penalties.

You tell your lawyer that at least the government has to spend its money to cleanup the site before it can go after your company's money. By the time U.S. EPA finishes, you will have sold everything off and there will be no assets to pay fines and penalties. Your attorney explains that U.S. EPA has the option to request an enforcement order through the court pursuant to section 106, to compel compliance and to assess and to collect penalties so as to prevent you from stalling and liquidating company assets. In other words, if U.S. EPA goes to court to force you to comply with the order, and you refuse to comply with the order by stalling, you can be held in contempt of court. If you are held in contempt of court, the judge can throw you in jail if you do not comply with U.S. EPA's order when so ordered by the court. Regardless of the route U.S. EPA chooses to take upon noncompliance with a unilateral order, your attorney explains that your company will remain potentially liable for the response action, and in the worst possible scenario, you could go to jail for refusing to comply with the court's order to enforce the unilateral administrative order.

You tell your attorney that you would rather pay him to fight U.S. EPA's unilateral administrative order than to pay for what you consider a senseless cleanup. To your amazement, your attorney informs you that CERCLA precludes a responsible party from initiating court proceedings to challenge a unilateral order upon receipt. Under CERCLA section 113(h), courts may review section 106 orders only when U.S. EPA seeks to enforce the order, or if U.S. EPA seeks penalties for violation of the order, or if the responsible party attempts to recover money from U.S. EPA for response costs incurred after compliance with the order. Therefore, if responsible parties refuse to comply with a unilateral order, the Agency may use the government money in the "Superfund" to clean up the site, without first defending its actions in court. Furthermore, your attorney explains that once in a court proceeding where the validity of the order is properly at issue, section 113(j)(1) of CERCLA provides that judicial review of any issues concerning the adequacy of any response action is limited to the administrative record. U.S. EPA already will have compiled the administrative record for the selection of the remedy. Therefore, where U.S. EPA expects a court challenge to a clean up, it is U.S. EPA that prepares the evidence for the court to review. This record will include information on the release, the possible endangerment, and the response action required. The court will consider no other evidence outside of the administrative record.

You ask your attorney what, if anything, can be done, and your attorney explains that it is U.S. EPA's policy to provide responsible parties with an opportunity to discuss with the U.S.EPA regional office issuing the order, implementation of the response actions required by the order, and the extent to which the respondent intends to comply. However, your attorney cautions you that U.S. EPA will not participate in the conference for the purpose of resuming settlement negotiations or negotiating the terms of the order. Your opportunity to negotiate a settlement on terms better than those required by the order expired when your company refused to negotiate a timely consent decree. Furthermore, the conference is not an evidentiary hearing, and the opportunity to confer does not give your company any type of right for a court to perform a pre-enforcement review. In addition, the conference is not intended to be a forum for discussing liability issues or whether the order should have been issued. Instead, U.S. EPA views the conference as a way to ensure that the order is based on complete and accurate information, and to facilitate understanding of implementation. Essentially, your attorney explains, the conference is merely a mechanism for U.S. EPA to explain how you will comply with the order. In other words, the conference is where U.S. EPA tells you that settlement negotiations are over - now you will do it the way U.S. EPA's order dictates.

U.S. EPA's authority to issue unilateral orders has become one of its most powerful tools for forcing companies to undertake a clean up. Unilateral administrative orders are primarily used against responsible parties who delay, stall and otherwise thwart efforts by U.S. EPA to obtain a voluntary clean up. I advise clients who are involved in settlement negotiations with U.S. EPA to be aware that if the negotiations break down, U.S. EPA has the authority to issue a unilateral administrative order. Once a unilateral administrative order is issued, all negotiations are over and the U.S. EPA will get practically whatever it wants, at your expense.

You are the owner of Acme Metal Coating, Inc., a metal coating plant. A river runs next to your plant into which you discharge your treated wastewater. You are very conscientious about your waste water discharge and have put a lot of money into wastewater treatment systems. The water that you discharge is actually cleaner than the water in the river that you use as make up water for your cooling towers.

You received permission to begin your wastewater discharges on January 10, 1987, from your state Environmental Protection Agency (the "state EPA"). Your state EPA issued your company a National Pollution Discharge Elimination System (NPDES) permit to discharge effluents into the River. The NPDES permit expired exactly five years later on January 10, 1992. For whatever reason, you neglected to apply for a new permit, even though the normal procedure for permit renewal is to reapply 180 days before expiration. Admittedly, you continued to discharge effluents into the river after January 10, 1992, but all of your wastewater monitoring data shows that your discharges were within the federal categorical pre-treatment standards for your industry

Yesterday, you received a letter from the Local River Defense Fund ("LRDF") notifying you, the Administrator of the U.S. EPA, the Regional Administrator of your U.S. EPA Region and your state EPA of your company's alleged violations of the Clean Water Act for discharging without an NPDES permit. The notice also explained LRDF's intent to file a lawsuit against your company. You are not sure what to make of the letter. You expect it is either a joke, or a baseless claim since your wastewater discharges have always been acceptable for your type of operation, regardless of whether you had a permit. Besides, you figure that if there was a real problem with your operations, your state EPA would have done something by now over the fact that you have operated over three years without a permit. Just to be safe, you decide to get your attorney's opinion of the letter.

After your attorney has accumulated all the necessary information, he meets with you to explain exactly what is happening. He explains that the LRDF is an organization consisting of about one hundred local activists who are bringing lawsuits against local businesses under the citizen suit provision for violations of the Clean Water Act. The statute provides that LRDF may request an injunction to shut down your wastewater discharges, a $25,000 per day civil penalty payable to the U.S. Treasury, and its costs and attorney fees. You immediately realize that operating without a permit for over three years could mean over $30,000,000 in penalties. Furthermore, if required to shutdown for any extended time, you are out of business. Your attorney assures you that $30,000,000.00 penalties, although possible, are not likely. However, an injunction requiring you to cease discharging wastewater into the river until the state EPA issues your permit is likely. Besides, your attorney reminds you that LRDF has not sued your company yet. You have only received a notice that LRDF intends to sue you under the citizen suit provision of the Clean Water Act. Your attorney has some ideas that may prevent LRDF from suing you at all since the Clean Water Act limits a citizen's right to sue.

The purpose of the Clean Water Act is to ensure that the nation's waters are not polluted through industrial effluents. Thus, Congress made unlawful the discharge of any pollutants into the navigable waters except as authorized by the Act. Under 33 U.S.C. § 1342, U.S. EPA may issue permits allowing waste water discharges into the nation's waters. A state can institute its permit program as part of the federal program, which your state did by enacting laws that U.S. EPA approved. The citizen's suit provision of the Clean Water Act allows citizens to bring suit against violators. Section 1365(b) provides that a citizen must give sixty days notice of the alleged violation before the initiation of any lawsuit. The notice must be given (i) to the Administrator of U.S. EPA, (ii) to the State in which the alleged violation occurs, and (iii) to any alleged violator of the standard, limitation, or order. It is likely that LRDF is aware of this requirement and will wait the requisite sixty days before filing a lawsuit.

A citizen is "a person or persons having an interest which is or may be adversely affected" by the discharge according to 33 U.S.C. § 1365(g). To be adversely affected, your attorney explains that a member of LRDF need only plead that he uses the river for recreational purposes into which your wastewater discharges. Thus, this will be easy for LRDF to prove. The Second Circuit has held that to have standing to sue as a citizen, a plaintiff must allege an injury, whether it be aesthetic, environmental well-being, or an economic injury. Since members of LRDF will undoubtedly assert that they use and enjoy the water resources into which Acme is discharging, this requirement is also likely to be satisfied.

If your state EPA or U.S. EPA initiates an enforcement action against you within the sixty days before LRDF sues you, the statute would bar LRDF's citizen suit. Section 1319(g)(6) "bars citizen suits where a state agency conducting enforcement proceedings against the defendant has authority to assess civil penalties, regardless of whether the agency has assessed such penalties." You ask your attorney whether immediately submitting a permit application to the state EPA would bar a citizen suit. To invoke section 1319(g)(6) to limit a citizen suit, it is imperative that a state commence actual enforcement proceedings. Review of a permit application is not an enforcement proceeding. Therefore, section 1319(g)(6) does not bar a citizen suit action pending the issuance of a permit. The only way to stop the citizen suit action under this provision would be for the state EPA or U.S. EPA to sue you. This admittedly is not a great option since you still end up being sued for civil penalties and possibly an injunction against wastewater discharges. However, unlike a citizen suit, at least you do not pay the other side's attorney fees, which admittedly, can be substantial.

The other possibility of avoiding being sued by LRDF is to cease violating the Clean Water Act. You explain to your attorney the situation with your permit, and that the state EPA will not expedite your permit application, even under these circumstances. Therefore, it is not likely that you will have your permit within the next sixty days. However, your attorney explains that a citizen suit may be brought in federal court only if the citizens make a good-faith allegation of continuous or intermittent violations of the Clean Water Act as required by 33 U.S.C. § 1365(a). The Supreme Court of the United States interpreted the phrase "alleged to be in violation" as imposing a jurisdictional requirement "that citizen-plaintiffs allege a state of either continuous or intermittent violation -- that is, a reasonable likelihood that a past polluter will continue to pollute in the future." Consistent with this requirement, the Court held that jurisdiction will not lie where a plaintiff alleges claims for "wholly past" violations.

The Supreme Court explained that the harm sought to be addressed by the citizen suit lies in the present or the future, not in the past. Thus, LRDF must be able to prove a continuing likelihood that you will continue to discharge without a permit to state a cause of action under the facts here. Thus, to avoid being sued by LRDF, you must be able to prove that you will not be discharging without a permit in the future. Since no one knows when your permit will show up from the state EPA after you apply, you must stop discharging, thus eliminating the need for an NPDES permit altogether. You could (a) permanently shut down your plant until you receive an NPDES permit, or (b) find a way to eliminate your waste water discharge.

After evaluating your options with a waste water consulting company, you discover that you can divert your waste water into your cooling tower as makeup water, thus eliminating the need for an NPDES permit. All the plumbing changes can occur within thirty days. Upon completion of these changes, your attorney puts the attorney for LRDF on notice that your company has eliminated all discharges requiring NPDES permits. Your attorney also puts the LRDF attorney on notice that if LRDF does sue, knowing that no regulated discharges are coming from the plant, your attorney will move for dismissal and sanctions against LRDF, including the reimbursement of your attorney fees. Without a regulated discharge, there is no basis for believing a "continuing" violation exists. Reluctantly and begrudgingly, LRDF agrees not to sue your company since it cannot prove a "continuing" violation of the Clean Water Act.

My recommendation to companies is to be careful about renewing your permits. Do not miss renewal deadlines. Operating without a permit can put you in serious legal trouble, even if you operate within acceptable discharge limits. Sometimes your enforcement agencies can be the least of your trouble. Collecting attorney fees interests some environmental groups more than protecting the environment. Furthermore, remember to get expert advice on legal issues. The company in this scenario implemented an affective alternative to a waste water discharge that prevented it from being sued, saved it money, and allowed it to continue operating legally. Also, review your operations periodically to see if you can combine water uses and eliminate a waste water discharge. With fewer discharges, there are fewer chances of problems from regulators and environmental action groups looking for a lawsuit.