**Funding Public Education Projects Through Air Pollution Penalties
Under The SEP Program **

**©HARRY F. KLODOWSKI, JR. **

** ATTORNEY AT LAW**

LAW OFFICES OF HARRY F. KLODOWSKI

SUITE 3321, GRANT BUILDING

PITTSBURGH, PA 15219

PHONE: (412) 281-7997

FAX: (412) 281-4212

**[e-mail: ]{.underline}**

**[ABSTRACT]{.underline}**

[Public Environmental Education programs are receiving increased
attention as efforts to reduce emissions concentrate on individual
behavior. Programs such as AWMA's ERG training, Ozone Action programs
and Clean Cities efforts are in demand but usually do not receive a high
level of government funding.]{.underline}

[These programs could be funded as Supplemental Environmental Projects.
A Supplemental Environmental Project is an environmentally beneficial
project which a violator voluntarily agrees to perform as part of
settlement of an enforcement action. In return, the agency agrees to
reduce the monetary penalty that would otherwise apply as a result of
the violation. As more enforcement actions are taken for larger
penalties, the SEP approach can become a significant source of funding
for public environmental education programs.]{.underline}

**[INTRODUCTION]{.underline}**

[As efforts to improve air quality focus on individual actions rather
than traditional smokestack controls, a number of public and community
education efforts have become more important in the field of air
pollution control. Ozone action Programs and Clean Cities Programs are
now operating in dozens of major metropolitan areas, and more programs
will be established if EPA's new ambient air quality standard move
forward.]{.underline}

[These programs are chronically short of funding, and this presentation
describes a method of funding public outreach and education programs
through parts of air pollution penalty payments that otherwise would be
paid to enforcement agencies. The diversion of penalty payments to
programs that benefit the community has been done for years at the
federal, state and local levels. They have been called "In Lieuitys"
because money is spent in lieu of penalties, and also have been called
"in kind penalties", "Environmentally Beneficial Projects" or "Bennies",
"Community Environmental Projects" (CEPs) or in the federal system,
"Supplemental Environmental Projects" or "SEPs".]{.underline}

[The legal mechanism for this funding is contained in agency
environmental enforcement policies. To use the federal system as an
illustration, EPA has published a guidance document called, EPA
Supplemental Environmental Projects Policy effective May 1, 1998. While
the federal practice is used as a pattern by many state and local
environmental enforcement agencies, almost every environmental agency
that has the power to collect penalties has a comparable policy. These
policies apply to any type of settlement - at the agency level as well
as actions filed in court.]{.underline}

**[FEDERAL SUPPLEMENTAL ENVIRONMENTAL PROJECTS]{.underline}**[
]{.underline}

[Without getting into too much detail on how the government penalizes
violators of environmental laws, the process is described in written
penalty policies at the federal, state and many local levels. The
policies describe how the penalty is calculated based on factors in the
underlying law, such as intent, the impact of the violation, the length
of time the violation occurred, and the costs saved as a result of the
violation. Once the penalty amount is initially determined, the SEP can
be evaluated.]{.underline}

[The federal policy describes a SEP as:]{.underline}

"[Environmentally beneficial]{.underline} projects which a
defendant/respondent agrees to undertake [in settlement of an
enforcement action]{.underline}, but which the defendant/respondent is
[not otherwise legally required to perform]{.underline}."

Environmentally Beneficial Projects improve, protect or reduce risks to
public health or the environment that primarily benefit the public, not
the violator. Usually, the violator proposes the project after the
regulator has identified a violation and a penalty. The project cannot
include tasks that the violators are likely to be required to perform
under environmental laws.

The project should have a "nexus," or a connection with the
environmental law and the community that was affected by the violation.
The nexus exists if the project reduces the likelihood of future,
similar violations, or reduces the risk to public health or the
environment. EPA suggests projects related to public health, pollution
prevention, pollution reduction, environmental restoration, assessments
and audits, production of environmental compliance, and emergency
planning and preparedness are acceptable SEPs. EPA does say that general
public education or awareness projects or unspecified contributions to
colleges are not acceptable, but EPA has approved specific, justified
projects and states and local governments approve public education SEPs
and on a regular basis. My guess is that EPA's Office of Enforcement is
not well acquainted with the need for and benefits of public education
programs. Other EPA program offices see the benefits of these programs
and will support them.

In the federal system, the SEP payment is not likely to be the entire
amount of the proposed penalty. Some states set a specific limit. For
example, Pennsylvania will give credit of up to 75% of the total penalty
for the amount spent on the SEP. EPA considers the following factors in
determining the amount of the penalty that can be spent on the SEP:
benefits to the public or environment, innovativeness, environmental
justice, community input, multimedia impacts and pollution prevention.

The SEP project is defined in a written settlement agreement covering
what, where and when. The agency will not want to be involved in
administrative aspects of the SEP, but will require assurance and
documentation that the project has been completed. There is a pattern
federal settlement agreement that provides form language.

**STATE PROGRAMS**

While about half of state and local agencies adopt the federal SEP
policy, each state can adopt an independent policy. For example,
Pennsylvania's "Community Environmental Project" policy is not as long
as EPA's, but allows CEPs that have a substantial public health, safety
or environmental benefit to the local community or general public. The
CEP cannot be something the company is required to do. Pennsylvania will
not suggest or force a CEP, but will identify possible projects once the
violator raises the idea. Pennsylvania does not allow tax deductions for
CEPs. It is probably fair to say that state programs follow the
objectives of EP's program but do not contain quite the level of
bureaucratic detail and may be more flexible in terms of what kind of
project will be acceptable as a SEP.

**HOW TO OBTAIN SEP FUNDING**

My experience as an attorney who defends air enforcement actions,
participates in a number of public education activities, and has
negotiated SEP agreements is that companies prefer to fund SEP projects
that have a positive impact in their communities rather than write
substantial checks that disappear into government accounts. However, the
SEP concept is fairly new and is not widely used. How can you obtain SEP
funding?

First, become familiar with the SEP rules as applied in you area. EPA
has a SEP homepage, Your state or local agency probably has a similar
policy. Ask an agency person who works in enforcement for a copy. It
will be a public document.

Second, identify possible SEP contributors. Agency enforcement actions
are published in news stories, agency press releases, summarized on web
sites, and talked about on the grapevine. Notices of Violation are
public documents available through the Freedom of Information Act upon
request. Not every NOV results in a penalty, but this will provide you a
contact list. Nearly every agency now has a community relations staff or
individuals who participate in public environmental education. Ask them
to help identify contacts, and explain the contribution of the SEP
within the agency once the SEP is proposed. Since the SEP is voluntary,
I think Pennsylvania's practice of not raising the SEP but helping once
the violator suggests it is a good one.

Third, contact the potential contributor. Explain the public and
community benefit of the SEP. Show them the SEP policy - many companies
will not be aware of the process. Provide a budget, discuss the result
or "deliverable". Make it self implementing to the extent possible. The
agency cannot, and the company will probably not want to administer the
project. SEPs may or may not be tax deductible (usually penalties cannot
be deducted). Companies can publicize their community contributions but
may have to disclose it as part of a settlement agreement.

Fourth, plan on selling the value of the SEP to the agency. The factors
the agency must evaluate will be in the SEP policy. In every agency
there are people who like SEPs and people who don't. Ask your allies to
help.

Fifth, plan ahead. The process of negotiating a penalty settlement
agreement always takes a long time, and the SEP aspect adds another
issue to the negotiations. Multimillion dollar agreements take perhaps a
year, and even fairly simple settlements can take six months from
agreement in principle to signing the document.

**CONCLUSION**

Federal and State enforcement efforts allow companies to fund public
education efforts as a community benefit and deduct these costs from
penalties paid to the government. As more and larger enforcement actions
are filed, SEP funding can become an important part of public education
budgets.

**List of Key Words for:**

**Funding Public Education Projects Through Air Pollution Penalties
Under the SEP Program**

**©Harry F. Klodowski, Jr.**

LAW OFFICES OF HARRY F. KLODOWSKI

SUITE 3321, GRANT BUILDING

PITTSBURGH, PA 15219

PHONE: (412) 281- 7997

FAX: (412) 281-4212

**Website: **

**Email: harry \@klodowskilaw.com**

**1. Public Education**

**2. Air Enforcement**

**3. Penalty Policies**

**4. Supplemental Environmental Projects**

**5. Funding Public Education Programs**