24796 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

protect confidential business

information. As we move forward with

implementing the agreement, we will

develop procedures to ensure that

information shared in the development

of proposals but designated as

confidential business information

remains confidential.

Measuring Success/Core Performance

Measures

Comments: A commenter said that

core performance measures should

emphasize environmental results (e.g.,

fewer diseases from pollution) over bean

counting (i.e., number of projects).

Another commenter said that the three

environmental objectives (air, water,

land quality improvements) are not

inclusive of all ecosystem

improvements, and that the measures

should take a broader holistic approach

towards improving environmental

quality.

Response: EPA and the states agree

that success measures should look more

broadly at improving human health and

environmental quality. The set of

measures in Attachment A of the

agreement is provided as a starting point

for discussion. As implementation of

the agreement gets underway, EPA and

the states, working with stakeholders,

will further develop the set of

performance measures that will be used

for evaluating success.

Specific Comment

Comment: A commenter said that the

provisions under the Measuring/

Verifying Results principle do not

require measurement and monitoring.

Response: EPA and the states believe

that the intent of this language is clear—

that innovations must have results that

are measurable and verifiable.

Legal Status of the Agreement

Comment: A commenter stated that it

is inappropriate for EPA to enter into an

informal agreement with a non-profit

organization (ECOS) that would subvert

EPA’s legal obligations.

Response: A paragraph has been

added to the agreement to clarify its

legal status. The paragraph says, ‘‘This

agreement signals the commitment of

EPA and state environmental agencies

to work together on innovations. It does

not create any legal obligations for EPA

or the states, and does not alter EPA’s

or states’ statutory responsibilities or the

nature of authorized or delegated state

programs. Any innovations under this

agreement will be implemented within

our existing legal authorities using

appropriate procedures.’’

Dated: April 29, 1998.

J. Charles Fox,

Associate Administrator, Office of

Reinvention.

[FR Doc. 98–11799 Filed 5–4–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[Docket No. 98F–FRL–6008–8]

Final EPA Supplemental

Environmental Projects Policy Issued

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Notice.

SUMMARY: The Environmental Protection

Agency (EPA) is issuing a revised, final

EPA Supplemental Environmental

Projects Policy. This Policy supersedes

the May 1995 Interim Revised

Supplemental Environmental Projects

Policy. Based on experience gained

implementing the Interim Revised SEP

Policy, EPA has refined and clarified

this Policy to better assist it in

exercising its enforcement discretion to

establish appropriate settlement

penalties and supplemental

environmental projects (SEPs) that

secure significant environmental and

public health improvements.

DATES: EPA will implement this Policy

effective May 1, 1998.

FOR FURTHER INFORMATION CONTACT: Ann

Kline, 202–564–0119, Office of

Regulatory Enforcement, Mail Code

2248–A, United States Environmental

Protection Agency, 401 M Street, SW.,

Washington, DC 20460.

SUPPLEMENTARY INFORMATION: These

final revisions to the EPA Supplemental

Environmental Projects (SEP) Policy

refine and clarify the 1995 Interim

Revised Supplemental Environmental

Projects Policy for easier

implementation. The basic structure and

operation of the Policy remains

unchanged. The primary purpose of this

Policy is to obtain environmental and

public health protection and

improvements that may not otherwise

have occurred without the settlement

incentives provided by this Policy. The

final Policy retains the 1995 Policy

framework for determining whether a

proposed project can be considered in

establishing an appropriate settlement

penalty. In addition, this Policy also sets

out clear legal guidelines, well-defined

categories of acceptable projects and

simple easy-to-apply rules for

calculating and applying the cost of a

SEP in determining an appropriate

settlement penalty.

The most significant changes made to

the 1995 Interim Revised Policy

include: (1) Explicit encouragement of

community input into the development

of SEPs in appropriate cases; (2) a

prohibition on using SEPs to mitigate

claims for stipulated penalties except in

extraordinary circumstances; and (3) the

creation of an ‘‘other’’ category, under

which projects that do not fit within a

defined category of this Policy but

otherwise meet all other criteria of the

Policy may be approved under certain

procedural requirements. A full copy of

this Policy is set forth below and also

may be found at U.S. EPA’s Web site at

http://www.epa.gov/oeca/sep.

Dated: April 10, 1998.

Steven A. Herman,

Assistant Administrator, Office of

Enforcement and Compliance Assurance,

United States Environmental Protection

Agency.

A. Introduction

1. Background

In settlements of environmental

enforcement cases, the U.S.

Environmental Protection Agency (EPA)

requires the alleged violators to achieve

and maintain compliance with Federal

environmental laws and regulations and

to pay a civil penalty. To further EPA’s

goals to protect and enhance public

health and the environment, in certain

instances environmentally beneficial

projects, or Supplemental

Environmental Projects (SEPs), may be

part of the settlement. This Policy sets

forth the types of projects that are

permissible as SEPs, the penalty

mitigation appropriate for a particular

SEP, and the terms and conditions

under which they may become part of

a settlement. The primary purpose of

this Policy is to encourage and obtain

environmental and public health

protection and improvements that may

not otherwise have occurred without the

settlement incentives provided by this

Policy.

In settling enforcement actions, EPA

requires alleged violators to promptly

cease the violations and, to the extent

feasible, remediate any harm caused by

the violations. EPA also seeks

substantial monetary penalties in order

to deter noncompliance. Without

penalties, regulated entities would have

an incentive to delay compliance until

they are caught and ordered to comply.

Penalties promote environmental

compliance and help protect public

health by deterring future violations by

the same violator and deterring

violations by other members of the

regulated community. Penalties help

ensure a national level playing field by
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24797

1 In extraordinary circumstances, the Assistant

Administrator may consider mitigating potential

stipulated penalty liability using SEPs where: (1)

Despite the circumstances giving rise to the claim

for stipulated penalties, the violator has the ability

and intention to comply with a new settlement

agreement obligation to implement the SEP; (2)

there is no negative impact on the deterrent

purposes of stipulated penalties; and (3) the

settlement agreement establishes a range for

stipulated penalty liability for the violations at

issue. For example, if a respondent/defendant has

violated a settlement agreement which provides

that a violation of X requirement subjects it to a

stipulated penalty between $1,000 and $5,000, then

the Agency may consider SEPs in determining the

specific penalty amount that should be demanded.

ensuring that violators do not obtain an

unfair economic advantage over their

competitors who made the necessary

expenditures to comply on time.

Penalties also encourage regulated

entities to adopt pollution prevention

and recycling techniques in order to

minimize their pollutant discharges and

reduce their potential liabilities.

Statutes administered by EPA

generally contain penalty assessment

criteria that a court or administrative

law judge must consider in determining

an appropriate penalty at trial or a

hearing. In the settlement context, EPA

generally follows these criteria in

exercising its discretion to establish an

appropriate settlement penalty. In

establishing an appropriate penalty,

EPA considers such factors as the

economic benefit associated with the

violations, the gravity or seriousness of

the violations, and prior history of

violations. Evidence of a violator’s

commitment and ability to perform a

SEP is also a relevant factor for EPA to

consider in establishing an appropriate

settlement penalty. All else being equal,

the final settlement penalty will be

lower for a violator who agrees to

perform an acceptable SEP compared to

the violator who does not agree to

perform a SEP.

The Agency encourages the use of

SEPs that are consistent with this

Policy. SEPs may not be appropriate in

settlement of all cases, but they are an

important part of EPA’s enforcement

program. While penalties play an

important role in environmental

protection by deterring violations and

creating a level playing field, SEPs can

play an additional role in securing

significant environmental or public

health protection and improvements.

SEPs may be particularly appropriate to

further the objectives in the statutes

EPA administers and to achieve other

policy goals, including promoting

pollution prevention and environmental

justice.

2. Pollution Prevention and

Environmental Justice

The Pollution Prevention Act of 1990

(42 U.S.C. 13101 et seq., November 5,

1990) identifies an environmental

management hierarchy in which

pollution ‘‘should be prevented or

reduced whenever feasible; pollution

that cannot be prevented should be

recycled in an environmentally safe

manner whenever feasible; pollution

that cannot be prevented or recycled

should be treated in an environmentally

safe manner whenever feasible; and

disposal or other release into the

environment should be employed only

as a last resort * * *’’ (42 U.S.C. 13103).

Selection and evaluation of proposed

SEPs should be conducted generally in

accordance with this hierarchy of

environmental management, i.e., SEPs

involving pollution prevention

techniques are preferred over other

types of reduction or control strategies,

and this can be reflected in the degree

of consideration accorded to a

defendant/respondent before calculation

of the final monetary penalty.

Further, there is an acknowledged

concern, expressed in Executive Order

12898 on environmental justice, that

certain segments of the nation’s

population, i.e., low-income and/or

minority populations, are

disproportionately burdened by

pollutant exposure. Emphasizing SEPs

in communities where environmental

justice concerns are present helps

ensure that persons who spend

significant portions of their time in

areas, or depend on food and water

sources located near, where the

violations occur would be protected.

Because environmental justice is not a

specific technique or process but an

overarching goal, it is not listed as a

particular SEP category; but EPA

encourages SEPs in communities where

environmental justice may be an issue.

3. Using this Policy

In evaluating a proposed project to

determine if it qualifies as a SEP and

then determining how much penalty

mitigation is appropriate, Agency

enforcement and compliance personnel

should use the following five-step

process:

(1) Ensure that the project meets the

basic definition of a SEP. (Section B)

(2) Ensure that all legal guidelines,

including nexus, are satisfied. (Section

C)

(3) Ensure that the project fits within

one (or more) of the designated

categories of SEPs. (Section D)

(4) Determine the appropriate amount

of penalty mitigation. (Section E)

(5) Ensure that the project satisfies all

of the implementation and other

criteria. (Sections F, G, H, I and J)

4. Applicability

This Policy revises and hereby

supersedes the February 12, 1991 Policy

on the Use of Supplemental

Environmental Projects in EPA

Settlements and the May 1995 Interim

Revised Supplemental Environmental

Projects Policy. This Policy applies to

settlements of all civil judicial and

administrative actions filed after the

effective date of this Policy, and to all

pending cases in which the government

has not reached agreement in principle

with the alleged violator on the specific

terms of a SEP.

This Policy applies to all civil judicial

and administrative enforcement actions

taken under the authority of the

environmental statutes and regulations

that EPA administers. It also may be

used by EPA and the Department of

Justice in reviewing proposed SEPs in

settlement of citizen suits. This Policy

also applies to federal agencies that are

liable for the payment of civil penalties.

Claims for stipulated penalties for

violations of consent decrees or other

settlement agreements may not be

mitigated by the use of SEPs.1

This is a settlement Policy and thus is

not intended for use by EPA,

defendants, respondents, courts or

administrative law judges at a hearing or

in a trial. Further, whether the Agency

decides to accept a proposed SEP as part

of a settlement, and the amount of any

penalty mitigation that may be given for

a particular SEP, is purely within EPA’s

discretion. Even though a project

appears to satisfy all of the provisions

of this Policy, EPA may decide, for one

or more reasons, that a SEP is not

appropriate (e.g., the cost of reviewing

a SEP proposal is excessive, the

oversight costs of the SEP may be too

high, the defendant/respondent may not

have the ability or reliability to

complete the proposed SEP, or the

deterrent value of the higher penalty

amount outweighs the benefits of the

proposed SEP).

This Policy establishes a framework

for EPA to use in exercising its

enforcement discretion in determining

appropriate settlements. In some cases,

application of this Policy may not be

appropriate, in whole or part. In such

cases, the litigation team may, with the

advance approval of Headquarters, use

an alternative or modified approach.

B. Definition and Key Characterisitics

of a SEP

Supplemental environmental projects

are defined as ENVIRONMENTALLY

BENEFICIAL PROJECTS which a defendant/

respondent agrees to undertake IN
24798 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

2Since the primary purpose of this Policy is to

obtain environmental or public health benefits that

may not have occurred ‘‘but for’’ the settlement,

projects which the defendant has previously

committed to perform or have been started before

the Agency has identified a violation are not

eligible as SEPs. Projects which have been

committed to or started before the identification of

a violation may mitigate the penalty in other ways.

Depending on the specifics, if a regulated entity had

initiated environmentally beneficial projects before

the enforcement process commenced, the initial

penalty calculation could be lower due to the

absence of recalcitrance, no history of other

violations, good faith efforts, less severity of the

violations, or a shorter duration of the violations.

3The statutes EPA administers generally provide

a court with broad authority to order a defendant

to cease its violations, take necessary steps to

prevent future violations, and to remediate any

harm caused by the violations. If a court is likely

to order a defendant to perform a specific activity

in a particular case, such an activity does not

qualify as a SEP.

4These legal guidelines are based on federal law

as it applies to EPA; States may have more or less

flexibility in the use of SEPs depending on their

laws.

5The immediate geographic area will generally be

the area within a 50 mile radius of the site on which

the violations occurred. Ecosystem or geographic

proximity is not by itself a sufficient basis for

nexus; a project must always satisfy subparagraph

a, b, or c in the definition of nexus. In some cases,

a project may be performed at a facility or site not

owned by the defendant/respondent.

6All projects which would include activities

outside the U.S. must be approved in advance by

Headquarters and/or the Department of Justice. See

section J.

7Earmarks are instructions for changes to EPA’s

discretionary budget authority made by

appropriations committee in committee reports that

the Agency generally honors as a matter of policy.

SETTLEMENT OF AN ENFORCEMENT ACTION,

but which the defendant/respondent is

not otherwise legally required to

perform. The three bolded key parts of

this definition are elaborated below.

Environmentally beneficial means a

SEP must improve, protect, or reduce

risks to public health, or the

environment at large. While in some

cases a SEP may provide the alleged

violator with certain benefits, there

must be no doubt that the project

primarily benefits the public health or

the environment.

In settlement of an enforcement

action means: (1) EPA has the

opportunity to help shape the scope of

the project before it is implemented; and

(2) the project is not commenced until

after the Agency has identified a

violation (e.g., issued a notice of

violation, administrative order, or

complaint).2

Not otherwise legally required to

perform means the project or activity is

not required by any federal, state or

local law or regulation. Further, SEPs

cannot include actions which the

defendant/respondent is likely to be

required to perform:

(a) As injunctive relief 3 in the instant

case;

(b) As injunctive relief in another

legal action EPA, or another regulatory

agency could bring;

(c) As part of an existing settlement or

order in another legal action; or, d) By

a state or local requirement.

SEPs may include activities which the

defendant/respondent will become

legally obligated to undertake two or

more years in the future, if the project

will result in the facility coming into

compliance earlier than the deadline.

Such ‘‘accelerated compliance’’ projects

are not allowable, however, if the

regulation or statute provides a benefit

(e.g., a higher emission limit) to the

defendant/respondent for early

compliance.

Also, the performance of a SEP

reduces neither the stringency nor

timeliness requirements of Federal

environmental statutes and regulations.

Of course, performance of a SEP does

not alter the defendant/respondent’s

obligation to remedy a violation

expeditiously and return to compliance.

C. Legal Guidelines

EPA has broad discretion to settle

cases, including the discretion to

include SEPs as an appropriate part of

the settlement. The legal evaluation of

whether a proposed SEP is within EPA’s

authority and consistent with all

statutory and Constitutional

requirements may be a complex task.

Accordingly, this Policy uses five legal

guidelines to ensure that our SEPs are

within the Agency’s and a federal

court’s authority, and do not run afoul

of any Constitutional or statutory

requirements.4

1. A project cannot be inconsistent

with any provision of the underlying

statutes.

2. All projects must advance at least

one of the objectives of the

environmental statutes that are the basis

of the enforcement action and must

have adequate nexus. Nexus is the

relationship between the violation and

the proposed project. This relationship

exists only if:

a. The project is designed to reduce

the likelihood that similar violations

will occur in the future; or

b. The project reduces the adverse

impact to public health or the

environment to which the violation at

issue contributes; or

c. The project reduces the overall risk

to public health or the environment

potentially affected by the violation at

issue.

Nexus is easier to establish if the

primary impact of the project is at the

site where the alleged violation

occurred or at a different site in the

same ecosystem or within the

immediate geographic 5 area. Such SEPs

may have sufficient nexus even if the

SEP addresses a different pollutant in a

different medium. In limited cases,

nexus may exist even though a project

will involve activities outside of the

United States.6 The cost of a project is

not relevant to whether there is

adequate nexus.

3. EPA may not play any role in

managing or controlling funds that may

be set aside or escrowed for

performance of a SEP. Nor may EPA

retain authority to manage or administer

the SEP. EPA may, of course, perform

oversight to ensure that a project is

implemented pursuant to the provisions

of the settlement and have legal

recourse if the SEP is not adequately

performed.

4. The type and scope of each project

are defined in the signed settlement

agreement. This means the ‘‘what,

where and when’’ of a project are

defined by the settlement agreement.

Settlements in which the defendant/

respondent agrees to spend a certain

sum of money on a project(s) to be

defined later (after EPA or the

Department of Justice signs the

settlement agreement) are not allowed.

5. a. A project cannot be used to

satisfy EPA’s statutory obligation or

another federal agency’s obligation to

perform a particular activity.

Conversely, if a federal statute prohibits

the expenditure of federal resources on

a particular activity, EPA cannot

consider projects that would appear to

circumvent that prohibition

b. A project may not provide EPA or

any federal agency with additional

resources to perform a particular

activity for which Congress has

specifically appropriated funds. A

project may not provide EPA with

additional resources to perform a

particular activity for which Congress

has earmarked funds in an

appropriations committee report.7

Further, a project cannot be used to

satisfy EPA’s statutory or earmark

obligation, or another federal agency’s

statutory obligation, to spend funds on

a particular activity. A project, however,

may be related to a particular activity

for which Congress has specifically

appropriated or earmarked funds.

c. A project may not provide

additional resources to support specific

activities performed by EPA employees

or EPA contractors. For example, if EPA

has developed a brochure to help a

segment of the regulated community

comply with environmental

requirements, a project may not directly,
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24799

8 If EPA lacks authority to require repair of the

damage caused by the violation, then repair itself

may constitute a SEP.

9Simply preventing new discharges into the

ecosystem, as opposed to taking affirmative action

directly related to preserving existing conditions at

a property, would not constitute a restoration and

protection project, but may fit into another category

such as pollution prevention or pollution reduction.

10These federal agencies have explicit statutory

authority to accept gifts of land and money in

certain circumstances. All projects with these

federal agencies must be reviewed and approved in

advance by legal counsel in the agency, usually the

Solicitor’s Office in the Department of the Interior.

or indirectly, provide additional

resources to revise, copy or distribute

the brochure.

d. A project may not provide a federal

grantee with additional funds to

perform a specific task identified within

an assistance agreement.

D. Categories of Supplemental

Environmental Projects

EPA has identified seven specific

categories of projects which may qualify

as SEPs. In order for a proposed project

to be accepted as a SEP, it must satisfy

the requirements of at least one category

plus all the other requirements

established in this Policy.

1. Public Health

A public health project provides

diagnostic, preventative and/or remedial

components of human health care

which is related to the actual or

potential damage to human health

caused by the violation. This may

include epidemiological data collection

and analysis, medical examinations of

potentially affected persons, collection

and analysis of blood/fluid/ tissue

samples, medical treatment and

rehabilitation therapy.

Public health SEPs are acceptable

only where the primary benefit of the

project is the population that was

harmed or put at risk by the violations.

2. Pollution Prevention

A pollution prevention project is one

which reduces the generation of

pollution through ‘‘source reduction,’’

i.e., any practice which reduces the

amount of any hazardous substance,

pollutant or contaminant entering any

waste stream or otherwise being

released into the environment, prior to

recycling, treatment or disposal. (After

the pollutant or waste stream has been

generated, pollution prevention is no

longer possible and the waste must be

handled by appropriate recycling,

treatment, containment, or disposal

methods.)

Source reduction may include

equipment or technology modifications,

process or procedure modifications,

reformulation or redesign of products,

substitution of raw materials, and

improvements in housekeeping,

maintenance, training, inventory

control, or other operation and

maintenance procedures. Pollution

prevention also includes any project

which protects natural resources

through conservation or increased

efficiency in the use of energy, water or

other materials. ‘‘In-process recycling,’’

wherein waste materials produced

during a manufacturing process are

returned directly to production as raw

materials on site, is considered a

pollution prevention project.

In all cases, for a project to meet the

definition of pollution prevention, there

must be an overall decrease in the

amount and/or toxicity of pollution

released to the environment, not merely

a transfer of pollution among media.

This decrease may be achieved directly

or through increased efficiency

(conservation) in the use of energy,

water or other materials. This is

consistent with the Pollution Prevention

Act of 1990 and the Administrator’s

‘‘Pollution Prevention Policy Statement:

New Directions for Environmental

Protection,’’ dated June 15, 1993.

3. Pollution Reduction

If the pollutant or waste stream

already has been generated or released,

a pollution reduction approach—which

employs recycling, treatment,

containment or disposal techniques—

may be appropriate. A pollution

reduction project is one which results in

a decrease in the amount and/or toxicity

of any hazardous substance, pollutant or

contaminant entering any waste stream

or otherwise being released into the

environment by an operating business

or facility by a means which does not

qualify as ‘‘pollution prevention.’’ This

may include the installation of more

effective end-of-process control or

treatment technology, or improved

containment, or safer disposal of an

existing pollutant source. Pollution

reduction also includes ‘‘out-of-process

recycling,’’ wherein industrial waste

collected after the manufacturing

process and/or consumer waste

materials are used as raw materials for

production off-site.

4. Environmental Restoration and

Protection

An environmental restoration and

protection project is one which

enhances the condition of the ecosystem

or immediate geographic area adversely

affected.8 These projects may be used to

restore or protect natural environments

(such as ecosystems) and man-made

environments, such as facilities and

buildings. This category also includes

any project which protects the

ecosystem from actual or potential

damage resulting from the violation or

improves the overall condition of the

ecosystem.9 Examples of such projects

include: Restoration of a wetland in the

same ecosystem along the same avian

flyway in which the facility is located;

or purchase and management of a

watershed area by the defendant/

respondent to protect a drinking water

supply where the violation (e.g., a

reporting violation) did not directly

damage the watershed but potentially

could lead to damage due to unreported

discharges. This category also includes

projects which provide for the

protection of endangered species (e.g.,

developing conservation programs or

protecting habitat critical to the wellbeing of a species endangered by the

violation).

In some projects where a defendant/

respondent has agreed to restore and

then protect certain lands, the question

arises as to whether the project may

include the creation or maintenance of

certain recreational improvements, such

as hiking and bicycle trails. The costs

associated with such recreational

improvements may be included in the

total SEP cost provided they do not

impair the environmentally beneficial

purposes of the project and they

constitute only an incidental portion of

the total resources spent on the project.

In some projects where the parties

intend that the property be protected so

that the ecological and pollution

reduction purposes of the land are

maintained in perpetuity, the

defendant/respondent may sell or

transfer the land to another party with

the established resources and expertise

to perform this function, such as a state

park authority. In some cases, the U.S.

Fish and Wildlife Service or the

National Park Service may be able to

perform this function.10

With regard to man-made

environments, such projects may

involve the remediation of facilities and

buildings, provided such activities are

not otherwise legally required. This

includes the removal/mitigation of

contaminated materials, such as soils,

asbestos and lead paint, which are a

continuing source of releases and/or

threat to individuals.

5. Assessments and Audits

Assessments and audits, if they are

not otherwise available as injunctive

relief, are potential SEPs under this

category. There are three types of

projects in this category: a. Pollution

prevention assessments; b.

environmental quality assessments; and
24800 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

11For purposes of this Policy, a small business is

owned by a person or another entity that employs

100 or fewer individuals. Small businesses could be

individuals, privately held corporations, farmers,

landowners, partnerships and others. A small

community is one comprised of fewer than 2,500

persons.

12Since most large companies routinely conduct

compliance audits, to mitigate penalties for such

audits would reward violators for performing an

activity that most companies already do. In

contrast, these audits are not commonly done by

small businesses, perhaps because such audits may

be too expensive.

c. compliance audits. These assessments

and audits are only acceptable as SEPs

when the defendant/respondent agrees

to provide EPA with a copy of the

report. The results may be made

available to the public, except to the

extent they constitute confidential

business information pursuant to 40

CFR part 2, subpart B.

a. Pollution prevention assessments

are systematic, internal reviews of

specific processes and operations

designed to identify and provide

information about opportunities to

reduce the use, production, and

generation of toxic and hazardous

materials and other wastes. To be

eligible for SEPs, such assessments must

be conducted using a recognized

pollution prevention assessment or

waste minimization procedure to reduce

the likelihood of future violations.

Pollution prevention assessments are

acceptable as SEPs without an

implementation commitment by the

defendant/respondent. Implementation

is not required because drafting

implementation requirements before the

results of an assessment are known is

difficult. Further, many of the

implementation recommendations may

constitute activities that are in the

defendant/respondent’s own economic

interest.

b. Environmental quality assessments

are investigations of: The condition of

the environment at a site not owned or

operated by the defendant/respondent;

the environment impacted by a site or

a facility regardless of whether the site

or facility is owned or operated by the

defendant/respondent; or threats to

human health or the environment

relating to a site or a facility regardless

of whether the site or facility is owned

or operated by the defendant/

respondent. These include, but are not

limited to: investigations of levels or

sources of contamination in any

environmental media at a site; or

monitoring of the air, soil, or water

quality surrounding a site or facility. To

be eligible as SEPs, such assessments

must be conducted in accordance with

recognized protocols, if available,

applicable to the type of assessment to

be undertaken. Expanded sampling or

monitoring by a defendant/respondent

of its own emissions or operations does

not qualify as a SEP to the extent it is

ordinarily available as injunctive relief.

Environmental quality assessment

SEPs may not be performed on the

following types of sites: sites that are on

the National Priority List under

CERCLA section 105, 40 CFR part 300,

appendix B; sites that would qualify for

an EPA removal action pursuant to

CERCLA section 104(a) and the National

Oil and Hazardous Substances Pollution

Contingency Plan, 40 CFR 300.415; and

sites for which the defendant/

respondent or another party would

likely be ordered to perform a

remediation activity pursuant to

CERCLA section 106, RCRA section

7003, RCRA 3008(h), CWA section 311,

or another federal law.

c. Environmental compliance audits

are independent evaluations of a

defendant/respondent’s compliance

status with environmental requirements.

Credit is only given for the costs

associated with conducting the audit.

While the SEP should require all

violations discovered by the audit to be

promptly corrected, no credit is given

for remedying the violation since

persons are required to achieve and

maintain compliance with

environmental requirements. In general,

compliance audits are acceptable as

SEPs only when the defendant/

respondent is a small business or small

community.11 12

6. Environmental Compliance

Promotion

An environmental compliance

promotion project provides training or

technical support to other members of

the regulated community to: (1) Identify,

achieve and maintain compliance with

applicable statutory and regulatory

requirements or (2) go beyond

compliance by reducing the generation,

release or disposal of pollutants beyond

legal requirements. For these types of

projects, the defendant/respondent may

lack the experience, knowledge or

ability to implement the project itself,

and, if so, the defendant/respondent

should be required to contract with an

appropriate expert to develop and

implement the compliance promotion

project. Acceptable projects may

include, for example, producing a

seminar directly related to correcting

widespread or prevalent violations

within the defendant/respondent’s

economic sector.

Environmental compliance promotion

SEPs are acceptable only where the

primary impact of the project is focused

on the same regulatory program

requirements which were violated and

where EPA has reason to believe that

compliance in the sector would be

significantly advanced by the proposed

project. For example, if the alleged

violations involved Clean Water Act

pretreatment violations, the compliance

promotion SEP must be directed at

ensuring compliance with pretreatment

requirements. Environmental

compliance promotion SEPs are subject

to special approval requirements per

Section J below.

7. Emergency Planning and

Preparedness

An emergency planning and

preparedness project provides

assistance—such as computers and

software, communication systems,

chemical emission detection and

inactivation equipment, HAZMAT

equipment, or training—to a responsible

state or local emergency response or

planning entity. This is to enable these

organizations to fulfill their obligations

under the Emergency Planning and

Community Right-to-Know Act (EPCRA)

to collect information to assess the

dangers of hazardous chemicals present

at facilities within their jurisdiction, to

develop emergency response plans, to

train emergency response personnel and

to better respond to chemical spills.

EPCRA requires regulated sources to

provide information on chemical

production, storage and use to State

Emergency Response Commissions

(SERCs), Local Emergency Planning

Committees (LEPCs) and Local Fire

Departments (LFDs). This enables states

and local communities to plan for and

respond effectively to chemical

accidents and inform potentially

affected citizens of the risks posed by

chemicals present in their communities,

thereby enabling them to protect the

environment or ecosystems which could

be damaged by an accident. Failure to

comply with EPCRA impairs the ability

of states and local communities to meet

their obligations and places emergency

response personnel, the public and the

environment at risk from a chemical

release.

Emergency planning and

preparedness SEPs are acceptable where

the primary impact of the project is

within the same emergency planning

district or state affected by the

violations and EPA has not previously

provided the entity with financial

assistance for the same purposes as the

proposed SEP. Further, this type of SEP

is allowable only when the SEP involves

non-cash assistance and there are

violations of EPCRA, or reporting

violations under CERCLA section 103,

or CAA section 112(r), or violations of
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24801

13Pursuant to the February 1995 Revised Interim

Clean Water Act Settlement Penalty Policy, section

V, a smaller minimum penalty amount may be

allowed for a municipality.

14A copy of the PROJECT computer program

software and PROJECT User’s Manual may be

purchased by calling the National Technology

Information Service at (800) 553–6847, and asking

for Document #ΠΒ 98–500408GEI, or they may be

downloaded from the World Wide Web at ‘‘http:/

/www.epa.gov/oeca/models/’’.

15The PROJECT calculated SEP Cost is a

reasonable estimate, and not an exact after-tax

calculation. PROJECT does not evaluate the

potential for market benefits which may accrue

with the performance of a SEP (e.g., increased sales

of a product, improved corporate public image, or

improved employee morale). Nor does it consider

costs imposed on the government, such as the cost

to the Agency for oversight of the SEP, or the

burden of a lengthy negotiation with a defendant/

respondent who does not propose a SEP until late

in the settlement process; such factors may be

considered in determining a mitigation percentage

rather than in calculating after-tax cost.

16See PROJECT User’s Manual, January 1995. If

the PROJECT model appears inappropriate to a

particular fact situation, EPA Headquarters should

be consulted to identify an alternative approach.

For example, PROJECT does not readily calculate

Continued

other emergency planning, spill or

release requirements alleged in the

complaint.

8. Other Types of Projects

Projects determined by the case team

to have environmental merit which do

not fit within at least one of the seven

categories above but that are otherwise

fully consistent with all other

provisions of this Policy, may be

accepted with the advance approval of

the Office of Enforcement and

Compliance Assurance.

9. Projects Which Are Not Acceptable as

SEPs

The following are examples of the

types of projects that are not allowable

as SEPs:

a. General public educational or

public environmental awareness

projects, e.g., sponsoring public

seminars, conducting tours of

environmental controls at a facility,

promoting recycling in a community;

b. Contributions to environmental

research at a college or university;

c. Conducting a project, which,

though beneficial to a community, is

unrelated to environmental protection,

e.g., making a contribution to a nonprofit, public interest, environmental, or

other charitable organization, or

donating playground equipment;

d. Studies or assessments without a

requirement to address the problems

identified in the study (except as

provided for in § D.5 above);

e. Projects which the defendant/

respondent will undertake, in whole or

part, with low-interest federal loans,

federal contracts, federal grants, or other

forms of federal financial assistance or

non-financial assistance (e.g., loan

guarantees).

E. Calculation of the Final Penalty

Substantial penalties are an important

part of any settlement for legal and

policy reasons. Without penalties there

would be no deterrence, as regulated

entities would have little incentive to

comply. Additionally, penalties are

necessary as a matter of fairness to those

regulated entities that make the

necessary expenditures to comply on

time: Violators should not be allowed to

obtain an economic advantage over their

competitors who complied.

As a general rule, the net costs to be

incurred by a violator in performing a

SEP may be considered as one factor in

determining an appropriate settlement

amount. In settlements in which

defendant/respondents commit to

conduct a SEP, the final settlement

penalty must equal or exceed either: (a)

The economic benefit of noncompliance

plus 10 percent of the gravity

component; or (b) 25 percent of the

gravity component only; whichever is

greater.

Calculating the final penalty in a

settlement which includes a SEP is a

five step process. Each of the five steps

is explained below. The five steps are

also summarized in the penalty

calculation worksheet attached to this

Policy.

Step 1: Settlement Amount Without a

SEP

a. The applicable EPA penalty policy

is used to calculate the economic benefit

of noncompliance.

b. The applicable EPA penalty policy

is used to calculate the gravity

component of the penalty. The gravity

component is all of the penalty other

than the identifiable economic benefit

amount, after gravity has been adjusted

by all other factors in the penalty policy

(e.g., audits, good faith, litigation

considerations), except for the SEP.

c. The amounts in steps 1.a and b are

added. This sum is the minimum

amount that would be necessary to

settle the case without a SEP.

Step 2: Minimum Penalty Amount With

a SEP

The minimum penalty amount must

equal or exceed the economic benefit of

noncompliance plus 10 percent of the

gravity component, or 25 percent of the

gravity component only, whichever is

greater. The minimum penalty amount

is calculated as follows:

a. Calculate 10 percent of gravity

(multiply amount in step 1.b by 0.1).

b. Add economic benefit (amount in

step 1.a) to amount in step 2.a.

c. Calculate 25 percent of gravity

(multiply amount in step 1.b by 0.25).

d. Identify the minimum penalty

amount: the greater of step 2.c or step

2.b.13

Step 3. Calculate the SEP Cost

The net present after-tax cost of the

SEP, hereinafter called the ‘‘SEP COST,’’

is the maximum amount that EPA may

take into consideration in determining

an appropriate penalty mitigation for

performance of a SEP. In order to

facilitate evaluation of the SEP COST of

a proposed project, the Agency has

developed a computer model called

PROJECT.14 There are three types of

costs that may be associated with

performance of a SEP (which are

entered into the PROJECT model):

capital costs (e.g., equipment,

buildings); one-time nondepreciable

costs (e.g., removing contaminated

materials, purchasing land, developing a

compliance promotion seminar); and

annual operation costs and savings (e.g.,

labor, chemicals, water, power, raw

materials).15

To use PROJECT, the Agency needs

reliable estimates of the costs associated

with a defendant/respondent’s

performance of a SEP, as well as any

savings due to such factors as energy

efficiency gains, reduced materials

costs, reduced waste disposal costs, or

increases in productivity. For example,

if the annual expenditures in labor and

materials of operating a new waste

recycling process is $100,000 per year,

but the new process reduces existing

hazardous waste disposal expenditures

by $30,000 per year, the net cost of

$70,000 is entered into the PROJECT

model (variable 4).

In order to run the PROJECT model

properly (i.e., to produce a reasonable

estimate of the net present after-tax cost

of the project), the number of years that

annual operation costs or savings will

be expended in performing the SEP

must be specified. At a minimum, the

defendant/respondent must be required

to implement the project for the same

number of years used in the PROJECT

model calculation. (For example, if the

settlement agreement requires the

defendant/respondent to operate the

SEP equipment for two years, two years

should be entered as the input for

number of years of annual expense in

the PROJECT model.) If certain costs or

savings appear speculative, they should

not be entered into the PROJECT model.

The PROJECT model is the primary

method to determine the SEP COST for

purposes of negotiating settlements.16
24802 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

the cost of an accelerated compliance SEP. The cost

of such a SEP is only the additional cost associated

with doing the project early (ahead of the regulatory

requirement) and it needs to be calculated in a

slightly different manner. Please consult with the

Office Of Regulatory Enforcement for directions on

how to calculate the costs of such projects.

17The penalty mitigation guidelines provide that

the amount of mitigation should not exceed the net

cost of the project. To provide penalty mitigation

for profitable projects would be providing a credit

in excess of net costs.

18Non-profit organizations, such as universities

and public interest groups, may function as

contractors or consultants.

EPA does not offer tax advice on

whether a regulated entity may deduct

SEP expenditures from its income taxes.

If a defendant/respondent states that it

will not deduct the cost of a SEP from

its taxes and it is willing to commit to

this in the settlement document, and

provide the Agency with certification

upon completion of the SEP that it has

not deducted the SEP expenditures, the

PROJECT model calculation should be

adjusted to calculate the SEP Cost

without reductions for taxes. This is a

simple adjustment to the PROJECT

model: just enter a zero for variable 7,

the marginal tax rate. If a business is not

willing to make this commitment, the

marginal tax rate in variable 7 should

not be set to zero; rather the default

settings (or a more precise estimate of

the business’ marginal tax rates) should

be used in variable 7.

If the PROJECT model reveals that a

project has a negative cost during the

period of performance of the SEP, this

means that it represents a positive cash

flow to the defendant/respondent and is

a profitable project. Such a project is

generally not acceptable as a SEP. If a

project generates a profit, a defendant/

respondent should, and probably will,

based on its own economic interests,

implement the project. While EPA

encourages regulated entities to

undertake environmentally beneficial

projects that are economically

profitable, EPA does not believe

violators should receive a bonus in the

form of penalty mitigation to undertake

such projects as part of an enforcement

action. EPA does not offer subsidies to

complying companies to undertake

profitable environmentally beneficial

projects and it would thus be

inequitable and perverse to provide

such subsidies only to violators. In

addition, the primary goal of SEPs is to

secure a favorable environmental or

public health outcome which would not

have occurred but for the enforcement

case settlement. To allow SEP penalty

mitigation for profitable projects would

thwart this goal.17

Step 4: Determine the SEP Mitigation

Percentage and then the Mitigation

Amount

Step 4.a: Mitigation Percentage. After

the SEP COST has been calculated, EPA

should determine what percentage of

that cost may be applied as mitigation

against the amount EPA would settle for

but for the SEP. The quality of the SEP

should be examined as to whether and

how effectively it achieves each of the

following six factors listed below. (The

factors are not listed in priority order.)

• Benefits to the Public or

Environment at Large. While all SEPs

benefit public health or the

environment, SEPs which perform well

on this factor will result in significant

and quantifiable reduction in discharges

of pollutants to the environment and the

reduction in risk to the general public.

SEPs also will perform well on this

factor to the extent they result in

significant and, to the extent possible,

measurable progress in protecting and

restoring ecosystems (including

wetlands and endangered species

habitats).

• Innovativeness. SEPs which

perform well on this factor will further

the development, implementation, or

dissemination of innovative processes,

technologies, or methods which more

effectively: reduce the generation,

release or disposal of pollutants;

conserve natural resources; restore and

protect ecosystems; protect endangered

species; or promote compliance. This

includes ‘‘technology forcing’’

techniques which may establish new

regulatory ‘‘benchmarks.’’

• Environmental Justice. SEPs which

perform well on this factor will mitigate

damage or reduce risk to minority or

low income populations which may

have been disproportionately exposed to

pollution or are at environmental risk.

• Community Input. SEPs which

perform well on this factor will have

been developed taking into

consideration input received from the

affected community. No credit should

be given for this factor if the defendant/

respondent did not actively participate

in soliciting and incorporating public

input into the SEP.

• Multimedia Impacts. SEPs which

perform well on this factor will reduce

emissions to more than one medium.

• Pollution Prevention. SEPs which

perform well on this factor will develop

and implement pollution prevention

techniques and practices.

The better the performance of the SEP

under each of these factors, the higher

the appropriate mitigation percentage.

The percent of penalty mitigation is

within EPA’s discretion; there is no

presumption as to the correct percentage

of mitigation. The mitigation percentage

should not exceed 80 percent of the SEP

COST, with two exceptions:

(1) For small businesses, government

agencies or entities, and non-profit

organizations, this mitigation percentage

of the SEP COST may be set as high as

100 percent if the defendant/respondent

can demonstrate the project is of

outstanding quality.

(2) For any defendant/respondent, if

the SEP implements pollution

prevention, the mitigation percentage of

the SEP COST may be set as high as 100

percent if the defendant/respondent can

demonstrate that the project is of

outstanding quality.

If the government must allocate

significant resources to monitoring and

reviewing the implementation of a

project, a lower mitigation percentage of

the SEP COST may be appropriate.

In administrative enforcement actions

in which there is a statutory limit

(commonly called ‘‘caps’’) on the total

maximum penalty that may be sought in

a single action, the cash penalty

obtained plus the amount of penalty

mitigation credit due to the SEPs shall

not exceed the limit.

Step 4.b: SEP Mitigation Amount.

The SEP COST (calculated pursuant

to step 3) is multiplied by the mitigation

percentage (step 4.a) to obtain the SEP

mitigation amount, which is the amount

of the SEP cost that may be used in

potentially mitigating the preliminary

settlement penalty.

Step 5: Final Settlement Penalty

5.a. The SEP mitigation amount (step

4.b) is then subtracted from the

settlement amount without a SEP (step

1.c).

5.b The greater of step 2.d or step 5.a

is the minimum final settlement penalty

allowable based on the performance of

the SEP.

F. Liability for Performance

Defendants/respondents (or their

successors in interest) are responsible

and legally liable for ensuring that a SEP

is completed satisfactorily. A defendant/

respondent may not transfer this

responsibility and liability to someone

else, commonly called a third party. Of

course, a defendant/respondent may use

contractors or consultants to assist it in

implementing a SEP.18
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24803

19 In civil judicial cases, the Department of Justice

already seeks public comment on lodged consent

decrees through a Federal Register notice. See 28

CFR 50.7. In certain administrative enforcement

actions, there are also public notice requirements

that are followed before a settlement is finalized.

See 40 CFR part 22.

G. Oversight and Drafting Enforceable

SEPS

The settlement agreement should

accurately and completely describe the

SEP. (See related legal guideline 4 in §C

above.) It should describe the specific

actions to be performed by the

defendant/respondent and provide for a

reliable and objective means to verify

that the defendant/respondent has

timely completed the project. This may

require the defendant/respondent to

submit periodic reports to EPA. The

defendant/respondent may utilize an

outside auditor to verify performance,

and the defendant/respondent should be

made responsible for the cost of any

such activities. The defendant/

respondent remains responsible for the

quality and timeliness of any actions

performed or any reports prepared or

submitted by the auditor. A final report

certified by an appropriate corporate

official, acceptable to EPA, and

evidencing completion of the SEP and

documenting SEP expenditures, should

be required.

To the extent feasible, defendant/

respondents should be required to

quantify the benefits associated with the

project and provide EPA with a report

setting forth how the benefits were

measured or estimated. The defendant/

respondent should agree that whenever

it publicizes a SEP or the results of a

SEP, it will state in a prominent manner

that the project is being undertaken as

part of the settlement of an enforcement

action.

The drafting of a SEP will vary

depending on whether the SEP is being

performed as part of an administrative

or judicial enforcement action. SEPs

with long implementation schedules

(e.g., 18 months or longer), SEPs which

require EPA review and comment on

interim milestone activities, and other

complex SEPs may not be appropriate in

administrative enforcement actions.

Specific guidance on the proper drafting

of settlement documents requiring SEPs

is provided in a separate document.

H. Failure of a SEP and Stipulated

Penalties

If a SEP is not completed

satisfactorily, the defendant/respondent

should be required, pursuant to the

terms of the settlement document, to

pay stipulated penalties for its failure.

Stipulated penalty liability should be

established for each of the scenarios set

forth below as appropriate to the

individual case.

1. Except as provided in paragraph 2

immediately below, if the SEP is not

completed satisfactorily, a substantial

stipulated penalty should be required.

Generally, a substantial stipulated

penalty is between 75 and 150 percent

of the amount by which the settlement

penalty was mitigated on account of the

SEP.

2. If the SEP is not completed

satisfactorily, but the defendant/

respondent: a) made good faith and

timely efforts to complete the project;

and b) certifies, with supporting

documentation, that at least 90 percent

of the amount of money which was

required to be spent was expended on

the SEP, no stipulated penalty is

necessary.

3. If the SEP is satisfactorily

completed, but the defendant/

respondent spent less than 90 percent of

the amount of money required to be

spent for the project, a small stipulated

penalty should be required. Generally, a

small stipulated penalty is between 10

and 25 percent of the amount by which

the settlement penalty was mitigated on

account of the SEP.

4. If the SEP is satisfactorily

completed, and the defendant/

respondent spent at least 90 percent of

the amount of money required to be

spent for the project, no stipulated

penalty is necessary.

The determinations of whether the

SEP has been satisfactorily completed

(i.e., pursuant to the terms of the

agreement) and whether the defendant/

respondent has made a good faith,

timely effort to implement the SEP

should be reserved to the sole discretion

of EPA, especially in administrative

actions in which there is often no formal

dispute resolution process.

I. Community Input

In appropriate cases, EPA should

make special efforts to seek input on

project proposals from the local

community that may have been

adversely impacted by the violations.19

Soliciting community input into the

SEP development process can: Result in

SEPs that better address the needs of the

impacted community; promote

environmental justice; produce better

community understanding of EPA

enforcement; and improve relations

between the community and the

violating facility. Community

involvement in SEPs may be most

appropriate in cases where the range of

possible SEPs is great and/or multiple

SEPs may be negotiated.

When soliciting community input, the

EPA negotiating team should follow the

four guidelines set forth below.

1. Community input should be sought

after EPA knows that the defendant/

respondent is interested in doing a SEP

and is willing to seek community input,

approximately how much money may

be available for doing a SEP, and that

settlement of the enforcement action is

likely. If these conditions are not

satisfied, EPA will have very little

information to provide communities

regarding the scope of possible SEPs.

2. The EPA negotiating team should

use both informal and formal methods

to contact the local community.

Informal methods may involve

telephone calls to local community

organizations, local churches, local

elected leaders, local chambers of

commerce, or other groups. Since EPA

may not be able to identify all interested

community groups, a public notice in a

local newspaper may be appropriate

3. To ensure that communities have a

meaningful opportunity to participate,

the EPA negotiating team should

provide information to communities

about what SEPs are, the opportunities

and limits of such projects, the

confidential nature of settlement

negotiations, and the reasonable

possibilities and limitations in the

current enforcement action. This can be

done by holding a public meeting,

usually in the evening, at a local school

or facility. The EPA negotiating team

may wish to use community outreach

experts at EPA or the Department of

Justice in conducting this meeting.

Sometimes the defendant/respondent

may play an active role at this meeting

and have its own experts assist in the

process.

4. After the initial public meeting, the

extent of community input and

participation in the SEP development

process will have to be determined. The

amount of input and participation is

likely to vary with each case. Except in

extraordinary circumstances and with

agreement of the parties, representatives

of community groups will not

participate directly in the settlement

negotiations. This restriction is

necessary because of the confidential

nature of settlement negotiations and

because there is often no equitable

process to determine which community

group should directly participate in the

negotiations.

J. EPA Procedures

1. Approvals

The authority of a government official

to approve a SEP is included in the

official’s authority to settle an
24804 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

enforcement case and thus, subject to

the exceptions set forth here, no special

approvals are required. The special

approvals apply to both administrative

and judicial enforcement actions as

follows:

a. Regions in which a SEP is proposed

for implementation shall be given the

opportunity to review and comment on

the proposed SEP.

b. In all cases in which a project may

not fully comply with the provisions of

this Policy (e.g., see footnote 1), the SEP

must be approved by the EPA Assistant

Administrator for Enforcement and

Compliance Assurance. If a project does

not fully comply with all of the legal

guidelines in this Policy, the request for

approval must set forth a legal analysis

supporting the conclusion that the

project is within EPA’s legal authority

and is not otherwise inconsistent with

law.

c. In all cases in which a SEP would

involve activities outside the United

States, the SEP must be approved in

advance by the Assistant Administrator

and, for judicial cases only, the

Assistant Attorney General for the

Environment and Natural Resources

Division of the Department of Justice.

d. In all cases in which an

environmental compliance promotion

project (section D.6) or a project in the

‘‘other’’ category (section D.8) is

contemplated, the project must be

approved in advance by the appropriate

office in OECA, unless otherwise

delegated.

2. Documentation and Confidentiality

In each case in which a SEP is

included as part of a settlement, an

explanation of the SEP with supporting

materials (including the PROJECT

model printout, where applicable) must

be included as part of the case file. The

explanation of the SEP should explain

how the five steps set forth in Section

A.3 above have been used to evaluate

the project and include a description of

the expected benefits associated with

the SEP. The explanation must include

a description by the enforcement

attorney of how nexus and the other

legal guidelines are satisfied.

Documentation and explanations of a

particular SEP may constitute

confidential settlement information that

is exempt from disclosure under the

Freedom of Information Act, is outside

the scope of discovery, and is protected

by various privileges, including the

attorney-client privilege and the

attorney work-product privilege. While

individual Agency evaluations of

proposed SEPs are confidential,

privileged documents, this Policy is a

public document and may be released to

anyone upon request.

This Policy is primarily for the use of

U.S. EPA enforcement personnel in

settling cases. EPA reserves the right to

change this Policy at any time, without

prior notice, or to act at variance to this

Policy. This Policy does not create any

rights, duties, or obligations, implied or

otherwise, in any third parties.

ATTACHMENT.—SEP PENALTY CALCULATION WORKSHEET

[This worksheet should be used pursuant to section E of the Policy. Specific Applications of this Worksheet in a Case Are Privileged, Confidential

Documents]

Step Amount

STEP 1: CALCULATION OF SETTLEMENT AMOUNT WITHOUT A SEP

1.a. BENEFIT: The applicable penalty policy is used to calculate the economic benefit of noncompliance ........................................... $

1.b. GRAVITY: The applicable penalty policy is used to calculate the gravity component of the penalty; this is gravity after all adjustments in the applicable policy.$

1.c SETTLEMENT AMOUNT without a SEP: Sum of step 1.a plus 1.b .................................................................................................. $

STEP 2: CALCULATION OF THE MINIMUM PENALTY AMOUNT WITH A SEP

2.a 10% of GRAVITY: Multiply amount in step 1.b by 0.10 ...................................................................................................................... $

2.b BENEFIT PLUS 10% of GRAVITY: Sum of step 1.a plus step 2.a .................................................................................................... $

2.c. 25% of GRAVITY: Multiply amount in step 1.b by 0.25 ..................................................................................................................... $

2.d MINIMUM PENALTY AMOUNT: Select greater of step 2.c or step 2.b ............................................................................................. $

STEP 3: CALCULATION OF THE SEP COST USING PROJECT MODEL ........................................................................................... $

STEP 4: CALCULATION OF MITIGATION PERCENTAGE AND MITIGATION AMOUNT

4.a. SEP Cost Mitigation Percentage. Evaluate the project pursuant to the 6 mitigation factors in the Policy. Mitigation percentage

should not exceed 80% unless one of the exceptions applies.

Percent

4.b. SEP Mitigation Amount. Multiply step 3 by step 4.a .......................................................................................................................... $

STEP 5: CALCULATION OF THE FINAL SETTLEMENT PENALTY

5.a Subtract step 4.b from step 1.c ........................................................................................................................................................... $

5.b. Final Settlement Penalty: Select greater of step 2.d or step 5.a ....................................................................................................... $

[FR Doc. 98–11881 Filed 5–4–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[FRL–6007–9]

Selections for Total Maximum Daily

Load Development for the State of

West Virginia

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Notice of availability for public

comment of the selection of two

waterbodies for Total Maximum Daily

Load (TMDL) development in the state

of West Virginia.

SUMMARY: Pursuant to the Consent

Decree filed with the court resolving a

citizen suit filed against EPA, Ohio

Valley Environmental Coalition, Inc,

West Virginia Highlands Conservancy et

al. v. Browner et al., (C.A. No. 2:95–

5029 and 2:96–0091 (S.D.WV), EPA

must establish TMDLs for seven water

quality limited segments (‘‘WQLS’’) of

waterbodies in West Virginia by

September 30, 1998, if the State of West

Virginia fails to establish these TMDLs

itself. The Consent Decree, in Paragraph

18, contemplates that, in the first

instance, West Virginia will select the

waterbodies for TMDL development, but

that EPA may select alternative

waterbodies, if EPA is establishing the

TMDLs in cooperation with West

Virginia.

West Virginia, with EPA’s

concurrence, is in the process of

announcing the selection of the

following five WQLS for TMDL

development for 1998: Lost River,

Hurricane Lake, Mountwood Park Lake,

Tomlinson Run Lake, and Burches Run

Lake. Pursuant to Paragraph 18 of the

Consent Decree, EPA today is providing

notice that EPA has selected two

additional waterbodies for TMDL