Economic penalties in CAAA
The Clean Air Act Amendments of 1977 (CAAA) substantially increased the enforcement powers of EPA and the States by adding two new types of economic penalties. The two are court-imposed “civil penalties,” which may be assessed for violations going back to Aug. 7, 1977, and “noncompliance penalties,” which will commence to run for violations after Aug. 7, 1979. Both of these new sanctions reflect Congressional frustration with continuing delays in the attainment of the health-related standards. Two civil penalty provisions are an extremely powerful new tool in the regulatory arsenal, particularly when complemented by the noncompliance penalties, which are triggered automatically, and over which ‘EPA and the States have very little discretion.
A new test The civil penalty provision supplements the criminal penalty sanctions for “knowing and willful” violations. (The criminal provision was toughened to make “any responsible corporate officer” personally liable.) The new civil penalties provide much more leverage for enforcement officials because civil liability need only be proven by a “preponderance of the evidence,” a substantially lighter burden than the criminal standard of “beyond a reasonable doubt.” Additionally, “knowledge” or “willfulness” are not elements of the civil provision, so only the occurrence of the violation must be proved. The premise of the civil penalty provision is that it is unfair for a rela-
tively small number of sources to continue to violate when the majority have made the effort and capital outlay to comply. The amount of the penalty (up to $25 000 per day per violation) may be determined by considering the size of the business, the economic impact of the penalty on the business and the seriousness of the violation. It is intended to be used as a punitive sanction as well as an economic incentive for compliance. The calculation of the amount of the civil penalty is highly structured. Not only are specific formulas provided, but the amount of the penalty to be sought in each case is reviewed by a panel of top officials from EPA, the Department of Justice, and some state agencies. The amount approved by this panel is a minimum, and the U.S. Attorneys and others negotiating settlements of these cases are instructed not to settle for less than the approved amount.
For noncompliance The other new economic sanction requires a mandatory assessment of “noncompliance penalties” against nearly every violating source of air pollution after Aug. 7, 1979. Similar to the civil penalty promise, this penalty is designed to eliminate any financial incentive to defer pollution control investments. There are only a limited number of exemptions from these automatic penalties (for example, for innovative technology or insignificant violations). EPA draft regulations describe in detail the method for calculating the amount of the penalty and the procedures governing the federal and state systems of penalty assessment and collection. The basic approach of the proposed penalty calculation formula is to determine the present value of the pollution control investments that should have been made and the present value of the investments that are being or will be made, and to take the difference between the two as the source’s economic benefit of not timely complying with the pollution control regulations. Obviously, if major con-
trol equipment such as scrubbers is required, the penalties will be substantial. The details for administering the noncompliance penalty system may vary in those states where the state agency has submitted and received approval for a plan for assessing and collecting these penalties. Such plans must fulfill the requirements of EPA’s draft regulations.
Calculation of penalty The source owner or operator must calculate the penalty owed and establish a payment schedule. If the source fails to calculate the penalty, the enforcement agency may hire an outside contractor to do the calculation and add the contractor’s fee to the amount of the penalty. The enforcement agency must, within 30 days, review the calculation and either accept it, request more information or recalculate it. The source may request a hearing to challenge any recalculation. The regulations sharply restrict both the subjects that can be raised in a petition for a hearing and the discretion of the hearing officer. Only two defenses against assessment of a penalty may be allowed in a petition for a hearing: the violation did not occur, or the source is eligible for an exemption (or both). The regulations envision a fastpaced and simple hearing procedure, with final disposition of the case within 90 days of receipt of a petition. Given the severe economic consequences of these automatic penalty provisions, the calculation formula, and other crucial aspects, should be carefully scrutinized and comments submitted before the regulations are finalized. Once the penalties start to run on Aug. 7, 1979, very little flexibility will remain with the regulatory agencies. The Amendments provide that civil penalties can be assessed in addition to the mandatory noncompliance penalties. Whether individually or in tandem, these new economic sanctions substantially increase the incentives to comply with the Act. Volume 13, Number 2,February 1979
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