Search

EPA Memo Shows How Regulators Evaluate Ability-to-Pay Claims

Posted on 7/9/2015 by Roger Marks

A memo released late last month by the US EPA’s Office of Civil Enforcement (OCE) provides insight into the steps EPA officials follow when determining the amount of a civil penalty for environmental violations.

For individuals or businesses that violate US EPA regulations, civil penalties can be costly. Noncompliance with the Resource Conservation and Recovery Act (RCRA) rules for managing hazardous waste, for example, are as high as $37,500 per day, per violation.

EPA Compliance Penalty Mitigation

Of course, not all violations of EPA rules are equal. Before EPA finalizes a civil penalty, officials must consider a number of factors that could mitigate the penalty amount. These factors include:
  • The individual’s degree of willfulness and/or negligence;
  • History of noncompliance at the site;
  • Ability to pay;
  • Degree of cooperation during the enforcement process; and
  • Other unique factors.
Among these, “ability to pay,” or ATP, is the subject covered in EPA’s 2015 guidance on penalty mitigation. Namely, the memo clarifies that EPA is not required to demonstrate specific evidence of a violator’s ability to pay a fine. Instead, the Agency must only “produce some evidence regarding the respondent’s financial status from which it can be inferred that the respondent’s ability to pay should not affect the penalty amount.”

EPA civil penalties go up to $37,500


Proving Your Inability to Pay

If a business argues that it is unable to pay the civil penalty levied by US EPA, the business must establish that paying the fine will cause undue financial hardship and prevent the business from paying ordinary business expenses. Tax returns alone are not sufficient evidence of ability to pay, but are one item EPA officials may ask for when determining a company’s ability to pay a fine.

According to an EPA financial expert quoted in the memo, other items a business may furnish to EPA include proof of cutbacks, loan extensions obtained, or statements of back taxes owed. Other financial documents EPA may request to substantiate an ability to pay claim include:
  • Financial statements prepared by an outside accounting firm;
  • Budgets and year-to-date results;
  • Asset ledger;
  • Loan and mortgage agreements;
  • Federal tax returns of related financial entities; and/or
  • SEC Filing DEF 14A Proxy Statements.
The full memo has more information about how EPA enforcement personnel evaluate ATP claims.

When a Business Can’t Pay EPA

If it’s determined that the business cannot pay the full penalty amount, EPA may allow for a reduced penalty. When the business can show that it has no options for raising funds to pay the fine—by using available cash, selling assets, personal or commercial borrowing, selling stock, or delaying future investments or profit distribution—a supplemental environmental project (SEP) may be an acceptable form of restitution.

To complete an SEP in lieu of paying the full civil penalty, the business must show that the SEP has a “nexus” to the underlying violation. Also, EPA’s SEP Policy states that the violator must pay a minimum penalty in addition to implementing the SEP.

Avoid Violations with Expert Training

Clearly, needing to prove that your business is unable to pay a civil penalty for environmental noncompliance is not an enviable position. Avoid noncompliance with expert training on the US EPA’s many major programs. The The Complete Environmental Regulations Workshop is presented in cities nationwide and covers critical elements of Clean Air Act, Clean Water Act, EPCRA, TSCA, FIFRA, and more.

For hazardous waste generator personnel, EPA requires annual training under RCRA. Meet EPA’s annual training requirement an learn the latest rules for managing your site’s hazardous waste at the interactive, two-day Hazardous/Toxic Waste Management Workshop.

Tags: best, EPA, practices, Recordkeeping and Reporting

Find a Post

Compliance Archives

Lion - Quotes

The instructor was very very informative, helpful, understandable and pleasant. This course answered many questions I had, being new to this industry.

Frances Mona

Shipping Manager

My experience with Lion classes has always been good. Lion Technology always covers the EPA requirements I must follow.

Steven Erlandson

Environmental Coordinator

The instructor had knowledge of regulations and understanding of real-world situations. The presentation style was engaging and fostered a positive atmosphere for information sharing.

Linda Arlen

Safety & Environmental Compliance Officer

The instructor was great, explaining complex topics in terms that were easily understandable and answering questions clearly and thoroughly.

Brittany Holm

Lab Supervisor

My experience with Lion training, both online and in the classroom, is that they are far better organized and provide a better sequential explanation of the material.

Robert Roose

Manager, Dangerous Goods Transportation

The instructor was very engaging and helped less experienced people understand the concepts.

Steve Gall

Safety Leader

The course is well thought out and organized in a way that leads to a clearer understanding of the total training.

David Baily

Hazmat Shipping Professional

The instructor was very dedicated to providing a quality experience. She did her best to make sure students were really comprehending the information.

Stephanie Venn

Inventory Control Specialist

One of the best trainings I have ever received!

Brandon Morfin

EH&S Manager

I like Lion's workshops the best because they really dig into the information you need to have when you leave the workshop.

Tom Bush, Jr.

EHS Manager

Download Our Latest Whitepaper

A guide to developing standard operating procedures, or SOPs, that help you select, manage, and audit your hazmat agents and contractors.

Latest Whitepaper

By submitting your phone number, you agree to receive recurring marketing and training text messages. Consent to receive text messages is not required for any purchases. Text STOP at any time to cancel. Message and data rates may apply. View our Terms & Conditions and Privacy Policy.