United States: The Nickel Report: Environmental Enforcement: Are There Any Trends?

Nearly two years into the current administration, many questions remain regarding the Environmental Protection Agency (EPA) and US Department of Justice's (DOJ) approach to environmental enforcement. EPA and DOJ have both issued various policies that we have covered in past blog posts that provide some level of insight on priorities and procedures, but a better assessment can only be made by looking at cases initiated, referred, resolved or concluded after a trial.

In many respects, this administration is still too young to gauge those numbers because many of the cases concluding now were initiated during the prior administration. In his recent speech to the American Bar Association Section of Environment, Energy, and Resources, Principal Deputy Assistant Attorney General of DOJ's Environment and Natural Resources Division (ENRD) Jeffrey Wood highlighted many of the Division's enforcement accomplishments over the last two years, even while acknowledging the decline in the number of formal enforcement actions initiated by EPA and/or referred to DOJ for civil or criminal prosecution. Wood noted that, even with the decline in the number of overall enforcement actions, ENRD continues to be active and has recovered over $120 million in civil penalties since 2017, which is more than the Division has recovered in twelve of the last twenty years.1 Although it is not clear how many enforcement cases are in the pipeline and how many of those will ultimately be pursued, several recent cases illustrate that EPA and DOJ continue to prioritize enforcement for certain types of violations and against certain industries.

In his remarks, Wood partially attributed the decline in enforcement actions to EPA and ENRD addressing violations of federal law at multiple facilities in the same settlement, rather than multiple settlements for multiple facilities owned by the same company. For instance, in August 2018, DOJ and EPA entered into a settlement agreement with Anchor Glass Container Corporation to resolve allegations that Anchor failed to obtain New Source Review permits, as required by the Clean Air Act (CAA), for major modifications conducted at the company's facilities in six states. Under the agreement, Anchor Glass must pay a $1.1 million civil penalty and implement pollution controls at its various facilities to reduce NOx and SO2 emissions. According to Wood, focusing on actions with multiple facilities allows for "even-handed enforcement that is consistent with a sound interpretation of applicable statutes and regulations."

Wood also noted that ENRD's Environmental Crimes Section has focused on prosecuting criminal environmental cases that also involve fraud. Last year, ENRD prosecutors, working with the IRS and EPA, resolved an investigation of the individual owner of GRC Fuels of Oneonta, New York, for engaging in a conspiracy that generated over $47 million in fraudulent EPA renewable fuel credits and over $12 million in fraudulent tax credits. The defendant was recently sentenced to 63 months in prison for the scheme. In a separate environmental/fraud case, ENRD secured a guilty plea this past September against a seafood processor that falsely labeled millions of dollars' worth of foreign crab meat. ENRD determined that Casey's Seafood Inc. purchased crab meat from other countries, commingled it with domestic crabs, and repackaged the crab in its own containers, which were labeled "Product of USA." The individual owner now faces up to five years in prison and a fine equal to half the gross gain of the fraud. The sentence in that case will be based, in part, on the $4.3 million wholesale value of the falsely labeled crab meat.

EPA and DOJ continue to focus on and address large-scale environmental accidents. In February 2017, the federal government obtained a $9.5 million settlement against Wood Group PSN Inc. for activities related to a 2012 explosion of an offshore oil platform in the Gulf of Mexico. Wood Group admitted its employees negligently attempted to weld piping that caused an oil tank to ignite, resulting in a series of additional explosions. Three workers were killed in the explosion while others were seriously burned and physically injured. Less than six months later, the owner of the facility, Black Elk Energy Offshore Operations, LLC was also sentenced on eight felony violations of the Outer Continental Shelf Lands Act and one misdemeanor count of violating the Clean Water Act for its actions contributing to the explosion .

Punishing repeat offenders also continues to be a focal point for ENRD, as outlined in DOJ's March 2018 memorandum titled "Enforcement Principles and Priorities." In the memo, Wood stated that criminal enforcement should be undertaken for "repetitive significant violations." Consistent with this mandate, the Environmental Crimes Section pursued criminal charges against a German shipping company with a history of violating environmental laws. Earlier this month, Mineralien Schiffahrt Spedition und Transport GmbH (MST) was sentenced to pay a $3.2 million criminal fine after pleading guilty to obstruction of justice and maintaining false official records. MST admitted to falsifying log books to hide intentional discharges of waste over a nine-month period while operating near Maine. The company was previously convicted for similar violations in 2016 in the US District Court for the District of Minnesota. ENRD Assistant Attorney General Jeffrey Clark commented, "This company is a repeat offender, which makes plain that it has shown contempt for the rule of law."

In addition to certain types of violations, EPA and DOJ have long pursued enforcement against actors in particular industries. For example, EPA has been paying very close attention to the after-market installation of "defeat devices," used to modify emission control devices in vehicle engines, particularly in offroad vehicles. As a result of numerous EPA enforcement actions, some of the largest manufacturers of defeat devices have agreed to pay penalties and stop the sale and subsequent installation of the devices. DOJ also recently concluded its investigation of Hyundai Construction Equipment Americas (a subsidiary of Hyundai Heavy Industries Co. Ltd.), which was sentenced to pay nearly a $2 million dollar criminal fine for conspiring to defraud the US government and to violate the CAA after pleading guilty to attempting to illegally import diesel engines for heavy equipment that did not comply with CAA regulations. Other actors in industries like oil and gas or chemical manufacturing also continue to be thoroughly scrutinized.

Regardless of the specific industry, recognizable companies are always at risk for being subject to high-profile enforcement actions. For example, EPA, DOJ and the State of Rhode Island reached a $100 million settlement with two subsidiaries of Stanley Black & Decker Inc. to clean up contaminated sediment and soil in North Providence and Johnston, Rhode Island, this past summer. Under the agreement, the companies must reimburse EPA $42 million in past costs incurred and for future costs incurred for overseeing the remedial work. Despite the large settlement, a spokesperson for the Fortune 500 company stated, "resolving this matter is consistent with our recent investments of the company's time, people, products and money to create a more sustainable world."

Even with the decline of formal federal enforcement actions, regulated parties must still be mindful of informal enforcement strategies and state-level regulatory efforts. At the federal level, EPA has expressed a desire to implement tools other than initiating enforcement proceedings to ensure compliance. One particularly powerful tool at the Agency's disposal is the formal information request, which EPA uses to determine whether a violation has occurred and to ascertain the necessary measures to bring facilities into compliance. Last month, Rosemarie Kelley, EPA's Director of the Office of Enforcement, released a guidance memo laying out the best practices for compliance and enforcement-related information requests. Kelley highlighted the Agency's broad authority to investigate whether entities are complying with environmental laws. The memo states that gathering information through informal means can be an effective and expeditious method to obtain information but also asserts that formal information requests may avoid potential confusion or delays, enhance the quality of evidence that is collected and ensure appropriate management control over the information requested from the facility. Given these realities, Kelley states EPA should weigh these factors on a case-by-case basis when deciding whether or not a formal information request is appropriate. More information on Kelley's memo can be found in "New EPA Guidance Aims to Reduce Burdens, Increase Collaboration of Information Collection Process."

Despite the uncertain nature of the future of environmental enforcement, it remains clear that DOJ and EPA continue to focus on violations at multiple facilities, repeat offenders and prosecuting certain types of violations and certain industries and parties. Moreover, the decrease in overall federal enforcement actions does not necessarily mean regulated entities are less likely to be subject to informal compliance measures or regulatory efforts by individual states. Therefore, regardless of an individual's particular situation or status, parties should remain vigilant to ensure they are in compliance with all relevant environmental laws and regulations.


1 This amount does not include the $1.45 billion civil penalty levied in a single Clean Air Act case.

Alexander Woo is a Law Clerk in the Washington, DC, office of Hunton Andrews Kurth LLP.

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