In the midst of countless other struggles, residential home builders must now contend with the EPA and its seemingly new agenda to pursue stormwater management violations. Specifically, the Federal Register shows a new focus by the EPA on Clean Water Act violations, which have cost several large scale residential home builders millions of dollars in penalties to the Federal Government.
The Clean Water Act establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters. Under the Act, the EPA has implemented pollution control programs such as setting effluent limits on industrial discharges and requiring states to set water quality standards for all contaminants in surface waters. The discharge of a pollutant from a point source is unlawful unless in compliance with permit requirements.
The Federal Register of June 24th (http://www.usdoj.gov/enrd/Consent_Decrees.html) contained notices of proposed settlements with four major developers relating to stormwater violations at construction sites. Proposed consent decrees resolving Clean Water Act violations were filed in the Eastern District of Virginia against Centex Homes, KB Home, M.D.C. Holdings and Pulte Homes1. In each of the subject consent decrees, the United States is a plaintiff, as are the states of Colorado, Maryland and the Commonwealth of Virginia. Missouri, Nevada, Tennessee and Utah joined some but not all four proceedings. Consent Decree Signatories also include the Regional Administrator for EPA Region III since the forum state is within the Region. In short, a consent decree is an agreement, approved by the court, pursuant to which the defendant, in this case the developer, ceases activities alleged by the government to be illegal in exchange for the government dropping its action. Often the consent decree sets forth guidelines which outline the steps that must be taken by a defendant to correct any alleged violation.
In the present cases, the consent decrees detail extensive builders compliance programs that must be followed and contain stipulated penalties for failure to comply. Further, each defendant must submit compliance reports that are national in scope and certified by a corporate executive. Pursuant to the consent decrees, each developer agreed to implement a company-wide compliance program that extended beyond current regulatory requirements. Otherwise stated, in an effort to avoid the cost of further litigation, each company opted to incur the additional cost of going above and beyond what is actually required pursuant to the existing regulations. Each company was also required to pay an additional sum to resolve the disputes. Specifically, Centex, KB Home and M.D.C Holdings agreed to pay civil penalties of $1,485,000, $1,185,000 and $795,000, respectively. Pulte Homes agreed to pay a civil penalty of $877,000 and to perform a supplemental environmental project at a minimum cost of $608,000. Most of the penalty paid by the developers in these cases will go to the United States.
It is important to note that the consent decrees contain "No Admission" clauses and do not detail alleged violations. Instead, the consent decrees act as a vehicle to avoid "wrongdoing" designations. Nevertheless, each consent decree avers that the respective defendant violated the Clean Water Act and various state laws principally related to stormwater discharges, as well as land disturbance.
Each consent decree also contains an appendix which lists sites across the nation as to which plaintiffs have knowledge of violations or which the builder owned or operated during the period between September 30, 2007 and March 31, 2008. All sites listed receive covenants not to sue for violations occurring through the date of the consent decree. The consent decrees terminate three years after the date of entry.
The consent decrees are the result of the EPA's Stormwater Initiative. Developers should be mindful of stormwater issues and related regulations that pertain to any development. As the above cases show, it will be relatively simple for the EPA or a state to adapt the template used in the consent decrees discussed above to enforce alleged violations committed by other developers across the country.
Footnote
1. U.S. and States of Colorado, Maryland, Missouri,
Nevada, Tennessee & The Commonwealth of Virginia v. Centex
Homes, a Nevada General Partnership.
U.S. and States of Colorado, Maryland, Missouri, Nevada, Tennessee
& The Commonwealth of Virginia v. KB Home.
U.S. and States of Colorado, Maryland, Missouri, Nevada, Utah &
The Commonwealth of Virginia v. M.D.C. Holdings, Inc., et
al.
U.S. and States of Colorado, Maryland, Missouri, Nevada,
Tennessee & The Commonwealth of Virginia v. Pulte Homes,
Inc.
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