On March 12, 2020, the head of the Environment & Natural Resources Division of the U.S. Department of Justice (“DOJ”) announced that the DOJ will no longer allow the use of supplemental environmental projects (“SEPs”) to offset the payment of civil penalties in the settlement of enforcement actions brought by the DOJ on behalf of the U.S. EPA.

SEPs have long been utilized in the settlement of governmental enforcement actions—specifically, settling defendants have agreed to fund projects that provide environmental and community benefits to areas and natural resources impacted by the alleged violation of environmental laws in exchange for a reduction in the amount of civil penalties to be paid by the settling defendant to the U.S. Treasury.

Both EPA and industry have favored SEPs as a settlement option because SEPs allowed settlement funds to be put to local use and have an environmental benefit.  However, the DOJ has now concluded that SEPs in DOJ enforcement actions violate the “spirt and the letter” of the federal Miscellaneous Receipts Act.

DOJ’s new prohibition on SEPs will not apply to past DOJ settlements, enforcement actions by state environmental agencies, or to citizen suits brought by non-governmental entities. For more information or questions about defending and resolving enforcement actions by federal or state environmental agencies, please contact Andy Thompson, Steve O’Day, or Phillip Hoover.