The U.S. Department of Justice’s (“DOJ”) Environmental and Natural Resources Division (“ENRD”) Chief, Jeffrey Bossert Clark, has issued a memorandum prohibiting the use of Supplemental Environmental Projects (“SEPs”) in civil environmental enforcement actions unless specifically authorized by Congress.

The nearly 20-page memorandum lays out Mr. Clark’s justification for his position that payments to third parties in ENRD civil settlements are inconsistent with law, namely the Miscellaneous Receipts Act. The Act requires that all monies received for the use of the United States be deposited in the U.S. Treasury. The memorandum claims that EPA’s 2015 SEP Policy effectively includes a “conversion rate” for SEPs into civil penalties. Mr. Clark conducts a detailed analysis in the memorandum of the Attorney General’s authority to settle matters and ultimately concludes that ENRD cannot agree to remedies in settlements not specified in the statutes governing the alleged violations that have no direct and specific relation to the underlying violation. Nor, he concludes, can ENRD trade monetary penalties for the funding of causes it deems worthy. The memorandum then analyzes the evolution of the use of SEPs from the early 1980s, to the 1991 EPA SEP Policy to the 2015 SEP Policy, finding that while EPA’s policy continued to evolve to address clashes with the Miscellaneous Receipts Act, such evolution has been insufficient to address the conflict.

The new memorandum supersedes DOJ’s previous January 9, 2018 policy regarding third party settlements and appears to be immediately effective without regard to potential impacts on ongoing settlement negotiations. Mr. Clark claims that while this new policy may disrupt existing cases including those in the final stages of negotiation, his earlier August 21, 2019 memorandum prohibiting SEPs in settlements with state and local governments effectively put EPA and ENRD on notice of the legal issues surrounding the use of SEPs. In a final footnote to the memorandum, Mr. Clark notes that he will next embark on a project to evaluate the use of SEP-like devices in criminal matters.

For more information regarding the memorandum and ENRD enforcement, please contact Brooks Smith or Patrick Fanning.