Environmental Enforcement
EPA Needs to Improve the Accuracy and Transparency of Measures Used to Report on Program Effectiveness Gao ID: GAO-08-1111R September 18, 2008As part of its mission to protect human health and the environment, the Environmental Protection Agency's (EPA) enforcement office maintains civil and criminal enforcement programs to help enforce the requirements of major federal environmental laws such as the Clean Air Act and the Clean Water Act. EPA's civil and criminal enforcement programs work with the Department of Justice (DOJ), and in some cases states, to take legal actions to bring polluters into compliance with federal laws. While civil enforcement actions require polluters to pay penalties and take other corrective actions, criminal enforcement actions also may include imprisonment. EPA's enforcement office sets national priorities to focus resources on significant environmental risks and non-compliance patterns; prepares nationally significant civil and criminal cases for legal action by DOJ; uses 10 regional offices to implement civil enforcement actions on a day-to-day basis; and pursues criminal violations of environmental laws through its criminal enforcement office. The agency exercises its authority to independently pursue some violators through administrative proceedings--civil administrative actions--and to refer significant matters to DOJ when it believes cases need to be filed in federal court as civil judicial actions. DOJ is responsible for prosecuting and settling civil judicial and criminal enforcement cases. EPA relies on a variety of measures to assess and report on the effectiveness of its civil and criminal enforcement programs. For example, EPA relies on assessed penalties that result from enforcement efforts among its long-standing measurable accomplishments. The agency uses its discretion to estimate the appropriate penalty amount based on individual case circumstances. EPA has developed penalty policies as guidance for determining appropriate penalties in civil administrative cases and referring civil judicial cases. The policies are based on environmental statutes and have an important goal of deterring potential polluters from violating environmental laws and regulations. The purpose of EPA's penalties is to eliminate the economic benefit a violator gained from noncompliance and to reflect the gravity of the alleged harm to the environment or public health. Like other federal agencies, EPA has established results-oriented goals and performance measures. Two of the major performance measures for civil enforcement, according to EPA, are (1) the value of injunctive relief--the monetary value of future investments necessary for an alleged violator to come into compliance, and (2) pollution reduction--the pounds of pollution to be reduced, treated, or eliminated as a result of an enforcement action. EPA told us these two measures, as well as penalties, should be considered when assessing the overall impact of its enforcement actions. EPA relies on these measures, among others, in pursuing its national enforcement priorities and overall strategy of fewer, but higher impact, cases. Unless these measures are meaningful, Congress and the public will not be able to determine the effectiveness of the programs. Therefore, it is important to understand how they are determined and the extent to which they accurately reflect EPA's accomplishments. In this context, we agreed to report on (1) amounts of civil and criminal penalties assessed in recent years and how EPA calculates and reports on these outcomes, (2) the value of injunctive relief and amounts of pollution reduction and how EPA calculates and reports on these outcomes, and (3) factors that influence EPA's process in achieving enforcement outcomes. This report recommends steps that EPA should take to improve the transparency and accuracy of its reports to Congress and the public when reporting on the effectiveness of its enforcement programs.
Total penalties assessed by EPA, when adjusted for inflation, declined from $240.6 million to $137.7 million between fiscal years 1998 and 2007. We identified three shortcomings in how EPA calculates and reports penalty information to Congress and the public. Specifically, EPA is: (1) overstating the impact of the enforcement programs by reporting penalties assessed against violators rather than actual penalties received by the U.S. Treasury; (2) reducing the precision of trend analyses by reporting nominal rather than inflation-adjusted penalties, thereby understating past accomplishments; and (3) understating the influence of its enforcement programs by excluding the portion of penalties awarded to states in federal cases. In contrast to penalties, we found that both the value of estimated injunctive relief and the amount of pollution reduction reported by EPA generally increased. The estimated value of injunctive relief increased from $4.4 billion in fiscal year 1999 to $10.9 billion in fiscal year 2007, in 2008 dollars. In addition, estimated pollution reduction commitments amounted to 714 million pounds in fiscal year 2000 and increased to 890 million pounds in fiscal year 2007. However, we identified several shortcomings in how EPA calculates and reports this information. We found that generally EPA's reports do not clearly disclose the following: (1) Annual amounts of injunctive relief and pollution reduction have not yet been achieved. They are based on estimates of relief and reductions to be realized when violators come into compliance. (2) Estimates of the value of injunctive relief are based on case-by-case analyses by EPA's technical experts, and in some cases the estimates include information provided by the alleged violator. (3) Pollution reduction estimates are understated because the agency calculates pollution reduction for only 1 year at the anticipated time of full compliance, though reductions may occur for many years into the future. Finally, we identified factors that affect EPA's process in achieving penalties, injunctive relief, and pollution reduction. For example, DOJ, not EPA, is primarily responsible for prosecuting and settling civil judicial and criminal enforcement cases. Therefore, EPA does not have ultimate control of enforcement outcomes.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-1111R, Environmental Enforcement: EPA Needs to Improve the Accuracy and Transparency of Measures Used to Report on Program Effectiveness
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September 18, 2008:
The Honorable John D. Dingell:
Chairman:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Bart Stupak:
Chairman:
Subcommittee on Oversight and Investigations: Committee on Energy and
Commerce:
House of Representatives:
Subject: Environmental Enforcement: EPA Needs to Improve the Accuracy
and:
Transparency of Measures Used to Report on Program Effectiveness:
As part of its mission to protect human health and the environment, the
Environmental Protection Agency's (EPA) enforcement office maintains
civil and criminal enforcement programs to help enforce the
requirements of major federal environmental laws such as the Clean Air
Act and the Clean Water Act. EPA's civil and criminal enforcement
programs work with the Department of Justice (DOJ), and in some cases
states, to take legal actions to bring polluters into compliance with
federal laws. While civil enforcement actions require polluters to pay
penalties and take other corrective actions, criminal enforcement
actions also may include imprisonment. EPA's enforcement office sets
national priorities to focus resources on significant environmental
risks and non-compliance patterns; prepares nationally significant
civil and criminal cases for legal action by DOJ; uses 10 regional
offices to implement civil enforcement actions on a day-to-day basis;
and pursues criminal violations of environmental laws through its
criminal enforcement office. The agency exercises its authority to
independently pursue some violators through administrative proceedings--
civil administrative actions--and to refer significant matters to DOJ
when it believes cases need to be filed in federal court as civil
judicial actions.[Footnote 1] DOJ is responsible for prosecuting and
settling civil judicial and criminal enforcement cases.
EPA relies on a variety of measures to assess and report on the
effectiveness of its civil and criminal enforcement programs. For
example, EPA relies on assessed penalties that result from enforcement
efforts among its long-standing measurable accomplishments. The agency
uses its discretion to estimate the appropriate penalty amount based on
individual case circumstances. EPA has developed penalty policies as
guidance for determining appropriate penalties in civil administrative
cases and referring civil judicial cases. The policies are based on
environmental statutes and have an important goal of deterring
potential polluters from violating environmental laws and regulations.
The purpose of EPA's penalties is to eliminate the economic benefit a
violator gained from noncompliance and to reflect the gravity of the
alleged harm to the environment or public health.[Footnote 2]
Like other federal agencies, EPA has established results-oriented goals
and performance measures. Two of the major performance measures for
civil enforcement, according to EPA, are (1) the value of injunctive
relief--the monetary value of future investments necessary for an
alleged violator to come into compliance, and (2) pollution reduction-
-the pounds of pollution to be reduced, treated, or eliminated as a
result of an enforcement action.[Footnote 3] EPA told us these two
measures, as well as penalties, should be considered when assessing the
overall impact of its enforcement actions. EPA relies on these
measures, among others, in pursuing its national enforcement priorities
and overall strategy of fewer, but higher impact, cases. Unless these
measures are meaningful, Congress and the public will not be able to
determine the effectiveness of the programs. Therefore, it is important
to understand how they are determined and the extent to which they
accurately reflect EPA's accomplishments.
In this context, we agreed to report on (1) amounts of civil and
criminal penalties assessed in recent years and how EPA calculates and
reports on these outcomes, (2) the value of injunctive relief and
amounts of pollution reduction and how EPA calculates and reports on
these outcomes, and (3) factors that influence EPA's process in
achieving enforcement outcomes. This report recommends steps that EPA
should take to improve the transparency and accuracy of its reports to
Congress and the public when reporting on the effectiveness of its
enforcement programs.
In conducting our work, we reviewed agency documents such as guidance
and policy statements as well as reports to Congress and the public. In
addition, we reviewed EPA information associated with the case that the
agency identified as resulting in the largest value of injunctive
relief in its history. We also met with EPA headquarters and regional
officials, DOJ officials, and non-profit groups concerned with
environmental enforcement. We reviewed EPA reports of monetary
accomplishments presented in nominal dollars and adjusted these amounts
for inflation when determining the extent of trends in the data through
statistical analysis. We primarily focused our penalty analysis on
fiscal years 1998 though 2007 since EPA officials said they were
confident in the data within most of the period and in our judgment the
most recent 10-year period appeared to be a reasonable time frame.
Further, we were able to perform some analysis of the data reliability
for most of those years by comparing amounts in EPA's database
available only to government officials and amounts reported to the
public. We conducted this performance audit in accordance with
generally accepted government auditing standards from January 2008
through September 2008. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Results in Brief:
Total penalties assessed by EPA, when adjusted for inflation, declined
from $240.6 million to $137.7 million between fiscal years 1998 and
2007. We identified three shortcomings in how EPA calculates and
reports penalty information to Congress and the public. Specifically,
EPA is:
* Overstating the impact of the enforcement programs by reporting
penalties assessed against violators rather than actual penalties
received by the U.S. Treasury.
* Reducing the precision of trend analyses by reporting nominal rather
than inflation-adjusted penalties, thereby understating past
accomplishments.
* Understating the influence of its enforcement programs by excluding
the portion of penalties awarded to states in federal cases.
In contrast to penalties, we found that both the value of estimated
injunctive relief and the amount of pollution reduction reported by EPA
generally increased. The estimated value of injunctive relief increased
from $4.4 billion in fiscal year 1999 to $10.9 billion in fiscal year
2007, in 2008 dollars. In addition, estimated pollution reduction
commitments amounted to 714 million pounds in fiscal year 2000 and
increased to 890 million pounds in fiscal year 2007. However, we
identified several shortcomings in how EPA calculates and reports this
information. We found that generally EPA's reports do not clearly
disclose the following:
* Annual amounts of injunctive relief and pollution reduction have not
yet been achieved. They are based on estimates of relief and reductions
to be realized when violators come into compliance.
* Estimates of the value of injunctive relief are based on case-by-case
analyses by EPA's technical experts, and in some cases the estimates
include information provided by the alleged violator.
* Pollution reduction estimates are understated because the agency
calculates pollution reduction for only 1 year at the anticipated time
of full compliance, though reductions may occur for many years into the
future.
Finally, we identified factors that affect EPA's process in achieving
penalties, injunctive relief, and pollution reduction. For example,
DOJ, not EPA, is primarily responsible for prosecuting and settling
civil judicial and criminal enforcement cases. Therefore, EPA does not
have ultimate control of enforcement outcomes.
We are recommending that the EPA Administrator take a number of actions
to disclose more information when reporting penalties and estimates of
the value of injunctive relief and pollution reduction.
While Assessed Penalties Declined between Fiscal Years 1998 and 2007,
There Are Three Shortcomings in How EPA Calculates and Reports
Penalties:
From fiscal years 1998 to 2007 total inflation-adjusted penalties
declined when excluding major default judgments,[Footnote 4] and we
identified three shortcomings in how EPA calculates and reports on
these outcomes. Total penalties reported by EPA are the sum of assessed
penalties resulting from EPA's civil administrative, civil judicial,
and criminal enforcement actions. When adjusted for inflation, total
assessed penalties were approximately $240.6 million in fiscal year
1998 and $137.7 million in 2007. Civil judicial penalties are the
largest source of assessed penalties, accounting for about 45 percent
of the total (see table 1).
Table 1: Assessed Penalties Reported by EPA, Adjusted for Inflation:
Constant 2008 dollars in millions.
Fiscal Year: 1998;
Civil Judicial: $82.9;
Administrative: $36.6;
Criminal: $121.1;
Total: $240.6.
Fiscal Year: 1999;
Civil Judicial: 180.8;
Administrative: 32.7;
Criminal: 78.8;
Total: 292.3.
Fiscal Year: 2000;
Civil Judicial: 68.1;
Administrative: 36.3;
Criminal: 151.3;
Total: 255.7.
Fiscal Year: 2001;
Civil Judicial: 122.2;
Administrative: 28.6;
Criminal: 113.9;
Total: 264.7.
Fiscal Year: 2002;
Civil Judicial: 75.6;
Administrative: 30.6;
Criminal: 73.7;
Total: 180.0.
Fiscal Year: 2003;
Civil Judicial: 83.6;
Administrative: 28.2;
Criminal: 82.2;
Total: 194.0.
Fiscal Year: 2004;
Civil Judicial: 137.1;
Administrative: 31.3;
Criminal: 53.1;
Total: 221.5.
Fiscal Year: 2005;
Civil Judicial: 139.3;
Administrative: 29.3;
Criminal: 109.5;
Total: 278.1.
Fiscal Year: 2006;
Civil Judicial: 86.4;
Administrative: 44.4;
Criminal: 45.4;
Total: 176.2.
Fiscal Year: 2007;
Civil Judicial: 41.0;
Administrative: 31.7;
Criminal: 65.0;
Total: 137.7.
Fiscal Year: Total;
Civil Judicial: $1,017.0;
Administrative: $329.6;
Criminal: $894.1;
Total: $2,240.7.
Fiscal Year: Percent of total;
Civil Judicial: 45.4%;
Administrative: 14.7%;
Criminal: 39.9%;
Total: 100.0%.
Source: GAO analysis based on EPA data.
Note: Numbers may not add due to rounding.
[End of table]
While these total inflation-adjusted penalties tended to decline during
this period, the trend exhibits only marginal statistical
significance.[Footnote 5] The data, according to EPA, include penalties
for three major cases totaling $227.2 million in 2008 dollars that EPA
does not expect the federal government to collect due to default
judgments, which represent uncontested cases where courts awarded the
statutory maximum penalty requested by EPA and DOJ. Figure 1 highlights
the three penalties in fiscal years 2004 through 2006, ranging from
$33.8 million to $104.4 million in 2008 dollars, and illustrates the
trend for this period.
Figure 1: Total Inflation-Adjusted Assessed Penalties, Fiscal Years
1998 through 2007, Default Cases Identified:
This figure is a combination bar graph showing total inflation-adjusted
assessed penalties, fiscal years 1998 though 2007. The X axis
represents the fiscal year, and the Y axis represents the total
penalties (constant 2008 dollars in millions). One bar represents the
default, and the other represents the non-default.
[See PDF for image]
Source: GAO analysis based on EPA data.
[End of figure]
When excluding these default judgments, total inflation-adjusted
penalties exhibit a statistically significant downward trend between
fiscal years 1998 and 2007 (see fig. 2).
Figure 2: Total Inflation-Adjusted Assessed Penalties, Fiscal Years
1998 through 2007, Less Default Cases:
This figure is a bar graph showing total inflation-adjusted assessed
penalties, fiscal year 1998 through 2007, less default cases.
[See PDF for image]
Source: GAO analysis based on EPA data.
[End of figure]
Excluding certain years or choosing different timeframes for analysis
could remove the appearance of a downward trend. While our analysis
focused on fiscal years 1998 to 2007, when reviewing EPA's reported
data since 1974, we recognized that total penalties increased until the
late 1990s and stopped rising thereafter (see enclosure I).
We identified three problems in how EPA calculates and reports
penalties that may inhibit the accuracy and transparency of EPA's
reporting:
* EPA does not report the actual amounts of penalties received by the
U.S. Treasury. This may overstate the impact of the enforcement
programs by reflecting penalties that have not, or will not, be
collected. For example, EPA identified three major civil judicial cases
in recent years that generated significant amounts of assessed
penalties through default judgments. These penalties are unlikely to
ever be collected, and the removal of these penalties results in a
significant reduction in the overall level of penalties reported by
EPA.
* When reporting penalties over time, EPA presents nominal amounts that
are not adjusted for inflation and, therefore, understate past
accomplishments. According to OMB, economic analyses are often most
readily accomplished using real or constant-dollar values to measure
benefits and costs in units of stable purchasing power. Therefore, to
evaluate real trends in penalties, it is necessary to remove the effect
of price changes in the reported nominal penalties by adjusting for
inflation.
* The penalty amounts EPA reports do not include portions of penalties
awarded to states in federal cases in which states also participated.
EPA indicated that states also participate in many federally-led
enforcement cases that result in penalties paid to both EPA and the
states. However, EPA reports only the amount of penalties assessed for
payment to the federal government, thereby understating the effects of
its enforcement efforts on defendants. For example, in 1999 EPA and the
State of California jointly settled an enforcement case with a major
commercial diesel engine manufacturer for alleged violations of the
Clean Air Act. The company agreed to pay a total of $25 million in
penalties, of which $18,750,000 was paid to the federal government and
$6,250,000 was paid to the State of California. However, only EPA's
share of $18,750,000 was included in its reporting of penalties.
Shortcomings in How EPA Reports Measures of Injunctive Relief and
Pollution Reduction May Inhibit Accuracy and Transparency of Reporting:
The value of estimated injunctive relief, when adjusted for inflation,
has increased from $4.4 billion in fiscal year 1999--the earliest
period for which EPA has reported the measure--to $10.9 billion in
fiscal year 2007 (see fig. 3).
Figure 3: Total Inflation-Adjusted Value of Estimated Injunctive
Relief, Fiscal Years 1999 through 2007:
This figure is a bar graph showing total inflation-adjusted value of
estimated injunctive relief, fiscal years 1999 through 2007. The X axis
represents the fiscal year, and the Y axis represents the total value
of injunctive relief (constant 2008 dollars in millions).
[See PDF for image]
Source: GAO analysis based on EPA data.
[End of figure]
Estimated pollutant reduction commitments amounted to 714 million
pounds in fiscal year 2000, peaked at 1.1 billion pounds in fiscal year
2005 and decreased to 890 million pounds in fiscal years 2006 and 2007
(see fig. 4).
Figure 4: Total Estimated Pounds of Pollution To Be Reduced or Treated,
Fiscal Years 2000 through 2007:
This figure is a bar graph showing total estimated pounds of pollution
to be reduced or treated, fiscal years 2000 through 2007. The X axis
represents the fiscal year, and the Y axis represents the pounds of
pollution (in millions).
[See PDF for image]
Source: EPA.
Note: The data from fiscal years 2000 to 2002 are based on EPA's
Performance and Accountability Report for Fiscal Year 2007, however
EPA's enforcement office reports the data from fiscal years 2003 to
2007, citing improved data quality assurance starting in fiscal year
2003. We cannot be certain of the extent that the revised methodology
affected the reported levels of pollution reduction after 2003 compared
to prior years.
[End of figure]
In reviewing the value of injunctive relief and pollution reduction
amounts reported by EPA, we identified several shortcomings in how EPA
calculates and reports these outcomes that may inhibit the accuracy and
transparency of EPA's reporting. The following shortcomings are
manifested in EPA reports to Congress and the public, such as (1)
annual accomplishments reports on enforcement performance and
accountability, and (2) reports comparing EPA's goals and
accomplishments under the Government Performance and Results
Act:[Footnote 6]
* EPA calculates estimated rather than actual amounts of pollution
reduction based on a 1-year period in the future at the anticipated
time of full compliance, and the value of injunctive relief based on
the monetary value of an alleged violator's estimated future
investments to come into compliance. However, the agency's reports do
not always make it clear that these amounts have not been achieved. For
example, EPA's fiscal year 2007 accomplishment report on enforcement
referred to the largest civil enforcement actions for just three
priority areas alone that "—achieved more than 400 million pounds of
pollutant reductions and more than $7 billion in injunctive relief and
supplemental environmental projects."[Footnote 7] However, for the most
part, those amounts were estimates of future anticipated results, such
as an estimated defendant's future costs over several years, and do not
represent actual accomplishments. Similarly, EPA's annual performance
and accountability report, referring to total pollution reduction,
states "EPA has reduced, treated or eliminated 890 million pounds of
pollution through enforcement actions in fiscal year 2007." However,
not all of those pollution reductions actually occurred in 2007.
* EPA does not disclose in its estimates of the value of injunctive
relief how the estimates are derived. In estimating the value of
injunctive relief, EPA technical staff rely on their professional
judgment without any agency guidance or systematic processes, and in
cases where they are available they rely on estimates of alleged
violators. For example, in one major settlement EPA estimated that the
value of injunctive relief would total $4.6 billion, the largest
injunctive relief amount in the agency's history. The purpose of the
injunctive relief in this case is to reduce future air pollutants from
several coal-fired generating plants of a power company.[Footnote 8]
EPA officials told us they based the estimated value on advice from
their technical experts and examination primarily of a 3-page
document[Footnote 9] the company provided through discovery.[Footnote
10] Furthermore, EPA officials said defendants are not always compelled
to provide information that the agency could use to estimate future
costs of compliance.
* EPA's estimates of pollution reduction may be understated because EPA
reports only 1-year of estimated pollution reduction at the anticipated
time of full compliance for a given case, although reductions may occur
for many years into the future. In addition, EPA's estimates do not
account for incremental reductions in the years leading up to full
compliance.
* The estimated pounds of pollution reduced, treated, or eliminated
does not reflect the varying toxicity of the types of pollution
represented by the measure. For example, EPA officials said that the
amount of mercury to be reduced in the atmosphere as a result of
enforcement efforts may be a small number of pounds when compared to
other pollutants, but mercury is a more toxic substance than many other
pollutants that are included in the measure. EPA officials said they
recognize this issue and they are working to address it.
Other Factors Influence EPA's Process for Achieving Enforcement
Outcomes:
EPA's process for achieving annual results in terms of penalties,
estimated value of injunctive relief, and amounts of pollution
reduction is influenced by many other factors. While the following list
is not comprehensive, it describes some of the significant aspects of
the legal and policy environment that could affect the outcomes:
* The Department of Justice (DOJ), not EPA, is primarily responsible
for prosecuting and settling civil judicial and criminal enforcement
cases. The Attorney General is charged by statute with conducting and
supervising litigation to which the United States, or its departments
or agencies, is a party, including cases referred by EPA.[Footnote 11]
Once cases are referred, EPA officials stated that they continue to
participate in all civil and many criminal cases. For each case, DOJ
must weigh the litigation risks that affect the likely outcome at trial
in making its decisions on whether or how to settle. Consequently, DOJ
officials said EPA's proposed penalty estimates do not govern DOJ's
decisions. DOJ, like EPA, considers applying penalties as described in
the relevant environmental statutes. EPA and DOJ officials say they
cooperate and reach mutually agreeable decisions on civil judicial
cases. For example, DOJ officials said both agencies sign the
settlement agreements. However, EPA does not have ultimate control over
the enforcement outcomes.
* Executive Order 12988 directs DOJ, whenever feasible, to seek
settlements before pursuing civil judicial actions against alleged
violators. According to DOJ officials, the Executive Order encourages
negotiations prior to the onset of litigation and, thereby, improves
the ability of the United States to achieve favorable enforcement
outcomes.
* Unclear legal standards, as illustrated in the following examples,
have hindered EPA's enforcement efforts. Agency officials told us a
2006 Supreme Court decision, Rapanos v. United States, generally made
it more difficult for EPA to take enforcement actions because the legal
standards for determining what is a "water of the United States" were
not clear. This uncertainty required EPA to gather significantly more
evidence to establish Clean Water Act jurisdiction in those cases where
alleged violators discharged to waters of the United States. In a March
2008 memorandum, EPA's Assistant Administrator for Enforcement and
Compliance Assurance said the Court decision and EPA's resulting
guidance "negatively affected approximately 500 enforcement cases." For
example, the official said EPA's regions decided not to pursue formal
enforcement in about 300 instances where there were potential
violations because of jurisdictional uncertainty.
* A rule change can affect the process for achieving enforcement
outcomes. For example, according to an EPA Office of the Inspector
General (OIG) report in 2004, a New Source Review rule change finalized
in October 2003 "seriously hampered (EPA) settlement activities,
existing enforcement cases, and the development of future cases" due
largely to EPA's revised definition of routine maintenance.[Footnote
12] Under the revised rule the definition of routine maintenance
allowed utilities to undertake projects representing a greater
percentage of the cost of replacing a power unit--up to 20 percent--
without being subject to the New Source Review requirements. According
to the OIG, while EPA officials said the rule change was not
retroactive, the change was so dramatic, that even though a court in
December 2003 issued a stay delaying implementation of the rule, EPA's
underlying legal arguments may have been weakened.[Footnote 13] For
example, three utilities said enforcement under a court-imposed remedy
should be heavily reduced because their actions would not be a
violation under the new rule. Furthermore, at the time the IG report
was issued in September 2004, no new enforcement actions had been taken
against coal-fired utilities alleged to have violated the old rule
because of the new rule's impact on EPA's leverage in settlements or
court remedies, according to the OIG. The decline in cases between 2002
through 2003 is also, according to EPA, due to the agency not
initiating coal-fired power plant cases during the proposal and
promulgation of the new rule. EPA officials said they initiated or
concluded eight cases under the old rule since 2003.
Conclusions:
Pursuing administrative, civil, or criminal action against a suspected
polluter is a complex undertaking that often lasts years. While EPA's
reported outcomes of enforcement efforts help inform Congress, the
public, and EPA management about EPA's progress in prosecuting those
who violate federal environmental laws, certain aspects of how EPA
reports the data may undermine the transparency and accuracy of its
reported outcomes and cause EPA to both over and under-report its
enforcement achievements. Taken as a whole, these various shortcomings
hamper the transparency and accuracy of EPA's reporting and create the
potential for Congress and the public to misunderstand the agency's
enforcement outcomes.
Recommendations for Executive Action:
To improve the transparency and accuracy of its reports to Congress and
the public when reporting on the effectiveness of the enforcement
programs, we recommend that the EPA Administrator take the following
six actions:
* When reporting the amount and nature of penalties stemming from
enforcement actions, disclose (1) penalties in a manner that clearly
indicates that they are assessed rather than collected penalties, (2)
penalties collected as well as assessed by the federal government, (3)
time series data that are adjusted for inflation, and (4) states' share
of penalties in federal cases.
* When reporting other major outcome measures of civil enforcement
efforts, clearly disclose (1) that the monetary value of injunctive
relief is based on estimates of future amounts that defendants expect
to spend to achieve outcomes, as agreed in consent decrees, and (2)
that the pounds of pollution reduced represent the anticipated
reduction for a 1-year period at the anticipated time of compliance.
Agency Comments:
We provided a draft of this report to the EPA Administrator and the
Attorney General of the United States for review and comment. EPA and
DOJ generally agreed with the findings, conclusions, and
recommendations in the report and provided technical comments that were
incorporated, as appropriate. Specifically, EPA agreed with five of the
six recommendations and stated it would consider the recommendation to
report collected penalties. EPA's comments are reproduced in enclosure
II.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution for 30 days
from the report date. At that time, we will send copies of this report
to interested congressional committees, the EPA Administrator, the
Attorney General of the United States, and other interested parties. We
will also make copies available to others upon request. In addition,
the report will be available at no charge on GAO's Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact David C. Maurer at 202-512-3841 or maurerd@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this:
report. In addition to the individuals named above, Assistant Director
Diane Raynes, Kevin Bray, Mark Braza, Alison O'Neill, Mick Ray, and
Daniel Semick made key contributions to this report. Other contributors
include Mehrzad Nadji and Dae Park.
Signed by:
David C. Maurer:
Acting Director, Natural:
Resources and Environment:
Enclosures - 2:
Enclosure I:
Figure 5: Total Inflation-Adjusted Assessed Penalties, Fiscal Years
1974 through 2007, by Type:
This figure is a combination bar graph showing total inflation-adjusted
assessed penalties, fiscal years 1974 through 2007, by type. The X axis
represents fiscal year, and the Y axis represents total penalties
(constant 2008 dollars in millions).
[See PDF for image]
Source: GAO analysis based on EPA data.
[End of figure]
Enclosure II: Comments from the Environmental Protection Agency:
United States Environmental Protection Agency:
Washington, D.C. 20460:
[hyperlink, http://www.epa.gov]:
September 11, 2008:
Assistant Administrator For Enforcement And Compliance Assurance:
Mr. David C. Maurer:
Acting Director, Natural Resources and Environment:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Maurer:
Thank you for the opportunity to comment on "Environmental Enforcement:
EPA Needs to Improve the Accuracy and Transparency of Measures Used to
Report on Program Effectiveness," Project Number GAO-08-1111R. The
Office of Enforcement and Compliance Assurance (OECA) appreciates the
work of GAO in preparing this report and generally accepts the
recommendations provided. OECA is proud of its accomplishments in
protecting public health and the environment, and agrees that clarity
and transparency in the reporting of our results is important. We
appreciate GAO's suggestions for improving clarity and transparency.
In our response below we address the specific recommendations and
provide some additional substantive comments.
This draft report evaluates the accuracy and transparency of the
performance measures OECA uses to report on program effectiveness. The
performance measures examined include penalties, value of injunctive
relief, and pounds of pollution estimated to he reduced, treated or
eliminated. Below is OECA's response to recommendations and suggested
corrections to technical inaccuracies.
I. OECA Response to Draft Recommendations:
Recommendation 1: Clearly indicate in public reports and press releases
that penalties reported are assessed.
GAO is correct that EPA reports penalties assessed rather than
penalties collected. The purpose of reporting penalties assessed is to
communicate to the public the consequences of noncompliance and to
create a general deterrent effect that helps us achieve our mission.
Response: OECA will monitor its press releases, Annual Results reports
and other nubile documents to ensure that it is clear that penalties
reported for a particular case or year arc penalties assessed.
Recommendation 2: Report penalties collected as well as assessed.
OECA continues to believe that reporting penalties assessed is the key
measure for reporting to the public. While we agree that penalties
collected is a useful internal management measure, we do not believe
that penalties collected should be publicly reported when EPA announces
individual case settlements or in its Annual Results. As a practical
matter, amounts collected arc not actually known for some time after
the settlement is announced. Administrative penalties are collected by
EPA's Office of the Chief Financial Officer (OCFO). Civil judicial and
criminal penalties are collected by the Department of Justice (DOJ)
through the individual U.S. Attorneys' offices. The amounts collected
are tracked by these many different offices. We have begun making
changes to our information systems and operating procedures that will
enable us to track when judicial penalties have been paid in full under
judicial Consent Decrees, and expect to begin collecting this
information in FY09.
Response: OECA continues to regard the reporting of assessed penalties
alone to be of greater deterrent value than reporting both assessed and
collected penalties. However, we will discuss this recommendation with
EPA's Office of Chief Financial Officer and the Department of Justice.
Recommendation 3: Provide time-series data adjusted for inflation.
Response: OECA concurs and will begin reporting this information for FY
2008.
Recommendation 4: Report states' share of penalties in federal cases.
The report is correct that EPA has not included state penalties in
reporting of annual results. This conservative approach was taken to
avoid claims that we overstated out results. If we had included the
state share of penalties in federal cases, our penally numbers would
have been higher during the period reviewed by GAO. However, OECA
recognizes that the State penalty amounts we obtain in our settlements
do contribute to deterrence.
Response: Starting in FY 2009, OECA will report states' share of
penalties assessed. This information will he reported separately from
federal penalty amounts assessed.
Recommendation 5: Make clear that the value of injunctive relief
reported is based on estimates of future amounts that defendants expect
to spend to achieve outcomes as agreed in Consent Decrees.
OECA strives to ensure that it is clear that its injunctive relief
values reflect estimates of future commitments by the defendants to
achieve compliance as specified in the consent decree.
Response: OECA will redouble its efforts to ensure that our reports
make clear what .his measure represents.
Recommendation 6: Clearly disclose that the pounds of pollution reduced
represent the anticipated reduction for a one-year period at the
anticipated time of completion.
The pollutant reductions in many cases can he expected to continue for
many years or indefinitely. This poses a question of what future time
period OECA should use in projecting and reporting the pollutant
reduction results. OECA has chosen to limit its projections to the one
year period following completion of the injunctive relief'. OECA has
adopted this approach to avoid the potential for overstating results.
OECA has endeavored to make this clear in its reporting of results but
acknowledges that a full explanation has not been present in all
documents.
Response: OECA agrees that its report of results should make clear the
time period over which estimated results are projected.
11. Response to Technical Inaccuracies:
Page 1 of draft report, footnote 1: "EPA generally depends on DOJ.in
some federal lawsuits."
Response: Revise footnote 1 to read, "Congress has limited EPA's
authority to pursue violations in an administrative forum under some of
the environmental statutes that EPA is responsible for enforcing. For
instance, under the Clean Au Act, EPA may pursue penalties in an
administrative forum only if the total penalty sought does not exceed
$270,000 (as adjusted by the Civil Monetary Penalty Inflation
Adjustment Rule) and the first alleged date of violation occurred no
more than 12 months prior to the initiation of the administrative
action, except where EPA and the Department of Justice "jointly
determine that a matter involving a larger penalty amount or longer
period of violation is appropriate for administrative penalty action."
See 42 U.S.C. $ 7413(d)(1). Additionally. Congress limited EPA's
compliance order authority under the Clean Air Act in the
administrative forum. EPA may only issue an order "to require the
person to whom it was issued to comply with the requirement as
expeditiously as practicable, but in no event longer than one year
after the date the order was issued, and shall be nonrenewable." See 42
U.S.C. § 7413(a)(4). Where a matter does not satisfy the above
statutory criteria, it is not appropriate for the administrative forum,
EPA will have to refer the matter to the Department of Justice for
enforcement in the civil judicial forum."
Page 4, second paragraph, last sentence: "Specifically, we found that.
do not clearly."
Response: Revise to read: "Specifically we found that EPA's reports do
not in every instance clearly disclose the following:"
Page 5, first paragraph, second sentence: ".DOJ, not EPA, is
responsible for prosecuting and settling civil judicial and criminal
enforcement cases. Therefore, EPA does not have ultimate control of
enforcement outcomes."
Response: Revise to read, ".DOJ, working with EPA, is primarily
responsible for prosecuting and settling civil judicial and criminal
enforcement cases and for collection of civil judicial penalties.
Therefore, EPA does not have ultimate control of all enforcement
outcomes or the collection of all penalties.
Page 10: "...peaked at 1.1 billion pounds in fiscal year 2005 and
leveled of at 890 million pounds..."
Response: Delete "leveled off at" and replace with "has been". Given
the variance from year to year, and a record increase already achieved
for FY 2008 greater than that achieved in FY 2005, FY 2006 and FY 2007
combined, the values for 2006 and 2007 do not reflect a "leveling off."
Page 12, second paragraph, last sentence, "EPA officials told us they
based the estimate on advice from their technical experts. through
discovery."
Response: Revise to read, "EPA officials told us from their technical
experts, examination of a 3-page document the company provided through
discovery, and that their decision was further informed by pollution
control planning documents obtained during discovery, representations
made in the litigation and transcribed statements made to the federal
court judge supervising confidential settlement negotiations."
Page 13, bottom paragraph, first, third and fifth sentences: ".DOJ, not
EPA, is responsible for prosecuting.cases. Consequently, DOJ officials
said EPA's proposed do not govern DOJ's decisions. While EPA and
D0J.enforcement outcomes."
Response: As written, this statement implies that EPA doesn't play a
role. Revise first sentence, to read, "...DOJ, with participation from
EPA on all civil and many criminal matters, is primarily responsible
for prosecuting. Revise third sentence to read, "Consequently, DOJ
officials said EPA's proposed penalty estimates do not exclusive govern
DOJ's decisions. Revise fifth sentence by deleting "While" and "EPA
does not have ultimate control over the enforcement 4
outcomes" so that sentence reads, "EPA and DOJ officials say they
cooperate and reach mutually agreeable decisions on civil judicial
cases."
Page 14, bottom paragraph, last sentence: "Second, no court has
considered an award of civil penalties...in such a case."
Response: The last sentence is inaccurate and should he deleted. Two
federal courts have imposed penalties in NSR cases. Sec U.S. v.
Louisiana-Pacific Corp., 682 F. Supp. 1141 (D. Colo. 1988);
and U.S. v. Chevron U.S.A., Inc., 639 F Supp 770 (W.D. Tex. 1985).
Second, the sentence goes on to say that "so there is no precedent on
how high a penalty a court may award in such a case." Although these
two cases are twenty years old, they do supply some evidence as to how
courts addressed the amount of civil penalties to award for NSR
violations. Finally, the statement does not support the GAO's theory
that "unclear legal standards have hindered EPA's enforcement efforts."
Page 15, first paragraph, third sentence: "While EPA. retroactive."
Response: This sentence should be deleted. Page 15, first paragraph:
Response: Add the following sentence before the last sentence in the
paragraph: "The decline in cases between 2002 -- 2003 is also,
according to EPA, due to EPA not initiating coal-fired power plant
cases during the proposal and promulgation of the new rule."
Page 15, last sentence: "EPA officials said they concluded a number.
since 2004."
Response: Revise to read, "EPA officials said they initiated and/or
concluded since 2003." See case list provided below on page 6.
Table: CAA NSR Power Plant Cases Initiated (Either Filed or Settled)
2003-2008:
Case Name: 4/17/03 ;
Date Filed or Settled: Virginia Electric Power Company.
Case Name: 4/27/03;
Date Filed or Settled: Wisconsin Electric Power Company .
Case Name: 3/16/04;
Date Filed or Settled: South Carolina Public Service Authority (Santee
Cooper).
Case Name: 4/24/06;
Date Filed or Settled: Minnkota Power Cooperative.
Case Name: 3/12/07;
Date Filed or Settled: Kentucky Utilities.
Case Name: 6/13/07;
Date Filed or Settled: Nevada Power.
Case Name: 7/2/2007;
Date Filed or Settled: East Kentucky Power Cooperative.
Case Name: 8/12/2008;
Date Filed or Settled: Salt River Project.
If you have any questions concerning our response please contact me at
202/564- 2440 or Margaret Schneider, Director of Administration and
Policy, at 202/564 2530.
Sincerely,
Signed by:
Granta Y. Nakayama:
[End of figure]
Footnotes:
[1] EPA generally depends on DOJ to file a complaint in court when EPA
seeks penalties greater or compliance periods longer than the
administrative limits imposed by statutes. For example, under the Clean
Air Act, the maximum amount that may be sought in a single
administrative enforcement action is $270,000, adjusted for inflation,
although higher amounts may be pursued with joint approval of the EPA
Administrator and the Attorney General. Also, under the Act, EPA may
only issue an administrative compliance order requiring the violator to
comply as expeditiously as practicable, but in no event longer than 1
year after the date of the order. In addition, states may also
participate as plaintiffs in some federal lawsuits.
[2] Violators frequently obtain an economic benefit by avoiding or
delaying necessary compliance costs, by obtaining an illegal profit, by
obtaining a competitive advantage, or by a combination of these
factors. EPA has developed an economic model for assisting the agency
in determining the portion of a penalty that should be attributable to
a polluter's economic benefit from a violation.
[3] The Government Performance and Results Act of 1993 (GPRA) requires
that each agency report annually to Congress on the results of its
activities in each fiscal year. Program managers use these measures as
short-term indicators of program performance and in longer-term trend
analyses.
[4] A default judgment is a binding judgment in favor of the plaintiff
when the defendant has not responded to a civil complaint.
[5] The tests of statistical significance cited in this paragraph are
based on simple linear regression analyses of penalty amounts as a
function of year. When analyzing total inflation-adjusted penalties for
fiscal years 1998 through 2007, the trend is marginally significant.
When default cases are removed for 1998 through 2007, and when total
inflation-adjusted penalties are analyzed from 1974 through 2007, the
trends are statistically significant at the less than 0.05 level.
[6] EPA, FY 2007 Office of Enforcement and Compliance Assistance
Accomplishments Report and Performance and Accountability Report for
Fiscal Year 2007.
[7] As part of a settlement, an alleged violator may agree to undertake
an environmentally beneficial project related to the violation in
exchange for mitigation of the penalty to be paid. A Supplemental
Environmental Project (SEP) furthers EPA's goal of protecting and
enhancing public health and the environment. It does not include the
activities a violator must take to return to compliance with the law.
[8] An enforcement action against American Electric Power resulted in a
settlement between the federal government and the Ohio-based utility in
October 2007. EPA officials said this particular estimate was
conservative because it excluded, for example, the increased operations
and maintenance costs of the plants and consideration of additional
plants covered in the consent decree that would require retrofitting
with pollution controls, conversion to different power sources, or
retirement, which could cost more than $1 billion.
[9] In commenting on our draft report, EPA said that their decision was
further informed by pollution control planning documents obtained
through discovery, representations made in the litigation, and
transcribed statements made to the federal court judge supervising
confidential settlement negotiations.
[10] Discovery is the process where civil litigants seek and obtain
information both from other parties to the litigation and others
through, for example, interrogatories and document requests.
[11] 28 U.S.C. §§ 515-519.
[12] EPA, Office of the Inspector General, New Source Review Rule
Change Harms EPA's Ability to Enforce Against Coal-fired Electric
Utilities, 2004-P-0034 (Washington, D.C.: Sept. 30, 2004).
[13] After EPA issued the final New Source Review Equipment Replacement
rule, 14 states, plus other governmental entities, and several public
health/environmental organizations filed suits in the Court of Appeals
for the District of Columbia Circuit challenging the rule. Some of
these groups asked the Court to prevent the rule from taking effect or
"stay the rule" until the challenges they raised in their lawsuits were
resolved by the Court. On December 24, 2003, the Court stayed the
effective date of the October 2003 Equipment Replacement New Source
Review rule until the case could be fully adjudicated. As a result, the
rule would not become effective on December 26, 2003. In March 2006,
the U.S. Court of Appeals for the District of Columbia vacated the
revised rule.
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