Lyons Quoted on Additional Limits of SEPs in Enforcement Settlements

Partner Francis Lyons, a former attorney with the U.S Department of Justice (DOJ) and a former regional administrator with the U.S. Environmental Protection Agency, was quoted on how further restrictions on the use of supplemental environmental projects (SEPs) may take shape.

In an August memo, the DOJ disallowed the use of SEPs in enforcement settlements with state or local governments. SEPs are generally used to offset penalty amounts paid to the U.S. Treasury by allowing environmental law violators to undertake a project to provide tangible environmental or public health benefits to the affected community or environment. The memo also noted that the DOJ’s Environment & Natural Resources Division would continue to review its SEP policy, and that “broader” limits on the use of SEPs may be under consideration.

Frank thinks a full ban on the practice is not necessarily the only option on the table.

“Further restrictions on the use of SEPs could take many forms, including limitations on the funds expended, greater scrutiny of the nexus of the SEP to the underlying violation, and even potential elimination of the use of SEPs altogether,” he said.

Frank added, “Typically, settling parties would much prefer including a SEP as part of a settlement, rather than simply paying all if its out-of-pocket costs as a civil penalty, so further restrictions or elimination of SEPs altogether would not be a positive development for the regulated community.”

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