2020 Environmental Real Estate IssuesThe current US Department of Justice’s antagonism to the use of Supplemental Environmental Projects (SEPs) to reduce fines paid in settlements of environmental enforcement cases is well known.  A March 12, 2020 memorandum by Assistant Attorney General Jeffrey Clark has now definitively prohibited DOJ lawyers from including SEPs in settlements.  In contrast, many states, including Texas, routinely encourage entities to propose a SEP as part of the settlement to lower the penalty amount.  While the states that employ SEPs and many environmental regulatory officials strongly disagree with DOJ’s prohibition on the use of SEPs, they have no power to challenge DOJ’s policy.

Mitigation of Environmental Harm
With the death of SEPs, at least during this administration, the trend toward mitigation projects in settlements is likely to continue.  In contrast to SEPs, a mitigation project’s purpose is to remedy the environmental harm of an illegal act.  In theory, as restoration, mitigation should be in addition to any penalty paid as punishment or deterrent.  However, some settlements with mitigation projects may appear remarkably similar to what would have been a SEP settlement under a different DOJ.

Superior Energy Settlement
For example, on March 2, 2020, DOJ announced a proposed settlement in US v. Superior Refining, regarding an April 2018 fire and explosion at a refinery in Superior, Wisconsin.  The proposed settlement, which includes the State of Wisconsin, requires the company to implement projects to replace older wood-burning stoves in the area and to install solar photovoltaic panels at the University of Wisconsin, Superior.
The settlement assesses no penalty or fine, unless the company fails to implement the mitigation projects on schedule.
The settlement seems to apply a rather flexible application of the concept of “mitigation,” as it will be years after the explosion and fire before these projects reduce emissions from wood-burning stoves and reduce electric demand at the university.

Trend toward Mitigation Settlements
An ongoing trend in settlements of environmental matters with DOJ, and perhaps even purely administrative settlement with EPA, may be for a broad concept of “mitigation” to allow for settlements that include implementation of environmentally beneficial projects; settlements with these projects appear to have a lower fine or penalty than what otherwise would have been paid.

For links to DOJ’s Federal Register notice of the Superior Energy settlement and the proposed Consent Decree https://www.justice.gov/enrd/consent-decree/us-et-al-v-superior-refining-company-et-al