SEPs Are Back: Biden Administration Rescinds Ban on Supplemental Environmental Projects

In March 2020, the U.S. Department of Justice Environment and Natural Resources Division (ENRD) issued a memorandum ceasing the use of Supplemental Environmental Projects (SEPs) as part of settlements of federal environmental enforcement cases. Much to the delight of many, the Biden Administration has rescinded that policy.

In a memorandum dated February 4, 2021, the assistant attorney general for ENRD declared that the prior memorandum dated March 12, 2020, Supplemental Environmental Projects (SEPs) in Civil Settlements with Private Defendants,” was withdrawn, effective immediately. The new memorandum notes that the cessation of SEPs memorandum was “inconsistent with longstanding [ENRD] policy and practice” and could “impede the full exercise of enforcement discretion in [ENRD’s] cases.”

For decades, SEPs have been a common tool in federal civil environmental enforcement cases. They allow private parties to develop and implement (or, in some cases, to fund) environmentally beneficial projects to offset a portion of civil penalties. The projects must have a nexus to the violations alleged by the federal government and there is a limit on how much of the civil penalties can be avoided. 

Many defendants in federal enforcement cases welcome the opportunity to use an SEP, which often generates goodwill in the community (in contrast to simply paying a monetary penalty to the U.S. Treasury).It was that notion – funding projects benefitting some portion of the community – which the Trump Administration ENRD found to violate public policy.

The previous ENRD leadership believed that SEPs essentially diverted penalty funds that would otherwise go to the Treasury, to environmentally beneficial projects in violation of the Miscellaneous Receipts Act, which requires penalties received by the government to go to the Treasury. Many regulators, environmental groups, and communities have also welcomed the use of SEPs because they help to redress environmental harm where it has occurred or prevent future harm from occurring in the community.

The February 4, 2021 ENRD memorandum also rescinded eight other memoranda related to civil environmental enforcement, four of which had been issued the week before President Biden’s inauguration.  The ENRD issued the February 4th memorandum in accordance with Executive Order 13,990, Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis, which directed agencies to review and take action to address regulations or other agency actions that conflict with the national objectives stated in the executive order.

For more information, or for assistance with federal environmental enforcement matters, including when and how to propose a SEP as part of a settlement, please contact Pierce Atwood partners Michelle O’Brien or Brian Rayback.