DOJ Significantly Limits The Use Of Supplemental Environmental Projects

The US Department of Justice (DOJ) Environment and Natural Resources Division has announced a major overhaul in the use of Supplemental Environmental Projects (SEPs)—a key penalty mitigation approach commonly used in settlement agreements. In an August 21, 2019 memorandum, DOJ announced that it will no longer allow SEPs as a component of settlements resolving federal claims against state and local governments. The memorandum strongly suggests that this new policy may well extend beyond settlements with states and municipalities, effectively removing what had been an important component of many environmental settlements.

Background

SEPs are environmentally beneficial projects with a nexus to the underlying violation that defendants agree to perform to offset a portion of the penalty amount they would otherwise owe. They have long provided a means by which regulated entities, including state and local governments, could mitigate penalties associated with violations