Clarification on Inflation Adjustments for Environmental and Other Civil Penalties: What Increases Should You Actually Expect to See?

In the event that a company is faced with a penalty for violating environmental requirements, it is helpful to know that penalty amounts can often be negotiated. Maximum amounts are set by law, but environmental agencies usually follow a penalty policy to determine the actual amount to assess. In order to keep up with inflation, EPA issued an inflation adjustment rule in 2019 to increase the maximum penalty allowed under environmental statutes, but the rule did not change the amounts provided in each program’s penalty policy. EPA had increased the amounts outlined in its penalty policies in 2018, and has not changed them since. The 2018 penalty policy amounts, therefore, are often the most relevant numbers to evaluate in an enforcement action.

The 2015 Federal Civil Penalties Inflation Adjustment Act Improvements Act (the “Act”) required EPA and other federal agencies to annually adjust the level of statutory maximum and minimum civil penalties, beginning in January 2017. In 2019, the maximum statutory penalties that can be assessed per violation per day increased by approximately 2.5%. However, the Act does not impact the penalty policies used to determine the penalties actually imposed on violators. Although, penalty policies are not binding on an agency or the courts, they do provide guidance. EPA follows the policies, which are specific to each environmental statute, in an attempt to be consistent, to give public notice regarding penalty calculations, as well as to reduce administrative effort. EPA penalty policies provide a range of monetary values based on the seriousness and extent of a violation; the values are then subject to decrease or increase based on objective and subjective factors that are also provided in the policies.

The full penalty policies are not updated often, so the Agency has occasionally issued memoranda to amend the penalty values only in order to reflect the increased statutory maximum amounts required by the Act. The most recent penalty policy amounts increases became effective in 2018 and apply to violations occurring after November 2, 2015. EPA designated a different multiplier under each environmental statute to be used to increase the values designated in each applicable existing penalty policy. For example, the multiplier for violations of Section 313 of the Emergency Planning and Community Right to Know Act (“EPCRA”) is 1.03711, the multiplier for violations of the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) is 1.14103, and the multiplier for the Resource Conservation and Recovery Act (“RCRA”) is 1.53790. For a complete listing of penalty policy multipliers, see the January 11, 2018, Memorandum “Amendments to the EPA’s Civil Penalty Policies to Account for Inflation (effective January 15, 2018) and Transmittal of the 2018 Civil Monetary Penalty Inflation Adjustment Rule” from Susan Parker Bodine, Assistant Administrator, Office of Enforcement and Compliance Assurance, United States Environmental Protection Agency.