Civil Monetary Penalty Inflation Adjustment Rule

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Interim final rule.

SUMMARY:

The Environmental Protection Agency (EPA) is promulgating this interim final rule to adjust the level of statutory civil monetary penalty amounts for the statutes that the agency administers. This action is mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended through 2015 (“the 2015 Act”), which prescribes a formula for adjusting statutory civil penalties to reflect inflation, maintain the deterrent effect of statutory civil penalties, and promote compliance with the law. The rule does not necessarily revise the penalty amounts that EPA chooses to seek pursuant to its civil penalty policies in a particular case. EPA's civil penalty policies, which guide enforcement personnel in how to exercise EPA's statutory penalty authorities, take into account a number of fact-specific considerations, e.g., the seriousness of the violation, the violator's good faith efforts to comply, any economic benefit gained by the violator as a result of its noncompliance, and a violator's ability to pay.

DATES:

This interim final rule is effective on August 1, 2016.

FOR FURTHER INFORMATION CONTACT:

Susan O'Keefe, Office of Civil Enforcement, Office of Enforcement and Compliance Assurance, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460, telephone number: (202) 564-4021; okeefe.susan@epa.gov.

SUPPLEMENTARY INFORMATION:

I. Background

Since 1990, Federal agencies have been required to issue regulations adjusting for inflation the statutory civil penalties that can be imposed under the laws administered by that agency. The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (DCIA), required agencies to review their statutory civil penalties every 4 years, and to adjust the statutory civil penalty amounts for inflation if the increase met the DCIA's adjustment methodology. In accordance with the DCIA, EPA reviewed and, as appropriate, adjusted the civil penalty levels under each of the statutes the agency implements in 1996 (61 FR 69360), 2004 (69 FR 7121), 2008 (73 FR 75340), and 2013 (78 FR 66643). Over time, the DCIA formula caused statutory civil penalties to lose value relative to total inflation.

The 2015 Act requires agencies to: (1) Adjust the level of statutory civil penalties with an initial “catch-up” adjustment through an interim final rulemaking; and (2) beginning January 15, 2017, make subsequent annual adjustments for inflation. This rule implements the statutorily mandated initial catch-up adjustments. The purpose of the 2015 Act is to provide a mechanism to address these issues by translating originally enacted statutory civil penalty amounts to today's dollars and rounding statutory civil penalties to the nearest dollar. Once Federal agencies issue the 2016 one-time catch-up rule, each statutory civil penalty amount will be adjusted every year to reflect the inflation that has thereafter accrued.

Pursuant to section 5(b)(2)(A) of the 2015 Act, this initial catch-up “cost-of-living adjustment” is, for each statutory civil penalty, the percentage by which the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October 2015 exceeds the CPI-U for the month of October of the year during which the amount of that civil penalty was established (i.e., originally enacted) or last adjusted by statute or regulation (other than pursuant to the Federal Civil Penalties Inflation Adjustment Act). However, section 5(b)(2)(C) of the 2015 Act provides that the maximum amount of any initial catch-up increase shall not exceed 150 percent of the level that was in effect on November 2, 2015. Table 2 to 40 CFR 19.4 presents the results of these calculations and adjustments, identifying: (1) The maximum or minimum penalty level established when each statutory section was originally enacted or last adjusted by Congress; and (2) the statutory maximum or minimum civil penalty level, adjusted for inflation under the 2015 Act, that applies to statutory civil penalties assessed on or after August 1, 2016 for violations that occurred after November 2, 2015, the date the 2015 Act was enacted.

The formula for determining the cost-of-living or inflation adjustment to statutory civil penalties consists of the following five-step process:

Step 1: Identify the latest year that the penalty level or range was established (i.e., originally enacted) or last adjusted by statute or regulation (other than pursuant to the Federal Civil Penalties Inflation Adjustment Act).

Step 2: Calculate the cost-of-living adjustment, which is the percentage for that statutory civil penalty by which the CPI-U for the month of October 2015 exceeds the CPI-U for the month of October of the year identified in Step 1 (hereafter referred to the “cost-of-living multiplier.”)

Step 3: Multiply the statutory civil penalty level derived from Step 1 by the cost-of-living multiplier calculated in Step 2 and round to the nearest dollar.

Step 4: To calculate the 150 percent increase limitation, identify the statutory civil penalty amount in effect on November 2, 2015 and multiply by 2.5.

Step 5: Compare the statutory civil penalty amounts in Step 3 and Step 4, and take the lesser of the two amounts. The lesser amount is the statutory maximum (or minimum) civil penalty that can be assessed on or after August 1, 2016, for violations that occur after November 2, 2015. Under this rule, these amounts are listed in Table 2 of 40 CFR 19.4.

For example, with this rule, the new statutory maximum total penalty that may be assessed in an administrative penalty enforcement action under Clean Air Act (CAA) section 113(d)(1), 42 U.S.C. 7413(d)(1), and CAA section 205(c)(1), 42 U.S.C. 7524(c)(1), is increasing from $320,000 to $356,312. Both of these statutory maximum penalty amounts were established or last adjusted by Congress in 1990, meaning that the applicable cost-of-living multiplier is 1.78156. Multiplying the originally enacted statutory penalty level of $200,000 by the cost-of-living multiplier of 1.78156 yields a statutory civil penalty level of $356,312 (see Column D). To determine the 150 percent statutory cap, multiply the inflation adjusted statutory civil maximum penalty level of $320,000, in effect as of November 2, 2015, by 2.5, which equals $800,000 (see Column F). The new statutory civil penalty level is the lesser of the Columns D and F, resulting in an upward adjustment for inflation of $36,312 (see Column H) and the new statutory civil penalty level of $356,312 (see Column G).

The 2015 Act allows agencies to limit the catch-up adjustment to less than the otherwise required amount only under narrowly defined circumstances. To do so, EPA must determine, and the Director of the Office of Management and Budget (OMB) must concur, that “increasing the civil monetary penalty by the otherwise required amount will have a negative economic impact; or the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.” In its February 24, 2016 guidance to Federal agencies on the implementation of the 2015 Act, OMB made clear that it expects reductions from the statutorily prescribed catch-up adjustment levels “to be rare.” This rare exception does not apply to the civil penalty provisions covered by this rule.

With this rule, the new statutory maximum (or minimum) penalty levels listed in Table 2 to 40 CFR 19.4 will apply to all statutory civil penalties assessed on or after August 1, 2016, for violations that occurred after November 2, 2015, when the 2015 Act was enacted. The statutory civil penalty levels, as codified at Table 1 to 40 CFR 19.4, will continue to apply to (1) violations that occurred on or before November 2, 2015, and (2) violations that occurred after November 2, 2015, where the penalty assessment was made prior to August 1, 2016.

II. The 2015 Act Requires Federal Agencies To Issue These Adjustments by Interim Final Rule

Section 4 of the 2015 Act directs Federal agencies to publish the initial catch-up adjustment through an interim final rule no later than July 1, 2016, which must be effective no later than August 1, 2016. Because the 2015 Act prescribes the formula that Federal agencies must follow to calculate the mandated inflation adjustments, the law does not provide Federal agencies any discretion to vary the amount of the statutory civil penalty changes to reflect any views or suggestions provided by commenters. Accordingly, pursuant to the 2015 Act and 5 U.S.C. 553(b)(3)(B), EPA finds that there is good cause to promulgate this rule without providing for public comment. It would be impracticable and unnecessary to delay publication of this rule pending opportunity for notice and comment because the 2015 Act does not allow agencies to alter the rule based on public comment.

III. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

Under Executive Order 12866, OMB determined this interim final rule to be a “non-significant” regulatory action and, therefore, it did not undergo interagency review.

B. Paperwork Reduction Act (PRA)

This action does not impose an information collection burden under the PRA. This rule merely increases the level of statutory civil penalties that could be imposed in the context of a Federal civil administrative enforcement action or civil judicial case for violations of EPA-administered statutes and their implementing regulations.

C. Regulatory Flexibility Act (RFA)

This action is not subject to the RFA. The RFA applies only to rules subject to notice and comment rulemaking requirements under the Administrative Procedure Act (APA), 5 U.S.C. 553, or any other statute. This rule is not subject to notice and comment requirements because the 2015 Act does not allow agencies to alter the rule based on public comment.

D. Unfunded Mandates Reform Act (UMRA)

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action is required by the 2015 Act, without the exercise of any policy discretion by EPA. This action also imposes no enforceable duty on any state, local or tribal governments or the private sector. Because the calculation of any increase is formula-driven pursuant to the 2015 Act, EPA has no policy discretion to vary the amount of the adjustment.

E. Executive Order 13132: Federalism

This action does not have federalism implications. It will not have a substantial direct effect on the states, or on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments

This action does not have tribal implications as specified in Executive Order 13175. This rule merely reconciles the real value of current statutory civil penalty levels to reflect and keep pace with the levels originally set by Congress when the statutes were enacted. The calculation of the increases is formula-driven and prescribed by statute, and EPA has no discretion to vary the amount of the adjustment to reflect any views or suggestions provided by commenters. Accordingly, this rule will not have a substantial direct effect on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.

G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.

H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use

This action is not subject to Executive Order 13211 because it is not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

The rule does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

The primary purpose of this rule is to reconcile the real value of current statutory civil penalty levels to reflect and keep pace with the levels originally set by Congress when the statutes were enacted. Because calculation of the increases is formula-driven, EPA has no discretion in updating the rule to reflect the allowable statutory civil penalties derived from applying the formula. Since there is no discretion under the 2015 Act in determining the statutory civil penalty level, EPA cannot vary the amount of the statutory civil penalty adjustment to address other issues, including environmental justice issues.

K. Congressional Review Act (CRA)

This action is subject to the CRA, and EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. The CRA allows the issuing agency to make a rule effective sooner than otherwise provided by the CRA if the agency finds that notice and comment rulemaking procedures are impracticable, unnecessary or contrary to the public interest (5 U.S.C. 808(2)). This rule is not subject to notice and comment requirements because the 2015 Act does not allow agencies to alter the rule based on public comment.

List of Subjects in 40 CFR Part 19

• Environmental protection
• Administrative practice and procedure
• Penalties

For the reasons set out in the preamble, title 40, chapter I, part 19 of the Code of Federal Regulations is amended as follows:

PART 19—ADJUSTMENT OF CIVIL MONETARY PENALTIES FOR INFLATION

1. The authority citation for part 19 is revised to read as follows:

Authority: Pub. L. 101-410, Oct. 5, 1990, 104 Stat. 890, as amended by Pub. L. 104-134, title III, sec. 31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Pub. L. 105-362, title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293; Pub. L. 114-74, title VII, sec. 701(b), Nov. 2, 2015, 129 Stat. 599.

2. Revise § 19.2 to read as follows:

3. Amend § 19.4 by:

a. Revising the section heading and the introductory text;

b. In Table 1, amending the last column heading by removing the text “Penalties effective after December 6, 2013”; and adding “Statutory civil penalties for violations that occurred after December 6, 2013 through November 2, 2015, or are assessed before August 1, 2016” in its place; and

c. Adding a new Table 2.

The revisions and addition read as follows: