On September 8, the EPA published Supplemental Guidance to the 1995 Interim Clean Water Act Settlement Penalty Policy for Violations of the Industrial Stormwater Requirements. This new guidance applies only to stormwater discharges—including violations of EPA- or State-granted NPDES permits and unauthorized discharges associated with industrial activity—and is meant to assist EPA staff in calculating nationally consistent minimum penalties. It does not cover unauthorized wastewater or process water discharges, nor does it address penalties for construction related activities. The guidance uses broad principles that may not capture all the factors of a particular situation, and it remains within the EPA’s sole discretion whether to follow the guidance. The guidance is to be used in settlements only, and is not intended for use at hearings or at trial by any party.

The 1995 policy is consistent with other EPA penalty policies and directs that a bottom-line penalty should be calculated in the following manner: Bottom-Line Penalty= (Economic Benefit) + (Gravity) +/- ‘(Gravity Adjustment Factors) – (Litigation Considerations) – (Ability to Pay) – (Supplemental Environmental Projects). As described below, the two substantive changes presented by the guide are the removal of two variables from the calculation of the Gravity Component and the removal of two Gravity Adjustment Factors and the addition of another. Besides these two changes the bulk of the document is dedicated to more in-depth discussion of each of the terms in the Bottom-Line Penalty Equation.

  • The formula for the Gravity Component is changed, removing a monthly constant and the number of effluent limit violations. The revised calculation for the gravity component is: Gravity Component = [(Sum of A for each month of violation) x $1000] + B + [D x $1000]. The guide describes the three relevant factors: A (significance of effluent violations); B (health and environmental harm); and D (non-effluent limit violations), and provides the methodology for their calculation.
  • The gravity component may be modified by a Gravity Adjustment Factor. The History of Recalcitrance Adjustment Factor increases the gravity amount in cases where the violator exhibits bad faith, delays the prevention, mitigation, or remediation of a violation, or fails to comply with administrative orders. The Quick Settlement Adjustment Factor can lower the gravity amount by 10% in order to encourage swift negotiation and settlement, within a period of 4, 6, or 12 months depending on the type of enforcement action. Beginning in 2018, gravity amounts will also be adjusted for inflation.

The new guide is completed by two worksheets meant to assist with the calculation of the overall minimum penalty under this policy the calculation of the gravity component.