July 28, 2017 The Minnesota Pollution Control Agency (MPCA) recently announced its second quarter summary of enforcement actions for 2017. During this period the MPCA collected over $450,000 in civil penalties from 48 enforcement actions. Individual penalty amounts from $550 to $110,000. The MPCA reports that it has 41 ongoing enforcement investigations. During the second quarter of 2017, seventeen new cases were opened. The MPCA's notes that all investigations do not lead to penalties or other enforcement action.
The MPCA primarily uses two tools to address environmental violations: Administrative Penalty Orders (APOs) and Stipulation Agreements. Both APOs and Stipulation Agreements have the same end result: a monetary penalty for violating environmental laws. However, the two enforcement tools differ in terms of their function and the level of penalty.
Administrative Penalty Orders
The MPCA has the authority to issue APOs assessing civil penalties of up to $20,000. MPCA's preferred enforcement method are APOs. In the second quarter of this year the MPCA issued 38 APOs compared to 10 Stipulation Agreements. An APO is an agency order that requires a regulated party to pay a civil monetary penalty and complete corrective actions to resolve non-compliance with environmental laws. APOs are used when the required corrective actions can be completed within 30 days.
An APO can come in three different forms: forgivable, non-forgivable, or a combination of the above. A forgivable penalty offers the party a chance to correct violations without paying the penalty while APOs with penalties that are non-forgivable require the payment of the penalty in full and completion of the required corrective actions. A penalty may be non-forgivable when the MPCA determines violations are either "repeated" or "serious."
In determining the penalty amount, the MPCA takes into account the extent, duration, and number of environmental violations as well as the party's knowledge of the regulations, its past enforcement history, any economic benefit that it may have received, and any costs it saved related to the environmental violation. A party receiving an APO may seek a review through an appeal with an administrative appeal or in state district court.
If a party opts for administrative review, then an Administrative Law Judge (ALJ) conducts a hearing and issues recommendations. Next the MPCA Commissioner will accept, reject, or modify the recommendations and issue a final order. Finally, the decision may be appealed to the Minnesota Court of Appeals.
The MPCA typically uses Stipulation Agreements for more serious violations. Stipulation Agreements include civil penalties of greater than $20,000 and are used if corrective actions will take longer than 30 days to complete. In addition stipulated penalties can be assessed if the party fails to undertake timely corrective measures.
Stipulation Agreements function like out-of-court settlements between the violating party and the MPCA. These settlements contain:
- a background statement
- a list of the alleged violations
- a provision for payment of a civil penalty for past violations
- a term for payment of stipulated civil penalties
- a covenant not to sue
- an acknowledgement from the MPCA that the party is not admitting liability except with regard to future penalty assessments
A Stipulation Agreement resolves a matter. Consequently, the State agrees not to file a civil action in court. A Stipulation Agreement is not an order and cannot be appealed. As part of the Stipulation Agreement, a party may propose a Supplemental Environmental Project (SEP) to defray a portion of the penalty. SEPs are projects that a regulated party undertakes to mitigate the environmental impacts of its violations within the affected community.
The enforcement process for both APOs and Stipulation Agreements usually begins with an inspection or site investigation. Often a citizen complaint or document review triggers an inspection. When potential violations are discovered, the MPCA reviews the case and determines which enforcement method to use and the party will then be notified to submit mitigating information regarding the alleged violations.
An APO is typically non-negotiable. When a Stipulation Agreement is proposed, the MPCA offers the regulated party an opportunity to meet and negotiate a settlement. Consequently, the level of civil penalty and the schedule for corrective actions are subject to negotiation.
However, the MPCA will not disclose its proposed penalty until a meeting is set with the regulated party. After a civil penalty is proposed, the MPCA explains the components of the penalty and how the MPCA's Civil Penalty Policy was applied to the specific facts of the case.
Statutory Penalties, Escalation and Referrals
APOs and Stipulation Agreements may carry large penalties regardless of the type of pollution (e.g., air quality, storm water, solid waste, tanks, hazardous waste or water quality). The MPCA has the authority to seek penalties of up to $10,000 per day of violation. For cases involving hazardous waste, the MPCA may seek penalties of up to $25,000 per day. In complex cases or cases with long-term periods of violation the MPCA may seek penalties of $1,000,000 or more. In matters where the State determines that either "knowing" or "intentional" violations have occurred, the State may referral a case for criminal prosecution and as a result, a prosecutor then determines if criminal charges will be filed.
If the MPCA finds violations warranting either an APO or a Stipulation Agreement and the regulated party fails to respond or refuses to settle, the MPCA may escalate its enforcement efforts. A referral must be made to the U.S. Environmental Protection Agency (EPA). EPA has the authority under federal law to order corrective actions or seek civil penalties of $37,500 per day per violation.
On the other hand, the MPCA may refer the matter to the Minnesota Attorney General, who may file a civil action in state district court. The Attorney General may seek an injunction requiring corrective actions, a court-ordered assessment of civil penalties and, in the case of willful violations, an award of its attorneys' fees.
The MPCA issues quarterly reports summarizing final enforcement actions across the State. To limit potential liability many regulated companies conduct periodic audits to determine if they are in compliance. In Minnesota, companies that conduct audits that disclose violations may take advantage of audit protections and avoid civil penalties. The EPA offers audit protection as well.
Thanks to associate Joseph Reutiman for help in preparing this update. Please see the disclaimer at the bottom of this page that relates to limitations on this blog and to legal advice. At Hessian & McKasy we assist clients in responding to APOs, Stipulation Agreements, and other MPCA enforcement actions. We also work with clients to evaluate whether their operations may qualify for protection under the MPCA and EPA Audit Programs. For more information about our firm and practice, please contact:
Joseph G. Maternowski
Hessian & McKasy, PA
T: (612) 746-5754