This post was co-authored by Beth Ginsberg & Krista McIntyre.

The U.S. Department of Justice (U.S. DOJ) recently issued a memorandum stating that settlements, including consent decrees, entered by the Environmental Protection Agency (EPA) and other federal agencies can no longer include a Supplemental Environmental Project (SEP), unless the SEP is expressly authorized by Congress. Companies and individuals accused of violating environmental laws and permits, like Clean Air Act and Clean Water Act permits, commonly agree to perform SEPs to fund projects that go beyond compliance instead of paying a higher cash penalty to the U.S. Treasury. Going forward, companies, individuals, and local governments will no longer have SEPs as a settlement option.

To support this policy reversal after more than 30 years, U.S. DOJ cites to the Miscellaneous Receipts Act, which grants only Congress the authority to decide how to appropriate federal funds. The U.S. DOJ views SEPs as federal funds, and, in U.S. DOJ’s opinion, the EPA and other federal agencies lack the authority to divert those funds to third party recipients and to select the projects that should receive the funds. The power of the purse rests squarely with Congress. “[W]ith SEPs, money otherwise destined for the Treasury finds its way to another destination, not at the insistence of Congress, where the Constitution puts that authority, but instead at the insistence of an administrative agency, or a non-federal entity, or some combination thereof.”
Continue Reading Reversing 30-Year Policy, U.S. DOJ Says Settlements Can No Longer Include Supplemental Environmental Projects (SEPs)