EPA Proposes Economic Benefit Penalty Policy
 
September 1, 1999
 

On June 18, the EPA published a notice in the Federal Register seeking public comments on its proposed methodology for calculating the economic benefit that regulated entities may obtain as a result of violating environmental permits and regulations. The EPA makes this calculation as part of its determination of the appropriate penalty to seek for violations. The notice responds to public comments on the calculation and provides advance notice of changes EPA is proposing to its so-called "benefit-recapture" approach and to its BEN computer model. The BEN computer model is used to calculate economic benefit for settlement purposes.

Among other things, EPA has proposed to modify the BEN model to accommodate different means of compliance and to allow regulated entities to stop the accrual of interest on penalties if the penalty amount is placed in escrow into an interest-bearing account during settlement negotiations. In the notice, EPA also advised that it will not establish a blue-ribbon panel to determine whether the financial methodology incorporated in BEN is correct. EPA also intends to apply BEN even where EPA has changed its interpretation of the rule and is seeking retroactive penalties and where an entire industry has misinterpreted a rule. Importantly for many industries, the notice provides examples of when a "wrongful profits" analysis should be used in penalty calculations.