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.
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