Enforcement Actions Under Section 404 of the Clean Water Act
Elizabeth A. Mitchell
January 24, 2002

I. Introduction
The stated purpose of the Clean Water Act ("CWA") is "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." To achieve this purpose, the CWA prohibits the discharge of a pollutant into waters of the United States by any person without a permit. The CWA permits certain discharges of dredged or fill material under Section 404. The CWA provides that a Section 404 permit acts as a shield to enforcement actions, as long as the permittee complies with all of the terms of the permit. Since the CWA is a strict liability statute, violators may be held liable for unpermitted discharges, regardless of the violator's knowledge of the legal requirements or intent to comply with or violate the law. The CWA does not provide any statutory defenses. The United States Environmental Protection Agency ("EPA"), the Army Corps of Engineers ("Corps") and the United States Department of Justice ("DOJ") share enforcement authority under the CWA and its Section 404 Program.

During the past decade, due to concern about the loss of wetlands, enforcement of Section 404 and other CWA provisions has increased. The Corps, EPA and DOJ have pursued violators aggressively, using an array of administrative and judicial enforcement mechanisms. A description of the regulatory authorities' enforcement authority, the enforcement mechanisms available to them and the framework for settling Section 404 enforcement actions follows.

II. EPA's Enforcement Initiative
The Corps and the EPA announced a joint Wetlands Enforcement Initiative (the "Enforcement Initiative") in December 1990. The Enforcement Initiative emphasized the government's commitment to Section 404 enforcement. The Enforcement Initiative identified several categories of cases as enforcement priorities, including: 1) cases involving discharges into high value wetlands; 2) cases which would have a high deterrence value in the district; or 3) cases involving a discharge by a repeat or flagrant violator. Since 1990, as the number and magnitude of the actions pursued increased, enforcement actions were not limited to these categories,. Regulatory agency guidance and other policy documents have provided the foundation for aggressive enforcement of Section 404 violations since the announcement of the Enforcement Initiative.

III. Enforcement Authority
On January 19, 1989, EPA and the Corps entered into a Memorandum of Agreement that delineates the scope of each agency's enforcement authority. The main objective of the Enforcement MOA is "to strengthen the Section 404 enforcement program by using the expertise, resources and initiative of both agencies in a manner which is effective and efficient in achieving the goals of the CWA."

The Enforcement MOA states that the Corps will conduct the majority of the initial on-site investigations of potential violations because it has more field resources. EPA, if it so requests and with prior notification to the Corps, will be the investigating agency for unpermitted activities occurring in specially defined geographic areas, such as a particular wetland type. The investigating agency will make geographic jurisdictional determinations for a specific case, with each agency advising the other of any problem trends that it becomes aware of through case-by-case determinations. It is also the responsibility of the investigating agency to make violation determinations.

The Enforcement MOA provides that the Corps shall be the lead enforcement agency for all Corps-issued permits. With respect to unpermitted discharge violations, EPA will be the lead agency if the violation involves one of the following: 1) a repeat violator; 2) a flagrant violation; 3) if EPA has requested a class of cases or a particular case; or 4) the Corps recommends that an EPA administrative penalty action may be warranted. The Corps will be the lead enforcement agency for all unpermitted discharges that do not fall under any of these four categories. Where EPA notifies the Corps that it will not take action on a particular case, due to limited resources or otherwise, the Corps may act in accordance with its own resource availability.

Conversely, if the Corps notifies EPA that it will not take action on a permit due to limited staff resources or other reasons, EPA may take action commensurate with its resource availability. However, a determination by the Corps that the activity is in compliance with the permit shall be the final enforcement decision for the case.

If a violation exists, the investigating agency must prepare a field investigation report that provides a description of the illegal activity, the existing environmental setting, the initial view on potential impacts and a recommendation on the need for initial corrective measures. This investigation report must be provided to the agency selected as the lead on the case. Once the investigation establishes that a violation exists, the investigating or lead enforcement agency must inform the responsible parties of the violation and inform them that all illegal activity should cease pending further federal action.

The lead enforcement agency may choose from multiple enforcement options, including an administrative order, an administrative penalty complaint, a civil judicial referral or a criminal judicial referral. The lead agency must also make a determination that a violation has been resolved and make arrangements for monitoring of any remedy, compensatory mitigation or other corrective measures. The Enforcement MOA does not create any rights or defenses for violators. A decision of the lead agency regarding any issue in a particular case, including a no enforcement action decision, is final for that case.

IV. Enforcement Mechanisms

A. Administrative Compliance Orders
EPA and the Corps may issue orders to violators, requiring the violators to cease the unauthorized activities or take remedial steps to correct the violations. EPA issues administrative orders; the Corps issues cease and desist orders. An EPA administrative order requires the violator to comply with the CWA while a Corps cease and desist order requires compliance with CWA Section 404. The orders must specify the nature of the violation and the deadline for compliance. In most cases, compliance within 30 days of issuance of the order is required.

Enforcement orders are not independently enforceable, but require judicial action, if the violator refuses to comply with the order; upon referral of the violation, DOJ may initiate civil or criminal judicial enforcement action. A violator must act promptly in response to receipt of an EPA or Corps order; non-compliance with an order may be considered a separate violation and subject the violator to additional penalties. Numerous courts have held that cease and desist orders are not subject to judicial review. Review of such orders is not available until the agency assesses civil penalties or brings its own enforcement action. As with cease and desist orders, the decision of the EPA to issue a compliance order is not subject to judicial review. Neither agency is required to issue a compliance order before bringing a civil enforcement action.

B. Administrative Penalties
In addition to issuing administrative compliance orders, EPA and the Corps both have the authority to assess administrative penalties. These penalties are divided into Class I and Class II civil penalties. Class I penalties may not exceed $10,000 per violation or a total of $25,000 for multiple violations while Class II penalties, which are directed at more egregious violations, may neither exceed $10,000 per day or $125,000 in the aggregate.

With respect to Class II violations, the violator may incur penalties for each day that the violation continues. A violator has the right to merely an informal hearing in connection with a Class I penalty. In contrast, the CWA provides a formal adjudicatory hearing in accordance with the Administrative Procedure Act for a Class II penalty. The amount of Title I and Title II penalties are based upon the following factors: 1) the nature, circumstance, and gravity of the violation; 2) the violator's ability to pay; 3) prior conduct of the violator; 4) the violator's degree of culpability; and 5) economic benefit resulting from the violation. EPA encourages settlement through pre-hearing conferences.

The Corps has promulgated regulations relating to Class I penalties. There are no administrative appeals beyond the district engineer for a Class I administrative penalty order. The Corps has limited its enforcement ability by establishing a policy that if it pursues an administrative penalty, it will not pursue a judicial action for civil penalties.

Administrative penalty orders are subject to judicial review. Class I penalties are subject to review in district court, while Class II penalties are reviewable in the court of appeals.

C. Civil Enforcement
The DOJ is the legal counsel for the EPA and Corps in civil enforcement actions in federal court. Through a civil action, DOJ may seek injunctive relief and civil penalties. Courts have broad discretion in setting penalties. Civil penalties may be awarded in the amount of up to $25,000 per day per violation. For civil penalty purposes, a violator may be liable for penalties for each day the fill remains in place; the violation continues until the fill is removed. The criteria for establishing the penalty amount are similar to those used for establishing the amount of administrative penalties.

The court has broad discretion to determine what injunctive relief is appropriate. Courts have repeatedly ordered the cessation of unauthorized activities, restoration of impacted areas, including removal of the unauthorized fill, or other mitigation activities. Courts defer considerably to regulatory agency recommendations for restoration plans. EPA's policy mandates that complete restoration of affected waters be sought as injunctive relief, except in limited circumstances. If the illegal discharges would not qualify for an after-the-fact permit (described in Section VI below), complete restoration is preferred over partial restoration and/or compensatory mitigation. Compensatory mitigation may be appropriate injunctive relief if: 1) substantial or meaningful restoration is not ecologically possible or would be ecologically harmful; 2) restoration is not practicable e.g., large structure constructed within wetlands; 3) a good-faith purchaser owns the property where the illegal activity occurred; and 4) litigation risks seeking full restoration are too high.

The statute of limitations that applies to civil penalty actions also applies to CWA civil enforcement actions. The government has asserted strongly that the statute of limitations begins to run upon the government's discovery of the violation, as opposed to when the violation first occurred. However, several courts have rejected this "discovery rule." A defendant in a Section 404 action has a right to a jury trial.

D. Criminal Enforcement
The CWA permits criminal prosecution of flagrant and significant violations. The CWA authorizes prosecution of negligent violations, knowing violations and knowing endangerment. Penalties for negligent violations include a fine of not less than $2,500 or more than $25,000 per day per violation, or imprisonment for not more than one year, or both. For convictions subsequent to the first, the fine is increased to not more than $50,000 per day per violation or imprisonment of not more than two years or both.

A knowing violation results in a fine of not less than $5,000, or more than $50,000 per day per violation, or imprisonment for not more than three years, or both. For convictions subsequent to the first, potential fines increase to not more than $100,000 per day of violation, or imprisonment of not more than six years or both. Courts have generally held that in order for a violation to be knowing, it is not necessary for defendant to know he was violating the CWA. Rather, the defendant need only know the facts meeting each essential element of the offense.

Knowing endangerment results in the highest penalties. A violator who places another person in imminent danger, death or serious bodily injury is subject to a fine of not more than $250,000, or imprisonment of not more than 15 years, or both. In the event the violator is an organization, the organization shall be subject to a fine of not more than $1million. Convictions subsequent to the first may result in the doubling of the maximum punishment with respect to both the fine and imprisonment term. Knowing endangerment prosecutions require proof that the defendant possessed actual knowledge that his conduct would place another person in imminent danger of death or serious bodily injury.

A violator also may be criminally prosecuted for knowingly making false statements on applications and other documents filed or required to be maintained under the CWA. A violator who makes false statements may be fined up to $10,000, or imprisoned for not more than two years, or both. Convictions after the first may result in a fine of not more than $20,000 per day per violation, or imprisonment of not more than four years, or both. Prosecutions for criminal violations may include any responsible corporate officer.

E. Citizen Enforcement
Citizens may directly undertake enforcement actions against violators under the CWA, seeking injunctive relief as well as penalties. Under Section 505, any citizen may sue any person alleged to be in violation of the CWA or a permit. For the purposes of Section 505, the term "citizen" means any person or persons having an interest that is or may be adversely affected. The purpose of a citizen suit must be to protect the environment, rather than to promote private interests such as recovering private damages. District courts may award costs, including attorneys' fees, to successful citizen plaintiffs.

In the enforcement realm, governmental enforcement has precedence. The CWA requires that citizens give notice of their intent to sue to the violator, the state and the federal government 60 days prior to suit. The sixty-day notice provision is mandatory. A citizen may pursue litigation against a violator only if neither the federal nor the state government is prosecuting a civil or criminal action. A citizen may intervene in a case if the federal or state government prosecutes. If the citizen sues, a copy of the complaint must be sent to DOJ and EPA. In addition, the government has review authority over any proposed consent judgment and has 45 days to conduct such a review. While the government is not prosecuting the action, it can monitor such citizen suits through the notice and review provisions.

The CWA allows a citizen suit against a person "alleged to be in violation" of the law. Interpretation of "alleged to be in violation" of the law has limited citizen enforcement cases to those where there is an actual, ongoing violation. In the context of wetlands violations, illegal fill constitutes a continuing violation until it is removed.

Jurisdiction in citizen suit cases has been granted to federal district courts, regardless of the amount in controversy or citizenship of the parties. A citizen enforcement action may be brought only in the judicial district in which the source is located.

A. EPA Penalty Policy
EPA developed a penalty policy that defines the statutory penalty criteria to be used in settling administrative and judicial enforcement actions. The Penalty Policy was designed to foster a more consistent, national approach to the determination of penalty settlement amounts, while giving EPA some flexibility to determine the appropriate settlement amount for a specific case. Through application of the Penalty Policy, EPA determines the minimum penalty acceptable for settlement, while reserving its right to seek a penalty up to the statutory maximum.

EPA will apply the Penalty Policy to all Section 404 civil administrative and judicial actions filed after December 21, 2001. The Penalty Policy also applies to pending cases in which a penalty amount has not yet been proposed. The maximum administrative and civil statutory penalty figures cited in the Penalty Policy reflect adjustments of the statutory maximums for inflation.

To determine appropriate penalty settlement amounts, the Penalty Policy adopts factors similar to those found in Sections 309(d) and 309(g)(3) of the CWA. To calculate the minimum penalty, EPA adds together the following elements: 1) economic benefit of non-compliance e.g., increased property value, delayed costs and avoided costs ; and 2) sum of environmental significance and compliance significance multiplied by a specified amount and then adjusted by recalcitrance, quick settlement and other relevant factors. The total of these elements is then decreased further based on relevant adjustment factors e.g., inability to pay , litigation considerations and mitigation credit for Supplemental Environmental Projects ("SEP"). See discussion of SEPs in Section V. B. below.

B. Supplemental Environmental Project Policy
In May 1998, EPA issued its Supplemental Environmental Project Policy which specifies the circumstances in which SEPs may be part of the settlement of an environmental administrative or judicial enforcement case. A SEP is an environmentally beneficial project that has a nexus to the violation and is not otherwise required by law and would not otherwise have been undertaken. A SEP is designed to redress harm violations have caused to the community at large. The SEP Policy applies to settlement of all civil judicial and administrative actions filed after May 1, 1998. The SEP Policy also may be used by EPA and DOJ in reviewing proposed SEPs in settlement of citizen suits.

Settlements with the EPA require the alleged violators to not only achieve and maintain compliance with federal environmental laws, but also to pay a civil penalty. In determining an appropriate settlement penalty, EPA may consider a violator's commitment and ability to perform a SEP. EPA encourages the use of SEPs since SEPs can provide significant environmental or public health protection and improvements to the community at large. It is EPA's sole discretion to determine whether to accept a proposed SEP as part of a settlement and determine the amount of any penalty mitigation that may be given for a particular SEP.

EPA has broad discretion to settle cases, including the discretion to include SEPs as an appropriate part of the settlement. EPA must follow five guidelines to ensure that the SEPs are appropriately authorized. A SEP must meet the following criteria: 1) the SEP cannot be inconsistent with any provision of the underlying statute; 2) the SEP must advance the objectives of the environmental statute that is the basis of the enforcement action and must have a nexus between the violation and the proposed project; 3) EPA may not control or manage any funds relating to the performance of a SEP; 4) the type and scope of the project must be defined in an executed agreement; and 5) a project cannot be used to satisfy EPA's statutory obligation or another federal agency's obligation to perform a particular activity.

In addition to meeting the legal guidelines, a SEP must fall within a specific category of projects that may qualify as a SEP. Several specific categories of projects qualify as SEPs, including environmental restoration and protection projects. An environmental restoration and protection project enhances the condition of the ecosystem or immediate geographic area adversely affected. This category of SEPs is particularly applicable to situations in which Section 404 has been violated. Beneficial environmental restoration and protection projects could include purchase and dedicated use of buffer land around a wetland.

In determining an appropriate settlement amount, EPA may consider the net cost to be incurred by a violator in performing a SEP. If a violator agrees to conduct a SEP, the final settlement penalty must equal or exceed either: (a) the economic benefit of noncompliance plus 10% of the original penalty amount (other than economic benefit); or (b) 25% of the original penalty amount, (other than economic benefit), whichever is greater.

Once the cost of the SEP has been calculated, EPA must determine what percentage of that cost may be applied as mitigation against the original EPA settlement amount. EPA analyzes the SEP qualitatively and considers the following six factors to determine the applicable mitigation percentage: 1) benefit to the public or environment; 2) innovativeness; 3) environmental justice; 4) community input; 5) multimedia impacts; and 6) pollution prevention. The appropriate mitigation percentage will increase as the SEP receives a high rating in each of these categories. The percentage of penalty mitigation is within EPA's sole discretion; there is no presumption of the correct percentage of mitigation. However, the mitigation percentage should not exceed 80% of the SEP costs, with certain exceptions.

After-the-fact permit applications are similar to an application for an initial Section 404 permit and are reviewed in accordance with the Section 404(b)(1) guidelines, just as Section 404 permits issued in the normal course are. An after-the-fact permit legitimizes discharge from date of issuance forward; it does not excuse violation that occurred before the permit was issued. The Corps will not accept after-the-fact permit applications until "all administrative, legal, and/or corrective action has been completed, or a decision has been made that no enforcement action will be taken" and a mitigation plan has been completed. If an after-the-fact permit is denied, restoration of the illegally filled area may be required.

An application for an after-the-fact permit will not be accepted until the violator has furnished to the district engineer a signed statute of limitations tolling agreement. Each unauthorized activity requires a separate tolling agreement. In the tolling agreement, the violator agrees that the statute of limitations will be tolled until one year after the final Corps' decision on the after-the-fact permit application or one year after the final Corps' decision, in the event of an administrative appeal.

VII. Conclusion
The Corps, EPA and DOJ have numerous enforcement tools to maintain and restore the quality of the Nation's waters and to discourage further unauthorized activities which may impair such waters. These regulatory authorities have increased their enforcement vigilance, as reflected by increasing penalties and accompanying restoration and replacement obligations. In addition, SEPs offer a further means by which community environmental improvements may be obtained in excess of penalties and legally mandated activities.