U.S. Department of Justice Issues New Policy on SEPs

The U.S. Department of Justice issued new guidelines on May 5, 2022, for supplemental environmental projects (SEPs) as part of a settlement in civil matters. The Trump administration halted nearly all SEPs in 2017 because of the concern that settlements involving payments to third parties were not reasonably related to the violation, and were a tool for third parties to obtain funding and other benefits they could not get but for the SEP. In 2020, Attorney General Barr clarified the policy by saying payments to non-governmental third-parties “if properly structured,” do not violate the Miscellaneous Receipts Act.

Attorney-General Garland’s May 5th letter rescinded the 2017 memorandum and provided new guidelines. An Interim Final Rule was issued contemporaneously rescinding 28 C.F.R. § 50.28, and also invites public comment on SEPs. The Guidelines are as follows:

  • Any such settlement agreement shall define with particularity the nature and scope of the specific project or projects the defendant has agreed to fund.
  • All such projects must have a strong connection to the underlying violation or violations of federal law at issue in the enforcement action. In meeting this requirement, the project must be consistent with the underlying statute being enforced and advance at least one of the objectives of that statute. The project should also be designed to reduce the detrimental effects of the underlying violation or violations at issue to the extent feasible and reduce the likelihood of similar violations in the future.
  • The Justice Department and its client agencies shall not propose the selection of any particular third party to receive payments to implement any project carried out under any such settlement. Similarly, the Justice Department and its client agencies shall not propose a specific entity to be the beneficiary of any projects carried out under any such settlement, although the Department and its client agencies may specify the type of The Department and its client agencies may also disapprove of any third-party implementer or beneficiary the defendant proposes for consideration, provided the disapproval is based upon objective criteria for assessing qualifications and fitness outlined in the settlement agreement.
  • Any such settlement must be executed before an admission or finding of liability in favor of the United States, and the Justice Department and its client agencies must not retain post-settlement control over the disposition or management of the funds or any projects carried out under any such settlement, except for ensuring the parties comply with the settlement. See Application of the Government Corporation Control Act and the Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement Agreement.
  • No such settlement shall be used to satisfy the statutory obligation of the Justice Department or any other federal agency to perform a particular activity. Nor shall any such settlement provide the Justice Department or any other federal agency with additional resources to perform a particular activity for which the Justice Department or any other federal agency, respectively, receives a specific appropriation.
  • No such settlement shall require payments to non-governmental third-parties solely for general public educational or awareness projects; solely in the form of contributions to generalized research, including at a college or university; or in the form of unrestricted cash donations.

This policy is consistent with the pre-2017 DOJ Policy on SEPs but clarifies the project must be agreed to before an admission of liability and must have a strong relationship to the underlying violation. As such, the party cannot commence the SEP until after the Consent Decree is final.  Note the DOJ policy does not necessarily change the EPA SEP policy entered into as part of a consent order and final agreement with EPA.

Written by William L. Penny.

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