Supplemental Environmental Project in the United States

Supplemental Environmental Project (SEP) in Environmental Law

An environmental endeavor approved by the Environmental Protection Agency (EPA) and completed in lieu of part of a penalty payment for violations. To be considered by the EPA, the proposed project must be in addition to legal requirements. A defendant could not, for example, agree to put in new equipment to cut down on pollution as a supplemental environmental project if the equipment is necessary to comply with the law.

Because it looks better to the public for a company to do something for the community than to pay a fine, many companies like the idea of SEPs. The EPA is sensitive about the issue; it does not want a violator to benefit from being caught. For that reason, the project is not normally a comprehensive substitute for a penalty. The EPA generally requires significant amounts to be paid in exchange for a reduction. One regional office of EPA stated that approximately $2.5 million must be spent to reduce the fine by one dollar. However, in one case the EPA did allow a dollar for dollar credit for an SEP.

Examples of SEPs include educational projects, environmental enhancements (such as paving a gravel road to reduce dust), comprehensive audits, pollution prevention, and corrective action. The most common SEPs provide for pollution reduction, followed by pollution prevention. They are most often associated with violations of the Emergency Planning and Community RightToKnow Act, the statute that deals with providing information to the community, and the Toxic Substances Control Act, which manages chemical substances.

In the beginning of the program, the EPA did not embrace SEPs, but now one in ten settlements with the agency involves them. The General Accounting Office has questioned the EPA’s authority to enter into such agreements, and the criticism centers on the authority to divert penalties from the United States Treasury, where all environmental penalties are supposed to go. Another concern is the deductibility of some of the expenses of a SEP Penalties are not deductible, but portions of a SEP may be. Despite the opinion of the General Accounting Office, the EPA now encourages the use of SEPs. It sees the policy as one that results in benefits to the environment not otherwise available.
Based on “Environment and the Law. A Dictionary”.