The Department of Justice, in the last year, has altered its guidance related to supplemental environmental projects (SEPs), first prohibiting their use in settlements with state and local governments, then extending that prohibition to settlements with private parties. The Department of Justice is now targeting settlements that include similar projects agreed to by two private parties.

Under prior guidance, parties settling with the United States could undertake SEPs, which are community-benefiting projects that relate in some way to the environmental harm caused by the settling party. Such projects previously served to reduce penalty payments and provided settling parties with flexibility in reaching an agreement.

Sierra Club and DTE are parties to a consent decree with DOJ. The consent decree requires DTE to pay a penalty amount and undertake pollution-reducing projects at its coal-fired power plants. DOJ moved to enter that consent decree earlier this year. In June, Sierra Club moved to enter – or have notice taken by the court if approval is not required – a separate agreement between Sierra Club and DTE. That agreement commits DTE to fund $2 million worth of community-based environmental projects in the area, carry out an energy efficiency and reduction project, undertake certain measures related to a bus replacement project required under the consent decree, and retire certain power plants. Sierra Club argues that this is a separate agreement – which releases DTE from claims made by Sierra Club – that does not require court approval.

DOJ objects to this separate agreement, arguing that (1) judicial review of the separate agreement is required; (2) Sierra Club may not second guess the United States’ enforcement discretion; (3) mitigation relief is limited to a narrow exception under the Clean Air Act, which is not satisfied in this agreement; and (4) the mitigation relief is really a penalty, and because that money is not deposited into the Treasury it violates the Miscellaneous Receipts Act. That last argument underpins DOJ’s reasoning for its recent prohibition of SEPs. In addition, DOJ argues that Sierra Club lacks standing to obtain this additional relief because Sierra Club has not demonstrated how these projects will remedy harms caused by DTE’s air pollution.

DOJ’s recent guidance has made clear that it will not allow any SEPs in settlements in which the United States is a party. Its actions here demonstrate that it will work to ensure that citizen plaintiffs are unable to extract such relief in other ways. Whether the court agrees with DOJ remains to be seen.