On July 1, 2016, the U.S. Environmental Protection Agency (EPA) issued in the Federal Register an interim final rule adjusting penalty amounts for Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) violations by more than three times the current level, in some cases.  The rule also adjusts the level of statutory civil monetary penalty amounts for the other statutes that EPA administers.  EPA issued this interim final rule pursuant to 2015 amendments to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (DCIA) (collectively the 2015 Act).  The 2015 Act sets forth new requirements for agencies to:  (1) adjust the level of statutory civil penalties with an initial “catch-up” adjustment through an interim final rulemaking; and (2) beginning January 15, 2017, make subsequent annual adjustments for inflation.

EPA states that the purpose of the 2015 Act is to “provide a mechanism to address these issues by translating originally enacted statutory civil penalty amounts to today’s dollars and rounding statutory civil penalties to the nearest dollar,” and “[o]nce Federal agencies issue the 2016 one-time catchup rule, each statutory civil penalty amount will be adjusted every year to reflect the inflation that has thereafter accrued.” 

EPA sets forth a five step procedure to determine the cost-of-living or inflation adjustment to statutory civil penalties.  Through this interim final rule, EPA amends 40 C.F.R. Part 19 of EPA’s regulations, Adjustment of Civil Monetary Penalties for Inflation, to include:

1. The operative statutory civil penalty levels, as adjusted for inflation, for violations occurring on or before November 2, 2015, and for violations occurring after November 2, 2015, where penalties are assessed before August 1, 2016; and

2. The operative statutory civil penalty levels, as adjusted for inflation, where penalties are assessed on or after August 1, 2016, for violations that occurred after November 2, 2015.

Table 2 to 40 C.F.R. Section 19.4 sets forth the specific statutory civil penalty provisions of statutes administered by EPA, with the original statutory civil penalty levels, as enacted, with the last column of which displaying the operative statutory civil penalty levels where penalties are assessed on or after August 1, 2016, for violations that occurred after November 2, 2015.  Specific changes to FIFRA penalties in Table 2 are as follows:

• U.S. Code citation:  7 U.S.C. 136(a)(1); Environmental Statute:  FIFRA; ​Statutory civil penalties, as enacted:  $5,000; Statutory civil penalties for violations that occurred after November 2, 2015, and assessed on or after August 1, 2016:  $18,750; and

• U.S. Code citation:  7 U.S.C. 136(a)(2)*; Environmental Statute:  FIFRA; ​Statutory civil penalties, as enacted:  $1,000/500/1,000; Statutory civil penalties for violations that occurred after November 2, 2015, and assessed on or after August 1, 2016:  $2,750/$1,772/$2,750.

* Note that 7 U.S.C. 136(a)(2) contains three separate maximum civil penalty provisions.  The first mention of $1,000 and the $500 statutory maximum civil penalty amount were originally enacted in 1978 (Pub. L. No. 95-396) and the second mention of $1,000 was enacted in 1972 (Pub. L. No. 92-516).

Commentary

Despite the large increase in some of the civil penalty amounts, EPA has determined, pursuant to Administrative Procedure Act (APA) Section 553(b)(3)(B), that it “would be impracticable and unnecessary to delay publication of this rule pending opportunity for notice and comment.” According to EPA, notice and comment are not necessary “because the 2015 Act does not allow agencies to alter the rule based on public comment.”  This rationale presumes that EPA has correctly determined the size of the initial “catch-up” penalty adjustment mandated by the 2015 Act.  Despite EPA’s APA finding, EPA would likely be obligated to consider any comment arguing that EPA did not determine the size of this initial adjustment correctly.  Future annual adjustments should be much smaller and, thus, presumably not as likely to be as controversial.