Underground Storage Tanks

Directive Organization

NOTICE

• 1. INTRODUCTION TO UST PENALTY GUIDANCE
  • 1.1 U.S. EPA Penalty Authority
  • 1.2 Overview of the UST Enforcement Process
  • 1.3 UST Penalty Assessment Framework
• 2. DETERMINING THE ECONOMIC BENEFIT COMPONENT
  • 2.1 Definition of Economic Benefit Component
  • 2.2 Avoided Costs
  • 2.3 Delayed Costs
• 3. DETERMINING THE GRAVITY-BASED COMPONENT
  • 3.1 Determining the Matrix Value
    • 3.1.1 Extent of Deviation from Requirements
    • 3.1.2 Potential for Harm
  • 3.2 Violator-Specific Adjustments
    • 3.2.1 Degree of Cooperation/Noncooperation
    • 3.2.2 Degree of Willingness or Negligence
    • 3.2.3 History of Noncompliance
    • 3.2.4 Other Unique Factors
  • 3.3 Environmental Sensitivity Multiplier
  • 3.4 Days of Noncompliance Multiplier
• 4. SETTLEMENT ADJUSTMENTS
• 5.USE OF FIELD CITATIONS
• FOOTNOTES
• APPENDICES
  • A: Matrix Values for Selected Violations of Federal Underground Storage Tank Regulations
  • B: UST Penalty Computation Worksheet
  • C: UST Penalty Computation Examples (PDF) (33 pp, 1.2MB, About PDF)

NOTE: The document you are viewing is an HTML facsimile of OSWER Directive 9610.12 that has been reformatted for the Internet. This version maintains as much as possible of the original document integrity. Only a couple of non-essential elements are missing, namely facsimiles of the OSWER Directive cover page, and EPA Form 1315-17 (the Directive Initiation Request). Also, the original typed document had the directive number as a header on each page--in this version the directive number appears at the beginning of each new section.

OSWER DIRECTIVE 9610.12

NOTICE

Top of page

OSWER DIRECTIVE 9610.12

CHAPTER 1. INTRODUCTION TO UST PENALTY GUIDANCE

This penalty document is part of a series of enforcement documents which includes: (1) the Agency's UST/LUST Enforcement Procedures Guidance Manual (OSWER Directive 9610.11, July 1990), which provides guidance to U.S. EPA Regional personnel on taking enforcement actions against violations of the UST technical requirements; and (2) the draft "Interim Enforcement Response Strategy for Violations of UST Financial Responsibility Requirements," which provides guidance on taking enforcement actions against violations of the financial responsibility requirements. Although these enforcement documents are intended primarily for U.S. EPA Regional enforcement staff, State and local UST implementing agencies may find it useful to adapt some of the concepts and methodologies for their own UST enforcement programs.

This chapter briefly describes the U.S. EPA's authorities for taking enforcement action and assessing civil penalties. It also provides an overview of the enforcement actions that may be taken in response to UST violations, and indicates how the assessment of penalties fits into the enforcement framework.

Top of page

OSWER DIRECTIVE 9610.12

1.1 U.S. EPA PENALTY AUTHORITY

Under Section 9006 of Subtitle I, EPA is authorized to take enforcement actions and assess penalties against violators of requirements promulgated under Subtitle I, including technical standards and financial responsibility requirements. (Footnote 1) In particular, Section 9006(a) provides the authority to issue administrative orders requiring compliance within a reasonable specified time period. All such orders will be processed within the Agency according to the Consolidated Rules of Practice (CROP). (Footnote 2) Pursuant to Section 9006(d), a Section 9006 compliance order may assess a civil penalty, provided that the penalty does not exceed $10,000 for each tank for each day of violation of the technical standards and financial responsibility rules. (Footnote 3) This document presents guidance for determining the appropriate civil penalty amount for an administrative complaint and order, and discusses use of penalties in field citations.

In addition to administrative enforcement actions, EPA may initiate judicial enforcement actions under Section 9006 to compel compliance with Subtitle I's statutory and regulatory requirements. EPA's judicial enforcement actions are processed through Federal courts and are reserved for violations of administrative orders. Under such actions, EPA is authorized to seek judicial penalties of up to $25,000 for each day of continued noncompliance with an administrative order issued under Section 9006 or a corrective action order issued under Section 9003. In these cases, Agency personnel should seek the maximum penalty. (Footnote 4)

Top of page

OSWER DIRECTIVE 9610.12

1.2 OVERVIEW OF THE UST ENFORCEMENT PROCESS

NOTE: Exhibit 1 is a flowchart: "Overview of Enforcement Response Options". This exhibit file contains a GIF image that is 29,203 bytes. View Exhibit 1.

As shown in Exhibit 1, there are two approaches to taking enforcement actions. Under the "traditional" approach, enforcement personnel may initially respond to a discovered violation by issuing a warning letter or NOV to inform the owner/operator of the violation, explain what actions need to be taken, and indicate possible consequences if the owner/operator fails to achieve compliance. If necessary, enforcement personnel may then meet with the owner/operator to negotiate an agreed-upon course of action for the owner/operator to follow to achieve compliance. However, for recalcitrant violators, or where violations pose a threat to human health and the environment, enforcement personnel will typically issue administrative complaints or take judicial action. To provide a deterrent effect, an administrative complaint may include an initial penalty target figure. Upon receipt of the complaint, a violator may pay the penalty specified, request an informal settlement conference, and/or request an administrative hearing. Regardless of the violator's response, the outcome generally will be a final penalty that the violator must pay or else face judicial prosecution. Exhibit 1 shows where the target and final penalties appear in the enforcement process.

As an alternative to the traditional approach, enforcement personnel may initiate an enforcement response using field citations (see Chapter 5). Field citations, similar to traffic tickets, are modified compliance orders issued by inspectors on-site at a facility when violations are discovered. However, the use of field citations is generally limited to first-time violators when compliance is expected and when the violation does not pose an immediate threat to human health and the environment. A typical field citation will not only require that the violator take actions to achieve compliance, but will also assess a pre-established, non-negotiable penalty. This penalty is usually fairly low (e.g., $100) to encourage prompt payment and response. In paying the citation penalty, the violator gives up the right to appeal and consents to the requirements specified; thus, the citation is analogous to the final penalty that results from settlement negotiations. This alternative path to arriving at a penalty is also shown in Exhibit 1. If the owner/operator fails to respond to the field citation, enforcement personnel may resort to enforcement actions under the traditional approach or may initiate judicial actions.

Under the UST program's franchise approach, States will undertake most of the enforcement actions. However, in certain cases (e.g., where an owner/operator is particularly recalcitrant or the State lacks sufficient enforcement authority), Federal assistance may be needed. In such cases, the Regional office may omit initial, informal responses and proceed directly with administrative or judicial actions. However, U.S. EPA enforcement also may be needed at the beginning of an enforcement case in certain circumstances (e.g., in States without active enforcement programs or on Indian Lands). In such cases, Regional enforcement personnel may begin with either the traditional responses or may determine that it is appropriate to use field citations.

Top of page

OSWER DIRECTIVE 9610.12

1.3 UST PENALTY ASSESSMENT FRAMEWORK

• Encourage timely resolution of environmental problems;
• Support fair and equitable treatment of the regulated community; and
• Deter potential violators from future violations.

1. Removing any significant economic benefit that the violator may have gained from noncompliance (the "economic benefit component"); and
2. Charging an additional amount, based on the specific violation and circumstances of the case, to penalize the violator for not obeying the law (the "gravity-based component").

NOTE: Exhibit 2 is a flowchart: "Process for Assessing UST Civil Penalties". This exhibit file contains a GIF image that is 65,678 bytes. View Exhibit 2.

The procedures for determining the economic benefit component and gravity-based component are discussed in Chapter 2 and Chapter 3. Furthermore, to support fair and equitable treatment of the regulated community, the penalty must allow for adjustments to take into account legitimate differences between similar cases. Thus, under this methodology, the gravity-based component incorporates adjustments that reflect the specific circumstances of the violation, the violator's background and actions, and the environmental threat posed by the situation.

The sum of the economic benefit component and the gravity-based component yields the initial penalty target figure that is assessed in the administrative complaint. (Footnote 6) For each case that involves more than one violation, the Regional case team will need to decide on the number of counts addressed in the complaint. Each count should be accompanied by an appropriate penalty calculation, and the sum of these penalties will be the initial penalty target figure assessed in the complaint. Once a complaint is issued, the Agency may enter into settlement negotiations with the owner/operator to encourage timely resolution of the violation. Such negotiations provide the owner/operator with the opportunity to present evidence to support downward adjustments in the penalty. The process of adjusting the penalty during settlement negotiations is addressed in Chapter 4. The outcome of such negotiations will be the final penalty.

For specific types of cases, enforcement personnel may issue field citations, which assess penalties while encouraging a swift return to compliance without a drawn-out appeals process. The use of field citations to assess penalties is addressed in Chapter 5.

Top of page

OSWER DIRECTIVE 9610.12

CHAPTER 2. DETERMINING THE ECONOMIC BENEFIT COMPONENT

• Economic Benefit Component, which removes any significant profit from noncompliance; and
• Gravity-Based Component, which imposes an assessment to penalize current and/or past noncompliance.

Top of page

OSWER DIRECTIVE 9610.12

2.1 DEFINITION OF ECONOMIC BENEFIT COMPONENT

The economic benefit component represents the economic advantage that a violator has gained by delaying capital and/or non-depreciable costs and by avoiding operational and maintenance costs associated with compliance. (Footnote 7) The total economic benefit component is based on the benefit from two sources: (1) avoided costs; and (2) delayed costs. All penalties assessed must include the full economic benefit unless the benefit is determined to be "incidental" (i.e., less than $100).

The Agency-wide penalty policy prescribes the use of two methods for calculating a violator's economic benefit from noncompliance:(Footnote 8) (1) the rule-of-thumb approach; and (2) the software program called BEN.(Footnote 9) The rule-of-thumb approach (described in the sections that follow) should be used for making an initial estimate of the economic benefit of noncompliance. If the initial estimate is less than $10,000, the rule-of-thumb calculation may be used as a basis for the economic benefit assessed in the penalty. If, however, the estimate indicates that the economic benefit is greater than $10,000, the BEN model should be used. The BEN model should also be used if the violator rejects the rule-of-thumb calculation.

The BEN model, which is accessible by computer from anywhere in the country, uses a financial analysis technique known as "discounting" to determine the net present value of economic gains from noncompliance. BEN determines the economic benefit for an individual violator based on 12 specific factors, or inputs, including the violator's initial capital investment, nondepreciable expenditures, and operation and maintenance costs. For some inputs, such as income tax rate, annual inflation rate, and discount rate, BEN will provide standard values if the user does not have actual figures. This use of standard values allows for national consistency in determining economic benefit. Because the majority of UST violations will be associated with an economic benefit of less than $10,000, the rule-of-thumb approach will be used in most cases.

The procedures for calculating the economic benefit of noncompliance using the rule-of-thumb approach are described below. Because of the fundamental differences between avoided and delayed costs, the process for determining the economic benefit component will depend on the type of cost involved. The sections that follow describe methods for calculating each type of cost.

Top of page

OSWER DIRECTIVE 9610.12

2.2 AVOIDED COSTS

Avoided costs are the operation and maintenance expenditures that are averted by the violator's failure to comply. These are considered to be avoided because they will never be incurred even if the violator comes into compliance. For example, a violator who has failed to maintain product inventory records in the past never will have to make up for the costs saved, even if he is directed to start maintaining inventory records now. Other examples of avoided costs include: (1) failure to conduct a required periodic test; (2) failure to obtain financial assurance by the phase-in date; and (3) failure to conduct periodic maintenance of equipment. The violator's benefit from avoided costs is generally expressed as the avoided expenditures plus the interest potentially earned on the money not spent.

                          Avoided = {Avoided    + Avoided  x Interest x Number} x (1-Marginal)
                        Costs      Expenditures Expenditures          of Days      Tax Rate
                                    -------------------------------------------
                                                      365 Days

To determine the value of the interest, compounded annually, the equity discount rate should be used. This represents the risk-free rate (T-bill) plus the cost of financing for pollution control equipment. This rate can be obtained by calling the EPA Office of Enforcement or by accessing the BEN computer model. (Footnote 10) As of the beginning of FY91, the equity discount rate was 18.1 percent. When used in the formula, this number should be expressed as a decimal and not a percentage (e.g., 0.181, instead of 18.1%).

The marginal tax rate (MTR) used in calculating the avoided costs will vary depending on the size of the business. Exhibit 3 provides a list of appropriate tax rates based on the facility or company's taxable income. As with the interest rate, this number should be expressed as a decimal, not a percentage (e.g., 0.15 instead of 15%). To determine the taxable income, enforcement staff should contact EPA's National Enforcement Investigations Center (NEIC) to determine whether the business in violation is listed in the Dun and Bradstreet Business Information Report data base.(Footnote 11) The data base provides information on the annual incomes of a large number of companies across the country, including the smaller, "Mom and Pop" businesses. Although most of the incomes listed in the data base are those reported to Dun and Bradstreet, the data base also includes some estimated incomes for companies that have not reported.

If information on annual income cannot be obtained from NEIC, enforcement staff may use the company's financial responsibility compliance class as a basis for determining the appropriate marginal tax rate, as follows:

MARGINAL TAX RATES BASED ON FINANCIAL RESPONSIBILITY COMPLIANCE CLASS

^aCompliance class is determined as follows: Class 1 - large petroleum marketing firms with 1,000 or more USTs or any firm with net worth over $20 million; Class 2 - large and medium-sized petroleum marketing firms with 100 to 999 USTs; Class 3 - small petroleum marketing firms with 13 to 99 USTs; and Class 4 - very small marketing firms with 1 to 12 USTs or less than 100 USTs at one site, all other firms with net worth of less than $20 million, and municipalities.

In the absence of specific information on the violator's FR compliance class, enforcement staff should assume that the violator is in FR Class 4 (which will result in the highest penalty).

		
		
			   MARGINAL TAX RATE BASED ON FEDERAL CORPORATE TAX RATES
						 (from 1989 U.S. Master Tax Guide):
		
				Taxable income over      Not over          Tax rate
				___________________________________________________
                         $0               $50,000             15%			
                    $50,000               $75,000             25%
                    $75,000              $100,000             34%
				   $100,000              $335,000             39%*
				   $335,000              ........             34%
		
				 *An additional 5% tax is applied to income between
				  $100,000 and $335,000 to phase out the benefits
				  of the graduated rates in that income range.
		
		The marginal tax rate is applied to each increment of income
		specified above (e.g., for an income of $75,000, 15% is applied
		to the first $50,000 and 25% to the next $25,000).  The weighted
		average tax rates below have been calculated for each $10,000
		increment in income to reflect the actual tax burden at each
		income level.  These values will facilitate the determination of
		penalty amounts by eliminating the need to calculate the tax burden
		on each increment of marginal taxable income.  To find the weighted
		tax rate, round the estimated taxable income to the nearest $10,000
		and use the tax rate indicated in the table.

		
		
			   Taxable Income    Tax         Taxable Income    Tax
			   not greater than  Rate        not greater than  Rate
		   ------------------------------------------------------------
		  $50,000        0.15          $200,000        0.31
		  $60,000        0.17          $210,000        0.31
		  $70,000        0.18          $220,000        0.31
		  $80,000        0.19          $230,000        0.32
		  $90,000        0.21          $240,000        0.32
		 $100,000        0.22          $250,000        0.32
		 $110,000        0.24          $260,000        0.33
		 $120,000        0.25          $270,000        0.33
		 $130,000        0.26          $280,000        0.33
		 $140,000        0.27          $290,000        0.33
		 $150,000        0.28          $300,000        0.33
		 $160,000        0.29          $310,000        0.34
		 $170,000        0.29          $320,000        0.34
		 $180,000        0.30          $330,000        0.34
		 $190,000        0.30          $340,000        0.34
		
				  **This table includes the additional 5% tax 
				  applied to incomes between $100,000 and $335,000.
		

Top of page

OSWER DIRECTIVE 9610.12

2.3 DELAYED COSTS

Delayed costs are the capital expenditures and one-time non-depreciable costs that have been deferred because the violator failed to comply with the requirements. Examples of delayed costs include: (1) failure to install required equipment, such as cathodic protection; and (2) failure to clean up a spill. These expenditures are considered only to be delayed, and not avoided altogether, because the violator will eventually have to incur these costs to come into compliance. The benefit from delayed costs is generally expressed as only the return on investment that could have been earned on the money not spent.

                     Delayed  =  Delayed        x    Interest    x    Number
                     Costs       Expenditures                         of Days
                           --------------------------------------------
                                     		365 Days
		

For delayed costs there is no computation of the tax rate. Although there may be a modest tax consequence for the violator because of delayed costs, this effect was deemed to be insignificant. Furthermore, such a tax consequence only would be incurred if the violation were to span more than one of the violator's tax years.

Top of page

OSWER DIRECTIVE 9610.12

CHAPTER 3. DETERMINING THE GRAVITY-BASED COMPONENT

• Matrix Value (Section 3.1);
• Violator-Specific Adjustments to the Matrix Value (Section 3.2);
• Environmental Sensitivity Multiplier (Section 3.3); and
• Days of Noncompliance Multiplier (Section 3.4).

The gravity-based component is then added to the economic benefit component to arrive at the initial penalty target figure assessed in the complaint.

                                            Violator-    Environmental  Days of
                   Gravity-Based = Matrix x Specific   x Sensitivity  x Noncompliance
                      Component    Value    Adjustments  Multiplier     Multiplier

If the complaint results in settlement negotiations, certain factors used to adjust the matrix value may be re-assessed during negotiations to determine whether a downward adjustment in the gravity-based component is appropriate. In general, it is the violator's responsibility to provide evidence in support of reducing the penalty assessment during the settlement stage (see Chapter 4).

Top of page

OSWER DIRECTIVE 9610.12

3.1 DETERMINING THE MATRIX VALUE

1. Extent of deviation from requirement - An assessment of the extent to which the violation deviates from the UST statutory or regulatory requirements.
2. Actual or potential harm - An assessment of the likelihood that the violation could (or did) result in harm to human health or the environment and/or has (or had) an adverse effect on the regulatory program.

NOTE: Exhibit 4 is a chart: "Matrix Values for Determining the Gravity-Based Component of a Penalty". This exhibit file contains a GIF image that is 30,511 bytes. View Exhibit 4.

Based on the type of violation (see Appendix A), penalties will be assessed on a per-tank basis if the specific requirement or violation is clearly associated with one tank (e.g., tank upgrading). If the requirement addresses the entire facility (e.g., recordkeeping practices), the penalty will be assessed on a per-facility basis. For requirements that address piping, the unit of assessment will depend on whether the piping is associated with one tank or with more than one tank. Appendix A indicates the suggested unit of assessment for specific violations.

Top of page

OSWER DIRECTIVE 9610.12

3.1.1 Extent of Deviation from Requirements

• Major - The violator deviates from the requirements of the regulation or statute to such an extent that there is substantial noncompliance. An example is installing a bare steel tank without cathodic protection.
• Moderate - The violator significantly deviates from the requirement of the regulation or statute, but to some extent has implemented the requirement as intended. An example is installing improperly constructed cathodic protection.
• Minor - The violator deviates slightly from the regulatory or statutory requirements, but most of the requirements are met. An example is failing to keep every maintenance record on properly constructed cathodic protection.

Top of page

OSWER DIRECTIVE 9610.12

3.1.2 Potential for Harm

The potential-for-harm factor will also be applied to violations of administrative requirements (e.g., recordkeeping and notification requirements) that are integral to the regulatory program. For violations of these requirements, enforcement personnel should consider the "importance" of the requirement violated. For example, failure to submit tank notification data may be considered to have significant potential for harm because the Agency has few other sources of information on the location of USTs. For purpose of this guidance, the categories for potential for harm are the following:

• Major - The violation causes or may cause a situation resulting in a substantial or continuing risk to human health and the environment and/or may have a substantial adverse effect on the regulatory program. Examples are: (1) improperly installing a fiberglass reinforced plastic tank (because a catastrophic release may result); or (2) failing to provide adequate release detection by the specified phase-in date (because without release detection a release may go unnoticed for a lengthy period of time with detrimental consequences).
• Moderate - The violation causes or may cause a situation resulting in a significant risk to human health and the environment and/or may have a significant adverse effect on the regulatory program. An example would be installing a tank that fails to meet tank corrosion protection standards (because it could result in a release, although the use of release detection is expected to minimize the potential for continuing harm from the release).
• Minor - The violation causes or may cause a situation resulting in a relatively low risk to human health and the environment and/or may have a minor adverse effect on the regulatory program. An example would be failing to provide certification of UST installation (assuming that the installation was done correctly).

Top of page

OSWER DIRECTIVE 9610.12

3.2 VIOLATOR-SPECIFIC ADJUSTMENTS

Specifically, to ensure that penalties are assessed in a fair and consistent manner, and take into account case-specific differences, enforcement personnel have the option of adjusting the matrix value based on any information known about the violator's: (1) degree of cooperation or noncooperation; (2) degree of willfulness or negligence; (3) history of noncompliance; and (4) other unique factors.

VIOLATOR-SPECIFIC ADJUSTMENTS TO THE MATRIX VALUE

The sections that follow discuss these four adjustment factors. In addition, the matrix value should be adjusted to reflect the environmental sensitivity and the days of noncompliance, which are discussed in Section 3.3 and Section 3.4. Subsequent adjustments made during the settlement stage, including adjustments for inability to pay, are discussed in Chapter 4.

To ensure that the penalty maintains a deterrent effect, enforcement staff should consider adjustments toward increased penalties in all cases (i.e., make upwards adjustments to the matrix value). It is up to the violator to present information during settlement that mitigates use of such upward adjustments. However, to ensure that penalties are calculated fairly and consistently, any upwards adjustment may be made only if the circumstances of the case warrant such adjustments. Furthermore, for any adjustments made to the matrix value, justification must be provided on the penalty assessment worksheet (see Appendix B).

Top of page

OSWER DIRECTIVE 9610.12

3.2.1 Degree of Cooperation/Noncooperation

In order to have the matrix value reduced, the owner/operator must demonstrate cooperative behavior by going beyond what is minimally required to comply with requirements that are closely related to the initial harm addressed. For example, an owner/operator may indicate a willingness to establish an environmental auditing program to check compliance at other UST facilities, if appropriate, or may demonstrate efforts to accelerate compliance with other UST regulations for which the phase-in deadline has not yet passed. (Footnote 12) Because compliance with the regulation is expected from the regulated community, no downward adjustment may be made if the good faith efforts to comply primarily consist of coming into compliance. That is, there should be no "reward" for doing now what should have been done in the first place. On the other hand, lack of cooperation with enforcement officials can result in an increase of up to 50 percent of the matrix value.

Top of page

OSWER DIRECTIVE 9610.12

3.2.2 Degree of Willfulness or Negligence

• How much control the violator had over events constituting the violation (e.g., whether the violation could have been prevented or was beyond the owner/operator's control, as in the case of a natural disaster);
• The foreseeability of the events constituting the violation;
• Whether the violator made any good faith efforts to comply and/or took reasonable precautions against the events constituting the violation; and
• Whether the violator knew or should have known of the hazards associated with the conduct; and
• Whether the violator knew of the legal requirement that was violated (resulting in an upward adjustment only).(Footnote 13)

Top of page

OSWER DIRECTIVE 9610.12

3.2.3 History of Noncompliance

• Number of previous violations;
• Seriousness of the previous violations;
• Time period over which previous violations occurred;
• Similarity of the previous violations;
• Enforcement tools utilized (e.g., whether the owner/operator's previous behavior required use of more stringent enforcement actions); and
• Violator's response to the previous violation(s) with respect to correction of the problem.

In cases of large corporations that have many divisions and/or subsidiaries, if the same corporation is involved in the current violation the adjustments for history of noncompliance will apply. In addition, enforcement staff should be wary of a company that changes operators or shifts responsibility for compliance to different persons or organizational units as a way of avoiding increased penalties. A consistent pattern of noncompliance by several divisions or subsidiaries of a corporation may be found, even though the facilities are at different locations. Again, in these situations, enforcement staff may make only upward adjustments to the matrix value by as much as 50 percent.

Top of page

OSWER DIRECTIVE 9610.12

3.2.4 Other Unique Factors

Top of page

OSWER DIRECTIVE 9610.12

3.3 ENVIRONMENTAL SENSITIVITY MULTIPLIER (ESM)

To calculate the environmental sensitivity multiplier, enforcement personnel must first determine the sensitivity of the environment. For purposes of this document, the environmental sensitivity will be either low, moderate, or high. Factors to consider in determining the appropriate sensitivity level include:

• Amount of petroleum or hazardous substance potentially or actually released (e.g., size of the tanks and number of tanks at the facility that were involved in the violation, as they relate to the potential volume of materials released);
• Toxicity of petroleum or hazardous substance released;
• Potential hazards presented by the release or potential release, such as explosions or other human health hazards;
• Geologic features of the site that may affect the extent of the release and may make remediation difficult;
• Actual or potential human or environmental receptors, including:

  - Likelihood that release may contaminate a nearby river or stream;

  - Number of drinking water wells potentially affected;

  - Proximity to environmentally sensitive areas, such as wetlands; and

  - Proximity to sensitive populations, such as children (e.g., in schools).

• Ecological or aesthetic value to environmentally sensitive areas.

DETERMINING THE ENVIRONMENTAL SENSITIVITY MULTIPLIER

Environmental Sensitivity Multiplier (ESM) is based on the potential or actual environmental impact at a site, and is given a corresponding value as follows:

Top of page

OSWER DIRECTIVE 9610.12

3.4 DAYS OF NONCOMPLIANCE MULTIPLIER

DETERMINING THE DAYS OF NONCOMPLIANCE MULTIPLIER

Days of Noncompliance Multiplier (DNM) is based on the number of days of noncompliance.

The DNM is then multiplied by the adjusted matrix value and environmental sensitivity multiplier to obtain the gravity-based component of the penalty, as follows:

                                                  Violator-    Environmental  Days of
                         Gravity-Based = Matrix x Specific   x Sensitivity  x Noncompliance
                            Component    Value    Adjustments  Multiplier     Multiplier

The economic benefit component is added to the gravity-based component to form the initial penalty target figure to be assessed in the complaint. As discussed previously, this figure cannot exceed $10,000 for each tank for each day of violation.

Top of page

OSWER DIRECTIVE 9610.12

CHAPTER 4. SETTLEMENT ADJUSTMENTS

In response to a complaint, the owner/operator may request an informal conference and/or a hearing to settle the penalty and violation. The Federal Consolidated Rules of Practice (CROP) procedures for administrative actions at 40 CFR Part 22 provide for a settlement conference and a right to a public hearing, giving the owner/operator the opportunity to present data to support a penalty adjustment. At a minimum, enforcement personnel may consider adjustments based on the four violator-specific adjustment factors discussed in Chapter 3, including:

• Degree of cooperation/noncooperation;
• Degree of willfulness or negligence;
• History of noncompliance; and
• Other unique factors.

In addition to the adjustment factors listed above, and because of the nature of the UST regulated community, one factor that commonly will be discussed during negotiations is the owner/operator's inability to pay. An adjustment may need to be made for inability to pay to ensure fair and equitable treatment of the regulated community. It is important, however, that this reduction not allow the regulated community to regard violations of environmental requirements as a way to save money. Furthermore, a penalty should not be reduced when a violator refuses to correct a violation, has a history of noncompliance, or in cases with egregious violations (e.g., failure to abate a release that is contaminating drinking-water supplies).

The Agency should assume that the owner/operator is able to pay unless the owner/operator demonstrates otherwise. The inability to pay adjustment should be based on the amount of the initial penalty target figure and the financial condition of the business, but it is the owner/operator's responsibility to provide evidence of inability to pay. The owner/operator may provide evidence, such as tax returns, to document his or her claims. In cases when the owner/operator fails to demonstrate inability to pay, the Agency should determine whether the owner/operator is unwilling to pay, in which case no adjustments to the initial penalty target figure should be made. In cases where the owner/operator can successfully demonstrate: (1) that the company is unable to pay; or (2) that payment of all or a portion of the penalty will preclude the violator from achieving compliance, the following options may be considered:

• An installment payment plan with interest;
• A delayed payment schedule with interest;
• An in-kind mitigation activity performed by the owner/operator;
• An environmental auditing program implemented by the owner/operator; or
• Reduction of up to 80 percent of the gravity-based component.

In order to evaluate a violator's claim regarding inability to pay, two sources of information are available to determine the likelihood that a company can afford to pay a certain civil penalty:

National Enforcement Investigation Center (NEIC). The NEIC of EPA's Office of Enforcement has developed the Superfund Financial Assessment System that can determine a company's ability to pay. For publicly owned companies, specific financial data is available from NEIC. If investigating a private company, enforcement staff can report financial data to NEIC and it will be keyed into NEIC's computerized economic computer model for analysis.(Footnote 15)

ABEL. EPA's Office of Enforcement developed the "ABEL" model as part of an ongoing effort to evaluate the financial health of firms involved in enforcement proceedings. The ABEL model has been used by EPA, Regions, and States to evaluate a firm's claim regarding inability to pay based on 21 inputs gathered from the company's Federal income tax returns from the previous 3 years. Enforcement staff may access ABEL by computer dial-up on a personal computer with a modem and an ABEL user ID number. (Footnote 16) In addition, OUST has developed a PC-based model called ABELPRO which is a simplified version of ABEL that is run on a PC using a LOTUS spreadsheet or Macintosh Excel.(Footnote 17)

Top of page

OSWER DIRECTIVE 9610.12

CHAPTER 5. USE OF FIELD CITATIONS

The Office of Underground Storage Tanks (OUST) has been exploring the use of field citations as an alternative means of assessing civil penalties and obtaining compliance with UST requirements. Once the manner in which field citations will be used in the Federal UST program has been determined, this policy will be revised to reflect how field citations fit into the UST penalty policy.

OSWER DIRECTIVE 9610.12

FOOTNOTES

Top of page

APPENDICES

OSWER DIRECTIVE 9610.12

APPENDIX A

Matrix Values for Selected Violations of Federal Underground Storage Tank Regulations

• Subpart B--UST Sstems: Design, Construction, Installation, and Notification
• Subpart C--General Operating Requirements
• Subpart D--Release Detection
• Subpart E--Release Reporting, Investigation, and Confirmation
• Subpart F--Release Response and Corrective Action
• Subpart G--Out-of-Service UST Systems and Closure
• Subpart H--Financial Responsibility

OSWER DIRECTIVE 9610.12

APPENDIX B

OSWER DIRECTIVE 9610.12

APPENDIX C

Top of page