STAFF CONTACT :
The Business Council opposes this legislation that could result in the imposition of significantly increased penalties for violations of the Environmental Conservation Law.
This legislation would authorize the Department of Environmental Conservation to require the posting of a bond or other form of security in an amount determined by the Department to reflect the cost of compliance of an order or other “final determination.”
This financial assurance requirement could be imposed in lieu of or in addition to civil penalties, and these bonds could be surrendered if the facility does not fully comply with the order.
Our principal reason for opposing A.1838 is that it would result in the imposition of excessive penalties for failure to comply with an order. Under the Department's current penalty assessment policy, the agency would assess a civil penalty that, at minimum, reflects any “economic advantage” gained by the facility through noncompliance. These penalties would also reflect any environmental risk or harm caused by the noncompliance. Maximum civil penalties under the ECL range from $10,000 to $50,000 per day.
In many enforcement cases, in addition to the payment of civil penalties, the DEC requires the violator to finance equipment upgrades, improved operating procedures and/or environmental cleanup projects, if necessary to bring that facility back into compliance.
Under this bill, the Department could require the facility to post a bond equal to the full cost of these mandatory compliance measures, and this additional mandate could be imposed on any facility regardless of its past compliance history. The facility could forfeit that bond if it fails to fully comply with the remedial order — for example, by missing a compliance deadline.
For a major compliance project whose price tag may be several hundred thousand dollars or more, the effect of this bill would be to authorize an additional six-figure penalty, even for fairly minor violations of the order. Interestingly, since it is the Department's current practice to include dispute resolution provisions in administrative consent orders, and since no such procedural safeguard is provided for in A.1838, this bill actually represents a reduction in procedural safeguards currently available to the regulated community.
This expanded statutory authority is unnecessary. The DEC already has more reasonable remedies at its disposal, such as the use of stipulated penalties in consent orders, to assure timely and complete implementation of compliance plans.
This proposed approach is also contrary to practices at the federal level, where the U.S. Environmental Protection Agency typically requires a respondent to provide evidence of financial wherewithal as a condition to entering into a consent order. This requirement can be met in several ways, including the provision of tax returns and financial statements. Many companies simply provide an Annual Report to demonstrate the capacity to fulfill the requirements of an EPA consent order. It is unclear why the DEC would require assurances beyond that which has proven successful at the federal level.
The Business Council does not oppose the use of performance bonds as a means to offset or reduce civil penalties, especially for minor violations at facilities that have had good compliance records. This approach would allow a facility to put its resources into compliance measures rather than the payment of fines. However, since this approach is already employed by the Department of Environmental Conservation, it is unclear why A.1838 is necessary.
For these reasons, it is The Business Council recommendation that the Assembly Codes Committee reject A.1838.