When a developer receives a Notice of Violation (NOV) from PADEP for noncompliance with the Clean Streams Law — most typically involving alleged violations of an NPDES storm water construction permit — that NOV sometimes results in a civil penalty being imposed. If the project is brought into compliance, PADEP often looks to resolve the matter with a fine and the signing of a Consent Assessment of Civil Penalty (CACP). I’m often asked by clients what happens if the developer thinks the fine is too high and they refuse to sign the CACP? Well, in that case, PADEP can file a penalty action against the developer, essentially asking the PA Environmental Hearing Board (EHB) to assess a penalty. That’s exactly what happened in a recent case involving violations of the Clean Streams Law alleged against a gas drilling operation for discharges from an impoundment. The case was PADEP v. EQT Production Co. and it was decided by the EHB on May 26, 2017. In that decision, the EHB noted that while PADEP is free to suggest a penalty amount, its suggestion is “merely advisory” and the EHB may impose a penalty that is higher or lower. The EHB noted that while PADEP’s penalty amounts are based on guidance documents and penalty policies, none of those apply to the EHB, which only applies statutory and regulatory penalty provisions and uses its own precedents. In this recent case, PADEP had made an initial demand of $4.5 million. In the hearing before the EHB, it simply asked that a “very substantial penalty” be imposed. Ultimately, the EHB imposed a penalty of $1.137 million. While still a significant penalty, it appears to be just 25 percent of PADEP’s initial demand. In my experience, the vast majority of civil penalties imposed by PADEP for violations of the Clean Streams Law get resolved through CACPs. In evaluating options when confronted with a CACP, developers can and should consider whether having the EHB calculate the penalty is likely to result in a higher or lower penalty, taking into consideration the cost of litigating the matter against PADEP before the EHB.
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