Lisa Brown, Cal/EPA

February 2007

Penalty Calculations For Non-Hazardous Waste AEOs

What is there when there isn’t a matrix?

The law Your judgment Examples from other programs and/or your

neighbors The AEO TAG Some UPAs have their own matrixes for non haz

waste programs

The Law: HSC Section 25404.1.1(a)

Authorizes UPAs to assess penalties for each program that is subject to the Administrative Enforcement Order (AEO) process

Only HW has a penalty matrix established in state regulations (see Mickey’s class)

AEO Penalty Amounts (per day per violation)

HW- up to $25,000

SPCC- up to $5,000 up to $10,000 for second or repeat

violations

UST- minimum $500 to $5,000, up to $10,000 for monitoring systems or

leak detection tampering

AEO Penalty Amounts (per day per violation)

BP & Inventory- $2,000, raises to $5-25,000 if knowingly done

after prior notice

Cal/ARP $2,000 raises to $25,000 if knowingly done after

notice

AEO penalties do NOT apply to….

Minor violations [defined in HSC 25404(a)(3)] Unless not corrected or not certified corrected

Violations of UFC

HSC Section 25404.1.1(b)When setting an AEO penalty, the UPA shall consider:

Nature, circumstances, extent & gravity of violation

Violator’s past and present efforts to prevent, abate, or clean up

Violator’s ability to pay The deterrent effect the penalty has on both

the violator and the regulated community

Suggested Steps to Set an AEO Penalty

Step 1 What is the violation (s) Step 2 How many occurrences of each violation Step 3 Apply statutory penalty factors Step 4 Come up with penalty amount Step 5 Repeat as needed

What is the violation?

What statute or regulation section What is the penalty range in the statute?

How many occurrences of the violation?

More than one violation on the same day?

Example 10 drums w/o lids The same violation on more than one day?

Example: 10 drums w/o lids for 2 weeks The same violation at more than one location?

in the same facility?

in a different facility (same owner)?

Evidence Check

If multi day violations—are you sure you have evidence for the days other that the day you observed the violation?

Problem Area

Multiple violations can result in very high penalty amounts

Can either set a high one day penalty or a low daily penalty (or justify your penalty by using both methods to determine your number)

Possible adjustment for multiple violations (from haz waste matrix)

A single initial penalty may be assessed when:

- The facility has violated the same requirement in different location (e.g., units) within the facility.

- The facility has violated the same requirement on different days, unless the facility has been notified of the violation and has had sufficient time to correct the violation.

- Violations that are not independent or are not substantially distinguishable.

One time vs. ongoing violations

Failure to submit a report (one day violation?)

Failure to train (one day, but per E’ee) Operating without a permit (everyday is a

violation) Operating without a designated operator

(everyday is a violation)

Statutory Penalty Factors “Nature, circumstances, extent & gravity of violation”

Penalty Factors :Nature & Extent of the Violation

How important is this requirement? Is it a new requirement? Degree of deviation from the requirement

Penalty Factors: “circumstances of the violation”

Effort to comply before & after violation Cooperation Knew or should have known better Any previous/current problems with regulatory

agencies Changes/unique circumstances

“Nature of the violation” includes Economic Benefit

Compliance costs money To be aware of the regulatory requirements To stay current on regulatory requirements Capital costs (equipment, testing, O&M) Staff costs (employees, training) Delays required to be in compliance before

you start a new activity or product

What Is Not Economic Benefit?

Economic Benefit does not include Accounting for ability to continue in business Don’t discount costs the violator incurred in

correcting the violation or cleanup

What to Consider in Determining Economic Benefit Time value of money Project/design alternatives Equipment costs - capital, shipping,

installation, taxes, labor Developed procedures

What to Consider (continued)

Labor costs – supervision and O&M

Training• What was

required?• What additional

training was needed?

Economic Benefit Steps

Determine what should have been done When and/or how often Estimate the type and cost of the actions,

distinguishdelayed costsavoided costs

Consider other economic benefits (e.g. continued production, early entry to market)

Do NOT adjust for expenditures to abate the effects

Avoided costs vs. Delayed costs

Avoided costs (EB is time value of money) Not filing BP for two years

Delayed costs (EB is the total cost +) E’ee training Equipment upgrade

Example

UST upgrade deadline 1998 In 1998 UST contractors prices went higher

as the deadline approached So upgrading in 1999 cost less than in

1998 Non upgraded stations made money in 1999

when should not have been open Gas Slurpies, beer, cigarettes

Too complicated for an AEO?

What you will hear–” I didn’t make any money”!

Net profit is only a part of economic benefit Economic benefit =

you did not spend money you were supposed to

You gained advantage by non compliance

Factor: Violator’s Ability to Pay

May be used to adjust upward or downward the penalty that would otherwise be imposed

You do not have to adjust to keep the violator in biz Some businesses cannot stay in biz and

comply with the law Gov’t cannot subsidize violators

Ability to Pay

The statute requires you “consider” ability to pay; NOT that you adjust the penalty so the violator can pay it and stay in businesses.

Does not requires that UPA figure out what the violator can pay

It’s a very broad concept

Factor: past and present efforts to prevent, abate, or clean up

Training programs? Is compliance encouraged? Do they go “beyond compliance” in other areas?

Factor: Deterrent effect of the penalty on the violator

Compliance costs money Deterrent effect on the violator

Economic benefit factors here also

Factor: Deterrent effect of the penalty on the regulated community

Is the penalty you want others to pay? You must be able to articulate and defend

this penalty in future AEOs Are you being fair to those who are in

compliance?

Deterrence—An economist’s approach

Probability of violation being detected If detected, probability of enforcement If enforcement action taken, probability of penalty Discount rate (interest) Time between date of violation and payment of penalty

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Ex: Initial Penalty Matrix – UST

Major Moderate Minimal

Major Maxi $5,000Avg $4,000Min $3,000

$3,000$2,500$2,000

$2,000$1,500$1,000

Moderate Max $3,000Avg $2,500Min $2,000

$2,000$1,500$1,000

$1,000$750$500

Minimal Max $2,000Avg $1,500Min $1,000

$1,000$500$500

$500$500$500

Ex: Initial Penalty Matrix – Biz Plan (1st time violator)

Major Moderate Minimal

Major Max $2,000Avg. $1,750Min. $1,500

$1,750$1,500$1,250

$1,500$1,250$1,000

Moderate Max $1,500Avg $1,250Min $1,000

$1,250$1,000$750

$1,000$750$375

Minimal Max $1,000Avg $750Min $500

$750$500$375

$375$250$0

Caveat!

If you use a matrix it must be designed and you must consider the statutory factors