Capital Conversations: Jeffrey Clark, Assistant Attorney General, Environment and Natural Resources Division (ENRD), Department of Justice

The Limits of EPA Authority: Supplemental Environmental Projects

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The Environment and Natural Resources Division of the Department of Justice recently announced a policy that the Division would no longer agree to Supplemental Environmental Projects (SEPs) in settlement agreements or judicial consent decrees resolving violations of environmental laws. As defined by EPA, a SEP is an environmentally beneficial project or activity that is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action.  Under EPA's SEPs policy, the agency (through the Division) will seek a lesser civil monetary penalty in settling a civil enforcement action than what it would otherwise seek in the settlement in exchange for a defendant’s voluntary commitment to perform a SEP.  Because SEPs purposefully trade civil monetary penalties payable to the U.S. Treasury for projects selected or approved by EPA that Congress either has not approved or had no occasion to consider, do SEPs violate the Miscellaneous Receipts Act and other laws intended to preserve Congress' constitutional power of the purse?   


Jeffrey Clark, Assistant Attorney General, Environment and Natural Resources Division (ENRD), Department of Justice


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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Practice Groups, was recorded on March 27, 2020, during a live teleforum conference call held exclusively for Federalist Society members. 


Dean Reuter:  Welcome to a special Capital Conversations edition of The Federalist Society's Practice Group Teleforum Conference Call.


This afternoon, we'll be talking to Jeffrey Clark. He's the Head of the Environment and Natural Resource Division at the Department of Justice. He'll make opening remarks of about 15-20-25 minutes or so. At the 30-minute mark or so, or even before then, we'll be trying to get to audience questions, so please have those in mind.


      I mentioned this is a Capital Conversations teleforum call. This is our effort in the age of coronavirus to try and bring you some check-ins with key administration officials. And this is our first such call.


      Please note that all expressions of opinion are those of the expert on today's call. But with that, Jeff Clark, the floor is yours.


Jeffrey Clark:  Well, thank you, Dean, for that. And I didn't know that I was the inaugural Capital Conversations, so thank you for inviting me for that purpose. I'm very happy to be joining you on today's teleforum.


      As I think those on the call would know from seeing the write-up that was done about the call on March 12, I issued a memorandum on so-called Supplemental Environmental Projects, SEPs, in civil settlements with private defendants. That's an important memorandum that is the latest in a series of actions I've taken to ensure that all the enforcement cases I authorize and supervise comport with the law.


      Under that new policy, the Environment and Natural Resources Division of U.S. DOJ, or what we call ENRD for short, will not enter into settlement agreements or consent decrees that include SEPs from the date of the memorandum forward.


      I'm also informed that EPA won't be including SEPs within the span of their own authority when they're not working with DOJ. And this is other than so-called diesel emission reduction SEPs, which Congress specifically authorized in the Clean Air Act.  


      So what is a SEP? In broad terms, SEPs are projects or activities that go beyond what could be legally required in order for the defendant to come into compliance, and they instead secure benefits in addition to those achieved by the compliance with applicable laws. So by definition, SEPs are not, number one, penalties payable to the Treasury; two, restitution to a harmed party, if that's something that can be provided for; or three, some form of action or refraining from action intended to undo or directly remediate demonstrable harm. Typically, that comes in the form of an injunction, which most environmental statutes offer us.


      Instead, SEPs are proposed by the defendant party or responsible party or by an administrative official to accomplish a purpose beyond the four corners of the statute under which the government is proceeding against that defendant or target or responsible party. SEPs by their nature run counter to—and this is the major point of the memo—to critical principles of majoritarian government, most importantly, the prerogative of Congress to decide how federal monies will be spent.


      And then in terms of the introduction, the last thing I think I want to say is something about a word on my approach. So the Reagan administration pioneered the application of what I would call economic stage one to the regulatory state in EO 12291 and EO 12498 from 1981 and 1985 respectively. That approach sunk in, and in 1993, President Clinton adopted and adapted them in EO 12866. These orders or their predecessors require the use of cost-benefit analysis when deciding whether to issue regulations.


      President Trump has built on that work. For instance, in EO 13771, from January 30, 2017, which is entitled, "Reducing Regulation and Controlling Regulatory Costs,"-- my SEP work here is primarily driven by statutory law as you'll hear later on in my presentation. But as a policy matter, it is consistent with what I call economic stage two as applied to the regulatory state, which is the application of public choice economics.  


      Public choice economics is the study of economics as applied to public actors and economic actors in the private sphere interacting with public actors. One of its major principles is that arrangements are to be studiously avoided by which pressure groups or industries can perpetuate their own narrow self-interest at the expense of the collective good. Such groups of narrow interest will often engage in what the literature calls rent-seeking behavior.


      Rent-seeking behavior is the earning of monopoly profits or "rent" by using the tools of government to secure those benefits. Much like many of the common law rules that are officiant from the perspective of stage one microeconomics, many of our constitutional rules, like the Constitution's control over the power of the purse and the structure of the Constitution as explained in Federalist Paper No. 10 and its desire to avoid faction, are functionally early expressions of public choice economics. So what's old is new again. And as I see it, SEPs are really nothing more than a kind of interest group perpetual motion machine or devices that promote rather than break the chain of rent-seeking behavior.


      Before I give you a history of regulations related to SEPs -- really, I should say guidance documents related to SEPs, let me stress the importance of the rule of law to this administration. And I want to do that first by noting two             quotations, one from Attorney General William Barr and the other one from Deputy Attorney General Jeff Rosen.


      The quotation from Barr is this, "The essence of the rule of law is to ask what the overall impact on society over the long run if the action we are taking," and I put an ellipsis here, "was universalized. That is, would it be good for society over the long haul if this was done in all circumstances?"


      And the DAG quote from Jeff Rosen is, "It is a privilege to be entrusted with the awesome and humbling responsibility of enforcing the law. We understand that along with responsibility comes an obligation to faithfully and vigorously defend the rule of law."


      I'm obviously guided by those principles as a subordinate in the Department, and I personally believe that all law enforcement activities in our system of justice have to be guided by and defend the rule of law. Federal and environmental enforcement is no different, and my decision on this SEPs matter is grounded in a commitment to the rule of law. And for that reason, I have instructed that ENRD will not negotiate for SEPs without express statutory authority to redirect money from the Treasury.


      Notably, this merely leaves intact Congress' prerogatives to decide how to spend money in the public fisc. If Congress wants to delegate to the Executive Branch the power to negotiate and settle for SEPs, it may do so, of course, so long as it states that intent clearly and provides the necessary standards to guide the Executive Branch's exercise of delegated congressional power.


      So now, I'd like to turn to talking about a brief history of SEPs. So violations of federal law such as the Clean Water Act or the Clean Air Act often result in the assessment of penalties against defendants who have violated those statutes. To protect the power of the purse, Congress has enacted statutes such as the Miscellaneous Receipts Act and the Antideficiency Act.


      The Miscellaneous Receipts Act provides that government officials "receiving money for the Government from any source shall deposit the money in the Treasury." The Antideficiency Act prohibits government officials from expending funds or incurring financial obligations in excess or appropriations.


      The point of these statutes collectively is to emphasize familiar principles. That is the accounts receivable of the United States are to be paid into the Treasury, and the accounts payable of the United States are to go out as Congress directs.


      Now, the attorney general does have broad discretion when settling litigation including the discretion to agree to settlement terms which a court would not have the power to order. In exercising this broad authority, the attorney general will in many instances defer to the policy judgments of the client agency. But, of course, the attorney general settlement authority must be exercised consistent with any restrictions imposed by Congress or by the Constitution itself.


In 1980, the Office of Legal Counsel, or OLC for short, at the Department, issued an opinion concluding that a proposed settlement in a case called In re the Complaint of Steuart Transportation Co. violated the predecessor statute to the Miscellaneous Receipts Act. OLC opined that the requirements of the statute must be strictly applied, noting that the Government of Accountability Office, or GAO, finds exceptions to the applications of that statute "only when supported by a clear expression of congressional intent."


Under the terms of the proposed settlement in Steuart, the state and federal governments would've shared entitlement to damages for the death of waterfowl, which would have been donated by the defendant to a third-party waterfowl organization. In the opinion, OLC offered theories for defending the settlement as proposed, including the theory that under the terms of the proposed settlement, no money was received.


But OLC went on to reject the no money received theory, finding it insufficient to override the mandate in the statute and it being irrelevant that no cash actually touches the palm of a federal official. Well, OLC concluded that money available to the United States and directed to another recipient is constructively received, and the statute barred the proposed settlement.


Most federal actions for failure to comply with the nation's environmental laws are resolved through settlement agreements or consent decrees. That's probably not a surprise to many people on the phone, but it might be somewhat surprising that not everything is litigated to many of the general members of the public.


The settlements or decrees usually stipulate the amount of the penalty, and the Environmental Protection Agency or the Department or them together determine the amount they're willing to settle for by considering several factors, including starting roughly in the Clinton administration whether the alleged violator had agreed up until the issuance of my memo to perform a SEP.


EPA has thus had some type of SEP policy in place since 1984. The current policy from the last administration that predated the memo that I've issued in March of this year was issued back in 2015. Under that 2015 EPA SEP policy, an alleged violator would generally, all else being equal, pay a lower civil penalty than it would otherwise pay by voluntarily agreeing to undertake an environmentally beneficial project that's ostensibly related to the violation being resolved but goes beyond what is required under federal law.


Thus, the use of the SEPs to reduce what would otherwise be our demand in negotiations to satisfy a monetary penalty component is actually long running. In 1992, GAO did conclude that some SEPs were unlawful because they had no nexus to the violation at issue and instead allowed the agency to carry out other goals, thereby, in its view, permitting the agency to improperly augment appropriations for these other purposes in circumvention of the congressional appropriations process.


Following GAO's relevant opinion, EPA worked with ENRD and OLC to impose several new limitations on SEPs with the intent of trying to avoid clashes with the Appropriations Clause and the Miscellaneous Receipts Act. Those limitations included requirements that any SEP have a nexus to the violation at issue but not be otherwise required by law.


EPA's self-imposed limitations also included specific restrictions against augmenting appropriations and a prohibition on EPA managing or controlling any funds. But obviously, note the conceptual similarity between that ostensible fix and the no money received theory that OLC had rejected in 1980 in the Steuart decision.


On June 5, 2017, Attorney General Sessions in this administration issued a policy that prohibited the use of payments to non-governmental third parties in Department of Justice settlements. The policy applies to all civil and criminal cases under the supervision of the attorney general. And in general, it disallows payments and settlements to non-governmental third-party organizations that were neither victims nor parties to the lawsuit.


That policy contained three exceptions. First, the policy does not apply to an otherwise lawful payments or loan that provides restitution to a victim or that otherwise direct remedies the harm that is sought to be redressed including, for example, harm to the environment or from official corruption. Second, the policy doesn't apply to payments for legal or other professional services rendered in connection with the case. And third, the policy does not apply to payments expressly authorized by statute including restitution and forfeiture.


Dean, I think I would say here that your original wisdom about a point for a slight break here might make sense before I turn to my remaining topics, which really are to talk about the two SEPs memos that I've issued, one in August of 2019 and one in March of -- this March, this month.


Dean Reuter:  So again, we're speaking with the Head of ENRD, it's Department of Justice, Jeffrey Clark, pausing briefly for questions. Jeff, shall we take a question or two before? I do want to hear what you have to say about your current SEPs memos. We've got three questions queued up. How do you want to proceed?


Jeffrey Clark:  Well, let's take at least one or two, and then we'll see where we are after that. And then I certainly do want to get to the rest of it.


Dean Reuter:  Good, first question of the call. Go ahead caller.


Caller 1:  Jeff, over the years, EPA has favored in one form another the SEP policy or the use of alternative environmental programs. To what extent is EPA going to either parallel what you have done in your memorandum or at least support your position on this abolition of the use of SEPs?


Jeffrey Clark:  So my understanding is that they will parallel it, but -- and I think I've seen some [inaudible 14:32] to that degree. But certainly, in any case in which we would be filing a consent decree or any case in which we'd even be doing potentially a non-court settlement, we would not be using SEPs.


      I think that the legal force of the memoranda have been recognized, and frankly, I would be surprised if SEP usage continued in this administration after the issuance of those memos.


Dean Reuter:  Let's check in with one more member of the audience, and then, Jeff, maybe we'll get you talk about the latest developments here. Go ahead, caller.


Caller 2:  Yeah, Jeff, this policy's been in place for over 30 years. Why are you changing it now, number one? And number two, do you intend to issue some policy that would prevent SEPs in citizen suits?


Jeffrey Clark:  Ah, first answer to that, I think you've heard some answer to in my introductory remarks about the history. So basically, SEPs have been questionable under authority from OLC in the In Re Steuart Transportation case and from GAO and the Comptroller General for quite some time. So it's actually odd that despite that authority, the EPA and DOJ have been pursuing SEPs nonetheless. So the first part of the answer.


      The second part of the answer would be it's always a good time to repair to the statutes and actually test whether the government is proceeding in accordance with them. I think that's an evergreen principle. And then on the third question about how this might map onto citizen suits, stay tuned. I may say something about that at the end of my remarks.


      So, Dean, if you think it makes sense, I think I'd like to go from here to some summary of the memos and what's behind them and the legal provisions and so on. And then after that, we can take the final round of questions.


Dean Reuter:  That sounds great.


Jeffrey Clark:  So the next topic I'd like to cover is my first SEPs memo from August 2019. But the first thing you need to understand before that is one more bit of history, which is that on November 7, 2018, the attorney general, Attorney General Sessions, announced a new policy governing civil consent decrees and settlement agreements with state and local governments. Among other things, the attorney general directed that consent decrees "must not be used to achieve general policy goals or to extract greater or different relief from the defendant than could be obtained through agency enforcement authority or by litigating the matter to judgment."


      That policy was structured in part to ensure that the authority to determine state and local policy goals remains with democratically accountable state and local institutions. The converse is also true. Namely, that a related goal of the policy was to avoid encouraging state and local governments to use federal consent decrees to circumvent any legal constraints they might face when they engage in new undertakings such as the need to pass new legislation or ordinances or to obtain the requisite funding to do so.


      So in light of that November 7, 2018, memo from the attorney general, last summer on August 21, I addressed the implications of that new policy for SEPs, or that then new policy for SEPs, in settlements with state and local governments in a public memorandum.


      I applied basically what I thought was syllogistic logic to the matter and the syllogism is basically this. The AG's November 2018 policy barred state and local consent decrees that sought relief that could not be obtained in court. EPA defines SEPs as relief that could not be obtained in court. Ergo, state and local consent decrees could no longer include SEPs.


      Though in my August 2019 memo, because I was focusing principally on the November 2018 AG policy, since that policy included the prospect for exceptions, my memo also included those exceptions as well. But I cautioned at the time in August of last year that exceptions can't be allowed to swallow the rule, signaling that any such exceptions if they were made would be disfavored and rare.        


      Furthermore, these SEPs often intruded on state and local government accountability by allowing the federal Executive Branch to commit state and local taxpayers functionally to funding projects that were not otherwise required by their laws. Indeed, one of the primary aims of the 2018 AG policy was to ensure that local officials could be held accountable by their constituents for using local taxpayer funds on such projects and that such accountability would not be diffused by using SEPs again to state and local defendants.


      If state and local defendants obviously want certain projects undertaken in their communities which are not required by the federal laws that ENRD enforces, those officials obviously generally can seek authorization through local democratic processes available to them rather than by acquiescing in consent decrees with the federal agency in federal court.


      In addition, the federal government's assistance on SEPs in that way could encroach on state and local sovereignty without expressed congressional authority. So in that SEPs 1 memo, so-called, I announced that I would be looking more broadly at whether SEPs were legal even with private parties. And so that process culminated in the issuance on March 12 of the SEPs 2 memo.


      The logic of the problems that I spotted in the SEPs 1 memo when we took a deeper look at it, we concluded that there were serious problems with SEPs even beyond state and local governments. And so I concluded in that memo on March 12 that in consent decrees and other judicial compromise settlements, SEPs must cease no matter whether the party is agreeing to -- that is agreeing to implement the SEPs is a state and local government or whether it's a private party.


      In my view, for the reasons I explain in that memo, SEPs violate the letter and spirit of the Miscellaneous Receipts Act. The Antideficiency Act is also relevant and other statutes intended to protect Congress' constitutional power of the purse. It doesn't matter whether SEPs provide for direct monetary payments to a third party or indirect payments to a third party through in kind contributions of goods and services. Using SEPs in settlements in either situation is inconsistent with the law as well as, I think, sound prosecutorial discretion. And for that reason, I called a halt to them.


      So now, turning to more granular analysis in terms of what's behind the legal conclusions in the SEPs 2 memo. So I concluded that SEPs contravene long-established principles prohibiting the diversion of funds away from the Treasury to support projects favored by the agency. The fundamental problem with SEPs is that, "They allow alleged violators to make payments to an institution other than the federal government for purposes of engaging in supplemental projects in lieu of penalties paid to the Treasury." And that's a quotation from a 1993 comptroller general opinion.


      Under EPA's 2015 SEP policy from the last administration, an alleged violator will, all else being equal, pay a civil penalty lower than it would otherwise pay by voluntarily agreeing to undertake an environmentally beneficial project closely related to the violation being resolved. SEPs allow alleged violators to expend funds on projects said to further -- at that time, said to further EPA's mission and benefitting third parties, but the key point is that they would otherwise go to the Treasury as miscellaneous receipts for Congress to appropriate as they see fit.


      In particular, the 2015 EPA policy established an 80 percent exchange rate. So if you did a million dollar SEP, you would basically get an $800,000 discount off the civil penalties that you would otherwise have to pay. And I concluded that that kind of interchangeability was trading civil penalties for SEPs in practice and that that's what violates the Miscellaneous Receipts Act.


      The 1980 OLC memo, I've already mentioned but let me include a few couple finer points about it. First, "Money is available to the United States and directed to another recipient that's constructively received for purposes of the Miscellaneous Receipts Act," according to the 1980 OLC opinion on page 688. OLC further articulated there "that the fact no cash actually touches the palm of federal officials is irrelevant if federal agency could've accepted possession and retained its discretion to direct the use of the money," and that's on the same page.


      So if EPA could accept a higher penalty in a consent decree or settlement, but instead foregoes that amount in favor of allowing the alleged violator to use the foregone funds to finance projects supporting its mission that Congress hasn't approved, I think that basic constitutional and statutory principles have been transgressed.


      In its consent decrees and settlements that include SEPs, EPA not only retains discretion to direct the use of the money, but it actually does do so, in my view, by requiring that the settlement agreements or consent decrees actually be spent on SEPs.


      Second principle to drill down in is that -- drill down on, is that the comptroller general stated that an agency "may not circumvent the receipts of a penalty to accomplish a separate objective." So the attorney general can, as part of his responsibility to litigate on behalf of the U.S., agree to settlements that differ from relief in an underlying statute so long as the violation and the relief have some connection. But that can't mask the fact that -- or authorize a statutory violation that with SEPs, money otherwise destined for the Treasury finds its way to another destination, not at the insistence of Congress but instead at the insistence of an administrative agency, a non-federal entity, or some combination thereof.


      Then, the Antideficiency Act is also relevant. And you'll remember that I said that that provides—and here's a quotation from that statute—"an officer or employee of the United States may not make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation or involve that government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law."


      So we can proceed based on broad statutory authority to remit disbursements from the Treasury absent, adequate, and "specific authority." The money, goods, or services at issue in SEPs never touch the Treasury, but the point is exactly the same. They're putative accounts receivable by the United States and as such, they're subject to the strict forensic principles talked about above.


      Let me note some of the criticisms I have heard about SEPs, and then, Dean, I will turn it over for you to do probably the remainder of the session in question-and-answer form.


      So one of the criticisms that's been launched is that SEPs are just one of the many factors in negotiation of the amount of a penalty, but I concluded in the memo that the fundamental problem with SEPs is the purposeful trading of lower monetary penalties for projects not approved by Congress. And that's not a problem that arises in non-SEP settlements.


      I've also heard it said that a defendant who agrees in settlement discussion to perform a SEP should get a lesser fine because performing the SEP reduces the severity of the underlying offense. And this argument, I think, is particularly strange and incorrect. SEPs, as I say in the memo, I think in colorful terms, aren't time machines that can return to the point of the offense and soften the blow of an impending violation to the public or the environment.


      Moreover, it makes no sense to imagine that a violator on the brink of breaking the law considers the future prospects of SEPs if caught after the violation or even in the midst of them to offset the offense precisely because SEPs are so indeterminate being subject to two layers of discretion before they were terminated EPAs and DOJs.


      The next criticism I've heard is that EPA requires SEPs to have a nexus to the underlying defense. My response there is that basically they wouldn't be SEPs if they didn't have some nexus to the violation. However, by their intent and their design, they exceed what is required under federal, state, or local law by definition. And therefore, they're prohibited under the terms and logic of the Miscellaneous Receipts Act as it's been interpreted in the prior authoritative opinions that I talked about from OLC and from Congress.


      I think in one of the questions, I've already heard echoes of this next criticism, which is that the division in OLC had reviewed and approved the SEP policy. And while it's true that in the past, OLC had advised ENRD and ENRD had advised EPA on different versions of the SEP policy over the past years, there was never an affirmative determination made contrary to the OLC In Re Steuart opinion that SEPs were not a kind of in kind exchange of benefits for a reduction in monetary penalties, which is a no-no. No determination that that was legally permissible or really good public policy either.


      So in my view, no amount of lawyering can save devices as flawed as SEPs, because by their intended purpose and design, they exchange penalties for Executive Branch selected or Executive Branch acquiesced in projects in contravention of variety of sources in both statutory law and in the Constitution.


      So, Dean, there is where I think I would stop for our remaining set of questions.


Dean Reuter:  Terrific. Thank you so much. Let's check in with our next caller.


Caller 3:  Hi. Can you explain whether the new SEP memo allows or does not allow mitigation projects?


Jeffrey Clark:  So that is a question that we've been hearing. So I thank you for posing that. So the answer to that is that sometimes mitigation is something that's provided by statute or by regulation. So in particular, I think a lot of folks are interested in mitigation policies that go to wetlands restoration. And there, there's both statutory authorization for that and there are EPA regulations that are based on that statutory authority.


      So nothing about that would change because the point here is that what I'm defining as a SEP and what, indeed, EPA defines as a SEP in the last administration in 2015 is a kind of relief that is outside the bounds of what a judge can require under a statute. So since some forms of mitigation are specifically required or permitted in statute, they're not something that I would have the authority to alter.


      The purpose of this memo is to stop seeking things that are not authorized by statute.


Dean Reuter:  We've got three questions pending now, so let me break in here if I could with a question. You might have mentioned this, but I'm not sure I heard that. How ubiquitous have these been? In other words, how many a year? Did you do any study of that? Or is there information available on that, how pervasive this issue was?


Jeffrey Clark:  You know, I think that I'm going to resist giving statistics because there are also some strange, public-choice related incentives that will sometimes mischaracterize things as SEPs but in reality, are proper injunctive relief. If something is proper injunctive relief, then it doesn't need to be converted by the 80 percent mechanism or whatever percentage was agreed on in a particular case.


      So it is a significant tool that has been used, and it also is a significant tool, as one of the early questioners noted, that is in use by environmental groups and citizen suits. It is not something that's just kind of a rare one off. It is an important thing to establish this principle that the SEPs shouldn't be used.


Dean Reuter:  Very good. Let's check in with another caller now.


Caller 4:  Jeff, with the drastically reduced number of enforcement actions by this administration, isn't this action superfluous, number one? And two, why don't you just declare that SEPs are not tax deductible, thereby not allowing polluters to get tax breaks?


Dean Reuter:  Well, there's a premise there that I have to resist, and then there are two questions there. So let me go to the first question first which is isn't this superfluous because of the premise? So I'll return to the premise in a second, but no, they are not superfluous because I can tell you that on my watch, I had been asked to approve a slew of SEPs. So that's what led to this, so they're not superfluous. They're arising.


      And, indeed, let me note at this point that the memo has a transitional quality to it to avoid actually upsetting the apple cart too much, which is that there had been some things that had been in progress with the highly competent and dedicated career lawyers that I have working here at the Justice Department with me before I put this policy in place.


      So those SEPs, you know, not disturbing so as not to have to return to the cudgels with the relevant defendants to renegotiate things and add a bunch of time to make sure that we expeditiously get the relief that the environment needs and the relief for the Treasury to deter environmental violations that we need to get.


      So hopefully, you can see with that orientation that I don't agree that the number of enforcement actions have been reduced. I kicked off my time here actually personally negotiating a very significant enforcement action against Fiat Chrysler, FCA, for a total package of relief of about a half billion dollars for cheating on emissions tests.


      I think that while I see it as a commonplace in some elements of the press that the environmental always aren't being enforced, I'm here to assure you that that is not the case. And then --


Caller 4:  Well, the numbers don't lie, Jeff.


Jeffrey Clark:  Well, I think numbers, as I said to the ABA when this question came up, are often meaningless statistics mongering. I think you need to look at the magnitude of the actions. And in any event, the general gist of the criticism is that there's no environmental enforcement going on at all, and that's clearly incorrect.


      And then I've forgotten now the last part of your question after the reference to it being superfluous. What was that?


Caller 4:  Yeah, why don't you just say SEPs aren't tax deductible, therefore, polluters don't get tax breaks, making that clear? That's generally been the policy for decades, but corporations have taken advantage of that.


Jeffrey Clark:  So look, I have my own views about that as a policy matter. And I certainly can't talk about anything that the administration hasn't released yet. But the main thing about that is that it's not within the span of authority of the assistant attorney general for the environment to decide on tax deduction policy. That's committed to the Treasury Department and the IRS. So I'm doing what I can within the span of authority that I have.


Dean Reuter:  Very good. Looks like we've got three questions pending now. Let's carry on.


Caller 5:  Let me pull you back to address the second part of your conversation here. You mentioned there was a question about citizen suits and what you might have planned going forward with this or an expansion there. Can you address that please?


Jeffrey Clark:  Sure. So I think that it shouldn't come as any surprise that this is connected in some way to citizen suits. So I'm starting to look at how the citizen suits fit into that equation. For those who aren't familiar with them, environmental citizen suits, sometimes called private attorney general's actions, that's a moniker that offends my sensibilities in reading Article II's Take Care Clause and in being a subordinate of the actual attorney general.


      But environmental citizen suits are devices by which private individuals or groups can under certain circumstances bring their own suits ostensibly standing in the shoes of federal enforcers to collect civil penalties and obtain injunctive relief. I don't think that that's a legally problematic free concept, that private groups should be able to wield such tools to gain especially not for themselves SEPs or SEP-like third party relief.


      And so I am going to look at that and just leave you with the observation that I'm studying the overlap between the SEPs logic and what should be permissible in citizen suits at this moment.


Caller 5:  And just because I just didn't quite hear the words you said a second ago, did you say you did believe it was legally problematic?


Jeffrey Clark:  I said I don't think they're problem free, basically. Although I fumbled a little bit. I would say it is not clear they are problem free.


Dean Reuter:  We've got two questions pending.


Caller 6:  First, I would like to applaud you for this courageous effort, really, given the politics of the matter because this racket has been going on for decades, and I'm hopeful that you'll expand the look into the citizen suit and the abuse of the Equal Access to Justice Act, which is also a part of the racket.


      Secondly, I've been out of this for quite a while so on the Department of Justice website, can I find your new guidance or your proposed guidance or will it be published yet or where can I get it?


Jeffrey Clark:  Just to stop you there, both memos, SEP 1 and SEP 2, are on the Environment Division website.


Caller 6:  Okay, good. And then finally, you made a comment earlier in your discussion which intrigued me because it strikes me as inconsistent with what you're trying to do with this SEP policy. You said the attorney general has the authority to enter into settlements which a court could not order. Could you elaborate on that because it seems contradictory?


Jeffrey Clark:  There is authority to go beyond forms of relief that are specifically authorized in statute, but the constraints on that is that that can't be wielded in a way that violates some other source of authority. So how the blades of the scissors come together to do the cutting here is that the Miscellaneous Receipts Act is principally the constraint at the other end that says that in this instance, if you're not talking about something authorized by statute because it has these appropriations consequences and it results in the divergence of money from the Treasury, that even that broad AG authority can't be used to accomplish that end.


Dean Reuter:  We've got three questions pending, so let's carry on.


Caller 7:  Hi, Jeff. Question just coming from the real world, you are positing that anytime DOJ accepts a SEP, they are giving up penalties to some extent. But isn't it possible that there could be a situation in which DOJ originally asked for $150 in penalties, realized that it really only could get $100, and then the defendant offers $100 and then throws in a SEP to bridge the difference? So in other words, they're hedging litigation risk. Is it always appropriate to assume that a SEP represents some giving up of penalties?


Jeffrey Clark:  To answer that question, theoretically, I think it is possible that a SEP could be an add-on and not a trade. But the problem is how do you identify that in practice, right? It's not as if there is an established process when you're deciding how to wield prosecutorial and enforcement discretion that kicks out a number that you're looking for at stage one, and then you go and start talking about SEPs. In reality, everything is in play simultaneously so the only way to ensure that that which the EPA policy had authorized, namely the trading of SEPs --


Indeed, there's a caveat on the EPA SEPs guidance document that says that the 80 percent conversion rate is presumptive but that in appropriate cases, EPA can even decide that they're 100 percent interchangeable with penalties. So the only way you can avoid that very serious statutory problem, and I think it's also a constitutional problem, is just to not use them at all because you can never guarantee when the element of unlawfulness is part of what's in play.


Dean Reuter:  Very good, still two questions pending.


Caller 8:  Hi, thanks again. I just want to go back to I had asked the mitigation question earlier. And so I just want to clarify if mitigation is allowed by statute, it's allowed, but otherwise, it's not? And I wanted to specifically ask you about projects similar to the Harley mitigation project that Justice tried to -- they're trying to revoke in a settlement, is that correct?


Jeffrey Clark:  So yeah, if there's no statutory or regulatory I would emphasize, right, so I think that regulations are also a source of law. So if a regulation is something that is not ultra vires under the relevant statute, then if there's a regulation that would allow something that's in the mitigation box, then it's also allowable. But if there's no source of legal authority that would allow such a, otherwise, SEP to be done, whether it goes by a mitigation moniker or not, then it shouldn't be done. But I think a lot of what I've been asked about in the mitigation box are things that can be authorized or are authorized under statute or statute. And the main situation I've heard about is wetlands. In wetlands, it's both a statutory and a regulatory creature.


Dean Reuter:  Let's go to what appears to be the final question.


 Caller 9:  Jeff, in 1968, the Supreme Court in Newman v. Piggie Park recognized the private attorney general role of citizens in enforcing our nation's laws and Congress' too. How does your personal ideology overrule those two entities and branches of government?


Jeffrey Clark:  Well, I'm not trying to use my personal ideology to do anything. First and foremost, I've taken an Oath Clause obligation to uphold, defend, apply the Constitution. And so I do think citizen suits raise constitutional questions that have never fully been run to ground. And I'll point you to the separate opinion that Justice Kennedy included in the Laidlaw case where he talked about some of those separation of powers and Take Care Clause type issues that attend citizen suits. So not any kind of issue of personal ideology, just a question of following the law and the ultimate law is obviously the U.S. Constitution.


Caller 9:  Well, Congress gave us these rights back in 1969 and in other acts, in the Civil Rights Act and others. I just find it really appalling that you're attacking those today.


Jeffrey Clark:  I'm not attacking them. I'm raising questions at this point. And those questions, I haven't issued any announcement about any particular decision or memo or litigation action connected to that. I'm focused here on SEPs. I was just trying to be responsive to folks raising the issue of potential interconnections with citizen suits. So nothing decided there, so there's no news on that as we sit here.


Dean Reuter:  Two more callers, so let's turn to the next caller.


Caller 10:  Thank you. Just a follow up to the rhetorical comment that was just made. When you cut off the racket, the pipeline, you're going to get some complaints. If there's a problem, are you prepared to defend this in court, because you know you're going to get sued, probably, the minute it hits the press if it hasn't already? 


Jeffrey Clark:  Well, I don't think that in the context of SEPs there's anything to sue about because there's no mandatory instruction to use SEPs. And the memos provide that they don't create any enforceable rights, much like there are often that proviso appearing in Executive orders. So I don't think there's anything to sue over.


Caller 10:  Well, that's good.


Dean Reuter:  Very good. Looks like we're down to our final question once again. Let's turn to our next caller. 


Caller 11:  I wanted to follow up with a question about the citizen suit that you had mentioned. What power does DOJ have in your opinion to limit these kinds of issues within citizen suits? So how far could DOJ go potentially in changing the current policy as it is now? 


Jeffrey Clark:  So that's a question that I don't have an answer for you here as I sit here. I think at this point, I have questions. I don't have answers, and I haven't talked to EPA about that topic.


Dean Reuter:  Let me give you a chance to express a final thought if you've got one, Jeffrey Clark.


Jeffrey Clark:  Sure. So thanks, Dean, and thanks for setting this up. I enjoyed the questions. I think we got more than I hear on some telefora, and I appreciate that.


      Look, I'll sum up by saying this. Absent a clearly expressed intention from Congress to delegate money, redirection authority, to the Executive Branch, it's Congress and not the Executive Branch that should decide how to spend the funds stemming from a legal violation. And I think that really every American should support that as a policy because you have a voice in what Congress does and how they write the laws.


      And I think the legislature is uniquely suited for the hurly-burly of debating important public issues like that. More than any other branch of government, it represents the people as an aspect of the Republican form of government that's guaranteed in America in Article IV, Section 4. So I think that that's where the polity can speak about these things.


And as I noted, both in the mitigation context where there's a statute and regulation, both of which come from the political branches that authorize particular forms of relief that are or look like SEPs, and then also in the Clean Air Act with the diesel emissions example, Congress has authorized those devices in those particular instances. And so that immediately takes it out of the box of a problem with a Miscellaneous Receipts Act, and it's a situation where Congress delegated that spending authority functionally to the Executive Branch in a proper way.


So if that were to occur on a broader basis, I would carry that out. The point of these two memos is to establish that when Congress has not done that, that is a void where it preserves for them the authority of how to exercise their Spending Clause power. And it's my duty to make sure that I collect the civil penalties that Congress has specified by statute, and they go into the general federal Treasury. And then Congress can decide what to do with them. So that's my concluding remark, Dean.


Dean Reuter:  Well, thank you so much, Assistant Attorney General Jeff Clark. You've been very generous with your time. I thank you for joining us today in the, as you mentioned, the inaugural edition of Capital Conversations. It's very good to kick this series off with you. I want to thank also our callers and our questioners for dialing in. We are adjourned. Thank you very much, everyone. 


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