United States: Wet Weather Regulations Now More Expensive Under EPA's Industrial Stormwater Settlement Penalty Policy

Last Updated: May 18 2017
Article by Amy P. Wang

Heavy and consistent rainfall this summer, even before Tropical Storms Hermine and Julia and Hurricane Matthew, produced a tremendous amount of stormwater.  Grass swales were too saturated to allow infiltration, and retention ponds were full, discharging stormwater into streets or surface waters. Managers at industrial operations had to inspect plant sites more frequently after heavy rainfall to ensure no stormwater escaped except as allowed under the facility's stormwater permit.  Federal and state enforcement personnel also conducted inspections of their own, finding opportunities to issue notices of violation ("NOV") of stormwater regulations.  Industries at the receiving end of an NOV found out it is more expensive than ever to pay for runoff.

Background: Industrial Stormwater Regulation

In the initial years after the passage of the 1972 Clean Water Act amendments, the United States Environmental Protection Agency ("EPA") focused on controlling the discharge of industrial process wastewater and municipal sewage through its National Pollutant Discharge Elimination System ("NPDES") permit program.  

Once water quality stabilized after EPA's implementation of treatment standards for the discharge of toxic and conventional pollutants from point sources, the agency shifted its focus to tackling pollutants discharged from diffuse, or "nonpoint" sources as the result of wet weather: that is, stormwater.  Further, amendments to the Clean Water Act in 1987 included a comprehensive new scheme for stormwater.  Since the inclusion of stormwater in the NPDES program, discharges composed entirely of stormwater from industrial and construction activities and municipalities have been subject to tighter controls under the applicable permits.

NPDES Permit Requirement

Since 1994, discharges associated with industrial activity have required compliance with an NPDES Stormwater Permit.  Industries falling within one of the Standard Industrial Classification Codes need a permit for stormwater discharge associated with industrial activities at facilities such as plant yards, access roads, rail lines used to carry material and products, material handling sites, refuse sites, shipping and receiving areas, storage areas for raw materials and products, and areas where industrial activity has occurred in the past where significant materials remain and are exposed to rainfall.

Most industries seek coverage under one of several General Permits available for various categories of regulated industrial activity such as: heavy manufacturing including paper mills, chemical plants, refineries, steel mills; coal and mineral mining; hazardous waste treatment, storage and disposal facilities; landfills and dumps holding industrial waste; metal scrapyards, automobile salvage and junkyards; battery reclaimers; power generating plants; transportation facilities; and light manufacturing including food processing, printing and publishing, public warehousing and storage, and electronic equipment manufacturing.  


The EPA has authorized most states to implement the NPDES stormwater permitting program while retaining concurrent enforcement jurisdiction.  In North Carolina, the Department of Environmental Quality administers the program through the Division of Energy, Minerals, and Land Resources ("DEMLR").  General Permit terms and conditions typically are a combination of stormwater pollution prevention plans ("SWPPP"), monitoring, and numeric effluent limitations.

Although the DEMLR generally issues and enforces NPDES industrial stormwater permits, the EPA has the discretion to exert its enforcement authority.  The EPA often becomes involved in cases of significant violations or those which are the subject of its current National Enforcement Initiatives.  Sometimes, EPA Regional Offices will target a particular watershed of interest, and then identify high priority industries in the area to inspect and provide enforcement training opportunities for federal and state personnel.  Enforcement inspections include a review of the SWPPP, inspections records, monitoring reports, and a site inspection to verify that the SWPPP has been implemented and that best management practices ("BMP") are sufficient and adequately maintained to control stormwater at the facility.  Common violations include inadequate SWPPPs, inadequate documentation of inspections after heavy rainfall or failure to document corrective actions, and effluent limitation violations.  

Once the EPA issues an NOV, it has several options.  The EPA can use Administrative Compliance Orders for smaller site-specific violations to require the industry to correct deficiencies within a period of time and submit a compliance letter.  Alternatively, it can initiate an administrative enforcement action for company-wide deficiencies identified at multiple sites or for significant site-specific violations.  

The EPA reserves judicial enforcement actions for cases involving significant environmental damage or cases of national importance.  

When civil penalties will be pursued, the Clean Water Act requires the EPA to weigh fact-specific considerations to determine the amount of penalties to be assessed, including the nature and circumstances of the violation, the extent and gravity of the violation, the violator's history of prior violations, the violator's ability to pay, and any economic benefit or savings resulting from the violation.  Among the EPA's environmental goals is the imposition of penalties large enough to deter future noncompliance by the violator and others and to ensure violators obtain no advantage over competitors by deriving an economic benefit from avoiding compliance with the Clean Water Act.

EPA's Industrial Stormwater Settlement Penalty Policy

Many civil enforcement actions do not reach trial and are settled by the EPA.  When negotiating a settlement the EPA now will follow the "Supplemental Guidance to the 1995 Interim Clean Water Act Settlement Penalty Policy for Violations of the Industrial Stormwater Requirements" ("2016 Supplement Guidance").  The 2016 Supplemental Guidance is an update to the Interim Clean Water Act Settlement Policy ("1995 Settlement Policy") originally adopted as a method for EPA staff to calculate nationally consistent minimum penalties for settlement of any Clean Water Act violation.  In 2008, the EPA developed supplemental guidance to the 1995 Settlement Policy specifically for violations of stormwater requirements for construction activities.  In 2016, it did the same for violations of industrial stormwater requirements.

The original 1995 Settlement Policy created a methodology for analyzing the statutory considerations to calculate a settlement penalty based on the following formula:

Penalty = Economic Benefit + Gravity +/- Gravity Adjustment Factors – Litigation Considerations – Ability to Pay – Supplemental Environmental Projects.

The 1995 Settlement Policy contains in-depth discussions of the components of the formula and how each is to be determined, including value ranges, tables, and computer models.  The 2016 Supplemental Guidance does not change the overall formula, but emphasizes and adjusts four of factors in order to tailor the settlement penalty specifically for industrial stormwater cases.

Economic Benefit

The violator gains an economic benefit from either avoiding or delaying costs that would otherwise have been incurred by complying with industrial activity requirements.  The 1995 Settlement Policy addresses calculation of the value of monitoring and reporting requirements, capital expenditures, and operation and maintenance.

The 2016 Supplemental Guidance adds the following factors into the total Economic Benefit calculation:

  • Failure to obtain an NPDES Permit;
  • Failure to develop a SWPPP;
  • Failure to implement stormwater controls or BMPs;
  • Failure to maintain stormwater controls or BMPs;
  • Failure to regularly inspect stormwater controls or BMPs; and,
  • Failure to monitor or report.


The 2016 Supplemental Guidance modifies the 1995 Settlement Policy calculation of the Gravity Component to fit the circumstances of industrial stormwater violations using factor-specific tables with ranges of values.  The Gravity Component of an industrial stormwater violation includes:

  • Significance of Effluent Violations: A calculation based on whether the facility violates a numeric effluent limitation in its NPDES Stormwater Permit;
  • Health and Environmental Harm: A calculation that identifies the harm and assigns a value based on tables, including many considerations such as the quality classification of the surface water receiving the discharge and whether it is listed as impaired for certain pollutants; the duration of the noncompliance; actual impacts or potential harm to human health or the environment; prioritization of the industry based on the level of threat to the environment from the industrial activity; and, whether drinking water supplies and stream beds are impacted; and,
  • Non-Effluent Limit Violations: A six step calculation using tables that consider the category of non-numeric effluent limit violations based on severity and duration of the violation, the size and sophistication of the owner or operator of the industrial activity, and whether the discharge occurred without an NPDES Stormwater Permit.

Gravity Adjustment Factors

The 2016 Supplemental Guidance applies two of the original four Gravity Adjustment Factors to industrial stormwater violations.  The EPA will continue to use the History of Recalcitrance Factor to increase penalties.  A violator's history can include bad faith, an unjustified delay in preventing, mitigating, or remedying a violation, and failure to comply with previous Administrative Compliance Orders.  The EPA will use the Quick Settlement Adjustment Factor to reduce a penalty by ten percent as extra incentive for timely settlement.

Litigation Considerations

The 2016 Supplemental Guidance encourages EPA staff to take into account the Litigation Considerations in the 1995 Settlement Policy.  The EPA may reduce the amount of civil penalty it will accept to settle a case where it recognizes weaknesses in its own case because the facts demonstrate a substantial likelihood it will not achieve a higher penalty at trial.  Possible considerations include reliability of evidence or witnesses and statements made by federal, state or local regulators that may allow the violator to credibly argue that it believed it was complying with the Clean Water Act.

The 2016 Supplemental Guidance is used in settlements only, and the EPA will not disclose its internal calculations during negotiations.  If the matter does not settle and proceeds to a hearing or trial, the EPA will pursue the full extent of civil penalties available under the law.

Increased Civil Penalties for Noncompliance 

Compounding the effect of the 2016 Supplemental Guidance is the EPA's recent update of the maximum civil penalties available for federal environmental violations.  Major environmental statutes mandate the maximum civil penalty amount that the EPA can impose for each violation for each day it occurs or continues.  The penalty amounts set in the statutes have been increased occasionally, but have not kept up with inflation.  

In July 2016, the EPA increased those maximum civil penalties in response to Congress's 2015 amendment to the Federal Civil Penalties Inflation Adjustment Act ("Civil Penalty Inflation Adjustment").  The first increase was an initial "catch up" adjustment to civil penalties effective July 1, 2016 for violations occurring on or after November 2, 2015 and assessed on or after August 1, 2016.  The second increase will be an annual adjustment beginning January 15, 2017.  Amounts vary across environmental statutes, but the effect on the Clean Water Act means Class I penalties for individual stormwater violations, originally set at $25,000 per violation per day and adjusted for inflation to $37,500, were increased to $51,570 per violation.  Class II penalties for continuous stormwater violations, originally set at $125,000 and adjusted for inflation to $187,500, were increased to $257,848.  A combination of stormwater violations could lead to the EPA assessing an astronomical civil penalty against a violator.


The cost of environmental non-compliance has increased under the factor-intensive 2016 Supplemental Guidance and will continue to do so annually under the Civil Penalty Inflation Adjustment.  Industries must invest time and money in compliance assessments and self-audits to identify issues, be proactive about corrective measures, and stay in compliance

Third-party auditing in consultation with legal counsel can help control enforcement costs.  Settlement negotiations can result in reduced penalties.  However, the EPA will pursue the maximum available penalties absent settlement.  Defending and resolving industrial stormwater violations are more important and expensive than ever – so, best to keep the EPA from knocking on the door.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions