Funds from Enforcement Actions
Enforcement actions brought by governmental authorities for violations of environmental or other natural resource laws are often settled on terms that require defendants to make community service or restitution payments. In turn, these types of payments are generally required to be applied in a manner that provides some redress for the underlying violations.
Community Service Payments (CSPs) and Restitution
At the federal level, “community service” is expressly allowed as a condition of probation by the United States Criminal Code (18 U.S.C. §3563(b)(12)). In turn, the United States Sentencing Guidelines allow community service where it is reasonably designed to repair the harm caused by the offense (U.S.S.G. §8B1.3). Additional requirements for appropriate community service measures are outlined in the United States Attorneys’ Manual, which expressly allows “organizational community service” in settlements of environmental prosecutions. Many federal environmental prosecutions do indeed include community service payments as part of their ultimate settlement.
The IDEA program has historically managed a wide array of CSPs arising from both federal and state environmental enforcement actions. Typically, these payments are required by the terms of applicable plea agreements or other judicial documents to be applied within a specific geographic area or for the benefit of a specific species impacted by the violations at issue. Whether by selecting a project already in the Foundation’s existing portfolio or soliciting project proposals through a Request for Proposals or other means, the IDEA program is able to ensure that community service and restitution funds are applied to high-quality conservation projects that satisfy all applicable legal constraints.
The particular language used by prosecutors to impose a community service or restitution requirement will vary from case to case. Nevertheless, with respect to federal prosecutions, there is a certain degree of consistency in the language used to direct CSPs to NFWF. Most typically, the operative provision will state as follows:
Community Service Payment. In furtherance of the sentencing principles provided for under §8B1.3 of the Federal Sentencing Guidelines and 18 U.S.C. § 3553(a), and within [__] days of sentencing, the Defendant shall make a Community Service Payment of $[_________] to the National Fish and Wildlife Foundation (“NFWF”), to be used by NFWF or by another organization selected by NFWF for the purposes set forth herein. The parties stipulate and agree that this amount is the maximum community service payment that may be imposed under this Agreement.
NFWF is a charitable and nonprofit organization established pursuant to 16 U.S.C. §§ 3701-3710. Its purposes include the acceptance and administration of “property . . . to further the conservation and management of fish, wildlife, plants, and other natural resources,” and the performance of “such other activities as will further the conservation and management of the fish, wildlife, and plant resources of the United States, and its territories and possessions for present and future generations of Americans.” 16 U.S.C. § 3701(b)(1), (2). NFWF is empowered to “do any and all acts necessary and proper to carry out” these purposes, including, specifically, solicitation, acceptance, administration, and use of “any gift, devise or bequest . . . of real or personal property.” 16 U.S.C. § 3703(c)(1), (11). NFWF’s Congressional charter mandates that it be governed by a Board of Directors that includes the Director of the United States Fish and Wildlife Service, the Under Secretary of Commerce for Oceans and Atmosphere, and various individuals educated or experienced in fish, wildlife, ocean, coastal, or other natural resource conservation and management. 16 U.S.C. § 3702(b)(1), (2).
The Community Service Payment of $[___________] shall be used by NFWF, or by another organization selected by NFWF, to fund projects for the purpose of [e.g., protection, scientific study, replacement, restoration, preservation, conservation, educational outreach efforts, etc.] with respect to species, habitat, or other natural resources in the vicinity of [GEOGRAPHIC AREA].
Because the community service payment is designated as community service by an organization, the Defendant agrees that it will not seek any reduction in its tax obligations as a result of the community service payment. In addition, because this payment constitutes community service, the Defendant will not characterize, publicize or refer to the community service payment as a voluntary donation or voluntary contribution.
Natural Resource Damages
The United States’ natural resources are legally protected by a wide array of federal and state laws and regulations. These laws and regulations generally require that any person or entity causing “damage” to those natural resources provide compensation to address the injury.
Most legal authorities in this context define “natural resources” very broadly to include land, water, air, fish, wildlife, biota, habitat, and other environmental assets. In turn, when an accident or activity injures these resources, the responsible party is typically required to conduct a damage assessment to define the extent of the injury; to return the impacted resources to their original baseline condition; and also to compensate the public for the interim loss of the resources pending their restoration.
In many cases, the governmental authorities overseeing the injured natural resources (usually referred to as “NRD Trustees”) will calculate the dollar value of the assessment, restoration, and compensation and the responsible party will pay this amount to resolve its overall liability. The laws applicable to natural resource damages typically require that these funds be used exclusively to restore, replace, or acquire the equivalent of the injured resources.
The IDEA program can readily assist NRD Trustees and other stakeholders in the management and administration of natural resource damage funds. Working with NRD Trustee councils, IDEA can serve as a fiduciary holder of funds, a contracting agent, an investment intermediary, and can run RFPs or other solicitations designed to get NRD funds “out the door and on the ground” for eligible projects. The IDEA program’s efficiency in this regard ultimately translates into less dollars for administration and more for the benefit of the impacted resources.
Supplemental Environmental Projects (SEPs)
Supplemental Environmental Projects are defined by the U.S. Environmental Protection Agency as environmentally beneficial projects that a respondent agrees to undertake as part of its settlement of an environmental enforcement action, but that the respondent is not otherwise legally required to perform. (See “Issuance of Final Supplemental Environmental Projects Policy,” U.S. EPA Office of Enforcement and Compliance Assurance, No. EC-P-1998-159, April 10, 1998 (the “SEP Policy”).) Respondents in environmental enforcement actions typically agree to implement SEPs in exchange for mitigation of the monetary penalty that otherwise must be paid.
The SEP Policy and several other EPA guidance documents on the use of SEPs contain provisions indicating the potential suitability of the IDEA program in this context. These provisions include the following:
EPA has acknowledged that, although a respondent must remain legally responsible for ensuring that a SEP is completed in a satisfactory manner, “[o]f course a respondent may use contractors or consultants to assist it in implementing a SEP” and “[n]on-profit organizations . . . may function as contractors or consultants.” (SEP Policy at Page 17, Section F and Footnote 18.
EPA has issued specific guidance on the role that entities such as NFWF-IDEA may play in the implementation of SEPs. (“Guidance Concerning the Use of Third Parties in the Performance of Supplemental Environmental Projects (SEPs) and the Aggregation of SEP Funds,” U.S. EPA Office of Enforcement and Compliance Assurance, December 15, 2003 (the “Third-Party SEP Guidance”).) In this guidance, EPA states that “[p]rivate organizations that are developing libraries of projects and offering project and funds management, project implementation, and oversight services can play a valuable role in SEPs.” (Third-Party SEP Guidance at Pate 4, Section II.A; emphasis in original.)
EPA has long recognized seven specific categories of projects which may qualify as SEPs. Among these are projects dedicated to “Environmental Restoration and Protection.” (See SEP Policy at Page 8, Section D.4.) EPA has further defined these types of projects as those that (1) enhance or improve the condition of an affected ecosystem, (2) protect an affected ecosystem from actual or potential damage resulting from the relevant violation, (3) restore important conservation resources such as wetlands and watersheds, and (4) provide for the protection of endangered species.
Whether by leveraging IDEA’s strengths as a fiduciary and project manager or by drawing on NFWF’s long history of evaluating and funding environmental restoration projects, both governmental agencies involved in environmental enforcement and respondents facing enforcement actions can benefit significantly from IDEA’s involvement in SEP implementation.