CPR Briefing Paper: Chesapeake Bay States Need to Strengthen Penalty Policies to Make Sure there is No Profit in Pollution

by Robert Glicksman

Industries that discharge water pollution are required to abide by clean water laws and regulations that limit how much they can pollute the nation's rivers, lakes, streams, and other bodies of water. If they exceed their limits or fail to implement appropriate methods for controlling their pollution, they violate the law. Such violations should trigger appropriate sanctions to deter all regulated entities from committing future violations.

Unfortunately, polluters may weigh decisions about whether and how much to pollute from a dollars-and-cents perspective only, comparing the costs of compliance with the penalties to which they may be subject for exceeding applicable discharge limits. Such a comparison can make decisions about how much to pollute turn on a comparison of the bottom line on the corporate balance sheet with and without a violation, without any apparent recognition of the impact that pollution may have on the health of others or the social responsibility to abide by legal mandates.

That's precisely why strict regulation of polluting industries is necessary. More specifically, it's why there should be no question that the cost of violating the law will exceed the avoided costs of compliance that result from a decision not to abide by applicable discharge limits. The penalties for violating environmental laws such as the Clean Water Act should provide ample economic disincentive to violate the law —the penalties must be high enough that regulated businesses that make decision about whether to pollute based purely on the bottom line will find no profit from polluting. 

Today, CPR releases No Profit in Pollution: A Comparison of Key Chesapeake Bay State Water Pollution Penalty Policies (CPR Briefing Paper 1305), which examines the component of clean water enforcement penalty policy that is aimed at ensuring that polluters do not profit from their bad behavior. The paper focuses on what is known formally as the “economic benefit of noncompliance (EBN).” We look at the penalty policies of three key Chesapeake Bay states, Maryland, Pennsylvania, and Virginia, to examine the rigor of their penalty policies and practices concerning the EBN penalty component. Using the EPA’s policies and frameworks as the comparative standard, we review the clean water statutory and regulatory frameworks in these three states to determine the answers to the following questions:

  • Does the primary water pollution statute mandate consideration of the EBN factor in administrative and civil penalty assessments?
  • Do written, publicly available penalty policies exist that incorporate the EBN factor into general or water pollution-specific penalty assessments?
  • Do publicly available calculation sheets, matrices, or penalty assessment methodologies include the EBN factor and offer detailed calculation instructions?

Beyond identifying the answers to these questions, we present background discussion of the key strengths and weaknesses of any identified penalty policies and information concerning the application and practices of both federal and state enforcement authorities in implementing these policies to recover the EBN penalty component. 

Our recommendations identify a number of actions that both EPA and the key Chesapeake Bay states should take to ensure that polluters do not profit from regulatory noncompliance, including: 

  • Amending existing statutes to mandate recovery of EBN, 
  • Drafting detailed civil penalty policies and making these available to the public, and
  • Offering more transparency concerning existing penalty assessments and EBN components. 

An objective baseline for penalties, mandating the recovery of EBN and strengthening existing frameworks and practices surrounding this critical penalty component, would move the Chesapeake Bay one step closer to improved health and vitality for all that rely on it.

© 2016 The Center for Progressive Reform