Supplemental Environmental Project (SEP) and Proposal Guidelines


A Supplemental Environmental Project (SEP) is an in-kind service or cash contribution to a project or program designed to advance environmental interests and which a “Person” (meaning a state agency, any municipality, governmental subdivision of the state or the United States, public or private corporation, individual, partnership, association, or other entity) agrees to perform in partial settlement of an enforcement action, but which the Person is not otherwise legally required to perform, and for which the Person retains no monetary benefit, however remote.

In order to be considered as partial settlement of an enforcement action, a specific project must be approved by ADEQ’s director in consultation with the enforcement manager assigned to the matter under the guidelines described herein and in pursuant to Arkansas Code Annotated §§ 8-4-103 (f)(3), 8-6-204 (e)(3), or 8-7-204 (e)(3). This guideline does not create any rights on behalf of the Person.

Reduction of Penalty

The final administrative penalty amount (without considering the amount approved for any SEPs) must be sufficient: (1) to have a deterrent effect on the individual violator and on other violators in similar positions, and (2) to the extent possible, recapture the economic benefits of noncompliance plus some appreciable portion of the gravity component of the penalty computation.

In general, a SEP will not justify more than a 35 percent reduction of the recommended administrative penalty; however, the director has the final authority to establish the level of partial mitigation of a statutory penalty. In addition, at least a $1 expenditure for a SEP will be required to justify a $1 reduction in penalties. Projects that directly remediate environmental contamination or reduce pollutants entering the environment may be acceptable at a 1:1 ratio. SEPs determined by ADEQ staff to have only indirect environmental benefits may be accepted at a rate of $3 expended for every $1 reduction in the penalty amount, or a 3:1 ration. These ratios are at the discretion of the director and may be modified.

  1. Governmental entities (meaning state agencies or departments; districts, authorities, counties, municipalities, and other political subdivisions of the state; and public utilities owned by a governmental entity) are eligible for reductions of up to 50 percent of their penalties on the basis of SEP expenditures, as well as a ratio of a $1 reduction in penalty for every $1 spent on an accepted SEP, or a 1:1 ratio.
  2. Any Person that is the subject of an enforcement matter is eligible to request a $1 reduction in penalty for every $1 spent, or a 1:1 ratio, on a SEP that is specifically determined to result in a discernible beneficial change in the environment. This would include projects that go beyond any legal requirement and result in direct reductions of pollutants entering the environment or actual remediation of contaminated sites.

Situations in Which SEPs May Be Appropriate

ADEQ will consider a SEP as part of an enforcement action if: (1) all violations are corrected through actions to ensure future compliance, (2) any pollution resulting from such violations has been remediated or will be remediated by the implementation of the terms of the agreed enforcement action, (3) both general and specific deterrence objectives are served, and (4) there is an appropriate relationship between the nature of the violation and the environmental benefits to be derived from the project or there is an overriding public and environmental good to be served by implementation of the project.

Projects Which May be Accepted

Preferred projects are those that will directly benefit the environment in the community where the alleged violation occurred. Acceptable projects are those that prevent pollution, reduce the amount of pollutants reaching the environment, enhance the quality of the environment, or contribute to public awareness of environmental matters. Projects that are not acceptable are those that would be required to bring the respondent into compliance with the law or are otherwise required to be completed or previously completed.

  1. Pollution prevention and/or reduction projects in which the amount of pollutants reaching the environment is decreased beyond any amount required to comply with environmental laws or other commitments
  2. Environmental restoration projects that go beyond repair to the enhancement of the environment in the vicinity of the violating facility
  3. Environmental projects that provide significant and meaningful technical assistance to other ADEQ regulated entities that are faced with economic and/or technological hardships
  4. Projects that provide significant and meaningful environmental education and/or engineering assistance to members of the regulated community or the public
  5. Projects to fund public works for a neighboring municipality or county that will benefit the environment in a way that is beyond ordinary compliance with the law
  1. Compliance History. ADEQ shall have the discretion to review whether the Person has a history of non-compliance with the environmental laws or regulations of this state or any other jurisdiction. The Person shall provide to ADEQ a history of all environmental enforcement actions that have been issued and the compliance status of each. ADEQ may refuse the use of a SEP to mitigate an administrative civil penalty where the Person has a history of non-compliance of the environmental laws or regulations of this state or any other jurisdiction.
  2. Performance. The Person must demonstrate to ADEQ its ability to perform the SEP before any such agreement is presented to ADEQ. Respondent must also provide a written report to the ADEQ division responsible for the action to show that the SEP has been properly implemented, within a time period to be stated in the enforcement action. Any dollars that are not spent for the approved SEP within a duration specified in the enforcement action shall be forfeited to ADEQ as a penalty.
  3. Oversight/Tracking. Additional staff resources will be required to monitor performance. Every effort should be made to ensure that the Person provides sufficient and timely data to facilitate any required staff efforts. If third-party oversight is necessary, these costs must be borne by the respondent.

This proposal guideline is intended to be used by a “Person” who requests to mitigate the administrative civil penalty of an ADEQ enforcement action by a SEP. In order for the enforcement staff to begin its evaluation of a proposed SEP, the following information is required:

  1. Enforcement Action - Indicate the name of the entity and the location of the site associated with the enforcement action. Include the city and county.
  2. Regulatory Information - Provide a brief summary of all environmental enforcement actions, including compliance status, relating to the site identified above. For on-site projects, provide all ADEQ and Environmental Protection Agency (EPA) permit and account numbers related to this facility for all media.
  3. Project Name - SEP Title
  4. Project Manager - Provide the name, mailing address, telephone number, and fax number for the project manager, organization conducting the project (if different from the Person), and the person who will be responsible for submitting status reports (if different from the project manager). If the project will be conducted by a third party to the ADEQ enforcement action, the proposal should be accompanied by a letter or resolution from the appropriate board, governing body, or executive staff expressing the organization's commitment to the project if approved.
  5. ADEQ Contact Person - Provide the name, division, and telephone number of any ADEQ staff person who has assisted with the development of this project.
  6. Geographical Area to Benefit From Project - Identify cities, counties, and watersheds that would benefit from the project.
  7. Types of Projects:
    • Pollution prevention/reduction
    • Environmental restoration/protection
    • Environmental regulatory compliance/technical assistance
    • Environmental education/assistance
    • Other environmental projects beneficial to neighboring community
  8. Project Description - Describe the project, including the following information: need for the project, availability of other similar services or projects in the area, and project implementation tasks such as technology, operation, or process changes.
  9. Expected Environmental Benefits - Explain the expected environmental benefits of this project and quantify the environmental benefits to the extent practical.
    • For pollution prevention or reduction projects - Quantify the amount of each pollutant that is expected to be reduced beyond the level required for environmental compliance. Specify the media (air, water, land) to be benefited.
    • For all other types of projects - Quantify the number of participants, programs offered, sites cleaned, types of contamination contained/removed, acres restored or affected, etc.
  10. Project Budget - Provide projected initial and annual project costs with specific line item expenditures. Costs must be clearly and solely attributable to the proposed SEP.
  11. Project Schedule - Provide a proposed schedule that addresses project implementation, the submittal of status reports to ADEQ, and the anticipated completion date. Project implementation must not commence until after ADEQ has approved the SEP in an executed enforcement action.
  12. Accounting - Describe how SEP contributions would be accounted for if a third party is the proposed project implementer.
  13. Reporting - Describe the information and documentation that would be included in project status reports. Project reports must provide sufficient information for ADEQ to monitor the project implementation status, to verify and document the proper expenditure of SEP funds, and to evaluate the effectiveness and benefits of the SEP.
  14. Prior Commitments and/or Regulatory Requirements:
    • Identify any applicable local, state, or federal regulations that would require implementation of this project or any part of this project.
    • Identify any binding private commitments to implement this project or any part of this project.
    • Identify any other requirement to implement this project or any part of this project.
    • Indicate the time frame for implementation of the project under any aforementioned commitments.
  15. Certification of Expenditures by Respondent - Provide a separate certification that the proposed SEP is solely attributable to the settlement of the current enforcement action and that no funding has been budgeted to the project prior to the approval of the project, nor is the proposed project funded by grants, donations, low-interest loans, or other sources of funding not attributable to the Person's normal budgetary process. Also certify that the proposed project is not being done, nor will receive credit, as part of an environmental incentive or awards program offered by industry or by federal, state, or local government, etc.

Guideline for Community Proposals

This guideline is intended for use by a local government or organization requesting that a specific SEP be considered for its community. If your community has a project that meets the criteria for a SEP, please provide the following information in case a regulated entity (Person as described in paragraph 1) in your community or area should become involved in enforcement settlement negotiations that could include a SEP. This project request will be retained for future consideration during ADEQ enforcement action settlements. A SEP is not required in an enforcement action settlement but is a settlement option that ADEQ may propose and the Person might agree to conduct to mitigate civil penalties. There are no guarantees the project will be selected, only that it will be considered.

  1. Project Recipient - Provide the name, mailing address, telephone number, and fax number for the project manager, organization desiring the project be performed (if known), and the person who will be responsible for submitting status reports (if different from the project manager). The proposal should be accompanied by a letter or resolution from the appropriate board, governing body, or executive staff expressing the organization's commitment to the project if approved.
  2. Name of Project - Title that identifies the SEP
  3. ADEQ Contact - Provide the name, division, and telephone number of any ADEQ staff who has assisted with the development of this project.
  4. Geographical Area to Benefit from Project - Identify communities, cities, counties, etc. benefiting from this environmental project.
  5. Types of Project:
    • Pollution prevention/reduction
    • Environmental restoration/protection
    • Environmental regulatory compliance/technical assistance
    • Environmental education/assistance
    • Other environmental projects beneficial to neighboring community
  6. Project Description - Describe project, including (1) need for the project, (2) availability of other similar services or projects in the area, and (3) project implementation tasks such as technology, operation, or process changes.
  7. Expected Environmental Benefits - Explain expected environmental benefits of this project and quantify the environmental benefits to the extent practical.
    • For pollution prevention or reduction projects - Identify the type of each pollutant expected to be reduced. Specify the media (air, water, land) to be benefited.
    • For all other projects - Identify the sites cleaned, types of contamination contained/removed, acres restored or benefited, number of participants, programs offered, etc.
  8. Project Cost - Provide estimated project costs with specific line item expenditures. Costs must be clearly and solely attributable to the proposed SEP.
  9. Project Schedule - Provide a proposed schedule addressing project implementation and submittal of status reports to ADEQ.
  10. Accounting - Describe how SEP contributions would be accounted for from receipt until expenditure of the full amount.
  11. Reporting - Describe the information and documentation that would be included in project status reports. Project reports must provide sufficient information for ADEQ to monitor the project implementation status, to verify and document proper expenditure of SEP funds, and to evaluate effectiveness and benefits of the SEP.
  12. Availability of Other Funding - Describe the availability of funding for this project from sources other than SEP contributors. Include sources of funding secured and applied for directly related to this SEP.
  13. Additional Information - ADEQ reserves the right to require additional information prior to approval of the proposed SEP*.

Deviation from this Policy

Consistent with the statutory provisions authorizing the use of SEPs, ADEQ’s director may deviate from the guidelines set forth above in extraordinary and limited circumstances where there is an unquestionable benefit to human health or the environment that outweighs the considerations resulting in the development of this policy. These extremely limited situations will be evaluated on a case-by-case basis by the director or the director’s designee and will be considered only where the direct beneficial impact of the project is exceptional and falls to the individuals, community, or area potentially or actually affected by the violations.