On Thursday, June 11, 2008, the United States District Court for the Eastern District of Virginia received consent decrees in four enforcement actions involving storm water management from construction sites. Each of the four actions targeted large-scale developers of residential properties doing business in multiple states. The United States Environmental Protection Agency (USEPA) promised to more strictly enforce storm water management regulations under the National Pollutant Discharge Elimination System (NPDES) permit program, a program authorized by the Clean Water Act (CWA), and these cases evidence its commitment to that promise. The consent decrees lodged levy large civil penalties and require compliance programs that reach beyond current regulatory requirements. The cases, noted below, involved common issues, and we anticipate that future enforcement by USEPA would look for similar fact patterns.

• United States v. Centex Homes, No. 1:08CV605 (E.D. Va. June 11, 2008)
• United States v. KB Home, No. 1:08CV603 (E.D. Va. June 11, 2008)
• United States v. M.D.C. Holdings, Inc., No. 1:08CV604 (E.D. Va. June 11, 2008)
• United States v. Pulte Homes, Inc., No. 1:08CV602 (E.D. Va. June 11, 2008)

Common Set of Facts

Construction activities that disturb one acre or more of land require an NPDES permit for storm water discharges. Permits may be issued by USEPA or authorized states and dischargers must be covered by a permit before construction begins. Any person subject to a permit must develop and implement a storm water prevention plan that incorporates best management practices to prevent or reduce the discharge of pollutants to waters of the United States. These practices include erosion controls (such as stabilizing soils and maintaining natural vegetation) and sediment controls (such as capturing sediments by silt fences or settling ponds). In each of the cases, the complaints alleged patterns of failure to comply with NPDES storm water permitting and reporting requirements.

The permits impose additional requirements such as site inspections during construction and after rain events, maintaining and updating the storm water prevention plan and associated records, and final stabilization of the site followed by termination of permit coverage.

All four cases were brought by the United States, on behalf of the USEPA, together with various states where the alleged violations occurred. Each of the defendants builds thousands of new homes each year in anywhere from 14 to 28 states. The allegations arose out of inspections conducted at various construction sites over a period of three to five years. The complaints alleged violations of the Clean Water Act and analogous state laws for discharging pollutants in storm water without a permit, failing to provide required information to the USEPA or authorized State agency, and failing to comply with NPDES permits, once issued.

Company-Wide Compliance Program

The consent decrees set forth compliance programs for the companies that go beyond current regulatory requirements. The defendants are required to designate compliance representatives and provide compliance summary reports not only on a site-specific basis, but also at a regional and national level. Further, the consent decrees require enhanced training and storm water orientation programs for contractors and consultants working for the companies.

Civil Penalties

Each of the civil penalties totaled approximately $1.5 million. It is important to keep in mind that the large civil penalty is due, in part, to the scope of the enforcement action and size of the developer. Portions of the civil penalties were designated to the individual states where the companies did business. The penalties designated to the states ranged from $2,000 to $83,000. Also part of the settlement, the parties agreed to stipulated penalties for future noncompliance such as causing storm water discharges, failing to timely report or failing to meet other requirements of the consent decree.

A feature unique to the Pulte Homes settlement that is becoming more commonly used in federal and State environmental settlements is a supplemental environmental project (SEP). A SEP is an environmentally beneficial project that the defendant would not otherwise be required to perform. Pulte Homes agreed to a project intended to reduce sediment loadings to the Garcia River Watershed in order to restore habitat for the recovery of indigenous species, including the California Coho Salmon. Supplemental environmental projects may offset a civil penalty in whole or in part. In this case, the project, expected to cost $608,000 to implement, offsets a portion of the civil penalty for Pulte Homes.

How You Can Comply

Compliance with the NPDES permit program requires proper permitting and the development of a comprehensive storm water prevention plan tailored to your specific construction site. If your company is considering new development or construction activities and you would like more information on how to be properly permitted in anticipation of storm water discharges, please contact any member of Schiff Hardin’s Environmental Group to discuss these issues.