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MINIMIZING RISK UNDER THE CLEAN WATER ACT
Carol Clayton
H. David Gold
Brent Gurney
Mark Kalpin
Alexander White
Synopsis: The Federal Water Pollution Control Act—more commonly known as
the Clean Water Act—establishes a stringent regulatory and permitting regime
governing the discharge of pollutants into rivers, streams, wetlands, and other
“navigable waters.” The statute also addresses accidental releases of oil and
hazardous substances, and imposes spill prevention, reporting, planning, and
response requirements on the regulated community, as well as civil and criminal
penalties for unauthorized discharges. The energy industry faces substantial legal
risk under the Clean Water Act because (1) many of its operations are subject to
Clean Water Act regulatory and permitting requirements, (2) the industry’s core
activities—oil and gas exploration and production, storage, transportation,
processing, and refining—are technically and operationally difficult and pose
inherent risks of accidental releases, (3) federal authorities have targeted the
industry for enforcement, (4) the statute provides for onerous civil and criminal
penalties, and has been interpreted by several courts to allow the imposition of
criminal fines and imprisonment for violations caused by simple negligence, and
(5) in certain circumstances, the statute automatically disqualifies violators from
receiving energy supply and other federal contracts, as well as federal oil and gas
leases.
Energy companies can minimize their exposure to Clean Water Act
regulatory enforcement actions by implementing strong compliance programs,
including compliance audits. But meeting regulatory requirements and permit
conditions is not enough. Energy companies should also have strong risk
management programs designed to prevent accidental releases of oil and
hazardous substances, as well as emergency preparedness and response plans that
enable them to minimize the impacts of any release. Should a regulatory violation
or accidental release nonetheless occur, energy companies may persuade the
government to forgo criminal enforcement and accept reduced civil penalties by
Partner and Chair of the Environmental Practice at WilmerHale in Washington, D.C. Ms. Clayton
represents clients in environmental, health and safety (EHS) regulatory compliance and enforcement defense
matters, including the design and implementation of corporate EHS compliance and risk management systems.
Special Counsel at WilmerHale in Boston, MA. Mr. Gold represents clients in environmental, energy,
and land use matters, with particular background on Clean Water Act compliance.
Partner in the Litigation Department at WilmerHale in Washington, D.C. Mr. Gurney represents
clients in complex civil and criminal cases throughout the United States, including environmental enforcement
matters.
Partner and Co-Chair of the Energy and Cleantech industry group at WilmerHale in Boston, MA. Mr.
Kalpin advises clients in all aspects of energy, environmental, and natural resources law
Senior Associate at WilmerHale in Washington, D.C. Mr. White represents clients in litigation and
enforcement matters, including criminal proceedings.
Energy Law Journal
Volume 36, No.1 (2015)
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70 ENERGY LAW JOURNAL [Vol. 36:69
taking steps spelled out in federal enforcement policies and guidelines. These
steps include promptly reporting a known or suspected violation, remediating
environmental damage and other harm caused by the violation, and implementing
corrective measures to prevent a recurrence.
I.Introduction ...................................................................................... 70
II.The Clean Water Act Creates the Potential for Significant Civil and
Criminal Liability and Collateral Consequences ............................. 73
A.Clean Water Act Programs ....................................................... 73
B.Enforcement under the Clean Water Act .................................. 74
C.Collateral Consequences: Disqualification, Suspension, and
Debarment ................................................................................. 76
III.The Prevailing Legal Standards Give Prosecutors Broad
Discretion ......................................................................................... 78
A.Simple or Gross Negligence Standard for Misdemeanors? ...... 78
B.Grounds for Challenging the Simple Negligence Standard ...... 81
C.Enforcement Authorities Have Broad Discretion in Deciding
Whether to Bring Criminal or Civil Charges ............................ 84
IV.Effective Compliance and Risk Management Programs are Critical 86
A.Effective Compliance Programs May Help Avoid Enforcement
and Reduce Penalties under Federal Policies and Guidelines ... 87
B.Elements of an Effective Compliance Program under Federal
Enforcement Policies and Guidelines ....................................... 90
C.Special Considerations for Energy Companies ......................... 92
V.Conclusion ....................................................................................... 94
I. INTRODUCTION
Energy companies—as well as their officers, employees, and contractors—
face significant legal risk under the Clean Water Act for a number of reasons,
including: the statute’s applicability to a wide range of energy industry activities,
imposition of liability for purely accidental discharges of oil and hazardous
substances, and onerous penalty provisions; judicial precedents construing the
statute to criminalize simple negligence; and a lengthening string of successful
enforcement actions against companies and individuals representing virtually
every sector of the industry. Indeed, the U.S. Environmental Protection Agency
(EPA), which has principal responsibility for administering and enforcing the
Clean Water Act, has specifically targeted the industry’s upstream sector for
enforcement under the Clean Water Act and other federal environmental statutes.1
The following sampling of enforcement cases against companies and
individuals in the energy industry illustrates the range of industry activities that
pose Clean Water Act enforcement risk, as well as the range of potential penalties:
1. EPA’s Office of Enforcement and Compliance Assurance (OECA) sets “National Enforcement
Initiatives” (NEIs) every three years. One NEI currently targets the “Energy Extraction Sector” for the period
2013 through 2016. EPA, OFFICE OF ENFORCEMENT &COMPLIANCE ASSURANCE, FY 2014 NATIONAL
PROGRAM MANAGER GUIDANCE 3, 8 (2013), available at
http://nepis.epa.gov/Exe/ZyPURL.cgi?Dockey=P100H18X.txt.
