A Review of Texas’ and Other States’ Policies on Recovery of Economic Benefit Through Administrative Penalties in Environmental Enforcement

Released by: Environment Texas

Executive Summary

In December 2003, the Texas Commission on Environmental Quality (TCEQ) launched a year-long, comprehensive review of its enforcement program and practices. The review comes after a string of reports by state and federal auditors, non-profits and academics that document that the agency’s “enforcement process does not consistently ensure that violators are held accountable”.

These studies detail the vast majority of illegal polluters who escape any kind of punishment, the many large polluting facilities which go years without inspections, and the lack of sufficient resources and political will to enforce the law aggressively and provide a credible deterrent against illegal pollution.

No issue is perhaps more illustrative of TCEQ’s failures in enforcement than that of its penalty policy. While few violators ever reach the penalty stage in the enforcement process, those who do routinely face low fines. And thanks to an explicit TCEQ policy, many facilities actually profit from non-compliance, even after being assessed an administrative penalty.

A cornerstone of environmental enforcement is recapturing the economic benefit that a violator may have gained from illegal activity (known as the economic benefit of non-compliance or EBN). According to the U.S. EPA, “recapture helps level the economic playing field, preventing violators from obtaining an unfair financial advantage over their competitors who timely made the necessary investment in environmental compliance. Generically, penalties serve as incentives to protection of the environment and public health by encouraging the adoption of pollution prevention and recycling practices that limit exposure to liability for pollutant discharges. Finally, appropriate penalties help deter future violations by the violator and by others similarly situated.” 

In Texas, however, TCEQ’s penalty policies allow many of the entities that violated Texas law to escape re-payment of all or part of EBN. According to a review of eighty enforcement cases over three years by the Texas State Auditor, TCEQ staff estimated that violators enjoyed an economic benefit of $8,647,005 through non-compliance. However, the fines assessed by TCEQ amounted to only $1,683,635, approximately 19 per cent of the violators’ economic benefit. The Auditor attributed this failure to TCEQ’s penalty policy.

A more recent review by TexPIRG confirms that this TCEQ practice continues. For example, a review of a number of enforcement cases since September 1, 2003 reveal that many of the EBNs calculated by TCEQ were not collected as penalties (Figures are from TCEQ Penalty Worksheets).