Recent legislation and an even more recent U.S. Environmental Protection Agency (EPA) rulemaking will cause civil monetary penalties for violations of federal environmental laws to increase significantly, beginning Aug. 1; subsequently, penalties will increase annually to track inflation. President Obama signed the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 on Nov. 2, 2015, (Section 701 of Public Law 114-74). This law created a mandate for all federal agencies to adjust civil monetary penalties upwards to match inflation, both initially in the summer of 2016 and annually thenceforth. Penalty adjustment tracking inflation has been required since 1990, but adjustments have been minor and have not kept pace with the actual rate of inflation. The Improvements Act was passed to give this requirement teeth.

First, the Improvements Act mandates that agencies will now adjust their civil penalties annually, beginning next January. To date, the EPA has been adjusting penalties only every four years pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990. Second, the Improvements Act establishes a “catch-up” period and guidelines for a one-time assessment and recalculation of penalty amounts. Section 5(b)(2)(A) of the Improvements Act provides a formula for this recalculation: penalty amounts should be increased by the same percentage by which the consumer price index for all urban consumers (CPI-U), a measurement of costs of living, has increased between the time the penalty was established or last recalculated—other than to track inflation—and October of 2015. This requirement is tempered, however, by Section 5(b)(2)(C) of the act, which limits any increase to 150 percent of the amount of the penalty on Nov. 2, 2015.

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