Staff Report and Recommendation to Amend the Commission’s Enforcement Procedures Regulations Including Adoption of Administrative Civil Penalty Policy
The Executive Director recommends that the Commission adopt the revised proposed amendments to its enforcement procedures regulations that are codified at Title 14 of the California Code of Regulations, Division 5, Chapter 13 (14 C.C.R. §§ 11300-11386) and Division 5, appendices H and I, and that include a new proposed Appendix J, entitled Administrative Civil Penalty Policy, as set forth in Attachment A to this staff report.
On December 29, 2020, the Commission issued a Notice of Proposed Rulemaking, an Initial Statement of Reasons, and proposed amendments to the Commission’s enforcement procedures regulations, including appendices H and I, and a proposed Administrative Civil Penalty Policy that would be set forth in a new Appendix J. The public review and comment period on the proposed amendments commenced on December 29th and ran through February 18, 2021. In addition, the Commission held a public hearing on the proposed amendments at its February 18th meeting.
The Commission’s regulations establish procedural requirements for enforcement proceedings brought for violations of the McAteer-Petris Act (“MPA”), the Suisun Marsh Preservation Act (“SMPA”), or any permit issued by the Commission. Such proceedings may lead to an enforcement hearing before the Commission’s Enforcement Committee or the full Commission and issuance by the Commission of a cease and desist order, an order setting administrative civil liability (i.e., civil penalties), or a permit revocation order. The regulations also identify six categories of violations that may be resolved without Commission enforcement proceedings through corrective action and the payment of standardized fines in an amount, if any, that depends on how long the responsible party takes to correct the violation but which by statute may not exceed $30,000 per violation.
The principal proposed amendments to the enforcement procedures regulations, and certain changes that are proposed throughout Chapter 13 to improve the clarity and consistency of the regulations, are summarized below. Following this summary, the next section of this staff report describes the revisions to certain proposed amendments that were made in response to comments by the Commission at its meeting on February 18th, after the public hearing. The Initial Statement of Reasons includes a section-by-section detailed description of the proposed amendments.
The proposed amendments would add a definition of the term "significant harm to the Bay's resources or to existing or future public access." This term currently is used in the standardized fines regulation (14 C.C.R. § 11386) to identify violations that are not suitable for resolution through the standardized fines process. Under the proposed definition, whether a violation has resulted in "significant harm to the Bay's resources or to existing or future public access" would be determined based on both the context and intensity of the violation. As further described in the proposed definition, "context" refers to the location of the violation and the characteristics of the area where it occurs; "intensity" refers to the severity of the impact and the degree to which it affects the environment or public access.
The proposed amendments would add an Administrative Civil Penalty Policy as Appendix J of the regulations. The Administrative Civil Penalty Policy would be used to calculate proposed civil penalties for violations in a transparent and consistent manner and in accordance with the factors that the Commission is required by statute to consider in determining the amount of administrative civil liability for violations.
In summary, under the Administrative Civil Penalty Policy, penalties would be calculated by first establishing a base penalty amount by evaluating: (1) the gravity of the violation and the degree of deviation from the requirement at issue; and (2) whether an adjustment is warranted based on the susceptibility of the violation to removal or resolution. Next, adjustments to the base penalty amount, either upward or downward, may be made to reflect the circumstances of the violation and actions by the violator. The penalty may also be adjusted to ensure that the amount is no less than necessary to recoup any savings gained from the unauthorized activity or any economic benefit derived from noncompliance. The policy includes a section addressing an alleged violator’s ability to pay/ability to continue in business, making it clear that the violator must raise this argument and present evidence to support it. Finally, the policy includes a section on supplemental environmental projects (“SEPs”). A SEP is an environmentally beneficial project that a violator voluntarily agrees to undertake and complete in exchange for an offset of a portion of the monetary civil penalty that would otherwise apply because of a violation.
Under the existing regulations, an enforcement hearing may be conducted by the Enforcement Committee, the Commission, or a hearing officer appointed by the Commission. The proposed amendments would delete the existing definition of the term “Hearing Officer” and the numerous references to an enforcement hearing possibly being conducted by a hearing officer. To preserve the option to refer matters to a hearing officer, the proposed amendments would add a provision stating that the Commission may appoint a hearing officer to conduct an investigation or hearing at the request of the Executive Director or chair of the Enforcement Committee or on its own initiative. (14 C.C.R. § 11320.)
The proposed amendments would establish an additional option for Commission action on an Enforcement Committee recommended enforcement decision. If the respondent and the Executive Director agree to accept the Committee’s recommended decision, the Executive Director would calendar the recommended decision as a consent item on a Commission meeting agenda. At the Commission meeting, after allowing public comment on the consent item, the Commission would determine by a majority vote whether to adopt the recommended enforcement decision on consent without any change and without any further proceedings. If it did not vote to adopt the recommended decision on consent, the Commission would proceed to act on the matter in accordance with the provisions of the existing regulations. (14 C.C.R. § 11332(c).)
Under the existing regulations, oral testimony is not allowed at an enforcement hearing, except in limited circumstances, but cross-examination may be permitted of any person who has submitted a declaration under penalty of perjury. The proposed amendments clarify that declarations under penalty of perjury may be submitted by staff with a violation report or complaint for administrative civil liability and by a respondent with a statement of defense, and further clarify that cross-examination may be allowed only of such declarants. Cross-examination would not be allowed of any person who has not submitted a declaration under penalty of perjury, including the author of a document or any member of the public who has commented on an enforcement matter or submitted information related to an alleged violation. (14 C.C.R. § 11327(g).)
The proposed amendments include increases in some but not all the standardized fine amounts established by the existing regulations for certain categories of violations.
The proposed amendments revise certain nomenclature used in the regulations for clarity and consistency. For example, the existing regulations generally refer to a “Complaint for Administrative Imposition of Civil Penalties” and a “Civil Penalty Order.” The proposed amendments would revise these references to instead use the statutory language of a “Complaint for Administrative Civil Liability” and an “Order Setting Administrative Civil Liability,” respectively. This terminology mirrors the language in Government Code section 66641.6.
As required by the Administrative Procedure Act, each section of the regulations includes a “note” that cites the Commission’s statutory authority to adopt the regulation and references the statute(s), San Francisco Bay Plan policy, or caselaw implemented, interpreted, or made specific by the regulation. The proposed amendments revise the authority and reference citations throughout the Chapter 13 regulations to correct errors and ensure consistency between or among regulatory provisions on the same topic.
The proposed amendments provide for notices and documents related to an enforcement hearing to be sent by email or regular mail, and to be made available on the Commission’s website. The proposed amendments would also allow certain documents, including a violation report, complaint for administrative civil liability, and a Commission order, to be sent to a respondent by email (rather than certified or registered mail), with the respondent’s consent.
Revisions to the Proposed Amendments Following the Public Hearing
The Initial Statement of Reasons and the staff report for the public hearing on the proposed amendments (dated February 5, 2021) presented several alternatives to the proposed regulatory action, including the “no action” alternative, under which the Commission would not adopt any of the proposed amendments, and a few alternatives that were limited in scope and related only to certain issues or certain provisions of the regulations. Following the public hearing on February18th, several Commissioners provided comments on one of the identified alternatives, which concerns the final section of the proposed Administrative Civil Penalty Policy that addresses the Commission’s discretion to offset a portion of a monetary civil penalty by allowing for supplemental environmental projects (“SEPs”). Under the alternative, the maximum amount of the monetary civil penalty that may be offset by a SEP would be 50% of the total administrative civil penalty amount that the violator is required to pay for the violation(s), rather than 25% as under the proposed amendments.
The Commissioners who commented favored adopting this alternative because increasing the maximum amount of the civil penalty offset to 50% would increase the amount of funds that could be available for SEPs, potentially resulting in a greater number of environmentally beneficial SEPs being implemented in the Bay or around the Bay shoreline over time. In addition, the Chair suggested that staff consider: (1) the appropriateness of possibly raising the maximum amount of the civil penalty offset from 50% to 100%; and (2) including in the identified categories of projects which may qualify for a SEP projects to enhance shoreline resiliency and adaptation to sea level rise.
In response to the Commissioners comments, staff has made three revisions to the final section of the proposed Administrative Civil Penalty Policy concerning SEPs, as shown on the revised proposed amendments set forth in Attachment A to this staff report.
First, in the second paragraph of the “Introduction,” which addresses BCDC’s discretion to include a SEP in resolution of an enforcement action, the third sentence has been revised to read (with the newly proposed text shown in underscore): “The decision to accept a proposed SEP, and the amount or percentage of a total administrative civil penalty that may be offset by a SEP, is within BCDC’s sole discretion and may depend on the specific facts of a particular case.”
Second, in the second paragraph of the “SEP Guidelines,” which identifies the categories of projects which may qualify as a SEP, the second category has been revised to read (with the newly proposed text shown in underscore): “(2) Enhancement of the Bay’s resources, including habitat restoration or shoreline resiliency and adaptation to sea level rise.”
Third, the third paragraph of the “SEP Guidelines” has been revised to read (with the revised text shown in underscore): “The amount of the penalty to be offset by a SEP shall not exceed 50% of the total administrative civil penalty amount that the violator is required to pay for the violation(s).”
After conducting further research on the maximum penalty offset allowed by other California regulatory agencies with SEP policies, and upon further consideration, staff recommends that the maximum penalty offset amount in the Commission’s policy be capped at 50% and not increased to 100%. The staff’s recommendation is based on the following:
Where the California Legislature has authorized SEPs, it has established a 50% limitation on the penalty offset. See Pub. Res. Code § 71118(b)(2) (requiring each agency within Cal EPA to establish a SEP policy allowing the amount of a SEP to be up to 50 percent of the enforcement action); Water Code § 13399.35 (regional water quality control board may allow a person to reduce penalties by up to 50% by undertaking a SEP).
Consistent with these statutory provisions, all other regulatory agencies with SEP policies reviewed by staff (including the State Water Resources Control Board, Department of Toxic Substances Control, and CalRecyle) allow a maximum offset of 50% of a penalty for a SEP.
The statutory provisions cited above and the uniform practice among other agencies to allow a maximum civil penalty offset of 50% reflects that SEPs are to be allowed only in partial, not full, resolution of a penalty to promote the enforcement goal of deterrence and to prevent SEPs from becoming viewed as a cost of doing business. Stated differently, to promote deterrence, it is important that a violator be required to pay at least 50% of a penalty as an out-of-pocket monetary expense.
Although the Commission might intend that a 100% offset would be allowed only in rare circumstances, as a practical matter, allowing a 100% SEP offset would likely turn many settlement negotiations with violators into negotiations about what SEP project would be acceptable and the value or cost of a proposed SEP in relation to the proposed penalty. Allowing a 100% SEP offset would undercut one of the central premises stated in the introduction of the SEP policy: “While SEPs may be useful in the resolution of enforcement actions, the funding of SEPs is not a primary goal of BCDC’s enforcement program, nor is it necessary that a SEP always be included in the resolution of an enforcement action…”
The McAteer-Petris Act provides that civil penalties collected through enforcement proceedings shall be deposited into the Bay Fill Clean-up and Abatement Fund. Govt. Code 66647(a). While the Commission has the discretion to offset a portion of an administrative civil penalty for a SEP, offsetting the entire amount of a penalty arguably would be contrary to the statutory provision requiring civil penalties to be deposited into the Fund.
Response to Public Comments
The Commission received one comment letter during the public comment period on the proposed amendments to the enforcement procedures regulations. In addition, one commenter provided oral comments at the February 18th public hearing on the proposed amendments. Attachment B to this staff report includes the comment letter and an excerpt of the minutes of the Commission’s February 18th meeting with the public comments on this agenda item. The comments in the letter are identified as Comments 1A through 1F, and the oral comments are identified as Comment 2A.
The public comments received by the Commission are summarized below, followed by the staff’s responses on behalf of the Commission. No revisions to the proposed amendments were made in response to any of the public comments.
Comment 1A: The comment states that there are major issues with BCDC’s permitting process that the Bay Stewardship Alliance and others have pointed out to the Commission, and that adding new and more onerous enforcement procedures, including substantially higher enforcement penalties, cannot be justified before the BCDC permitting process is reformed.
Staff Response: As discussed in the staff report on the proposed amendments presented at the October 15, 2020 Commission meeting and in the Initial Statement of Reasons, the proposed amendments include increases in the standardized fines that apply to some but not all categories of minor violations currently listed in section 11386(e) (which would be redesignated as new section 11390) to create a greater incentive for responsible parties to take necessary corrective action promptly to resolve violations. BCDC is not increasing the administrative civil penalties that may be assessed for violations that are not included in the categories set forth in the standardized fine regulation. The allowable administrative civil penalties are established by statute, and the McAteer-Petris Act states that civil liability may not be imposed in an amount that exceeds $30,000 for a single violation. Gov’t Code § 66641.9(e).
The standardized fines will continue to be low in comparison to the allowable administrative civil penalties. As an example, for a violation involving the failure to comply with a permit condition, if the violation is corrected between thirty-six and sixty-five days after the mailing of a notice, the fine will be increased from a total sum of $1,000 to $2,000. See New section 11390(a)(3).
BCDC is also proposing reforms to its permitting regulations. At the Commission meeting on December 17, 2020, the Commission authorized staff to initiate the rulemaking process to adopt proposed amendments to the Commission’s regulations concerning administrative/procedural, permitting, and planning matters, and on March 21, 2021, BCDC held a public hearing on those proposed amendments. The proposed amendments to the permitting regulations include clarifications to the regulations addressing permit applications and the findings to be made by the Commission in support of permitting actions. The intent of those proposed changes is to clarify certain permitting requirements.
To the extent this comment, and the additional comments by this commenter, object to the adoption of the proposed amendments to the Commission’s enforcement procedures regulations, such objections are noted. As stated in the Initial Statement of Reasons, the purposes of the proposed amendments “are to promote transparency, consistency, and fairness in the enforcement process and strengthen the deterrent effect of BCDC’s enforcement program.” The commenter has not identified any reasonable alternative that would be more effective in carrying out the purpose of the proposed amendments, would be as effective and less burdensome to affected private persons than the proposed action, or would be more cost-effective to affected private persons and equally effective in implementing the statutory policy or other provisions of law governing the Commission’s permit application fees. See Gov’t Code §§ 11346.5(a)(13), 11346.9(a)(4).
Comment 1B: The comment alleges that enforcement has been applied in an arbitrary way in the past and that this calls into question whether any new regulations would be applied fairly.
Staff Response: The comment does not address any of the proposed changes to the Commission’s enforcement procedures regulations. BCDC’s enforcement team, led by the Enforcement Policy Manager, has implemented significant reforms to improve the transparency and fairness of BCDC’s enforcement program. Reforms include the development of new case review procedures and case management procedures. Among other issues, the procedural reforms address how matters will be escalated to the Regulatory Program Director, Executive Director, and to the Commission. The new procedures have streamlined the case resolution process and have met the enforcement goals of building consistency in process and providing transparency in how cases are addressed and resolved. These improvements have been described in numerous public meetings of the Enforcement Committee and Commission. The commenter does not cite any specific examples of instances where BCDC has not applied its regulations fairly or has acted arbitrarily. BCDC has developed the proposed amendments to its regulations to strengthen the enforcement program and further the enforcement program goals of deterrence, fairness, transparency, and consistency.
Comment 1C: The comment states that BCDC’s permits are poorly written and that BCDC has done little or nothing to reform permitting. The comment further states that many enforcement violations are the result of poorly drafted permit language and conflicting requirements.
Staff Response: The comment does not address any of the proposed changes to the Commission’s enforcement procedures regulations. Audit Report No. 2018-120 that was issued on May 14, 2019 found that:
“the commission generally drafted reasonable permit conditions that complied with applicable state law…. We reviewed five permits and found no instances when the commission included a condition that appeared unreasonable or outside its legal authority.” Audit Report at 43.
The commenter does not identify any allegedly poorly written permit conditions or any specific permit violations that were the result of allegedly poorly written permit conditions to support the assertion that the manner in which BCDC drafts permits results in violations. At a public meeting on October 23, 2019, BCDC staff briefed the enforcement committee on the permitting process and permit conditions to provide a greater understanding of the special conditions and standard conditions in the authorizations that BCDC issues for projects. BCDC is also continually working to improve the permitting language for each permit and permit amendment issued. Staff incorporates herein its response to Comment 1A, above.
Comment 1D: The comment states that BCDC’s practice of issuing permits after other agencies have acted creates unjustifiable delays and inefficiencies and conflicts with applicants and other agencies. The comment also states that BCDC staff are rewriting permits already well-structured by more qualified agencies.
Staff Response: The comment does not address any of the proposed changes to the Commission’s enforcement procedures regulations. As noted above, at the Commission meeting on December 17, 2020, the Commission authorized staff to initiate the rulemaking process to adopt proposed amendments to the Commission’s regulations concerning administrative/procedural, permitting, and planning matters, and on March 21, 2021, BCDC held a public hearing on those proposed amendments.
The McAteer-Petris Act requires that an applicant for a BCDC permit obtain any required local discretionary approval before the Commission acts on an application. Gov’t Code § 66632(b). Consistent with this statutory provision, section 10310 of the Commission’s regulations requires that a permit application include evidence that all local discretionary approvals have been granted. This requirement ensures that BCDC does not act on an application for a project that has not been approved under applicable local requirements and discretionary review. The Commission’s regulations also require an application to include evidence that a project is consistent with applicable laws and policies, and the appropriate means of doing this is to ensure that other agencies with expertise inadministering laws related to water quality or other resource issues have granted any necessary approvals before BCDC acts on a project.
Comment 1E: The comment asks why BCDC is not using the process employed by the SF Bay Restoration Authority to permit restoration projects for all the projects at BCDC.
Staff Response: The comment does not address any of the proposed changes to the Commission’s enforcement procedures regulations. Moreover, and as noted above, the Commission has initiated a separate rulemaking process to consider proposed changes to its permitting regulations.
The San Francisco Bay Restoration Authority is a regional agency created to fund shoreline projects through the allocation of funds raised by Measure AA. The Authority does not issue permits for projects. The Bay Restoration Regulatory Integration Team (“BRRIT”) was formed as a collaborative team of staff from six state and federal regulatory agencies, including BCDC, to improve the permitting process for multi-benefit habitat restoration projects and associated flood management and public access infrastructure. The BRRIT seeks to improve permitting timelines through a team approach that helps projects navigate permitting from different agencies, but the BRRIT does not issue permits. Projects that are eligible for BRRIT review must still receive any necessary permits from the individual entities that are part of the BRRIT.
Comment 1F: The comment opposes the practice of directing enforcement fines to pay for BCDC and staff overhead.
Staff Response: The comment does not address any of the proposed changes to the Commission’s enforcement procedures regulations. Government Code section 66647(a)(3) directs that moneys collected civilly from enforcement of violations must be paid into the Bay Fill Clean-up and Abatement Fund (Fund) in the State Treasury. Government Code section 66647(b) provides that moneys paid into the Fund shall be available for expenditures by the Commission or the Executive Director “when appropriated by the Legislature.” For many years, including the current state fiscal year, the Legislature has appropriated money from the Fund to pay all or a portion of enforcement staff salaries. Money from the Fund is not used for agency or staff overhead.
Comment 2A: The comment from the Bay Planning Coalition (“BPC”), a policy advocacy organization that advocates for economic growth and environmental sustainability of the region, applauds the efforts of the Enforcement Committee, staff and the Commission for the effort and time that they have devoted to making the enforcement process a clear and equitable one. BPC appreciates all the opportunities the Enforcement Committee has given for public engagement and comment, and BPC looks forward to continuing to be engaged on this topic.
Staff Response: Comment acknowledged. The changes to the enforcement procedures regulations are the result of multiple Enforcement Committee meetings that focused on examining the recommendations in Audit Report No. 2018-120. BCDC appreciates BPC’s recognition that BCDC has sought public engagement and public comment as part of its efforts to improve the enforcement program and implement the recommendations in Audit Report No. 2018-120.
Notice of Additional Public Review Period
On March 29, 2021, the Commission provided notice of an additional 15-day public review period on the revised proposed amendments to the Commission’s enforcement procedures regulations. The notice described the three revisions that have been made, in response to Commissioner comments, to the final section of the proposed Administrative Civil Penalty Policy concerning SEPs, as discussed above. The notice was accompanied by the complete set of revised proposed amendments and stated that the written comment period closes on April 14, 2021.