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F I S C A L I M P A C T R E P O R T

SPONSOR Wirth

DATE TYPED 03/07/05 HB 516/aHENRC

SHORT TITLE Compliance Order Penalties

SB

ANALYST Hadwiger

APPROPRIATION

(in $000s)

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

None

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Indeterminate

Indeterminate Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Department of Environment (NMED)

New Mexico Oil and Gas Association (NMOGA)

SUMMARY

Synopsis of HENRC Amendment

Where the original bill gave the NMED secretary power to assess penalties to enforce a compli-

ance order, the HENRC amendment allows the secretary to commence a civil action in district

court for this purpose. Where the original bill included, as one possible penalty for noncompli-

ance, suspension of any permits issued to the violator pursuant to the Air Quality Control Act,

House Bill 516/aHENRC -- Page 2

the amendment allows suspension or revocation only of the permit that is alleged to have been

violated. The amendment also changes the requirements for public sector attorneys (the attorney

general, city attorney or district attorney) to represent regulatory agencies in enforcement actins

from “emergency orders” to “orders.”

Synopsis of Original Bill

House Bill 516 would allow civil penalties of up to $25,000 and suspension or revocation of

permits for persons who violate the Air Quality Control Act and fail to take corrective action

within the time specified in a compliance order. If a violator defaults on a final order, the

NMED secretary may commence a civil action in district court to collect civil penalties assessed

in the order. Penalties would be deposited in the general fund.

Significant Issues

According to NMED, the Air Quality Control Act (Act) authorizes that courts to assess civil

penalties for violations of the Act, air quality regulations, and permits. The Act does not author-

ize civil penalties for failure to comply with a compliance order. HB516 provides more incen-

tive for compliance. There are similar provisions in the Solid Waste Act, Hazardous Waste Act,

and the Water Quality Control Act.

The New Mexico Oil and Gas Association (NMOGA) agreed there should be sanctions for non-

compliance with a compliance order, but indicated the proposed penalty departs from enforce-

ment penalties at the federal level under the federal Clean Air Act. Under federal law, the EPA

is authorized to seek judicial enforcement of its orders and to recover interest on any penalty due,

as well as costs of the enforcement action. NMOGA indicated concern that the new penalty

could be abused, because there is no requirement to prove violation of the underlying regulation

or law. There was also concern that the bill would allow NMED to revoke all air permits held by

a permittee rather than the permit for the specific noncompliant site. The HENRC amendment

appears to address these concerns by providing for court imposition of civil penalties (and court

appeals), as well as specifying that only the permit alleged to have been violated would be sub-

ject to revocation or suspension.

FISCAL IMPLICATIONS

HB516 may result in savings to NMED by creating an incentive for violators to comply with

compliance orders. Any civil penalties collected will be deposited in the General Fund. The

amount of civil penalties that might be collected is unknown and would be difficult to project.

OTHER SUBSTANTIVE ISSUES

NMED offered the following additional comments:

NMED has authority to enforce state and federal air quality regulations to preserve air qual-

ity. One of the ways the Department implements these regulations is through the issuance of

permits to sources of air pollution. The Act authorizes the Department to issue compliance

orders whenever a person violates those regulations or permits. These orders compel com-

pliance immediately or within a specified time period and often assess a civil penalty.

The Act currently does not specify NMED’s course of action if a violator defaults on or fails

House Bill 516/aHENRC -- Page 3

to comply with a compliance order. In the past, violators have defaulted on orders and failed

to comply with the corrective actions required in the order. A violator's default or failure to

comply may result in the emission of large quantities of air pollutants, potentially compro-

mising public health and welfare. In addition, the current statutory language is not clear re-

garding the scope of review in district court for defaulted compliance orders, creating poten-

tial disputes with violators that divert resources from other important air quality issues.

HB516/HENRC authorizes the courts to assess civil penalties up to $25,000 for each day of

noncompliance, whenever a violator fails to take corrective actions within the time period

specified in the compliance order. Penalties collected would be deposited in the state general

fund. The additional civil penalty should serve as a deterrent to noncompliance with air

quality regulations and permits. The department or the courts also would be authorized to

suspend or revoke any permit issued to the violator.

HB516/aHENRC also provides a mechanism to enforce the corrective actions and collect

civil penalties on a defaulted order. If a violator defaults on a final order issued pursuant to

the Act, Section 74-2-12 A, the Secretary of the Department could bring a civil action in dis-

trict court to enforce the corrective actions and collect the civil penalties assessed in the or-

der. The violator then may appeal the district court's decision to the court of appeals. The

district court's scope of review would be limited to whether the order was defaulted, which in

turn would limit the court of appeal's scope of review.

DH/lg