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Compliance SEPs for Local Governments

Information for local governments regarding Compliance Supplemental Environmental Projects.


The SEP statute, Texas Water Code Section 7.067, gives TCEQ the discretion to approve a SEP that would assist local governments that are respondents in enforcement actions to come into compliance with environmental laws or to remediate the harm caused by those violations.

Definition of a local government: 

The SEP Statute defines a local government as a school district, county, municipality, junior college district, river authority, water district, or other special district or political subdivision created under the constitution or a statute of this state.

Qualifying for a Compliance SEP ("C-SEP"):

A local government respondent may qualify to offset up to 100 percent of an assessed penalty by performing an approved C-SEP in settlement of an unresolved enforcement action. During the approval process, the TCEQ will review the following:

1)   Whether the respondent meets the definition of a local government described in Texas Water Code Section 7.067;

2)   If there is a need for a corrective action;

3)   Whether the respondent has a financial need to participate in a C-SEP. Local governments will be screened for financial ability to pay using the following screens:

a.  A Financial Test to demonstrate financial assurance for any TCEQ program and Compliance Costs plus penalty < 1% of Total Revenue; or

b.  Bond Rating: Moody’s – Higher than Ba; Standard and Poor’s or Fitch’s – higher than BB+; and Compliance Costs plus penalty <1% of Total Revenue; or

c.  Unrestricted reserves from General Fund and Enterprise Fund less Penalty less Compliance Cost/Operating Expense > 16.6% (2 months).

An affirmative response to any of the above disqualifies the respondent for a C-SEP.


If you have questions regarding the financial screening process, please contact the Financial Administrative Division at 512/239-6263.

The SEP statute requires the TCEQ to ensure that the local government respondent does not systematically avoid compliance through the use of SEPs. So, in addition to assessing the respondent’s financial ability to pay the administrative penalty, the ability of the respondent to remediate the harm or come into compliance, and the need for corrective action, an agency investigation must not show that the local government respondent delayed compliance to qualify for a C-SEP.

If a local government respondent does not satisfactorily complete a C-SEP, it may become ineligible to perform a future C-SEP.

Basis for C-SEP Proposals

1)   A repair on structures or equipment that may be the cause of the violation; or

2)   Remediation of environmental harm, such as a cleanup of a spill.

C-SEP Process:

1)   Identify the corrective action based upon the type of C-SEP proposal;

2)   Respondent will complete and sign the Financial Information Worksheet (“FIW”) and provide supporting documentation for the financial review;

3)   Provide an estimated line-item budget identifying the costs for the corrective action. Administrative costs are non-allowable expenses and will not receive SEP credit;

4)   If eligible for a C-SEP, the respondent will complete and sign the C-SEP application form, provide details for the project description, and include the line-item budget;

5)   If the assessed penalty amount is greater than the cost to perform the C-SEP, a local government respondent may use the remaining penalty balance, with TCEQ approval, for another SEP.

Download the C-SEP Application form:—PDF | Word

If you have any questions regarding the C-SEP, please contact the SEP program at 512/239-2223 or by email at