98-136: Superfund Act Reauthorization: Liability
Provisions of Leading Congressional Proposals
Robert Meltz
Legislative Attorney
American Law Division
Updated December 21, 1999
CONTENTS
Summary
Congress is currently seeking to reauthorize and amend the Superfund
Act (Comprehensive Environmental Response, Compensation and Liability Act, or
"CERCLA"). This report targets the liability issues addressed in the two House
committee-reported bills, H.R.
1300 and H.R. 2580,
and the House Committee on Commerce's minority substitute offered by Representative Towns.
Senate bills are not covered at this time because the Senate has decided to wait until the
House acts.
CERCLA creates a stringent liability scheme so that persons
associated with sites contaminated by hazardous substances bear their share of cleanup and
associated costs. Whenever a hazardous substance is released (or threatened to be
released) from a facility, potentially responsible parties (PRPs) include the generators
of the substance, transporters who selected the disposal/treatment facility, and the
owners or operators of the facility both now and when the hazardous substance was disposed
of. Several exemptions from liability are provided -- e.g., for innocent purchasers who
made due diligence inspection of the site. PRPs are liable for "response"
(cleanup) costs, natural resource damages, and costs of federal health assessments. The
liability standard is strict, joint and several, and retroactive.
This liability scheme flowed from two policy choices made by the
Congress that enacted it -- adoption of the "polluter pays" principle and a
correlative decision that, in light of the many contaminated sites, disbursements from the
newly created Superfund at each site should be as low as possible. These choices dictated
an expansive liability scheme that maximized the chance of finding PRPs able to fund
cleanup at most sites. With the passing of time, however, issues have arisen as to this
scheme's high transaction costs (for litigation, studies, oversight) and its inclusion of
PRPs who, in the view of some, should not be held liable.
None of the bills would repeal the existing liability scheme
outright, but all contain a nonbinding, nonlitigation alternative through which a PRP can
avoid the scheme. At sites with multiple PRPs (which is most), a neutral
"allocator" would assign each PRP a percentage of the overall liability, which
the PRP can accept or reject. Acceptance has certain advantages, such as avoidance of
possibly large transaction costs and protection from further liability.
In addition, all the bills would add to or clarify the current
categories of liability-exempt parties -- addressing de minimis and de micromis
contributors to a site, small businesses, municipalities and municipal waste, codisposal
landfills, and nonprofit institutions, among others. Importantly, the bills all would
expand upon EPA's longstanding initiative to encourage brownfields development -- e.g., by
exempting from liability the innocent purchaser who wants to improve the site.
Continuing a debate begun in the 103rd Congress, the 106th Congress
now has before it several bills that seek to reauthorize or amend the Superfund Act. This
report deals with one set of issues, those involving the Act's liability scheme, as
addressed by the major House bills and a House Democratic substitute. Senate bills are not
covered at this time, since the Senate has decided to wait until the House of
Representatives passes a bill.
The Superfund Act has three main purposes, conveniently indicated by
the statute's formal name -- the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA).(1) First,
"Response." The Act authorizes federal response (i.e., cleanup) to releases or
substantial threats of release of hazardous substances, and pollutants and contaminants,
into the environment. Second, "Compensation." CERCLA creates a Hazardous
Substance Superfund to pay costs of cleanup not allocable to a solvent, responsible party.
Third, "Liability." The Act creates a broad and stringent liability scheme so
that persons linked to hazardous substance contamination bear their share of cleanup and
other costs.
The last of these three components, liability, lies at the very
heart of the Act. CERCLA is often referred to as a "liability driven" or
"litigation driven" statute. Other federal environmental statutes affect the
private sector through prospective rules of general application -- Clean Air Act auto
emission standards, for example. Only when the rules are violated do questions of
liability (in the form of penalties) arise. CERCLA is quite different. It prescribes few
rules of general application. Rather, the Act operates chiefly by imposing liability for
the costs of cleanup (among other things) based on past or current status. Thus, a
liability issue, and the likelihood of litigation, arises almost every time the Superfund
Act is applied, not merely when some regulation is transgressed.
This report (1) describes the existing CERCLA liability scheme, (2)
explains why it seemed to make sense to the Congress that first enacted it, but now
provokes some dissatisfaction, and (3) sets out the major proposals in the House of
Representatives for modifying the liability scheme.
The Existing CERCLA Liability
Scheme
The CERCLA liability scheme is set out principally in sections 106
and 107 of the Act,(2) and is
unaffected by whether the site is one of those targetted for permanent cleanup by the
National Priorities List (NPL). Section 106 governs abatement orders. When EPA determines
that there may be an "imminent and substantial endangerment" because of the
actual or threatened "release" of a "hazardous substance" from a
"facility,"(3) it may either
issue an administrative order or seek a court order. Either type of order commands
affected parties to take appropriate measures to abate the danger.
In contrast, section 107 is for recovering from a responsible party
when the cleanup is done by others (other private parties or the government). It states
who is liable for what. Most of the CERCLA liability debate revolves around the desired
reach of section 107, and its liability standard.
Since 1989, EPA has followed an "Enforcement First"
policy, under which it seeks to have the responsible parties at a site do the cleanup --
as opposed to cleaning up itself using Superfund money, then filing cost recovery actions
against such parties.(4)
Who is liable for what and to whom?
Who is liable? CERCLA's universe
of potentially responsible parties (commonly called "PRPs") is quite broad. The
following entities are liable under section 107 when there is a release or threatened
release of a hazardous substance into the environment from a facility.(5)
"Arrangers" (often called "generators").
In the words of CERCLA: "any person who ... arranged for disposal or treatment, or
arranged with a transporter for transport for disposal or treatment, of hazardous
substances owned or possessed by such person, by any other party or entity, at any
facility or incineration vessel owned or operated by another party or entity ...."(6) Almost always, the arranger is the
entity that generated the hazardous substance. For this reason, the word
"generator" is commonly used in place of "arranger," though it is not
found in CERCLA.
Transporters who selected the facility. In the statute's
words: "any person who accepts ... any hazardous substances for transport to disposal
or treatment facilities ... selected by such person ...."(7)
Owners and operators. That is, a person who owns or
operates the facility from which there is a release -- both the current owner/operator and
the owner/operator at the time the hazardous substance was disposed of.(8)
These PRP categories apply to governments (federal, state, and
local), corporations, and individuals alike. Thus, a municipality that operates a trash
disposal site that accepts hazardous waste is covered. Note, too, that section 107 is
viewed by most courts as delimiting who can be held liable under section 106 as well.(9) So any entity that can be required to
reimburse others for cleanup costs they incurred can also be ordered to perform the
cleanup itself (when there is an "imminent and substantial endangerment").
CERCLA carves out several exemptions from the basic liability
scheme. These "carve-outs," however, are often qualified (do not apply in all
circumstances), may only limit CERCLA liability rather than eliminate it, and do not
necessarily affect any liability the PRP has under other federal statutes or state law.
They include:
innocent purchasers who undertook a due diligence inspection of the
site before acquisition,(10)
lenders and fiduciaries,(11)
response action contractors,(12)
governments that acquired a facility by escheat or other involuntary
acquisition, and persons who acquired by inheritance,(13)
federally permitted releases,(14)
and
application of a federally registered pesticide.(15)
CERCLA also declares that if not a PRP, a person is not liable under
CERCLA for providing cleanup assistance in accordance with the National Contingency Plan
(NCP) or as directed by an on-scene coordinator (but may still be liable for common-law
negligence). Similarly, again if not a PRP, state and local governments are not liable
under CERCLA for their emergency actions (but may still be liable for gross negligence or
intentional misconduct).
For what are PRPs liable?
Section 107 says that PRPs are liable for three types of consequences of a hazardous
substance release:(16)
Response (chiefly cleanup) costs -- whether incurred by the
United States, a state or Indian tribe (if "not inconsistent" with the NCP) or
by any other person (if "consistent" with the NCP). Response costs include a
share of EPA's administrative and enforcement costs, plus private-party legal costs
closely linked to the actual cleanup.(17)
Natural resource damages. As CERCLA puts it: "damages
for injury to, destruction of, or loss of natural resources."(18) The assessment of natural resource damages by the
natural resource "trustee" (the designated official charged with acting on
behalf of the public to recover damages) acts as a rebuttable presumption, if the
assessment was done in accordance with the natural resource damages regulations.(19)
Health assessments costs. Health assessments are carried
out by the Agency for Toxic Substances and Disease Registry in the Public Health Service
under CERCLA section 104(i).
Liability includes interest.
Ceilings on a particular PRP's liability (per incident) are imposed
based on the type of PRP -- vessels (depending on size and whether hazardous substance is
carried as cargo or residue); motor vehicles, aircraft, pipelines and rolling stock; and
other facilities and incineration vessels.(20)
These liability limits do not apply under certain circumstances -- e.g., when the release
resulted from willful misconduct within the privity or knowledge of the PRP. Moreover, as
a practical matter, the limits have had scant application, since courts have viewed each
discrete release as a separate incident.
Stiff penalties are provided for a PRP who fails "without
sufficient cause" to comply with a section 106 or section 104 cleanup order. Such a
PRP may be liable for civil punitive damages equal to three times the costs incurred by
the Fund as a result of the PRP's failure to act,(21)
in addition to those costs. Fines of up to $25,000/day are authorized if the failure to
comply "without sufficient cause" is willful.(22)
To whom is the PRP liable? A
PRP's liability for response costs is generally to the entity, government or private, that
incurred them. PRP liability for natural resource damages is to the government entity
(federal, state, or Indian tribe) with jurisdiction over the natural resource.(23) Private parties may not bring suits
for natural resource damages.
The liability standard
The liability standard in any liability scheme defines what must be
part of the complaining party's case. In formulating that standard, the legislature makes
a policy decision: How should the interests of plaintiff and defendant be balanced? In the
Superfund Act, Congress created a very broad liability standard that seeks to promote
successful recoveries by public and private parties when they incur cleanup costs, and to
encourage cleanups by the PRPs themselves.
The CERCLA liability standard has three key elements. It is --
Strict. As customarily used in the law, "strict
liability" means that a plaintiff may prevail by proving only two things: (1) the
defendant did the act of which it is accused, and (2) that act caused the plaintiff's
injury. Importantly, the plaintiff need not show, as it must in a negligence
case, that the defendant's conduct was less careful than it should have been -- i.e., that
it fell short of the appropriate standard of care. In effect, strict liability makes the
defendant an insurer against any injury it causes.(24)
CERCLA, in its variant of strict liability, dispenses with certain
aspects of causation as part of plaintiff's case. Instead, the Act attaches liability
based on status categories (e.g., "arranger" or "transporter")
regardless of whether a particular defendant's substance at a site can be shown to have caused
the particular release that provoked cleanup. However, the United States is not relieved
of having to show causation between the release and the incurrence of response costs.
Joint and several. Joint and several liability is a common
law tort standard used when more than one party contributed to the plaintiff's injury, but
there is no reasonable basis for allocating liability among them. Under it, liability for
plaintiff's entire injury can be imposed on any one tortfeasor, or any combination of the
aggregate. In this way, the plaintiff is made whole expeditiously, and the burden of who
should pay what share of the total liability is shifted to the defendant(s), to resolve on
their own.
Under the Superfund Act, joint and several liability is triggered
whenever it would be used under the common law of tort. Thus, joint and several liability
is not applied automatically, though it is used in the large majority of cleanups since
courts usually conclude that the common law precondition (no reasonable basis for
allocating liability) is met. As a result, the CERCLA plaintiff, such as the Federal
Government, is often free theoretically to seek recovery of all its site costs from a
fraction of the total number of PRPs at the site. Notwithstanding, there is a small
minority of cases where a basis for allocating liability among PRPs is found by
the court, so joint and several liability is rejected.
The theoretical harshness of joint and several liability is softened
by several mechanisms in CERCLA: nonbinding EPA allocations of responsibility,(25) "mixed funding" (using
Superfund money to reimburse PRPs who clean up pursuant to a settlement with EPA for the
share of cleanup costs attributable to non-settlor PRPs),(26) "orphan share" funding (using Superfund money
-- or, more frequently, compromising government claims for costs it has already incurred
-- in recognition of PRPs that are insolvent or defunct),(27) and "contribution actions" (suits by a PRP
seeking reimbursement for a portion of its cleanup costs from other PRPs).(28) The frequent use of de minimis settlements (entered into
on a proportional contribution basis, plus a premium) and the threat of de micromis
settlements also reduce the impact of joint and several liability (see discussion below
under "Exemptions from liability").
The executive branch has long regarded joint and several liability
as the essential "stick" for encouraging PRPs to settle with the government. The
executive branch does not typically seek to assign liability shares to individual PRPs,
preferring to seek a proportionate share of liability from the settling PRPs collectively.
The settling PRPs may then on their own work out a mutually acceptable allocation of
liability. The Department of Justice asserts that where helpful to achieve a settlement,
the United States in some cases assists PRPs in resolving allocation issues.
Retroactive. The liability imposed by CERCLA extends to
conduct occurring prior to the original enactment of CERCLA in 1980. Thus, a company
disposing of a hazardous substance in 1970 (or, in theory, 1870) may find itself liable
under CERCLA for government cleanup costs being incurred now -- even though such disposal
complied fully with applicable laws at the time. Some courts dispute that such liability
is truly "retroactive," noting that the liability is for cleanup costs occurring
after enactment, but the term is so often employed that we adopt it here.
It may come as a surprise that none of these elements of CERCLA
liability is stated in the statute in so many words. Rather, their origins lie in CERCLA's
express incorporation of the liability standard in Clean Water Act section 311,(29) CERCLA's structure, legislative
history, and case law, or some combination. For example, the controversial "joint and
several" component was present in early versions of the bills that contributed to the
enacted CERCLA, but was deleted as part of a last-minute Senate compromise. Those members
who opposed express inclusion of joint and several liability compromised by accepting
floor statements that the bill contemplated use of joint and several liability whenever
the common law would employ that standard.(30)
Regardless of their source, the elements of CERCLA liability are today well settled.
CERCLA allows few general defenses to its liability regime. A PRP
may escape liability only by making the difficult demonstration that the hazardous release
was caused solely by an act of God, act of war, or act (or omission) of a third
party who is not an employee or agent of the PRP, and has no direct or indirect
contractual relation with the PRP.(31)
The last-listed defense, for third parties, covers releases caused by vandalism, assuming
the PRP took precautions against such occurrences. There is also a statute of limitations
that may be asserted as a defense.(32)
For example, an initial action for recovery of remedial action costs must be brought
within six years after construction of the remedial action began.
Because litigation exhausts time and money, CERCLA seeks to
encourage parties in cost-recovery litigation to reach a settlement. Incentives to settle
in the Act include: protection for parties that have resolved their liability to the
United States from contribution actions (as to matters addressed in the settlement)
brought by non-settlors;(33)
nonbinding EPA allocations of responsibility for cleanup costs;(34) and an "early cash-out" provision allowing
innocent landowners (who failed to do a due diligence inspection prior to acquiring the
property) and de minimis contributors to resolve their response cost liability by
expedited settlement.(35)
Policies Underlying the
Liability Scheme, and Why Some Want to Modify It
The existing CERCLA liability regime seemed to the Congress that
enacted it in 1980 to be dictated by two fundamental policy choices made by that body. At
least so the legislative history suggests. Congress' first policy choice was adoption of
the still-debated "polluter pays" principle. The congressional thinking appeared
to be that morally blameworthy or not, whether occurring after CERCLA's enactment or
before, the conduct that led to the release of hazardous substances is the proper locus of
liability for the resultant cleanup costs. Those that benefitted economically from the
contamination-causing conduct, many members believed, should be asked to bear the costs --
not the general taxpayer. Viewed from this policy perspective, the Superfund Act is simply
a burden-shifting statute, not (with an exception or two) a punitive one. Hence, one might
argue, it is inappropriate to judge it by the standards of fairness associated with
punitive liability regimes.
The second policy choice embodied in CERCLA liability flows from two
congressional realizations. The first was that the cleanup of hazardous waste sites would
be costly. The second was that at a sizeable fraction of sites, particularly the many
abandoned ones, there was an inadequate paper trail to link dumpers to the site. Even
where the necessary linkage could be established, many parties were insolvent or long
since dissolved. It was clear, then, that unless a broad and government-friendly liability
scheme were used, no PRP source of cleanup funds would exist at many sites. That, in turn,
would mean that the lion's share of cleanup costs under the new statute would be borne by
the Superfund (largely industry financed), or by the taxpayer. To forestall that
eventuality, Congress adopted a liability scheme designed to maximize PRP funding.
So if the CERCLA scheme is rooted in such apparently sensible policy
precepts, why is it today so controversial? Several reasons suggest themselves. A key one
is the huge transaction costs (especially attorney fees) often expended to resolve the
liability of each PRP at a site. CERCLA relegates this critical determination, often
involving millions of dollars, to the PRPs themselves. Though nonbinding EPA allocations
of responsibility are occasionally used, the PRPs are essentially on their own in working
out a mutually agreeable allocation. And some have argued (though government studies do
not support the contention) that such squabbling among PRPs over liability is a prime
reason for the typically lengthy period of time between site identification and cleanup
completion.
Other reasons for the controversiality of the Act's liability system
are variations on the theme of overinclusiveness. First, contrary to the rationale that
those who benefitted from use of hazardous chemicals should shoulder the consequences,
some entities swept into the CERCLA liability net have never generated hazardous
waste in more than trivial quantities, or benefitted therefrom. For example, one who sends
ordinary household trash to a disposal site may in theory be hauled into court under
CERCLA based on testimony that such trash contains trace quantities of hazardous
substances.(36)
A second arguable example of overinclusiveness stems from the Act's
impact on small businesses, due to both liability itself and the high transaction costs
often incurred to determine it. A third instance is the Act's failure to give special
consideration to those willing to buy contaminated land in order to economically
revitalize it (the brownfields issue). A fourth is the nonexemption of several entities
whose current inclusion arguably offends a sense of fairness -- municipalities that sent
only municipal waste or sewage sludge to a solid waste landfill; religious, educational,
and other charitable institutions; recyclers; owners of land contaminated by migrating
hazardous substances released on other property; and so on.
Major House Proposals in the
106th Congress
A key point of difference between the Administration and many in
Congress has been how far to modify existing CERCLA liability. Supporters of some pending
Superfund bills assert that considerations of fundamental fairness call for numerous
exceptions in the reach of CERCLA liability.
By contrast, the Administration and its allies in Congress have
sought to hold such retrenchments to a minimum.(37)
They assert that those responsible for the contamination should pay for the cleanup, at
least if they are financially able. New statutory exemptions are sought only for very
small volume contributors, generators and transporters of municipal solid waste, and bona
fide prospective purchasers. EPA has deflected some of the legislative pressure to amend
CERCLA through use of administrative reforms in the Act's enforcement. EPA guidance, for
example, calls for greater use of the Superfund to pay the "orphan share" of
site cleanup costs (meaning less liability for PRPs) and expanded accommodation of de
micromis PRPs.(38) EPA argues that
the pending bills are based on criticisms of the Superfund program as it once was, not on
the "faster, fairer, more efficient" program it claims to have brought about
through its reforms.
Currently, two committee-reported House bills and a House Committee
on Commerce minority substitute seem most likely to supply the substantive ingredients of
any floor debate on Superfund Act reauthorization. The first bill is H.R. 1300, as reported
from the House Committee on Transportation and Infrastructure. The second is H.R. 2580, as reported
from the House Committee on Commerce. The Commerce Committee minority substitute, an
expanded version of the Democratic caucus' brownfields bill (H.R. 1750), is entitled
"Substitute to the Amendment in the Nature of a Substitute Offered by Mr.
Towns." The CERCLA liability reforms proposed by these bills address the following
key areas.
In the interest of brevity, discussion of the bills and Towns
substitute includes key features only. Because the bills and substitute contain many
differences, even when addressing the same matter, the reader with an interest in a
particular liability reform should consult the actual text of these documents.
Allocation among multiple parties
Most Superfund sites have more than one PRP -- sometimes many
more than one. The allocation of cost liability among these PRPs is likely to be a matter
of great interest to them, since the average cleanup cost at an NPL site is $20 million,
according to EPA. Needless to say, however, the combination of high stakes and the Act's
absence of guidance as to who should pay for what virtually invites litigation. To reduce
the volume of liability-share litigation and direct more PRP dollars into actual cleanup, H.R. 1300 and H.R. 2580 propose, in
near-identical language, a non-litigation, nonbinding-on-the-PRPs alternative for
allocating liability. PRPs who accept their allocation can pay up and be protected from
future liability, including contribution suits from other parties.
The H.R.
1300/H.R. 2580
proposal states that the purpose of an allocation under the bills is to "determine an
equitable allocation of the costs of a removal or remedial action at a facility on the
National Priorities List that is eligible ... including the share to be borne by the Trust
Fund ...." The bills make it mandatory on the "President" (EPA in most
cases) to initiate the allocation process at certain NPL facilities -- i.e., where the
cleanup is not the subject of a decree or administrative order as of date of bill
introduction, there are unrecovered costs of over $2 million, and there are response costs
attributable to the Trust Fund. The "President" may, in his discretion, initiate
an allocation for other response actions at NPL facilities.
For mandatory allocations, the "President" must ensure an
equitable allocation of liability by a neutral allocator selected by the parties, under
procedures agreed to by the parties. Initiation of an allocation process triggers a
moratorium on litigation seeking recovery of response costs at the site, which lasts until
150 days after issuance of the allocator's report. The allocation process does not alter
the CERCLA liability scheme, but merely offers PRPs an alternative to it.
The allocator shall determine the share of response costs to be
allocated to the Fund. The share of liability for which no generator, transporter, or
owner/operator at the time of disposal can be identified shall be divided pro rata among
the PRPs and the Fund share.
PRPs may submit to the allocator a private allocation, which the
allocator must accept if the bills' criteria are met. The "President" shall
accept an offer of settlement based on the allocation, unless the EPA Administrator and
the Attorney General reject the allocator's report. Governmental agencies that are PRPs
shall be subject to the allocation process just as any other PRP.
The Towns substitute contains no liability allocation procedures.
Relief from liability
The debate over whether to add to the exemptions from liability
already in CERCLA echoes some of the themes noted before. For example, some argue that
adding more exemptions to CERCLA erodes the "polluter pays" principle. Others
contend that the principle is better served by targetting those who own and operate
contaminated facilities, rather than the larger universe of PRPs under the current
statute. More broadly, the conflict is between the desire not to burden certain societal
activities, versus the need to retain a large pool of PRPs to supply cleanup funding.
Businesses likely not to be covered by an exemption see this as a matter of fairness as
well.
As with the Act's existing carve-outs, the bills and Towns
substitute impose many qualifications on eligibility for the new exemptions. Generally,
the PRP must not have impeded the response action or natural resource restoration, must
have substantially complied with information requests from EPA, and so on. We do not
mention these cooperativeness-oriented conditions for liability exemptions in each case
below.
De minimis / de micromis. The
"de minimis" provisions in CERCLA refer to parties whose contribution to a
contaminated site is minimal both as to amount and toxicity. As noted, CERCLA allows such
PRPs the opportunity to settle with EPA on expedited terms, in advance of other PRPs. The
hope is that a speedy exit from the complex settlement negotiations that CERCLA often
entails may hold the small PRP's transaction costs to a minimum.
For the smallest of the small contributors of hazardous substances
to a site, EPA may exercise its enforcement discretion to enter into "de
micromis" settlements.(39) (They
are not mentioned in the Act.) Such settlements are contemplated for use chiefly where
contributors of larger amounts of hazardous substances, who are being pursued by
government as PRPs, bring contribution actions against contributors of minuscule amounts,
against whom the government likely would never enforce. On several occasions, such
large-amount contributors have sued hundreds of small businesses, towns, schools, and
non-profit organizations (Little League, symphony orchestras, etc.) arguing that the
ordinary trash they sent to a disposal site contained hazardous substances, requiring that
they be brought into the PRP negotiations at the site. By entering into a de micromis
settlement for zero dollars, EPA gives the de micromis contributor protection against such
contribution actions.
In practice, the availability of de micromis settlements is regarded
mostly as a deterrent, and the relative infrequency of the device's actual use is regarded
by the Administration as an indicator of its success. Notwithstanding, some have suggested
that for de micromis contributors there should be no settlement negotiations at all.
Rather, they should be removed from the CERCLA liability regime altogether.
H.R.
1300 and H.R. 2580
have identical de minimis provisions. As under the present Act, qualifying PRPs are not
exempted from liability, but rather are entitled to expedited settlement with the United
States. A key difference from the current Act is that terms in the current Act that give
the "President" unreviewable discretion as to whether to offer a de minimis
settlement are removed by the bills. The bills also define how great a PRP's contribution
of hazardous substances can be and still be de minimis (unless EPA sets a different
threshold). The Towns substitute does not address de minimis contributors.
H.R.
1300 and H.R. 2580
are also identical as to de micromis contributors. A transporter or arranger is completely
exempt from CERCLA liability at NPL facilities if no more than 110 gallons or 200 pounds
of materials containing hazardous substances are attributable to such person, and the
arranging/transporting took place before the bill's enactment. The exemption is
unavailable, however, if the "President" determines the material contributes
significantly to the costs of response at the facility.
The Towns substitute uses the same quantitative ceiling for de
micromis contributors, but gives EPA authority to change the ceiling up or down. Also, the
substitute makes the exemption unavailable where all or part of the disposal or treatment
occurred after September 1, 1999. An important difference is that under the Towns
substitute, the determination that the materials contribute significantly to response
costs is in EPA's "sole discretion" -- meaning not judicially reviewable. The
standard in the committee-reported bills, above, appears to impose a greater evidentiary
burden on the United States, and confer judicial reviewability. The same standard also is
used elsewhere in the bills.
Small businesses. Liability for
CERCLA cleanup costs may be especially onerous for small businesses. The present statute
makes no special provision for the small-business status of a PRP.
H.R.
1300 and H.R. 2580
are nearly identical. Each provides that as to actions before the bill's introduction
date, no small business shall be liable as a transporter or arranger for response costs or
natural resource damages at an NPL facility. "Small business" is defined to mean
a business that, on average over the last three years, has no more than 75 full-time
employees and no more than $3 million in gross revenues.
The exemption is unavailable if the hazardous substances
attributable to the small business contributed significantly to response costs.
H.R.
1300 and H.R. 2580
also provide relief to small businesses through their municipal solid waste and
inability-to-pay provisions. See pertinent headings below.
The Towns substitute contains no provision devoted exclusively to
small business. As with the committee-reported bills, however, small businesses are among
the benefited groups under its municipal solid waste and inability-to-pay provisions.
Municipalities and municipal solid
waste/sewage sludge. CERCLA treats a municipality no differently than other PRPs,
and municipal solid waste (MSW) no differently than other potentially hazardous substance.
Therein lies a problem. The quantity of MSW and sewage sludge sent to a dump may be quite
large, and inevitably contains some hazardous waste. Because courts have often fallen back
on volumetric contribution as the basis for allocating CERCLA liability, municipalities
are an inviting target for third-party actions by corporate PRPs. Corporate PRPs assert in
such litigation that their admittedly more toxic contribution to the site being cleaned up
was, nonetheless, in far smaller quantity than that of the municipal PRP. Therefore, they
have argued, the municipality should bear the lion's share of liability.
While not differentiated in CERCLA, EPA has adopted a lenient
enforcement policy toward municipal PRPs and MSW.(40)
Under it, EPA will not notify municipalities or private parties that they are PRPs if the
MSW they generated or transported contains only household hazardous wastes -- unless a
"truly exceptional situation" exists. This policy leaves a municipality
vulnerable to EPA enforcement chiefly where it is or was the owner or operator of the
site,(41) or where the waste contains
hazardous substances from non-household sources.
A word about "codisposal landfills." Prior to the advent
of federal regulation of hazardous waste -- in 1980, under the Resource Conservation and
Recovery Act (RCRA)(42) -- it was
common practice for landfills to accept both municipal trash and hazardous waste. These
pre-hazardous waste regulation facilities, known as "codisposal landfills,"
raise some of the same issues as solid waste landfills. At codisposal landfills, there are
many contributors (possibly thousands) of waste containing only small amounts or low
concentrations of hazardous waste. These parties are tempting third-party defendants from
which contributors of more toxic wastes can seek contribution for cleanup costs.
EPA has sought to blunt the threat of such contribution actions at
codisposal landfills by offering non-de micromis generators and transporters of municipal
solid waste the option of "cashing out" at $5.30 per ton of waste sent to the
site.(43) (Recall that de micromis
contributors may often settle with EPA for zero dollars.) Importantly, such a settlement
allows EPA to confer contribution protection on the settlor.
H.R.
1300 and H.R. 2580
are identical in how they treat persons, including municipalities, in their capacity as arrangers
and transporters of MSW and sewage sludge. Such persons are not liable for response
costs or natural resource damages at an NPL landfill if the arranging or transporting
occurred prior to enactment of the bill. Liability may be imposed on persons in
the business of transporting waste, however, if the material transported contributed
significantly to response costs. As for arranging and transporting MSW and sewage sludge after
bill enactment, the aggregate liability of all arrangers and transporters at the NPL
landfill shall not exceed 10% of response costs. A special rule exempts homeowners, small
businesses, and small nonprofit organizations from CERCLA liability for generating and
transporting MSW in connection with NPL landfills.
MSW is defined to include waste materials generated by households
and hotels/motels, and also by commercial and institutional sources to the extent the
waste is essentially the same as household waste or is collected with other MSW and
contains only de micromis amounts of hazardous substances. The term does not include
combustion ash and solid waste from processes involving ores and minerals.
H.R.
1300 and H.R. 2580
diverge, however, in their treatment of municipalities as owners or operators of
facilities that receive MSW. H.R. 1300 simply states
aggregate liability limits for small (population 100,000 or less) versus large
municipalities, as to facilities proposed for NPL listing before March 25, 1999 and
response costs on or after that date. Small municipalities are limited to 10% of total
response costs; large municipalities, to 20%.
Under H.R. 2580, a
municipality liable as an owner or operator of a landfill listed on the NPL on or before
September 1, 1999 must be offered a settlement. The settlement shall be offered on the
basis of a payment or other obligation equivalent to no more than 20% of total response
costs. This ceiling may be increased to 35% if the municipality exacerbated the
contamination or received operating revenues from the facility above a specified amount.
The "President" may decline to offer a settlement if there is only MSW
or sewage sludge at the facility, or all other PRPS are insolvent or eligible for a
settlement.
The Towns substitute exempts homeowners, small businesses and small
nonprofit organizations from liability as arrangers and transporters. Its definition of
MSW is similar to that in the Republican bills, except that it does not exempt solid waste
from processes involving ore and minerals.
The Towns substitute also ratifies EPA's MSW settlement policy for
arrangers and transporters of MSW and sewage sludge sent to NPL codisposal facilities.
Thus, the "President" is instructed by the substitute to offer a settlement to
such party on the basis of a payment of $5.30 per ton of MSW or sewage sludge contributed.
For a municipality to be eligible for settlement, acts giving rise to liability must have
occurred less than 2 years after enactment of the substitute. A PRP shall be ineligible
for a settlement if the facility contains only MSW or sewage sludge. Under
certain conditions, persons who sent MSW together with other hazardous substances may be
eligible for the per-ton settlement rate as to the MSW or sewage sludge sent.
As for municipal owners and operators, the substitute provides for
settlements based on payment or other obligation equivalent to no more than 20% of total
response costs. This percentage may be increased to 35% if the municipality exacerbated
environmental contamination at the facility or received operating revenues over a
specified amount.
Charitable ("section
501(c)(3)") organizations. Existing CERCLA treats charitable institutions
just as any other PRPs. This has discouraged such institutions from accepting donations of
property that might contain hazardous contamination. Once the institution acquires such a
site, it is an "owner" under CERCLA and fully subject to section 107 liability.
Moreover, the liability of the institution is not limited by CERCLA to the value of the
donated facility, but could easily be far greater.
H.R.
1300 and H.R. 2580
are identical on this matter. Each would limit the owner/operator liability of charitable
organizations (those described under section 501(c)(3) of the Internal Revenue Code) to
the lesser of the fair market value of the donated facility and the actual proceeds of the
sale of the facility. To invoke this liability exemption, however, the organization would
have to show that the facility was acquired after the hazardous substances were disposed
of, and that it did not contribute to the release.
The Towns substitute does not address this issue.
Recyclers. Existing CERCLA
treats recyclers just as any other PRPs. Given the social desirability of recycling, some
argue that recyclers should be subject to a more lenient liability standard than other
PRPs.
H.R.
1300 and H.R. 2580
are nearly identical in their treatment of recyclers, with the exception of H.R. 1300's inclusion of
used oil. Each bill provides that a person who arranged for the recycling of recyclable
material, or transported such material, shall not incur arranger or transporter liability
under CERCLA. "Recyclable material" is defined to mean scrap paper, scrap
plastic, scrap glass, scrap textiles, scrap rubber, scrap metal, spent batteries -- and,
for H.R. 1300, used
oil. The liability exemption does not apply, however, if the person had an objectively
reasonable basis to believe that the material would not be recycled or would be burned
(other than used oil), the person had reason to believe that hazardous substances had been
added to the material, or the person failed to exercise reasonable care as to the
management and handling of the material.
The Towns substitute is very similar to the above bills. Used oil is
not covered.
A late development that moots almost all of the recycler provisions
in the bills and substitute is the enactment of P.L. 106-113 on
November 29, 1999. This law contained a rider, added by Senator Lott, which is almost
identical with the recycler section of H.R. 2580.(44) The rider does not cover used oil,
however, and thus leaves viable the used oil coverage of H.R. 1300. In addition,
the rider, like the Towns substitute but unlike the bills, does not include "whole
tires" as a component of scrap rubber.
Construction contractors.
Current CERCLA affords no special treatment to construction contractors whose activities
trigger releases of preexisting contamination at a site.
H.R.
1300 and H.R. 2580
exempt construction contractors from liability for cleanup costs and natural resource
damages where the contractor can show that he did not know or have reason to know of the
hazardous substances at the facility, and exercised appropriate care as to the discovered
substances.
The Towns substitute does not address this issue.
Contiguous property owners.
CERCLA does not exempt a landowner from liability merely because the contamination on his
property arrived there from elsewhere, with no complicity on the landowner's part. At
least in theory, a homeowner who has the misfortune to live near a hazardous dumpsite may
become a PRP when contaminated groundwater from the dumpsite migrates onto his property.
EPA policies state that the agency will not seek to impose CERCLA liability on residential
homeowners unless their activities led to the release,(45) and on owners of land above aquifers contaminated by
subsurface migration from outside the property.(46)
H.R.
1300, H.R. 2580,
and the Towns substitute all contain exemptions, differently worded, for owners and
operators of property contiguous to real property (under other ownership) from which there
is a release of hazardous substances. H.R. 2580 and the Towns
substitute also confer the exemption on those "similarly situated" to the
contiguous property owner, while H.R. 1300 extends to any
property onto which a release has migrated. Covered parties are exempted only if various
conditions are met, such as (depending on the bill/substitute) -- the owner did not cause
the release, is not affiliated with any person at the facility where the release occurred,
fully cooperates with those conducting the cleanup, etc.
Brownfields development. EPA
defines brownfields as "abandoned, idled, or under-used industrial and commercial
facilities where expansion or redevelopment is complicated by real or perceived
environmental contamination."(47)
Many such sites are located in the urban core, and are well served by infrastructure. The
current CERCLA, however, contains no provisions easing liability for persons who buy such
sites with the socially desirable goal of upgrading them. The result is that capital
investment is steered away from such desolate, close-in sites (termed
"brownfields") and toward pristine, outlying areas ("greenfields").
While the statute is silent, EPA has undertaken several
liability-related initiatives to encourage brownfields development. Most directly on
point, the agency has allowed expanded use of "prospective purchaser
agreements."(48) These
constitute a "no action assurance" by EPA that it will not enforce against
someone who wants to buy contaminated property for cleanup or redevelopment. There must be
a clear benefit to EPA (often, obtaining cleanup funding not otherwise available) and/or
to the community in entering into the agreement. Another initiative is the EPA
"comfort letter," a notification to the prospective buyer of a brownfield (such
as a closed military base) as to EPA's enforcement intentions there, based on information
then known to EPA.(49) Comfort
letters are not binding assurances, however, as the prospective purchaser agreements are.
They are solely informational.
The above EPA policies, however, constrain only EPA. They provide no
assurance that other parties may not sue under the Act. In some cases, however, EPA may
consider de minimis settlement with a buyer to protect him/her from contribution suits.
Expanding on EPA's prospective purchaser policy, H.R. 2580 and the Towns
substitute would exempt "bona fide prospective purchasers" from present-owner
liability. A bona fide prospective purchaser is one who buys a facility after bill
enactment and after all active disposal of hazardous substances, who made all appropriate
inquiry into the previous uses of the facility, provided all required notices as to any
hazardous substances discovered, exercised appropriate care, cooperates with any
authorized cleanup, and is not affiliated with any PRP at the facility. Where a federal
response action increases the market value of a bona fide purchaser's facility, the United
States obtains a "windfall lien" against the facility for its unrecovered
response costs.
The "innocent landowner" provisions in the bills and
substitute also can be thought of as facilitating brownfields development. Innocent
landowner provisions differ from prospective purchaser provisions (above) in that with the
former, the pre-purchase "all appropriate inquiry" cannot reveal any hazardous
substances. Both bills and the Towns substitute would clarify the meaning of "all
appropriate inquiry," a precondition for invoking the innocent-purchaser exemption in
the current Act.
Response action contractors.
Soon after CERCLA was enacted in 1980, it was realized that the "response action
contractors" (RACs) who clean up contaminated sites could conceivably be regarded as
PRPs (e.g., as "operators" or "transporters"), exposing them to CERCLA
liability. Obviously, this was a disincentive to companies coming forward to do the
cleanup work. In the 1986 amendments to CERCLA, provisions were added to soften the
liability exposure of RACs. New section 119 says that under CERCLA (or any other federal
law), RACs are subject only to a negligence/intentional misconduct standard, not strict
liability as under CERCLA. Moreover, under certain circumstances, the
"President" may indemnify RACs for negligent conduct, but not grossly negligent
or intentional misconduct.
H.R.
1300 and H.R. 2580
contain very similar modifications to the liability provisions of section 119. Both would
expand the negligence/intentional misconduct standard to preclude the use of a stricter
standard under not just federal law, but state law as well. The federal liability
threshold, however, would not apply where the state has enacted a law determining the
liability of RACs. H.R.
1300, but not H.R.
2580, imposes a statute of limitations on claims against RACs -- namely, six years
from completion of the RAC's work.
The Towns substitute does not address this issue.
Inability to pay. Current
CERCLA does not explicitly note a PRP's ability to pay as a factor to be considered in
assessing the dollar amount of liability.
Both the bills and the substitute would make a PRP's limited ability
to pay a consideration under CERCLA by making it a circumstance authorizing an expedited
settlement (the other circumstance being the de minimis contributor). As well, both bills
and substitute stipulate that the party seeking expedited settlement must be a natural
person, a small business, or a municipality and can demonstrate an inability or limited
ability to pay response costs.
H.R.
1300 and H.R. 2580
define "small business" to mean a business that employs no more than 100
persons. The Towns substitute appears not to define small business for purposes of this
ability-to-pay provision, though as noted above, it is defined elsewhere.
Footnotes
1. (back)42
U.S.C. §§ 9601-9675.
2. (back)42
U.S.C. §§ 9606, 9607 (respectively). Determination as to who is a responsible party may
also be made under § 104 in connection with government cleanups, 42 U.S.C. § 9604.
3. (back)The
quoted terms are all defined -- and defined quite broadly -- in CERCLA section 101 (and in
case law). For example, "release" includes not only the obvious --
"spilling, leaking, pumping, pouring" and so on -- but also the mere abandonment
or discarding of closed receptacles containing hazardous substances. CERCLA § 101(22)
4. (back)OSWER
Directive No. 9201.01-A (1989).
5. (back)Hereinafter,
references to "releases" in this report should be read to include threatened
releases.
6. (back) CERCLA
§ 107(a)(3).
7. (back) CERCLA
§ 107(a)(4).
8. (back) CERCLA
§ 107(a)(1)-(2). The owner/operator category of PRPs also expressly extends to the
current owner or operator of a "vessel," a term excluded from the definition of
"facility." Id. at § 101(9).
9. (back) See,
e.g., United States v. Hardage, 663 F. Supp. 1280 (W.D. Okla. 1987). Thus, for
example, section 106 orders can be issued to past generators, since past
generators are liable under section 107.
10. (back)
CERCLA §§ 101(35)(A)(i), 101(35)(B).
11. (back) From
the outset, CERCLA section 101(20) exempted holders of security interests in a
contaminated facility (typically, lenders) from "owner" or "operator"
liability, as long as they do not participate in the facility's management. EPA
regulations seeking to clarify and expand the existing case law on this liability
exemption were judicially invalidated, however, as beyond the agency's authority. Congress
responded by codifying the EPA regulations -- through the Asset Conservation, Lender
Liability, and Deposit Insurance Protection Act of 1996, P.L. 104-208,
Title II, §§ 2501-2505. Provisions relating to holders of security interests were
inserted into CERCLA section 101(20). Provisions related to fiduciaries were added as new
CERCLA section 107(n).
12. (back)
CERCLA § 119.
13. (back)
CERCLA § 101(35)(A)(ii)-(iii).
14. (back)
CERCLA § 107(j).
15. (back)
CERCLA § 107(i).
16. (back) Note
that CERCLA liability is not as broad as CERCLA response authority. Liability, imposed
under section 107, requires the release of a hazardous substance. Authority to
respond to a release, under section 104, includes hazardous substances and pollutants
or contaminants.
17. (back)Key
Tronic Corp. v. United States, 511 U.S. 809 (1994). Key Tronic held that legal
fees pertaining to a private plaintiff's activities in identifying other PRPs are a
"necessary cost[] of response" under CERCLA § 107(a)(4)(B), hence recoverable.
In contrast, litigation-related attorney fees incurred by private parties are not response
costs, and so are not recoverable.
The United States recovers its attorney fees under the explicit
reference to "enforcement activities" in CERCLA's definition of
"response." CERCLA § 101(25).
18. (back)
"Damages" is used here in the strict legal sense of the word -- meaning monetary
compensation. It does not refer to the damage or injury itself. Thus, it is not redundant
to speak of "damages for injury to ... natural resources."
There is no liability under CERCLA for harm to natural resources
clearly identified as an irreversible commitment of natural resources in an environmental
analysis, where the decision to grant a permit or license authorizes that commitment.
CERCLA § 107(f)(1).
19. (back)
CERCLA § 107(f)(2)(C).
20. (back)
CERCLA § 107(c).
21. (back)
CERCLA § 107(c)(3).
22. (back)
CERCLA § 106(b)(1).
23. (back) Id.
The development of natural resource damages regulations under CERCLA was delegated to the
Department of the Interior. See 43 C.F.R. part 11. Under the Oil Pollution Act of
1990, the development of virtually identical regulations was delegated to the National
Oceanic and Atmospheric Administration.
24. (back)Strict
liability has been the general liability rule in federal environmental statutes since
enactment of the Clean Air Act and Clean Water Act in the early 1970s.
25. (back)
CERCLA § 122(e)(3).
26. (back)
CERCLA § 122(b)(1). Non-settling PRPs are often called "recalcitrants."
27. (back)
Orphan share funding through compromise of the government's CERCLA claims against the PRP
is a government favorite, since it does not draw from appropriated funds. EPA recently
asserted that in FY 1996, it "offered over $57 million in orphan share compensation
to potentially settling parties, and continued that practice this past fiscal year at every
eligible negotiation." Superfund Reauthorization and Reform Legislation: Hearing
on H.R. 2727 Before
the Subcomm. on Water Resources and Environment of the House Comm. on Transportation and
Infrastructure, 105th Cong. (Oct. 29, 1997) (statement of Carol Browner, EPA
Administrator) (emphasis in original).
28. (back)CERCLA
§ 113(f)(1).
29. (back)CERCLA
§ 101(32).
30. (back)See,
e.g., 126 Cong. Rec. 31965 (Dec. 3, 1980) (statement of Rep. Florio, House floor
manager, that "The terms joint and several liability have been deleted with the
intent that the liability of joint tortfeasors be determined under common or previous
statutory law.").
31. (back)
CERCLA § 107(b).
32. (back)
CERCLA § 113(g).
33. (back)CERCLA
§ 122(g)(5).
34. (back)CERCLA
§ 122(e)(3).
35. (back)CERCLA
§ 122(g).
36. (back)As
later discussion shows, this might happen through a contribution action, not through EPA
enforcement.
37. (back)"The
Clinton Administration's Superfund Legislative Reform Principles." Enclosure to
Letter from Carol Browner, EPA Administrator, to Hon. John Chafee, Chairman, Sen. Comm. on
Environment and Public Works (May 7, 1997).
38. (back) EPA,
FY 1998 Superfund Reforms Strategy, OERR Directive No. 9200.0-28 (Nov. 13, 1997).
Orphan share funding and de micromis settlements were the two administrative reforms in
CERCLA enforcement stressed by EPA in recent congressional testimony. See, e.g.,
Superfund Reauthorization and Reform Legislation: Hearing on H.R. 2727 Before the
Subcomm. on Water Resources and Environment of the House Comm. on Transportation and
Infrastructure, 105th Cong. (Oct. 29, 1997) (statement of Carol Browner, EPA
Administrator).
39. (back) EPA,
Revised Guidance on CERCLA Settlements with De Micromis Waste Contributors (June
3, 1996).
40. (back) 54
Fed. Reg. 51071 (1989).
41. (back) An
EPA policy document offers municipal owner/operators of NPL codisposal sites a
"presumptive baseline settlement amount" of 20 to 30% of total estimated
response costs to resolve their owner/operator liability. EPA, Policy for Municipality
and Municipal Solid Waste CERCLA Settlements at NPL Co-Disposal Sites (Feb. 5, 1998).
42. (back) The
first major set of RCRA hazardous waste regulations promulgated by EPA took effect on
November 19, 1980. 20 Fed. Reg. 33066 (May 19, 1980).
43. (back)EPA, Policy
for Municipality and Municipal Solid Waste CERCLA Settlements at NPL Co-Disposal Sites
(Feb. 5, 1998).
44. (back)
Finding the rider language requires a bit of digging. P.L. 106-113
chiefly concerns District of Columbia appropriations. Division B, however, enacts into law
S. 1948, title VI of
which contains the CERCLA recycling provisions. Title VI adopts the language of S. 1528, a bill introduced
earlier by Senator Lott.
45. (back) EPA,
Policy Towards Owners of Residential Property at Superfund Sites, OSWER Dir. No.
9834.6 (July 3, 1991).
46. (back) 60
Fed. Reg. 34790 (1995).
47. (back) 62
Fed. Reg. 4624, 4624 (1997).
48. (back) 60
Fed. Reg. 34792 (1995).
49. (back) 62
Fed. Reg. 4624 (1997).
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