Managing environmental liabilities for beneficial reuse.

U.S. foundries have practiced beneficial reuse of sand, slag, dust and sludge for as long as the industry has existed. For the past two decades, extensive efforts in the U.S. to establish environmental standards and regulatory vehicles for beneficial reuse have been overshadowed by the possibility of incurring liability under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) at a site where foundry materials were beneficially reused. Since the costs for cleanup of Superfund sites often have been allocated to generators of waste containing hazardous substances based upon relative volume, foundries have been pursued for large shares of the cleanup costs--often amounting to several million dollars.

This article outlines methods and tools that foundry owners and operators can use to minimize exposure to potential CERCLA liability for the beneficial reuse of their foundry wastes. Included is a brief discussion of a recent federal court decision that provides a roadmap for limiting CERCLA liability for the foundry industry.

Disposal and Beneficial Reuse Regulation

Everyone who has ever worked in a foundry knows that sands, slag, dust and sludges have been used for virtually every constructive purpose for which soil and rock are used. That's because these foundry process materials come from soil and rock. Like virtually all material from industrial processes, foundry process materials are regulated as waste unless and until they can be shown to qualify for exemptions or less stringent disposal requirements.

In states that have established beneficial reuse standards for foundry process materials, the exemptions and/or less stringent management standards are part of the regulations that govern solid waste disposal.

AFS has worked since the mid-1970s to promote beneficial reuse and to establish the technical foundation for reasonable standards for foundry waste disposal and beneficial reuse. Table 1 summarizes some of the major milestones to date. These research and government relations efforts have saved foundries of all types and sizes untold dollars. In some cases, the savings may have been significant enough to keep a foundry financially viable in lean times.

In addition, foundry residuals have been used as a substitute for tens of millions of cubic yards of soils, saving hundreds of millions of dollars. One construction project alone in the mid1980s made use of nearly one million cubic yards of foundry sand and slag as a substitute fill.

From a public policy standpoint, beneficial reuse makes economic and environmental sense. The U.S. EPA even maintains a portion of the Agency's website to cover technical information on beneficial reuse of foundry materials (www.epa.gov/jtr/comm/gls-info.htm).

The standards for foundry waste classification and beneficial reuse typically involve three main types of criteria:

* material characteristics;

* site restrictions;

* documentation,

Most state regulations that include foundry-specific waste disposal and beneficial reuse standards require some demonstration that material proposed for beneficial reuse or less stringent management standards will not cause undue risk to human health or the environment. Most of these state programs require laboratory leaching tests to demonstrate that water percolating through the material will not contaminate groundwater or surface water. Many programs now also require that the materials be analyzed and compared to compositional standards for certain metal and organic compounds. Compositional tests are used to assess risks to humans (and sometimes animals) for direct contact, ingestion and inhalation.

States that have foundry-specific standards generally link the leaching and compositional criteria to specific allowed uses. A foundry manager would logically assume that if the company's foundry waste meets all applicable state standards for foundry waste disposal and beneficial reuse, the company should be in good shape with regard to liability exposure. Unfortunately, that's only half the battle.

The Risks of CERCLA Liability

In 1980, CERCLA (42 U.S.C. $ 9601 et seq.) was passed. Six years later, the Superfund Amendments and Reauthorization Act (SARA) was enacted. The primary purpose behind CERCLA was to provide for cleanup of abandoned sites at which wastes containing hazardous substances had been dumped. Over the years, U.S. EPA's Superfund program has become best known for its costly cleanups.

CERCLA also has become well known for its broad liability scheme, under which a site's current and past "owners and operators," the generators of a site's waste and the transporters of that waste each can be held "strictly" liable (i.e., even if they did not intend to pollute). Liability under CERCLA has been held to be "joint and several," meaning that any one or only some of the liable parties may be held liable for the entire cost of cleanup, and is subject to only a few narrow statutory defenses. As a result, there have been several well-publicized cases in which generators of only minor amounts of waste or even "mom and pop" operators have been held liable for millions of dollars in Superfund cleanup costs.

Under Section 106 of CERCLA, U.S. EPA may order liable parties to investigate and remediate any "release or threatened release" of "hazardous substances" from a facility. If U.S. EPA, any state and/or even a private party incurs "response costs" to address a release or threatened release, it can bring suit in federal court under Section 107 of CERCLA against any liable parties to recover such costs. If a claim is brought against only some of the "potentially responsible parties" (PRPs) at a site, those parties can in turn bring claims for contribution against any other PRPs who have not paid their fair share of the cleanup costs, Consequently, large Superfund sites often spawn several rounds of costly litigation.

A Question of Fairness

Foundries can certainly get drawn into such suits if their sands or other wastes end up at a Superfund site. Wastes often contain one or more CERCLA "hazardous substances" (lead, cadmium, chromium, toluene, methylene chloride PCBs, etc.). CERCLA itself does not require any threshold concentration or amount of hazardous substances for liability to he incurred. Indeed, courts have held that as little as one molecule of a hazardous substance is sufficient to trigger liability under CERCLA.

Because the allocation of Superfund cleanup costs often is based in large part upon the relative volume of waste contributed by each generator, foundries that generate relatively large volumes of foundry wastes run the risk of incurring substantial CERCLA liability if their disposal sites become the subject of Superfund remedial action.

The fact that a foundry's wastes meet state standards for beneficial reuse is not a legal defense to CERCLA liability. Nor is a foundry insulated from CERCLA liability simply because it obtained state approval to dispose of its waste at a particular site. Many of these sites are regulated by the state environmental agency right up to the day that EPA drops the CERCLA hammer. Although a court may, in its discretion, consider such "equitable factors" in allocating Superfund site cleanup costs among liable parties in a contribution action, there is no guarantee that a foundry can escape Superfund liability based upon such factors.

The Bottom Line for CERCLA Liability

The bottom line is that a foundry which sent wastes containing only trace amounts of hazardous substances to a disposal site runs the risk of incurring tremendous liability if the site later becomes subject to a CERCLA cleanup.

In many of the early cost allocation cases under CERCIA, U.S. EPA, PRP groups and the federal courts struggled to find ways to appropriately divide the liability for cleanup costs among the liable parties, which can number in the hundreds for a large site. Over time, CERCLA allocation schemes developed that were based on such factors as the relative volume of waste contributed, the relative toxicity of the waste, and the role that the waste actually played in "driving" the need for cleanup. Nonetheless, the actual allocation factors used can vary dramatically from site to site, which often makes it difficult for a liable party to predict what portion of the liability it ultimately will bear.

In addition, these factors often are manipulated by those liable parties who are most active in participating (and financing) the allocation mechanism (such as neutral third parry mediation, arbitration or simple negotiation between the PRPs who are ordered to conduct the cleanup). These allocation factors typically are the focal point of a Superfund allocation case. Even more than two decades after passage of the statute, these allocation issues remain hotly contested.

So Where Does that Leave Me?

So where does that leave a foundry that sent a few dozen truckloads of non-hazardous foundry sand (with all required state approvals) for use as final cover at a landfill that later becomes a CERCLA site? Quite possibly right in the middle of protracted, expensive and technically complex Superfund litigation years down the road.

Despite CERCLA's expansive liability scheme, there is some hope for avoiding such harsh and inequitable results at the allocation stage. The recent case of Ninth Avenue Remedial Group v. Allis-Chalmers Corp. et al., Case No. 2.94CV0331RL-1 (N.D. Ind.) provides an instructive roadmap for how a foundry might avoid CERCLA liability. In that case, White Consolidated Industries, Inc. (WCI), had provided spent foundry sand for beneficial use as cover material at an illegal dump with approval from the state.

Even though the foundry sand allegedly was the largest volume waste at the site, the Court awarded WCI a "zero share" allocation of the cleanup costs. Because WCJ demonstrated that its spent foundry sand did not necessitate any of the plaintiffs' cleanup expenses and actually saved response costs, the Court ruled that it should not pay any of the roughly $40 million in past and future costs claimed by the plaintiffs. Although such "zero share" decisions are rare in Superfund litigation, the Ninth Avenue case demonstrates what can be achieved where litigation is unavoidable.

De Minimis Settlements

CERCLA authorizes U.S. EPA to enter into "de minimis" 'settlements with contributors of wastes involving "minimal" amounts of hazardous substances and toxicity, where EPA determines that such settlements are "practicable" and "in the public interest (42 U.S.C. 9622(g))." In fact, U.S. EPA has issued a formal policy on the situations and conditions under which it will consider entering into such settlements.

However, de minimis settlements are entirely discretionary with U.S. EPA, and usually are made available only to generators whose wastes account for only a small percentage of a site's total waste volume. In addition, U.S. EPA generally requires de minimis settlers to pay a substantial premium reflecting the substantial savings from avoided negotiation and other "transaction" costs. Thus, despite their title, de minimis settlements often involve a substantial settlement payment that can reach hundreds of thousands of dollars.

Small Business Liability Relief & Brownfields Revitalization Act

Another form of assistance is the Small Business Liability Relief and Brownfields Revitalization Act (H.R. 2869) passed into law earlier this year. The Act is intended to provide some relief from CERCLA liability to small waste contributors, "innocent" purchasers and certain small business waste generators. Although the Act establishes a new "de micromis" exemption from CERCLA liability, the exemption applies only if the total amount of waste involved is less than 110 gal or less than 200 lb. However, the volume of foundry waste typically sent to a disposal site greatly exceeds these limits.

The Act also establishes a liability exemption for certain small business concerns having no more than 100 full-time employees, but this exemption applies only with respect to "municipal solid wastes" disposed of by such companies. The exemption generally does not apply to waste from manufacturing or processing operations. Thus, this new legislation is not likely to provide significant relief from CERCLA liability to foundries who have sent their foundry wastes to Superfund sites.

Minimizing Superfund Liability

There are several key actions that a foundry can take to help limit its Superfund liability exposure.

Materials testing and documentation--One of the more important actions a foundry can take to manage liability exposure is to document the non-toxic characteristics of its "secondary" (waste) materials. This involves careful recordkeeping of the raw materials used, flow charting its foundry processes, recording its process parameters (such as temperature and cycle time), and representative sampling of secondary materials using test methods and procedures specified in applicable state beneficial reuse regulations. Such test results can enable a foundry to prove that its wastes were relatively non-toxic and did not contribute the "driver" contaminants that eventually may necessitate a Superfund cleanup. It is also critical that a foundry carefully document all waste volumes sent to each disposal or beneficial reuse site, so that its waste volume is not overestimated should the site become subject to Superfund remediation.

Securing formal approvals--While securing state agency approvals of secondary materials classification and suitability for beneficial reuse will not insulate a foundry from potential Superfund claims, documented state approvals will go a long way toward persuading U.S. EPA, a PRP group or a court that your company did not contribute to the problem, but rather to the solution.

Agreements and Audits--Agreements with transporters, recyclers, users and landfills can and should be structured to protect your company in the event of Superfund action. This may include indemnification provisions and insurance requirements. Although such third-party contractual arrangements will not preclude U.S. EPA, a state or private PRPs from asserting a CERGLA cost recovery claim against you, your company may be able to shift the costs arising out of such claims to a viable indemnitor or an insurer if such protections are included in your vendor agreements.

In addition, you should periodically check with or even audit your foundry waste transporters, purchasers and disposal facilities to insure that they are handling your materials in an environmentally responsible manner and in accordance with the terms of any regulatory approvals and their contractual obligations. What you don't know could come back to haunt you.

Do's and Don'ts

* Do adequately sample and test both your raw materials and foundry wastes to demonstrate that they are relatively non-toxic and meet regulatory standards for beneficial reuse.

* Do keep accurate records of the volume of foundry wastes sent to each site.

* Do obtain formal regulatory approvals for beneficial reuse or disposal where possible.

* Don't mix foundry wastes with other wastes or impurities that could have adverse effects such as strong acids or bases.

* Do inspect and audit the reuse or disposal sites that receive your foundry waste to insure that they are handling your material in an environmentally responsible manner.

* Don't allow your foundry waste to be sent to a site that is known to be in need of or undergoing remediation unless your foundry material is part of a Superfund remedy that has been formally approved by U.S. EPA or the state.

* Do insist on the inclusion of indemnification provisions and/or insurance requirements covering environmental claims that might be asserted against you as a result of the beneficial use or disposal of your foundry wastes, and insure that the indemnitor is financially viable (remember that an indemnity is only as good as the indemnifying party's ability to pay).

* If you are sending your foundry wastes to a site where foundry wastes generated by others also is present, do make sure that the other foundries' wastes have been properly tested, documented and segregated from your own, and insure that foundry wastes not eligible for beneficial reuse are excluded from the site.

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Table 1

Major Milestones for Reasonable Beneficial Reuse and Disposal Standards

1978 to Present

AFS research and efforts with state environmental regulatory agencies
create beneficial reuse exemptions and more appropriate waste
classification and disposal standards in solid waste regulations.

1980

AFS research and government relations efforts eliminate foundry emission
control dust and sludge from hazardous waste listing K061, which became
limited to emission control dust/sludge from the primary production of
steel in electric furnaces.

1984

AFS research and government relations efforts create exemption from
double liner requirements for hazardous foundry waste landfills, surface
impoundments and waste piles (Hazardous and Solid Waste Amendments of
1984 reauthorizing RCRA).

RELATED ARTICLE: A Ruling for Foundries: Ninth Ave. Case Summary

The recent case of Ninth Avenue Remedial Group v. Allis-Chalmers Corp. et al. [Case No. 2:94CV0331RL-1 (N.D. Ind.)] involved an illegal industrial waste dumpsite known as the Ninth Avenue Dump Site in Gary, Indiana. After discovering the site in 1975, the state ordered the site's operator to cease operations and to cover the oily liquid wastes dumped there with an inert solid material. Based upon limited test results, the state approved the use of spent foundry sand from White Consolidated Industries' (WCI's) Blaw Knox foundry in East Chicago, Indiana, for this purpose. U.S. EPA subsequently ordered the dump's customers to conduct remedial action at the site under CERCLA.

A group of 22 parties who had been ordered to clean up the site later filed suit against several parties, including WCI, to recover a portion of their past and future response costs (alleged to be approximately $40 million). Following a two-week trial on liability, the court ruled that WCI was liable because its foundry sand contained trace levels of phenol and furan--CERCLA "hazardous substances." The Court then held a five-week "allocation" trial to determine WCI's "equitable share" of the plaintiffs' cleanup costs.

At trial, WCI argued that it should not be allocated any of the site response costs on several grounds. Its foundry sand did not necessitate any of the plaintiffs' cleanup expenses. because only areas contaminated by the oily liquid wastes were required to be remediated. The state approved WCI s foundry sand for use as part of the initial site cleanup activities WCI's foundry sand actually saved response, costs because it reduced the amount of additional sand that plaintiffs needed to purchase in order to implement the remedy.

On August 30,2001, the Court ruled that even though its foundry sand contained hazardous substances, WCI's equitable share of site response costs was zero. The Court held that the plaintiffs had failed to prove that the presence of WCI's foundry sand had caused the incurrence of any of their Site response costs, entitling WCI to a zero share.

About the Authors

Bill Stephens and Ted Devine are principals with Kestrel Management Services and have been addressing environmental issues in the metals industry for more than 30 years. Vincent Atriano is a partner in the Environmental Practice Group of Squire, Sanders & Dempsey L.L.P., and has a principal area of practice of representing industrial clients in state and federal litigation.

For More In formation

The authors of this article will be part of a panel presentation, "CERCLA Case Study," at 10:15 a.m. on May 4 at the 2002 AFS Casting Congress in Kansas City, Missouri.

Two cases pertinent to the topic of beneficial reuse liability are:

Brookfield-North Riverside Water Cmmn. v. Martin Oil Marketing, Ltd., Case No. 90C5884, 1992 U.S. Dist. LEXIS 2045 (ND. III. Feb. 21,1991).

United States v. Cantrell, 92 F. Supp. 2d 718 (S.D. Ohio 2000). Focuses on the issue of the levels of contamination and financial responsibility.