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Superfund liability dumped onto local governments.

Who is liable for the cleanup bill at municipal landfills where industrial hazardous waste was disposed of along with municipal waste?

A spate of recent lawsuits around the country attempts to force hundreds of local governments and their citizens to pay millions of dollars because they disposed of ordinary household waste. Large polluting corporations are arguing that taxpayers and their local governments should pay as much to clean up a garbage bag of twigs and pizza boxes as large corporations must pay to clean up the same amount of toxic chemicals. This is the tip of an iceberg that could destroy many local governments' fiscal solvency.

"Superfund," officially known as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), was intended to be an ambitious program to clean up the nation's worst toxic waste sites. It was enacted in 1980 to make parties responsible for environmental contamination pay the high cost of cleanup. Although Superfund has made important, needed progress in cleaning up dangerous abandoned chemical dumps, the problem is that its liability scheme is being abused, and local governments are its newest target.

CERCLA is a far-reaching statute. Anyone who has created, transported, managed or disposed of hazardous waste, or who owned or operated a waste site, can be forced to pay for the cost of hazardous waste cleanup. If several polluters' waste becomes mixed, each one can be held liable for the entire cleanup bill. And when the federal government sues a party for cleanup costs, that party acquires the right to sue other polluters to share the cleanup expense.

Local Governments and Superfund

CERCLA affects local governments and their citizens because local governments, which frequently arrange for the disposal of their citizens' garbage and sewage sludge, are increasingly the target of corporations' attempts to make others pay their cleanup costs. Included on the Environmental Protection Agency's (EPA's) list of the nation's worst hazardous waste sites are approximately 230 so-called "municipal" landfills, where industrial hazardous waste was co-disposed along with municipal waste, contaminating the ordinary garbage.

A community's garbage and sewage sludge are items that need to be disposed of carefully, but they contain only trace amounts of hazardous substances, those found in discarded batteries, for example, or near-empty bottles of nail polish remover, etc. These are not the kind of hazardous wastes that cause EPA to name sites as among the most toxic in the nation. Studies show that less than one-half of one percent of the municipal solid waste stream consists of hazardous materials.

Twenty or 30 years ago, it was common practice to dump liquid hazardous waste on top of municipal waste; it was thought that the benign municipal waste would spread out and soak up the toxic materials. While the municipal waste may very well have delayed the hazardous waste's contamination of the underlying soil and groundwater, eventually the municipal waste became saturated and toxic leachate drained out. The end result was an environmental nightmare compounded by a massive amount of newly contaminated household waste.

From the perspective of the large industrial hazardous waste generators, these past "co-disposal" practices have created a new weapon in the latest round of Superfund wars. In their lawsuits against municipalities, they essentially argue that once citizens' discarded paint cans get mixed in with their toxic chemicals, everyone is equally responsible for cleaning up the entire mess. They also argue that costs should be apportioned solely on the basis of waste volume without regard to overall waste toxicity, a perspective that sees a ton of grass clippings and food scraps as dangerous and as expensive to clean up as a ton of asbestos or vinyl chloride.

Some local officials find it hard to believe that such legal action could happen to them. As these types of lawsuits have spread across the country, however, more and more municipal officials are realizing that the fiscal integrity of every local government could be at stake. Any municipality that ever took any household waste to a landfill that might have become contaminated with hazardous waste could become seriously involved in this issue. At least 29 cases in a dozen states have been filed or threatened against approximately 450 local governments and thousands of small businesses, non-profit groups and individual citizens. With the average Superfund site costing almost $30 million to clean up, the outcomes may not be just a one-year surcharge on garbage disposal fees but potential bankruptcy.

In California, local governments have been sued for doing nothing more than issuing business licenses to private waste haulers who contract directly with citizens for waste hauling services. In Colorado, cities have been sued over sewage sludge that is so low in toxicity and affirmatively good for the environment that it has received an award from EPA for being "beneficially reused" as fertilizer.

The legal strategy of those filing such lawsuits poses severe financial consequences for local governments. In California, 64 major corporations have filed a suit against 29 cities and towns located near the Operating Industries Superfund site in Monterey Park, east of Los Angeles. The corporations originally argued that the local governments should pay 90 percent of cleanup costs estimated at $650 to $800 million because the garbage they contributed allegedly accounts for 90 percent of the volume at the site. During the past three years, the California cities have spent $7 million on lawyers and technical experts to defend themselves. With more than two hundred "municipal" landfills on the Superfund list, these third-party contribution suits are becoming increasingly common.

Some of these lawsuits are motivated by a desire to make it easier for large industrial hazardous waste generators to convince EPA to accept a cheaper, less stringent cleanup remedy. Some corporations believe that local governments receive a better reception from EPA when they argue for a less expensive cleanup. Another aim is to make CERCLA look unworkable. A large segment of the petrochemical and insurance industries would like to see Superfund's strict liability scheme eliminated.

The courts have not stepped in to protect local governments. A few federal courts already have ruled that municipal solid waste is not exempt under the statute and that merely hiring a contractor to pick up citizens' trash is enough to create liability for a city as an "arranger." Once a local government becomes the subject of one of these suits, it has two grim alternatives in response: pay large fees to defend itself or, if possible, settle the case, which also is likely to carry a large price tag.

Legislative Relief

Local governments have an additional way to protect themselves: join the campaign for legislative reform. Over the past two and half years, largely through the lobbying efforts and grassroots organizing of American Communities for Cleanup Equity (ACCE), significant progress has been made toward ending the municipal liability crisis under Superfund.

ACCE is a national coalition of local governments which now has approximately 110 members in a dozen states. In the summer of 1991, the coalition first succeeded in having legislation introduced in both houses of Congress, the Toxic Cleanup Equity and Acceleration Act (TCEAA), which would end the worst abuses of Superfund now facing local governments. In the Senate, the TCEAA was authored by Senators Frank Lautenberg (D-NJ) and Tim Wirth (D-CO). Senator Lautenberg's involvement is especially significant because he is the chairman of the Superfund Subcommittee of the Senate Environment and Public Works Committee. In the House, the bill was authored by Congressmen Robert Torricelli (D-NJ) and David Dreier (R-CA), who have formed a bipartisan, politically diverse alliance.

Although the original TCEAA was never voted on by Congress, its introduction helped accelerate a series of events which culminated in two victorious votes on the Senate floor in June 1992. The municipal community became increasingly organized and vocal, EPA began an initiative to try to solve the problem administratively, and municipal liability was widely recognized as a major issue for the Superfund reauthorization.

By the spring of 1992, the environmental community had become so alarmed about the abuses of Superfund being borne by municipalities that they decided to participate in negotiations to develop modified legislation which would have their full support. Working with Senator Lautenberg, municipal and environmental representatives reached agreement on a revised piece of proposed legislation with the following provisions.

* Prevention of private parties from bringing "third-party" suits over municipal solid waste (MSW) and sewage sludge. If a local government has handled truly hazardous waste, then it would be treated as an industrial party who behaved the same way. Only the federal government would be allowed to sue generators and transporters of municipal waste, including both garbage and sewage sludge.

* An easing of settlement procedures for generators or transporters of MSW or sewage sludge. If EPA decides to sue generators or transporters of MSW or sewage sludge, such parties would be able to avoid high transaction costs and would have their combined liability capped at no more than 4 percent of total cleanup costs.

* Creation of incentives for future disposal practices. Beginning three years after the date of enactment, for disposal of MSW or sewage sludge that occurs after such time, parties wishing to take advantage of the legislation's special settlement provisions must have household hazardous waste collection programs, or sewage sludge disposal in compliance with the Clean Water Act, regarding their respective MSW or sewage sludge waste streams.

* Protection of public rights-of-way. A local government would not be liable for merely owning or maintaining a public right-of-way over which hazardous materials are transported, or for merely granting a business license to a private waste hauler.

* Retroactive relief. The legislation would apply to all pending administrative or judicial actions, unless a final court judgment has been rendered or a court-approved settlement has been reached.

At that time, a banking bill, S.2733, was pending before the Senate, and Sen. Lautenberg succeeded in adding the above provisions as an amendment to that bill. Despite two roll call votes against the amendment and the opposition of the oil, chemical and manufacturing industries, the Senate voted twice in favor of the Lautenberg amendment. The banking bill then passed the entire Senate, with the municipal liability provision intact, on July 1, 1992. Due to procedural battles unrelated to the municipal Superfund provisions, the House never considered the Lautenberg amendment.

Most recently, the momentum for relief to municipalities has intensified with the introduction of the Toxic Cleanup Equity Act of 1993 (S.965 and H.R.2137). Introduced by Sens. Frank Lautenberg (D-NJ), George Mitchell (D-ME) and Barbara Boxer (D-CA), and Reps. Robert Torricelli (D-NJ) and David Dreier (R-CA), the bill contains the same provisions that passed the Senate as part of the Lautenberg amendment to S.2733 and the following additional provisions to help municipalities that have owned or operated closed waste sites.

* A block on "third-party" suits against municipal owners and operators of closed waste sites. To be eligible, a municipality must have owned or operated the site before the date of enactment, and the site (or clearly defined units at the site) must not accept waste after that date.

* Expeditious settlements with an "ability to pay" test to limit liability. If EPA decides to send notices of potential liability to municipal owners or operators, such parties would be able to avoid high transaction costs and would not be required to pay settlement costs beyond their "ability to pay." A municipality would have the option to assert that it has other environmental obligations besides Superfund and to require EPA to consider those costs in determining the municipality's ability to pay. The municipality's "ability to pay" would be determined by considering, among other things, several financial tests comparing factors, such as a municipality's debt service, operating and encumbered revenues, funds and dedicated funds, total expenses and population, as well as the settlement's impact on the municipality's ability to provide essential services. In addition, a municipality would not be deemed to possess the ability to pay to the extent that Superfund payments would create a significant risk of bankruptcy, default or cutbacks that would impede the protection of public health and safety.

The Toxic Cleanup Equity Act (TCEA), a compromise developed among key Senate supporters and municipal and environmentalist representatives, has the backing of an array of organizations representing local governments, as well as the major environmental groups.

Administrative Relief

Although EPA announced in the summer of 1991 that it would begin an initiative to settle with municipalities to protect them from third-party lawsuits, the agency has not yet implemented such a program. The purpose of the initiative was to give local governments and other MSW parties an opportunity to settle fairly and quickly without incurring huge transaction costs or paying a large share of the cleanup costs. Settlements with EPA are especially desirable because they provide "contribution protection," a special creature of Superfund that protects a party from being sued by anyone other than EPA. The few cases that have reached settlements so far have required municipalities to settle with the corporate third-party plaintiffs; EPA has not settled with municipalities directly.

By March 1992, EPA had drafted a proposed Municipal Settlement Strategy that was widely circulated. The strategy was perceived to represent the agency's final position on how to determine the share of costs to be paid by municipal waste generators and transporters at co-disposal sites. The strategy rejected the various allocation schemes that have the effect of emphasizing waste volume. Instead, the agency adopted a "unit cost" approach which assigns no more than 4 percent of total costs to municipal waste generators and transporters. The "unit cost" approach is based on the assumption that it costs $94,000 per acre to clean up the average "pure" MSW site and $2.279 million to clean up an acre of industrial hazardous waste. EPA derived the 4 percent figure by dividing $94,000 by the sum of $2.279 million plus $94,000.

The draft Municipal Settlement Strategy effectively destroys the arguments made by industrial parties across the country that local governments should pay up to 90 percent of total cleanup costs. Overall, the strategy would prevent the worst of the current abuses of the Superfund law and protect local governments and other municipal waste generators from paying a grossly disproportionate share of the cleanup expense. The strategy has a sound scientific basis and would provide sorely needed, quick relief.

In April 1992, the Bush administration blocked the Municipal Settlement Strategy from becoming official policy. As this article goes to press, a new EPA administrator is seriously considering releasing the Municipal Settlement Strategy as part of the agency's package of administrative reforms to improve the implementation of the Superfund program. The same coalition of municipal and environmental organizations that support the Toxic Cleanup Equity Act has joined forces to urge the administration to release EPA's settlement strategy.

Conclusion

ACCE and its allies seek to restore Superfund to its original purpose and to help local governments return to the job of providing essential public services. The TCEA is fair and rational. Lawmakers may be persuaded by the intrinsic value of the legislation, but it will be the loud, persistent voices of local government officials and their supporters that convince them to take a public stand that is very much opposed by industry. In the current Superfund climate, local governments must continue to increase their collective pressure if they hope to see the law amended in their favor.

GOVERNMENT FINANCE OFFICERS ASSOCIATION POLICY STATEMENT STATE AND LOCAL GOVERNMENT LIABILITY UNDER THE SUPERFUND ACT

The goal of the Comprehensive Environmental Response, Compensation, and Liability Act, better known as the Superfund Act, is to clean up the nation's hazardous waste sites. Such a goal is clearly important, but its stringent liability provisions have placed unintended and potentially crippling liability on state and local governments. The statute makes any individual or group that has created, transported, managed or disposed of hazardous waste strictly liable for the cost of hazardous waste cleanup, without regard to fault. Polluters who jointly contribute to a hazardous waste site's dangers are each potentially liable for the entire clean-up bill. When the federal government sues a party, that party acquires the right to sue its fellow polluters to share the clean-up expense.

Landfills where industrial hazardous waste has contaminated ordinary solid waste now represent approximately 20 percent of the worst hazardous waste sites in the nation as listed by the Environmental Protection Agency (EPA). Private party defendants in Superfund cases have sued local governments and others to

pick up a disproportionate share of the clean up expense. These actions represent a staggering financial burden for local governments, estimated at $25 million per site. While EPA has recognized and been responsive to these concerns, only statutory change will provide permanent relief to governments.

The Government Finance Officers Association urges Congress to adopt legislation that will bar third-party actions against state and local governments for the generation or transportation of solid waste, facilitate negotiated settlements with the federal government of potential state and local government liability, and enact other changes in the law to reduce litigation.

Adopted: May 4, 1993

RENA I. STEINZOR is a partner and DAVID KOLKER is a senior associate at Spiegel & McDiarmid, a Washington law firm specializing in the representation of local governments. The authors also serve as legislative counsel to American Communities for Cleanup Equity. For further information about American Communities for Cleanup Equity and the legislation pending before Congress, contact the authors at 202/393-3734.
COPYRIGHT 1993 Government Finance Officers Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article
Author:Steinzor, Rena I.; Kolker, David
Publication:Government Finance Review
Date:Aug 1, 1993
Words:2910
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