Municipal Superfund Liability

Since its inception, the federal Superfund law has been based on the principle of "polluter pays," that those who contributed waste to sites that is hazardous to human health and the environment should ultimately be responsible for its cleanup. Industrial parties that are largely responsible for the toxic waste associated with more than 1,300 Superfund sites on that law's "National Priorities List" have never liked this principle, and have tried for many years to shift the liability and cost responsibility for Superfund sites onto others.

A prime target for attempts by industry to shift the costs of Superfund cleanups has been local governments that have been involved in Superfund "co-disposal" landfills as either owners or operators of landfills where industry dumped hazardous waste, or as generators or transporters of non-hazardous municipal solid waste or sewage sludge that became mixed with industry's toxic waste at these landfills. In early 1998, the United States Environmental Protection Agency ("EPA") issued a policy to provide such municipalities the opportunity to settle their liability early in the CERCLA process, at an equitable level reflecting the non-hazardous nature of municipalities' involvement at co-disposal landfills. EPA's "Policy for Municipality and Municipal Solid Waste; CERCLA Settlements at NPL Co-Disposal Sites," 63 Fed. Reg. 8197 (February 18, 1998) ("Muni Policy") is a valuable tool designed to provide settlement protection to municipalities from contribution suits by parties seeking to shift the cost of Superfund co-disposal site cleanups to those not responsible for the hazardous wastes at such sites.

However, in the spirit of the adage "if at first you don't succeed, try, try again," a coalition of industrial polluters has recently challenged the EPA policy in federal court. This industrial coalition has vowed to bring suit against any Superfund settlement that makes use of the Muni Policy, and has undertaken substantial efforts in the U.S. Congress to trash the "polluter pays" principle, and prevent municipalities and other parties from obtaining reasonable liability relief at Superfund co-disposal sites.

This paper provides local government officials and attorneys that are involved at Superfund co-disposal landfills with background on the issue, an explanation of EPA's approach to providing municipalities with a mechanism for resolving their liability quickly and equitably, a description of the ongoing legal challenges being leveled by industry against the EPA Muni Policy, and suggestions to local governments on steps for resolving your liability at these Superfund sites.

THE CO-DISPOSAL SUPERFUND PROBLEM FOR MUNICIPALITIES

A. Description of Co-Disposal Landfills

A Superfund "co-disposal landfill site" is a site, listed on the National Priorities List of the Comprehensive Emergency Response, Compensation, and Liability Act ("CERCLA" or "Superfund"), 42 U.S.C. §§ 9601-9675 (1994), that has received both municipal solid waste ("MSW") or municipal sewage sludge ("MSS"), and other hazardous wastes regulated under the CERCLA statute.

Currently, there are about 250 co-disposal landfills on the NPL, comprising approximately 23% of the total Superfund sites on the NPL. Many of these landfills were or are owned or operated by municipalities in connection with their governmental function of providing necessary sanitation and trash disposal services to residents and businesses. Muni Policy, 63 Fed. Reg. at 8198. In addition, many other municipalities have sent MSW and MSS to these landfills or have arranged to have their trash and sewage sent to these sites. Unfortunately, hazardous materials from industrial and other parties became mixed with, and contaminated, the MSW and MSS present in the landfill. Thus, these co-disposal sites have become threats to public health and the environment, and were designated as Superfund sites, due directly to the hazardous substances deposited by industry. More than 800 municipalities are potentially liable under Superfund because of their involvement as owners, operators, generators or transporters of non-hazardous waste at these co-disposal sites.

EPA has recognized the difference between MSW/MSS and the types of wastes that usually give rise to the environmental problems at NPL sites. MSW is defined by EPA as "household waste and solid waste collected from non-residential sources that is essentially the same as household waste." Id. MSW is generally composed of non-hazardous substances, such as yard waste, food waste, glass or aluminum, along with small amounts of other types of wastes. MSS is any solid, semi-solid or liquid residue removed during the treatment of municipal waste water or domestic sewage sludge, but does not include sewage sludge containing residue removed during the treatment of wastewater from manufacturing or processing operations. Id. Although MSW/MSS may contain small concentrations of hazardous substances, EPA has found that landfills at which MSW/MSS alone was disposed of do not typically pose environmental problems of sufficient magnitude to merit designation as NPL sites. Id. With rare exceptions, only when other hazardous wastes — such as industrial wastes — are mixed with MSW/MSS, will landfills become Superfund sites. Id.

For these reasons, EPA issued a policy in 1989, titled the "Interim Policy on CERCLA Settlements Involving Municipalities and Municipal Wastes," 54 Fed. Reg. 51,071 (December 12, 1989) ("1989 Policy"), to establish criteria by which EPA would generally determine whether to exercise enforcement discretion to pursue MSW and MSS generators/transporters as PRPs under CERCLA. The 1989 Policy provided that EPA would not generally identify an MSW/MSS generator or transporter as a PRP at a co-disposal site unless there was site-specific evidence that the MSW that party disposed of contained hazardous substances derived from a commercial, institutional or industrial activity. In addition, the 1989 Policy identified several settlement mechanisms that might be particularly suitable for settlements with municipal owners/operators of co-disposal sites, in light of their status as governmental entities. However, this EPA discretionary enforcement policy did nothing to stem dozens of contribution claims brought by industrial PRPs against municipalities at co-disposal sites.

B. Superfund Contribution Suits at Co-Disposal Sites

The non-hazardous nature of MSW and MSS has not deterred industrial PRPs at co-disposal sites from seeking to impose a high proportion of liability on municipalities. Typically under CERCLA, EPA identifies a limited number of PRPs at each Superfund site and then seeks to have them perform future response actions, and reimburse EPA's own response costs. Under CERCLA, these parties may assert equitable contribution claims against other PRPs at the same site as joint tortfeasors, in order to recover the fair shares of the PRPs that EPA either failed to identify or declined to pursue. 42 U.S.C. § 9613.

The Superfund law imposes strict, joint and several liability for cleanup costs on four categories of persons, known as "Potentially Responsible Parties" or "PRPs." 42 U.S.C. § 9607(a). These PRPs include: (1) current owners or operators ("owners and operators") of a facility where a release or a threat of release of hazardous substances exists; (2) former owners or operators of such a facility at the time when hazardous substances were disposed; (3) persons who arranged for disposal of hazardous substances ("generators") at such a facility; and (4) persons that transported hazardous substances ("transporters") to such a facility.

Over the past decade, many municipalities and school boards that are involved at Superfund co-disposal sites as owners/operators or generators/transporters of non-hazardous MSW have been subject to contribution suits by industrial PRPs seeking cost recovery based on a principle of volumetric share liability. Under this theory, contribution liability is to be based on the volume of total waste contributed to a co-disposal site, rather than volume of contamination contributed. Such an apportionment method can quickly lead to exorbitant and unfair liability for municipalities that owned or operated a garbage dump, or contributed trash or sewage sludge to such a site. At the least, defense against such contribution claims can lead to significant legal and transaction costs.

For example, 29 cities were sued for up to 90 percent of an estimated $500 million in clean up costs at the Operating Industries Superfund site in Monterey Park, California. In December, 1989 these 29 cities, the County of Los Angeles, five county municipal solid waste disposal districts, and the State of California Department of Transportation were sued in contribution by 64 corporate PRPs on the claim that the municipalities were liable for the cleanup of the 190 acre site. The evidence in this case indicated that the industrial generators dumped more than 200 million gallons of liquid industrial hazardous waste on essentially non-hazardous garbage from nearby municipalities, and that the garbage absorbed this waste, creating a sodden mass of dangerous pollution. In many cases, the municipal PRPs had no more direct connection to the garbage disposal at the site than to issue business licenses and, in some instances, franchises to private haulers, who in turn picked up the trash. Claiming that municipal sites are expensive to clean up because of the large volumes of contaminated municipal garbage, the industries argued that the local governments should be made to bear a volumetric share of liability for clean up costs, which translated into 90 percent of $500 million.

Five cities were eventually dismissed from the suit. Ten cities arrived at de minimis settlements with EPA and the industrial waste generators, in part to avoid substantial future litigation costs. Fourteen other cities fought for several years, because each faced enormous liability and could not afford the initial settlement offers. For example, the City of Alahambra faced an initial settlement demand of $11.6 million. Yet its General Fund budget was only $26 million. After several years of hard-fought negotiations, those 14 cities settled in 1995. In total, the 24 involved cities assumed a total liability of $34 million, and the cities' waste haulers assumed an additional liability of $11 million. In the aggregate, the cities paid more than $5 million in legal costs for in-house and outside counsel. In a number of cities, quality and quantity of municipal services suffered because of the large costs associated with the Superfund site.

The contribution problem at the Operating Industries site is not an isolated phenomenon. For example, more than 200 school districts have been named as defendants in contribution suits related to Superfund co-disposal sites.

Faced with the possibility of expensive litigation and exorbitant liability associated with MSW and MSS sites, a coalition of more than 300 local governments joined together in the early 1990s to form American Communities for Cleanup Equity, or "ACCE," to seek legislative or administrative liability relief from contribution suits associated with co-disposal landfills. In 1998, with the issuance of the EPA Muni Policy, which offers protection from contribution liability through the settlement with EPA of municipal liability for reasonable and equitable amounts, these municipalities hoped that they had solved the Superfund co-disposal problem.

U.S. EPA POLICY FOR MUNICIPAL LIABILITY SETTLEMENTS

In early 1998, EPA issued a policy document that provides municipalities with the opportunity to settle their liability associated with co-disposal landfill sites at a fair and equitable level, and thereby protect themselves from the threat of litigation from industrial PRPs seeking to shift the bulk of clean up costs onto local governments. As stated by EPA, the Muni Policy "is intended to reduce transaction costs, including those associated with third-party litigation, and to encourage global settlements at sites." 63 Fed. Reg. at 8198

Under CERCLA Section 113(f)(2), contribution claims cannot be brought against any PRP that has entered into a settlement with the United States that resolves its CERCLA liability. Such settlements confer contribution protection on the settling party as a matter of law.

In order to provide this contribution protection for municipalities involved at co-disposal landfills, EPA proposed in July, 1997 and finalized on February 18, 1998 its "Policy for Municipality and Municipal Solid Waste CERCLA Settlements at NPL Co-Disposal Sites." Many members of the International Municipal Lawyers Association are familiar with the Muni Settlement Policy, as it was announced and explained by Assistant Attorney General for Environment and Natural Resources Lois Schiffer at IMLA's 1998 Mid-Year Seminar.

The Muni Policy declares that "EPA intends to exercise its enforcement discretion to offer settlements to eligible parties that wish to resolve their CERCLA liability based on a unit cost formula for contributions by MSW generators/transporters and a presumptive settlement percentage and range for municipal owners/operators of co-disposal sites." 63 Fed. Reg. at 8198. The policy works as follows:

A. General Provisions

• The policy applies to co-disposal sites on the National Priority List where local governments have not yet entered into a settlement agreement.
• Municipalities settling under the policy must waive their right to seek contributions from other parties, with one exception. EPA does not intend to seek multiple recovery of the unit cost rate from different generators/transporters with respect to the same units of MSW/MSS. Thus, EPA will settle with one or all such parties for the total amount of costs associated with the same waste. If one municipal party bears more than its share of costs pursuant to such an EPA settlement, that party can still bring contribution claims against nonsettling, non-de minimis generators or transporters associated with the same waste.
• EPA will consider the limited ability of a municipality to pay when determining settlement amounts. Moreover, EPA recognizes that because municipal owners/operators are often uniquely situated to perform in-kind services at a site (e.g., mowing, road maintenance, structural maintenance), EPA will consider any forms of in-kind services that a municipality may offer as partial settlement of its cost share.
• The Muni Policy does not apply to generators/transporters of non-MSW hazardous waste, who also happen to be generators or transporters of MSW or MSS. However, EPA may consider settlement with respect to MSW/MSS liability, if the settling party also agrees to an appropriate settlement relating to its non-MSW terms and conditions on terms and conditions acceptable to EPA.
• The Muni Policy does not address claims for natural resource damages.
• It is the responsibility of municipal PRPs to notify EPA of their desire to enter into settlements under the Muni Policy.
• At this time, all Muni Policy settlements negotiated and approved by EPA regional offices will be reviewed and approved by EPA headquarters, in order to ensure that the policy is applied consistently and equitably on a nationwide basis.
• The EPA will not apply the policy where, under the circumstances of the case, the resulting settlement will not be fair, reasonable, or in the public interest.

B. Settlements for Generators/Transporters of MSW

The Muni Policy presents an standard unit settlement cost for generators or transporters of municipal solid waste and municipal sewage sludge associated with a co-disposal site. This portion of the policy applies to all generators/transporters, not just local governments.

• For settlement purposes, EPA calculates an MSW generator/transporter's share of response costs by multiplying the known or estimated quantity of MSW/MSS contributed by the generator/transporter by an estimated unit cost of remediating MSW at a representative landfill subject to Subtitle D (non-hazardous waste) closure/post-closure requirements under the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ("RCRA"). EPA has found that this method usually provides a fair and efficient means by which EPA may settle with municipalities, and reflects a reasonable approximation of the cost of remediating MSW.
• EPA's estimated unit cost is set at $5.30 per ton.
• To calculate the unit costs, a RCRA Subtitle D landfill cost model was applied to account for the costs associated with the closure/post-closure criteria for two types of cost-scenarios: (1) basic closure cover requirements at a Subtitle D landfill; and (2) closure requirements supplemented by a typical corrective action response at a Subtitle D landfill. Based on EPA's estimate that approximately 35 percent of existing unlined MSW landfills will trigger correction action, EPA weighted costs at a typical landfill against costs at a corrective action landfill to produce the $5.30/ton figure. EPA believes that the $5.30 unit cost reflects the approximate cost of cleaning up unlined landfills containing generally non-hazardous MSW or MSS.

C. Settlements for Municipal Owners/Operators of Co-Disposal Sites

In the Muni Policy, EPA recognizes that co-disposal sites on the National Priorities List were often owned or operated by municipalities in connection with their governmental function to provide necessary sanitation and trash disposal services to their communities. Moreover, EPA notes, the nonprofit status of municipalities and their unique fiscal planning considerations "warrant a national settlement policy that provides municipal owners/operators with settlements that are fair, reasonable, and in the public interest." 63 Fed. Reg. at 8199. Thus, EPA has established a presumptive settlement level for municipal owners and operators of co-disposal landfills:

• The policy establishes 20 percent of total estimated response costs for the site as a presumptive baseline settlement amount for an individual municipality to resolve its owner/operator liability at a site. This 20 percent baseline applies only to owner/operators, and not to any other aspect of a municipality's liability (e.g., liability associated with the generation or transport of hazardous waste and/or MSW).
• The 20 percent baseline amount is based on data from past settlements at co-disposal NPL sites that involved multiple, financially viable, non-de minimis, non-MSW generators/transporters, such as industrial PRPs. EPA's analysis of past settlements indicated an average municipal settlement amount of 29 percent of site costs, making the baseline of 20 percent (and the potential for reduced legal and transactional costs) a significantly reasonable level for municipalities.
• When there is more than one municipal owner/operator associated with a site, EPA will consider settling with individual municipalities at less than the 20 percent baseline. Where a group of two or more municipalities jointly owned or operated a site and thus have the same basis for owner/operator liability, they will be considered a single owner/operator for purposes of developing a cost share.
• EPA regions may adjust the baseline settlement in a particular case upward (but generally not to exceed 35 percent shared) based on consideration of two factors:

• EPA regions may also adjust the presumptive percentage downward from 20 percent, based upon relevant equitable factors, including whether the municipality, of its own volition (i.e., not pursuant to a judicial or administrative order) made specific efforts to mitigate environmental harm once that harm was evident.

The Environmental Protection Agency launched a proactive effort to educate EPA regions and local governments about the availability of the Muni Policy. At the time of this writing, one MSW generator/transporter settlement has been approved by the EPA regional office, EPA headquarters and the Department of Justice, and is expected to be lodged in a consent decree in the short term. In addition, a handful of settlement offers have been approved by EPA, and the EPA Regions are expected to offer them to

MSW parties in the short term. Another handful of Muni Policy settlements have been requested from EPA by co-disposal sites, and are now under consideration. The Muni Settlement Policy is thus being put to use. Yet it is also being put to the test in litigation by a coalition of industrial associations.

THE INDUSTRIAL LITIGATION CONTINUES . . .

As EPA was developing the Muni Settlement Policy, several industrial groups, led by the Chemical Manufacturers Association ("CMA"), vowed to challenge the Policy and seek to have it invalidated. CMA has lived up to its word.

On May 18, 1998, a coalition including the Chemical Manufacturers Association, the American Automobile Manufacturers Association, the American Petroleum Institute, the Electronic Industries Alliance, the National Association of Manufacturers, and the U.S. Chamber of Commerce ("Industry PRPs") filed suit in both federal district court and the U.S. Court of Appeals for the District of Columbia Circuit, claiming that EPA is not permitted by the CERCLA statute to adopt the Muni Policy, and that the Agency did not follow proper procedure in adopting the policy. This litigation is ongoing, and described below.

The Industry PRPs filed a complaint against EPA in the U.S. District Court for the District of Columbia. The case was assigned to Judge Louis Oberdorfer. On the same day, the Industry PRPs filed a petition for review of the EPA Muni Policy in the U.S. Court of Appeals for the District of Columbia Circuit. The Industry PRPs filed suit in the Court of Appeals out of caution, because they were not certain which court had jurisdiction to hear the appeal.

The Industry complaint in the district court claimed that the Muni Policy allegedly "arbitrarily limits the Superfund liability of certain Potentially Responsible Parties ("PRPs") that contributed hazardous substances to contaminated Superfund sites to just $5.30 per ton of waste contributed, regardless of the facts or equitable considerations present at individual sites," and otherwise allegedly establishes "rigid limits" on the liability of such parties. According to the Industry PRP claim, the Muni Policy, by establishing a global (as opposed to site-specific) approach to municipal settlements, is not in accordance with law because it conflicts with the requirements of CERCLA § 113(f)(1). Section 113(f)(1) specifies that, when Superfund contribution suits are brought in federal district courts, "the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." Moreover, claim the Industrial PRPs, the Muni Policy is not in accordance with law because "EPA lacks statutory authority to limit the CERCLA liability of one category of PRPs at the expense of another category of PRPs." The complaint also alleges that EPA is not authorized to issue nonbinding preliminary allocations of responsibility, which would "usurp the role of federal courts in making equitable allocations of Superfund liability." Moreover, according to industry, the Muni Policy conflicts with CERCLA because it will allegedly lead to the creation of additional "orphan shares" at Superfund sites. Similar attacks are made on the Policy's treatment of municipalities that are owners or operators of Superfund co-disposal sites.

In addition, the Industry PRPs allege that the policy is substantively arbitrary and capricious, and procedurally flawed under the Administrative Procedure Act, 4 U.S.C. § 706(2), because EPA did not respond to all of the Industry PRPs' comments on the draft Muni Policy. The Industry PRPs thus request the District Court set aside the Muni Policy as unlawful, and grant permanent injunctive relief prohibiting EPA from using the Final Settlement Policy for any purpose, including relying in any way upon the Policy when conducting settlement discussions or making settlement decisions.

In order to support EPA and the validity of the Municipal Settlement Policy, a coalition of municipalities and municipal organizations — including IMLA — was formed to intervene and participate in the suits. This municipal Superfund coalition represents, through its membership, essentially all municipal officials that may be affected by Superfund liability at NPL co-disposal landfill sites. The coalition collectively represents more than 50,000 municipal officials, and includes the following groups and local governments that are supporting the litigation:

• American Communities for Cleanup Equity
• American Public Works Association
• Association of Metropolitan Sewerage Agencies
• International City/County Management Association
• International Municipal Lawyers Association
• National Association of Counties
• National League of Cities
• Solid Waste Association of North America
• City of Beverly Hills, CA
• City of Claremont, CA
• City of Coranando, CA
• City of Fremont, CA
• City of Grand Junction, CO
• City of Howell, MI
• City of Industry, CA
• Los Angeles Sanitation District
• Metro Denver Wastewater Reclamation District
• City of Monterey Park, CA
• City of Rancho Palos Verdes, CA
• City of Santa Fe Springs, CA
• City of San Marino, CA
• City of Sunnyvale, CA
• City of Walnut, CA

The eight (8) organization members of this municipal coalition intervened in the Circuit Court case on June 17, and the intervention was granted on June 18. On July 23, 1998 the municipal coalition moved to intervene in the District Court case, and that motion was granted on August 24, 1998.

On July 2, 1998 the EPA and the Industry PRPs submitted a "Stipulation of Dismissal of Petition for Review" to the Court of Appeals. This joint stipulation stated that the Muni Policy is "neither a rule nor a regulation and thus has no binding effect now or in future proceedings." The Industry PRPs further submitted (but EPA did not agree) that "because the Settlement Policy is neither a rule nor a regulation, '[w]hen the agency applies the policy in a particular situation, it must be prepared to support the policy just as if the policy statement had never been issued.'" Because the CERCLA statute specifies that the Court of Appeals has jurisdiction only over actions that are "final rules or regulations," the Court of Appeals dismissed the Industry PRP petition for review on July 13, 1998.

Now proceeding in the District Court, the Industry PRPs filed a motion on June 12 for partial summary judgment in the District Court with respect to the portion of the Muni Settlement Policy related to generators and transporters of municipal solid waste and municipal sewage sludge. This industry challenge on the merits of the EPA policy makes the claims that:

• the policy violates the CERCLA statute, because CERCLA does not authorize EPA to limit the liability of particular classes of PRPs.
• the policy violates CERCLA because Section 113(f) of the statute (which governs contribution suits) vests the federal district courts, and not EPA, with the authority to determine the overall allocation of liability and costs in Superfund cases based on site-specific, equitable factors.
• by adopting a settlement policy that is generally applicable to all generators/transporters of municipal waste and all municipal owners/operators, the policy conflicts with Section 122(g)(1) of CERCLA, which requires that certain settlements (for de minimis parties) address site-specific factors.
• Section 122(e)(3) of CERCLA indicates that EPA is not empowered to impose binding allocations of Superfund liability through a global policy.
• EPA's policy was not the product of reasoned decision-making, because it did not explain the basis for the policy, nor did it address all industry comments on the policy when it was first proposed in 1997.

There is a good chance that these arguments on the merits of the Muni Policy will not be addressed in this litigation. The strategy of the EPA and Department of Justice ("DOJ") is to dismiss the case on procedural grounds, as explained further below. Thus, EPA/DOJ filed a motion to delay its answer to the Industry Motion for Summary Judgment, so that the government could file, and the Court could rule upon, a motion to dismiss the entire case on procedural grounds. The Court granted that request for delay, and EPA has proceeded with its procedural defenses. If EPA's Motion to Dismiss fails, the Court will address the merits arguments outlined above. In any case, the Industry PRP motion for summary judgment outlines the type of challenge that is likely to be brought in later suits against the implementation of the Muni Settlement Policy in particular settlements, if those issues are not resolved in the instant case.

On July 2, EPA/DOJ filed a "Motion to Dismiss Plaintiffs' Complaint" pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. This Motion to Dismiss explained that the Court lacks jurisdiction to review the EPA policy because the policy is not "final agency action" under the Administrative Procedure Act, and because the policy is not yet ripe for judicial review, because it has no binding legal effect and cannot be evaluated except in the context of a specific settlement negotiated using the approach set forth in the policy. The fact that the Industry PRPs stipulated to the Court of Appeals that the Muni Policy "has no binding effect now or in future proceedings" strengthens EPA's procedural defense.

The Industry PRPs answered EPA's Motion to Dismiss on August 18, arguing that the EPA policy will influence and bind the decisions of Agency staff, such as regional Superfund officials, and thereby harm Industry PRPs by "decreasing their bargaining power" in Superfund co-disposal site negotiations. Thus, the industry parties argue, the policy has the effect of a "final agency action" and thus should be reviewed on the merits by the D.C. District Court. On September 4, EPA/DOJ filed a reply to the Industry PRPs' answer opposing dismissal of the suit, emphasizing the government's arguments about finality and ripeness.

Although the members of the Municipal Superfund Coalition that are supporting the Muni Policy would prefer a positive ruling on the merits disposing of future judicial challenges, the coalition understands that the adoption of a policy, rather than a rule, makes this impossible. Thus, on September 8, the municipal coalition filed a reply supporting EPA's motion to dismiss. This pleading emphasized that the Industry PRPs are seeking to have it both ways — to prevent the Muni Policy from having any binding effect at individual Superfund sites, yet also get judicial review of the Policy now based on a claim that the policy does have binding legal effect. The municipal pleading explained that, because the Industry PRPs had already stipulated that the Muni Policy was neither a final rule nor had any binding effect, they had no basis for judicial challenge in the district court now. The pleading further explains that a judicial review of the EPA Muni Policy now will have the adverse policy effect of forcing agencies to forego the issuance of beneficial policy guidance, and instead either go through the laborious rulemaking process to establish policies, or do things in a secret and arbitrary way that offers no guidance to those subject to government policies. For example, if the Industry PRPs had their way, and a court could review and throw out an agency policy before it was even applied, EPA might decide either to issue no policies like the Muni Settlement Policy, or make back-room arrangements in these matters that would not serve anybody in the Superfund liability process.

Oral argument on EPA's Motion to Dismiss is scheduled to take place before Judge Oberdorfer on November 6, 1998.

RETURN TO CONGRESS?

It should be apparent that, even if EPA wins the current litigation against the Muni Settlement Policy, the overall legal challenges by industry to this policy may not be over. Indeed, the Chemical Manufacturers Association has vowed that it will challenge every Superfund co-disposal settlement that utilizes the Muni Policy until the Policy is knocked down. Whether or not this CMA challenge bears itself out, such site-specific litigation is as much of a problem for municipalities as the contribution litigation that led to the collective efforts to establish the Muni Settlement Policy in the first place.

Municipalities have been seeking relief from the risk of exorbitant cost and liability from industrial contribution suits at co-disposal landfills for more than a decade now. For many years, municipals sought legislative amendment to CERCLA that would either cap municipal liability or create reasonable settlement baselines for MSW-liability. These municipal efforts led to proposed legislation in the 103rd and 104th Congresses (i.e., in 1993-94) that would have granted municipal liability relief. Despite consensus for this approach at that time among municipalities, large and small business, environmentalists and the Clinton Administration, these bills were thwarted by national politics — and legislative relief has remained stalled by Superfund politics to this day. Specifically, in the 103rd Congress the Republicans, sensing (correctly) that they would take control of the House and Senate, killed consensus Superfund reauthorization at the end of the session because it would be viewed as a victory for the Administration. In the 104th Congress, many in industry believed (incorrectly) that an anti-environmental agenda, including weakening Superfund, could be advanced; as a result consensus legislation that had included municipal liability relief fell apart.

More recently in the 105th Congress, House and Senate leadership adopted a Superfund strategy that comprehensive Superfund reform must be passed, and that no stand-alone provisions dealing with specific issues, such as municipal liability or brownfields legislation, would be permitted. Thus, municipal Superfund liability became part of larger legislative proposals that would deal with a range of issues, including less stringent remedy selection, relief from natural resource damages, and the repeal of the basic retroactive liability scheme of the statute. This strategy is driven by the lobbying of the same large industry trade associations that are leading the litigation challenging the EPA Muni Policy. Indeed, it is in the interest of the industry polluters to keep municipalities from obtaining administrative relief, because it increases the pressure on Congress for overall Superfund statutory changes.

Municipal liability provisions were included as part of several comprehensive Superfund bills introduced in the 105th Congress. Each of the main legislative proposals considered by Congress last session contained municipal liability relief provisions that would have been as favorable, or more favorable, than the existing EPA Muni Policy. For example:

• S.8, the Senate Republicans' proposal, introduced by Senator Robert Smith (R-NH), the Chair of the Superfund Subcommittee of the Senate Committee on Environment and Public Works, would have created an aggregate cap of 10 percent of Superfund liability for any person or group of persons that generated or transported MSW/MSS to a co-disposal site. However, because the cap only applied to costs incurred prospectively, after the passage of the bill, this approach might not be favorable to municipalities that have already expended substantial pre-settlement resources at a co-disposal site. With respect to municipal owners/operators of co-disposal sites with populations greater than 100,000, S.8 would have capped aggregate liability of municipalities at between 10 and 35 percent, depending upon whether the municipal PRPs took action that mitigated, or exacerbated, contamination or exposure at the facility. For small municipalities, with populations less than 100,000, the aggregate liability would have been capped at 5 to 20 percent, depending upon the same factors. In addition, the bill authorized reductions in settlement amount based on the limited ability of a municipality to pay, as judged by a number of factors.
• S. 1497, the Senate Democrats' proposal, introduced by Senator Frank Lautenberg (D-NJ), was focused solely on municipal Superfund relief, and would essentially have codified the EPA Muni Policy.
• H.R. 2727, a leading Republican Superfund proposal in the House, introduced by Representative Sherwood Boehlert (R-NY), proposed an approach that would have completely exempted generators and transporters of MSW and MSS, and municipal co-disposal owners/operators, from liability at co-disposal landfills unless the MSW/MSS wastes at the site "contribute significantly, or could contribute significantly to the cost of response or to natural resource damages at the facility . . ." H.R. 2727, Section 305(b)(o)(4). fff

As explained above, municipal liability relief remains stuck because of Congress' inability to agree on Superfund reform, in particular the stalemate on whether Superfund reform must be comprehensive, or if stand-alone pieces of Superfund reform can move forward on their own. However, there was a near break in this stalemate this year. Senate Majority Leader Trent Lott and Senate Minority Leader Tom Daschle co-sponsored a bill (with many other senators) that would have exempted scrap recyclers from Superfund liability. Although this Lott-Daschle bill was killed in the final hours of the 105th Congress, these activities indicate the potential for stand-alone Superfund amendments to move in the next Congress. Municipal organizations such as American Communities for Cleanup Equity will be considering efforts to promote such legislative action to codify EPA's Muni Policy in the 106th Congress. A legislative fix to municipal Superfund co-disposal problem may be the best way to end the litigation that otherwise may continue for several more years.

Interested local governments should consider lending their support to such an approach. Local communities can be certain that the Chemical Manufacturers Association and its cohorts in industry are carefully considering their approach to Superfund lobbying next year. Indeed, at a September 25 meeting with industry representatives, the chairmen of the House of Representative committees on Commerce and Transportation & Infrastructure, and the chairmen of the subcommittees on Finance & Hazardous Materials and Water Resources & Environment, called upon industry to underwrite a public relations campaign aimed at promoting the re-write of Superfund next year. According to trade press reports, House Commerce Committee Chairman Thomas Bliley (R-VA) called for a new Superfund lobbying strategy, and suggested that industry follow the model set by tobacco companies when they launched a $40 million public relations campaign to fight congressional efforts to regulate smoking and tobacco sales. Inside EPA Superfund Report, vol. XII, No. 20 at 5 (September 30, 1998). If at first you don't succeed, try, try again.

PROSPECTS FOR PROGRESS BY LOCAL GOVERNMENTS

If your local government is involved as a PRP at a co-disposal landfill site, you may want to consider how you can best ensure that the EPA Municipal Settlement Policy works for you.

Despite the current and potential future legal challenges by industrial PRPs, you should take advantage of the Muni Policy by requesting that your EPA regional officials use it to resolve your Superfund liability now. EPA has vowed to stand behind this policy and make it work, despite the Industry PRP litigation.

However, because the Superfund law does mandate that individual settlements with PRPs be fair and equitable, it is important that negotiations with your EPA region about the application of the Muni Policy consider and justify such application on equitable grounds. Such consideration should include the equitable factors identified by the EPA policy itself, such as whether the MSW/MSS materials contributed by your municipality contained an unusually high level of hazardous wastes (e.g., batteries or household hazardous wastes), or whether your municipality aggravated the release or risk associated with mixed wastes at the co-disposal site.

At the same time, if your municipality, as an owner/operator of a landfill, took actions to mitigate the release or risk of contamination at your site, you may wish to seek EPA approval for a settlement amount that it less than the presumptive settlement level of 20 percent. For example, you may be able to settle for less if your local government installed environmental control systems, such as gas control or leachate collection systems, at the landfill.

Local governments now have an effective tool for early settlement of Superfund liability. Hopefully, with the EPA Muni Policy, you will succeed, and will not need to try again.