Response Costs Must Be Necessary To Be Recovered

In the case of Southfund PartnersIII v. Sears, Roebuck and Co., 57F. Supp. 2d 1369 (N. D. Ga. 1999), plaintiff was a purchaser of property formerly owned by Sears. Buyer discovered underground storage tanks that contained solvents and removed them. Later when it was contemplating selling the property, it discovered that there was contamination in the soils and groundwater that had leaked from the old solvent tanks during the period of time that Sears owned the site. Because the contaminated areas were covered with asphalt and enclosed by a fence, the Georgia Department of Natural Resources removed the property from its Hazardous Site Inventory. When Buyer had difficulty selling the property after the contamination was discovered, it decided to enhance the marketability of the property by installing a series of extraction wells to pump contaminated groundwater into the city sewer system and to drill sparging wells and inject air into the contaminant plume to increase the rate of decay of hazardous materials in the soil. When Buyer brought the action in federal court to recover its costs for clean-up, Sears moved for summary judgment, which was granted by the Court.

The first argument made by Sears was that it could not be liable because the contract of sale stated that the property was to be sold "as is". The Court found, however, that under Georgia law, an "as is" clause only precludes the buyer from claiming a breach of warranty. It does not preclude an action for contribution under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). Next the Court examined §107 of CERCLA and found that Sears was a covered person under the statute because it owned the property when releases of hazardous materials occurred. These releases constituted "disposal". Section107 also requires, however, that the costs to be recovered must be "necessary costs". The Court found that costs would be necessary if they were incurred in response to a threat to human health or the environment that existed prior to the initiation of the response action and if they were necessary to address that threat. The Court found that "no reasonable juror could find, based on the present record, the response costs incurred to cleanse the groundwater and soil were necessary to address threats to the public health or the environment." Instead it found that the costs were made to make the property more attractive to potential buyers by preparing it for residential use. The Court then quoted from a Seventh Circuit case, G.J. Leasing Co. v. Union Electric Co., 54F.3d 379 (7th Cir. 1995), as follows:

Suppose a building that was being used to warehouse heavy industrial equipment were found to have very low levels of contamination by some hazardous substance and only a small expenditure would be necessary to remove enough of the substance to make the building safe for its current use. Thinking this is a perfect opportunity to upgrade that use, the owners decide to incur enormous costs to eliminate the contamination utterly, charge those costs to whoever was responsible for the current very low level of contamination and then convert the building to a hospital, daycare center or dairy products plant. The limitation "necessary" response costs would deter them from carrying out this scheme. 54F.3d at 386.

The facts in the case sub judice fall squarely within this hypothetical, the only difference being that absolutely no costs were necessary to make the property at issue safe for its current use as an industrial site.

Wetlands Ruling

To the surprise of absolutely no one, EPA's Environmental Appeals Board narrowly construed the decision in National Mining Association v. U.S.Army Corps of Engineers, 145F.3d 1399 (DC Cir. 1998), which enjoined EPA from enforcing the so-called "Tulloch Rule", which defined the discharge of dredged materials to include "any redeposit" of such material. The DC Circuit held that the incidental fall back of dredge materials was not a regulable "addition" of material under the Clean Water Act. In the case of In Re: Slinger Drainage, Inc., CWA AppealNo.98-10 (September29, 1999), the Environmental Appeals Board upheld the enforcement action that EPA Region5 brought against Slinger Drainage Inc. for using its Hoes Trenching Machine to dig a trench and lay drainage tile and then redeposit the excavated material back into the trench. In a curious twist of logic, the Board found that because Slinger redeposited all of the material that it excavated instead of just some of the material like the dredging company in the Circuit Court case, the decision in National Mining was not applicable. The Circuit Court had stated as follows:"We agree with the plaintiffs, and the District Court, that the straightforward statutory term 'addition' cannot reasonably be said to encompass the situation in which material is removed from the waters of the United States and a small portion of it happens to fall back." and "[W]e fail to see how there can be an addition of dredged material when there is no addition of material." The Environmental Appeals Board nevertheless found that when there is no addition of a lot of material, it somehow becomes an addition.

Agent Subject to Order By DEP

The Environmental Hearing Board recently upheld an order from DEP requiring access to property pursuant to the Hazardous Sites Cleanup Act. The case is RonaldL. Clever v. DEP, EHBDocket No.98-086-MG (October26, 1999). In response to the Department's motion for summary judgment, the appellant submitted an affidavit maintaining that he is not the owner of the property, but merely represents those who are. The Department submitted tax sales receipts and recorded deeds showing the property in the name of the appellant. The Board upheld this as sufficient evidence of appellant's rights to the site "to make him an owner of the site for purposes of the Department's right to access under §§503(e) and (f) of HSCA." In the alternative, the Board stated that even if the appellant where not the legal owner he would be liable under the doctrine of vicarious liability because he was acting as an agent for undisclosed principals. The appellant had refused to obey an order of the Board that he answer an interrogatory asking that he disclose the real owners.

No Mixing Zones In The Great Lakes

On October4, 1999, EPA proposed an amendment to its Final Water Quality Guidance for the Great Lakes System (the "Guidance") to prohibit mixing zones for bioacccumulative chemicals of concern ("BCCs"). The proposal would phase out mixing zones for existing discharges over a period of ten years.

The EPA had proposed a similar provision on mixing zones when it first issued the Guidance in 1995. The U.S. Court of Appeals for the District of Columbia Circuit, however, vacated that provision and remanded it to EPA for further consideration. A mixing zone is the area beyond the point source outfall in which ambient concentrations of a particular pollutant are allowed to exceed the otherwise applicable water quality criterion for that pollutant. It is the area of dispersal in the receiving water where the pollutants in the effluent are not yet sufficiently diluted to meet the applicable water quality criteria. EPA claims that the elimination of mixing zones is necessary to maintain the environmental integrity of the Great Lakes basin ecosystem. It maintains that contamination by BCCs has already disrupted sport fisheries in the lakes and if BCCs are allowed to be discharged above water quality criteria, they could present a significant potential risk to human health, aquatic life and wildlife.

If the proposed rule becomes final, Great Lakes states would be required to adopt regulations consistent with the Guidance. Illinois, Indiana, Minnesota, Michigan and Wisconsin already have adopted requirements to eliminate mixing zones for BCCs that they have submitted to EPA for approval. New York, Ohio and Pennsylvania have not adopted requirements to eliminate their mixing zones. Under the proposal, these states would have 18 months after the publication of a final BCC mixing zone rule to submit their own provisions complying with the Guidance. EPA would then have six months following this mission to approve or disapprove.

DEP Comprehensive Compliance Monitoring Program

At a recent meeting of the Allegheny County Bar Association Environmental Law Section, the DEP's Eric Conrad described its Foundation for Information eXchange ("FIX"), its data integration and system conversion project. This has resulted in the development of a "General Information Form" to be used in permit applications across programs. The FIX Project was designed to foster cross program communication, support new initiatives, better manage DEP resources and better support decision making. In the cross program communication, the aim is to address compliance issues at facilities regulated by multiple programs. To better manage DEP resources, there will be team assignments for multi-media inspections. And to better support decision-making, staffing will be allocated to address those areas most in need. Some new initiatives that will be supported by the program in addition to the joint inspections, are the pollution prevention compliance assistance and ISO 14000 certification.

The interim compliance system was implemented beginning on July1, 1997, and there is now a department-wide compliance system, with program specific inventories. Mr.Conrad claims that the system has been well received by the public. The system is designed to do the following:

1. Give a multi-media view of all permitted facilities at a location.
   
2. Give a multi-media view of all clients associated with a site.
   
3. Tell what permit applications are pending, who is reviewing them and how much time is left before the review must be completed.
   
4. Tell what facilities have compliance problems and the nature of the problem.
   
5. Identify the most frequently occurring violations by region, program, facility type and industry type.
   
6. Generate compliance rates by program, region, facility type and industry type.
   
7. Generate GIS layers so facilities can be viewed spatially.

OSHA Won't Routinely Request Employer's Voluntary Self-Audits Of Workplace Safety and Health

On October 6, 1999, the Occupational Safety and Health Administration announced that it will not routinely request voluntary self-audit reports of workplace safety and health conditions at the start of an inspection. Where an audit identifies a hazardous condition in the workplace and the employer promptly takes corrective action, OSHA will not treat the audit report as evidence of a willful violation and will treat the audit as evidence of good faith, which may entitle the employer to a penalty reduction. If the agency has an independent basis to believe that a specific safety or health hazard warranting investigation exists, OSHA may exercise its authority to obtain the relevant portions of voluntary self-audit reports relating to a hazard.

OSHA includes in many of its standards an explicit requirement that employers conduct self-audits to determine their compliance. In addition to these required audits, many employers undertake voluntary self-audits to improve safe and healthful work environments and to ensure compliance with the Occupational Safety and Health Act. There is little dispute that OSHA can request mandatory audits, but some employers have contested OSHA's right to access their voluntary self-audits. Employers complain that OSHA's use of self-audits in enforcement proceedings discourages employers from conducting them.

Under the OSH Act, an employer's good faith normally reduces the amount of penalty that would be assessed for a violation. OSHA's Field Inspection Reference Manual provides up to a 25% penalty reduction for employers who have implemented a safety and health program, including self-audits. OSHA will treat a voluntary self-audit that results in prompt action to correct violations found, as well as steps to prevent similar violations, as strong evidence of an employer's good faith with respect to matters covered by the voluntary self-audit.

The policy makes clear that if an employer engages in such self audits, it must act on the results. Otherwise, OSHA retains the right to use the audits as a basis of more severe enforcement action.

OSHA Revises Bloodborne Pathogens Compliance Directive

On November 5, 1999, OSHA issued a new directive to address exposure to bloodborne pathogens. The directive guides OSHA's compliance officers in enforcing the standard that covers occupational exposure to bloodborne pathogens. (29 C.F.R. §1910.1030). It updates an earlier directive issued in 1992 and reflects the availability of improved devices, better treatment following exposure and OSHA policy interpretations. The revised directive emphasizes the importance of an annual review of the employer's bloodborne pathogens program and the use of safer medical devices to help reduce needlesticks and other sharps injuries. It emphasizes the use of engineering controls, such as safer medical devices, rather than administrative controls and personal protective equipment. The directive also highlights basic work practices, personal protective equipment and administrative controls. The emphasis on engineering controls results from OSHA's request last year for ideas and recommendations on ways to better protect workers from contaminated needles or other sharp objects.

The revised directive includes detailed instructions to compliance officers on inspections of multi-employer worksites, such as home health services, employment agencies, personnel services, physicians and health care professionals in independent practices, and independent contractors. Also included in the directive are decontamination requirements, guidelines on hepatitis vaccinations and post exposure treatments, and employee training. It adds the most recent guidelines from the Center for Disease Control on vaccinations against Hepatitis B virus and incorporates CDC's guidelines on post exposure evaluation and follow-up for HIV and the Hepatitis C virus. OSHA mandates effective training and education for employees whenever safer devices are implemented and stresses "interactive" training sessions rather than just the use of films or videos that do not provide the opportunity for discussion with a qualified trainer. In addition, the directive provides sample engineering control evaluation forms, an Internet resource list, a "fill-in-the-blanks" sample exposure control plan, and CDC guidelines pertaining to HIV exposure, control and prevention of hepatitis C, and hepatitis B vaccinations.

Title V Planning - Audit Result Disclosures Of New Source Review Or Prevention Of Significant Deterioration Violations Merit Reduced Penalties

On September 30, 1999, EPA's Director of the Office of Regulatory Enforcement issued a memorandum entitled: "Reduced Penalties for Disclosures of Certain Clean Air Act Violations" (Air Audit Memorandum"). A step-child of its Audit Policy, the memorandum details a program whereby companies can review their prior decisions regarding the application of New Source Review (NSR) and Prevention of Significant Deterioration (PSD) programs and if they determine that, despite being made in good faith, they were in violation of the air rules, they may avoid penalties, except for the economic benefit of noncompliance. To be eligible, the company must agree to correct the situation prior to Title V permit issuance and otherwise meet the conditions of conditions 3 through 9 of the EPA Audit Policy. (The Audit Policy was issued at 60 Fed. Reg. 66706, 12/2/95.)

Previously, EPA established a "no look back" policy in its "White Paper for Streamlined Development of Part 70 Permit Applications" that allowed companies to avoid reconsideration of previous applicability determinations as part of their Title V permit preparations. The new policy would encourage PSD and NSR reviews and require companies to correct violations, generally by installing state-of-the-art pollution controls.

In a related matter, EPA has announced that it signed a multi-facility agreement with a large manufacturing company requiring the company to conduct Clean Air Act NSR audits at 40 of its facilities over the next three years and address any violations found under the Air Audit Memorandum. EPA has refused to release the name of the manufacturer citing a Freedom of Information Act exemption. EPA says the name will be released once the audits are complete and any enforcement action resolved.

EPA Guidance For Superfund National Policy Managers

On October 7, 1999, the Director of EPA's Office of Emergency and Remedial Response, Steven Luftig, issued a final guidance to Superfund national policy managers at all EPA regions entitled "Ecological Risk Assessment and Risk Management Principles for Superfund Sites." Its stated purpose is to help Superfund risk managers make ecological risk management decisions that are based on sound science, consistent across regions, and present "a characterization of site risks that is transparent to the public." The guidance includes six principles which are to be considered by risk managers when making ecological risk management decisions. The principles are as follows:

1. Superfund's goal is to reduce ecological risks to levels that will result in the recovery and maintenance of healthy local populations and communities of biota. Therefore the response actions selected should result in the recovery and/or maintenance of healthy local populations or communities of ecological receptors that are or should be present at or near the site.
   
2. Coordinate with federal, tribal, and state natural resource trustees. EPA investigations of risk and trustee investigations of resource injuries should be coordinated to most efficiently use federal and state monies and to avoid duplication of efforts.
   
3. Use site-specific ecological risk data to support cleanup decisions. The site-specific information can include plant and animal tissue residue data, toxicity test data, bio-availability factors, and population-or community-level effects studies.
   
4. Characterize site risks. Site risks are to be characterized in terms of (a) magnitude, i.e., the degree of the observed or predicted responses of receptors to the range of contaminant levels; (b) severity, i.e., how many and to what extent the receptors may be affected; (c) distribution, i.e., areal extent and duration over which the effects may occur; and (d) the potential for recovery of the affected receptors.
   
5. Communicate risks to the public. Managers are to clearly communicate to the public the scientific basis and ecological relevance of the assessment endpoints used in site risk assessments and the relationship between the effect or exposure measures used to determine if there are any adverse effects to any of the assessment endpoints.
   
6. Remediate unacceptable eco-risks. Working within the framework of the National Contingency Plan, the goal is to eliminate unacceptable ecological risks due to any release or threat of a release.

The guidance then includes four questions that risk managers and risk assessors should address to facilitate the reaching of sound decisions. They are as follows:

1. What ecological receptors should be protected? Superfund risk assessments should use site-specific assessment endpoints that address chemical specific potential adverse effects to local populations and communities of plants and animals.
   
2. Is there an unacceptable ecological risk at the site? Site specific biological data should be developed in order to determine if there are unacceptable risks.
   
3. Will the cleanup cause more ecological harm than the current site contamination? Even though an ecological risk assessment may demonstrate that adverse ecological effects have occurred or are expected to occur, it may not be in the best interest of the overall environment to actively remediate the site.
   
4. What cleanup levels are protected? The risk assessor can use the same toxicity tests, population or community-level studies, or bioaccumulation models that were used to determine if there was an unacceptable ecological risk to identify appropriate cleanup levels.

Migratory Bird Rule Upheld

On October 7, 1999, the United States Court of Appeals for the Seventh Circuit upheld the U.S. Army Corps of Engineers' migratory bird rule. In the case of Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers, No. 94 C7489 (Oct. 7, 1999), the court denied a challenge by the Solid Waste Agency of Northern Cook County to the rule which interprets the Clean Water Act to grant the Corps jurisdiction over certain intra-state waters based on their actual or potential use as a habitat for migratory birds. The Solid Waste Agency attempted to site a landfill on property that included some old gravel pits and seasonal ponds. The Corps determined that there were no jurisdictional wetlands but determined that the ponds were used as a habitat for migratory birds and therefore could not be filled in without a permit. When the Solid Waste Agency was denied a permit, it brought this action challenging the migratory bird rule. The court upheld the exercise of legislative power by Congress over the ponds as a regulation of activities that substantially affect interstate commerce because of the cumulative effect on the birds. "The effect may not be observable as each isolated pond used by the birds for feeding, nesting and breeding is filled, but the aggregate effect is clear, and that is all the Commerce Clause requires." Having concluded that Congress had the power under the Commerce Clause to permit the regulation of waters based on the presence of migratory birds, it had no problem at all finding that it was reasonable for EPA and the Corps to interpret the act in a manner that concluded that Congress did exercise that power.

Compliance Assurance Monitoring Upheld

In the case of Natural Resources Defense Council v. EPA, No. 97-1727, (Oct. 29, 1999), the United States Court of Appeals for the District of Columbia Circuit upheld the enhanced emission source monitoring rule promulgated by EPA, known as Compliance Assurance Monitoring. The Natural Resources Defense Council claimed that the rule violated the Clean Air Act Amendments of 1990 because it exempted too many major sources and the length of the phase in period for the rule created an unreasonable delay. The court upheld the rule as a reasonable exercise of the EPA's authority to interpret the statute because EPA considered the relevant factors and articulated a rational connection between the facts and the choices it made in the regulation.

The Chemical Manufactures Association and others intervened in the lawsuit and challenged the rule as an impermissible increase in the stringency of emissions standards. Industry challenged the part of the rule that requires permittees to submit compliance certifications based on "any other material information" including "credible evidence." The court found this issue not to be ripe for consideration until there is before it an enforcement action actually brought by EPA using "credible evidence." The court included an interesting paragraph recognizing the right of permittees to qualify their certifications. The paragraphs reads as follows:

At oral argument, EPA counsel agreed with the court's supposition that nothing precludes an owner from adding a caveat to his certification to the effect that, while it is providing other evidence which EPA might find material, the submitter disputes its materiality and reserves the right to challenge the use of the evidence in court.

There was one part of the law that the court remanded to EPA. That part was the provision that required a source to certify that the methods it used for determining compliance provided continuous or intermittent data. The court found this to be an insufficient implementation of the statute that requires a source to certify whether its compliance is continuous or intermittent. "Here, Congress expressly and unambiguously required that the certification include 'whether compliance is continuous or intermittent.' EPA's regulations do not effectuate that expressed mandate of the statute and must be remanded."