While both parties in Congress agree that Superfund needs significant reform, they disagree on the appropriate legislative mechanism. Some suggest that Congress delay reform until after the election, passing an appropriations bill that allows for clean-ups only through fiscal year 1996. Then, after reappropriation, Congress could pass a separate reauthorisation bill to reform the programme and fund future clean-ups. Others, however, argue for the passage of one comprehensive reauthorisation and reform bill.
This article outlines the current legislative proposals to reform Superfund, including the Reform of Superfund Act of 1995 sponsored by Representatives Michael Oxley (R-Ohio) and Sherwood Boehlert (R-N.Y.), the Accelerated Cleanup and Environmental Restoration Act sponsored by Representative John Dingell (D-Mich.). As a backdrop to this discussion, the following is a summary of the major provisions of the current law and a look at some of its problems.
I. Superfund - its provisions and problems
President Carter signed CERCLA into law on 15 December 1980. CERCLA was to provide a framework for both government and private entities in responding to the release of hazardous substances. Unlike most laws, its intent was retrospective, addressing contaminated sites which already existed. Although it was intended to be a short term programme, Congress underestimated the number of contaminated sites as well as the cost and time associated with their clean-ups. As a result, CERCLA has blossomed into a much more expansive law than originally contemplated.
CERCLA contains two important provisions. First, CERCLA establishes a federal response and enforcement programme for the clean-up of contaminated sites. Taxes on certain chemical and petroleum feedstocks, as well as a general corporate environmental tax, finance this "Superfund," helping to pay for clean-ups overseen by federal officials. Second, CERCLA authorises a cause of action under which both governmental and private parties can sue responsible parties to recover some or all of their clean-up costs.
CERCLA creates four classes of potentially responsible parties (PRPs), including the present owner and operator of the site; the owner and operator of the site at the time of disposal; the transporter who selected the site for disposal; and the person who "arranged for" the disposal of hazardous substances. An "owner" is the person holding legal title to the property, even if it is leased to or operated by someone else. An "operator" is the person with control of the site regardless of ownership. As currently written, the present owner and operator of the site are liable for clean-up costs regardless of their responsibility for the actual contamination. The owners and operators at the time of disposal also are liable, even if the disposal was legal at the time. As to all PRPs, knowledge and intent are irrelevant to the question of their liability. As such, CERCLA liability is not only retroactive but strict, attaching without regard to fault.
CERCLA also provides for joint liability in situations where the contamination is indivisible. Thus, even if an entity is only partially responsible for the contamination, it may be liable for the entire cost to clean up the site.
Many commentators have argued that the problems with CERCLA lie within its liability provisions. For example, some argue that CERCLA's joint and several liability provisions encourage PRPs to resist efforts by the Environmental Protection Agency (EPA) to clean up sites and instead engage in lengthy litigation with other PRPs to avoid or lessen liability. These efforts, in addition to litigation with insurance companies over coverage issues, result in greater transaction costs (for example, legal or administrative expenses unrelated to site clean-up), thereby reducing the percentage of money ultimately available for site remediation. Although statistics vary, conservative estimates suggest that only 50% to 70% of the $30 billion already spent under Superfund has been on actual site clean-up.
Furthermore, many argue that the joint liability and retroactive liability provisions of CERCLA have made small businesses and municipalities the unfair target of larger, better-funded PRPs. Many times, small businesses which have contributed minimal quantities of waste to a site are unable to expend the costs associated with lengthy litigation or the allocation process. Instead, they are forced to accept group representation, at best, and no representation, at worst.
CERCLA's strict liability provisions also add to the problem. Although lenders or other parties with mere security interests in the contaminated site are subject to a "security interest" exemption, regulations and court decisions impose strict requirements before this exception applies. As a result, many lenders shy away from contaminated property altogether.
2. Current legislative proposals
The current legislative proposals to reform Superfund are, in large part, attempts to address the above-discussed problems. Since all of the bills currently are undergoing mark-up in various committees, it is unclear which, if any, will ever be put to a vote. What is clear, however, is that Congress must act before the current Superfund is depleted.
A. Reform of Superfund Act of 1995
The current legislative frontrunner appears to be the Reform of Superfund Act of 1995. This bill advocates a cut-off date of 1987 for retroactive liability. This cutoff date would correspond with the date record keeping for shipments of hazardous substances began to be required under the Resource Conservation and Recovery Act, thereby making the allocation process easier. In addition, although the original version of the bill contained a "retroactive liability discount" for those parties who voluntarily cleaned up property after enactment of the law, recent commentary on the bill suggests that it will be scrapped from the final version. In either case, these measures would lower transaction costs by substantially reducing the number of qualified Superfund sites and PRPs. Also, this bill would exempt small businesses, municipalities and not-for-profit corporations from liability under the Superfund scheme.
In addition to the changes in who would be liable, the bill also proposes reforms as to the extent of liability itself. Under the bill, the neutral allocator would determine a party's liability based on equitable factors, such as the amount and toxicity of the party's hazardous substances. A PRP would be liable only for its allocation of fault, thus eliminating the current joint liability scheme. This process would significantly reduce litigation among PRPs, even though one may seek limited judicial review of the allocation.
Another significant component of the bill requires that state and local governments concur in the addition of a site to the National Priorities List (NPL). This effectively would limit the number of sites added each year and, perhaps more importantly, allow state and local governments some participation in the decision of which sites in their jurisdiction most need federal funds for clean-up.
B. Accelerated Cleanup and Environmental Restoration Act
Senator Bob Smith's bill presents the most dramatic proposal to reform CERCLA. This bill completely exempts from liability any company whose pollution occurred before 11 December 1980, thus eliminating retroactive liability for these sites. As to post-1980 contaminated sites, including "straddle sites," the Smith bill would eliminate the current strict and joint liability scheme. Instead, PRPs would participate in a mandatory, non-binding arbitration, which would allocate fault. PRPs then would be liable only for their percentage of the clean-up costs.
The bill also provides for a 50% "accelerated clean-up tax credit" available to PRPs who accept an allocator's findings for clean-up costs of pre-1980 disposal, and who stay on-site to conduct the work.
Another central tenet of this bill is a cap on additions to the NPL limiting the number to 30 over the next three years. Also, states would have the right to veto new NPL sites and may choose, if they take control of the site clean-up, to use their own remedy selection procedure instead of the current federal procedure.
C. Superfund Reform Act of 1995
Although the Superfund Reform Act of 1995 was the first to be introduced, it currently is out of favour. This bill primarily intends to eliminate litigation among PRPs and insurers over policy coverage for clean-up costs. The bill proposes an $8.1 billion, 10 year "resolution fund," financed, in large part, by a retroactive tax on insurers who wrote certain policies during the period of 1971 through 1985, and a prospective tax on commercial insurers.
The "resolution fund" would offer to pay PRPs a certain percentage of their clean-up costs in lieu of their right to litigate. The percentage would depend on whether or not the highest court of the state in which the site is located had decided Superfund policy coverage issues. If the state court had found for the policyholder, the percentage would be 60. If the court, however, had not addressed the issue, the percentage would be 20. Beside the creation of this fund, this bill would leave intact the current system of CERCLA liability.
3. Conclusion
Although there are several well-developed Superfund reform bills pending in Congress, in order for a bill to be passed this year the legislative momentum must shift back to Superfund. The concepts of strict, joint and retroactive liability have resulted in outrageous transaction costs and impose impossible burdens on businesses, municipalities and especially the least involved contributors. CERCLA was enacted in 1980 with admirable goals and purposes. After fifteen years, enormous costs to the government and private sector, and continuous litigation, the need for reform is clear. The new Superfund law must treat all parties fairly and must attempt to achieve realistic goals. It remains to be seen whether the need for Superfund reform will survive political compromise.