Lawyers shouldn’t be the only ones cleaning up under Superfund

Wizards of ooze: Lawyers shouldn’t be the only ones cleaning up under Superfund

Strock, James M

This is the Court of Chancery; which has its decaying houses and its blighted lands in every shire; which has its worn-out lunatic in every madhouse, and its dead in every churchyard; which has its ruined suitor, with his slipshod heels and threadbare dress, borrowing and begging through the round of every man’s acquaintance; which gives to monied might, the means abundantly of wearying out the right; which so exhausts finances, patience, courage, hope; so overthrows the brain and breaks the heart; that there is not an honorable man among its practitioners who would not give–who does not often give–the warning, “Suffer any wrong that can be done you, rather than come here?”

Charles Dickens wrote these words 142 years ago in his novel Bleak House, but he could easily have been describing the legal quagmire known as Superfund. The Comprehensive Environmental Response, Compensation and Liability Act, signed by Jimmy Carter in 1980, was intended to be a temporary program. It was supposed to ensure the rapid cleanup of what has been elegantly called the detritus of the Industrial Revolution: the many sites where hazardous wastes were left buried in the ground, leaching into groundwater, threatening homes and neighborhoods.

Instead, Superfund has become the environmental equivalent of the Defense Department’s $600 toilet seat. Environmentalists have an enormous stake in making certain Superfund is reformed thoroughly and quickly, for if the American people begin to regard it as a “typical” environmental program, public support for environmental protection could erode precipitously.

TOXIC LIABILITIES

Superfund has failed in its mission of cleaning up hazardous waste sites across the nation. After more than a dozen years and nearly $30 billion dollars ($12 billion in federal appropriations, $7 billion collected from parties, and $10 billion in litigation expenses), the Environmental Protection Agency (EPA) concedes that cleanup has been completed at fewer than 200 of the 2,000 sites that pose the greatest threat to public health. But this failure is not the result of idleness; Superfund has been a bonanza for lawyers and consultants. A recent Rand Corporation report found that at studied sites nearly one-third of the money spent has gone to “transaction costs” rather than to cleanup itself. Nor is there any end in sight. Its ultimate costs are now credibly projected from $100 billion to $700 billion.

In my own state of California, we see monuments to Superfund all around us. Public officials in Oakland have complained to me that fear of toxic liability is holding up redevelopment of that city’s downtown. Under Superfund rules, the purchaser of a property is liable for cleanup costs of any hazardous wastes that may be found there. The result is to sharply discourage investment in industrial inner cities; business executives tell me it is much less risky to develop property in pristine exurban areas that have not yet been industrialized. This incentive system makes no environmental sense whatsoever.

After over a decade of delay, cleanup is only now beginning at the McColl site in Fullerton. During the early and mid-1940’s, various refinery wastes including acidic sludge from aviation fuel for the World War II effort were disposed into pits or sumps. A lifetime later, toxic black waste continues to ooze into a residential neighborhood, rejected by the earth. Why the slowdown? Because Superfund’s application of liability to a small number of companies with “deep pockets” is an open invitation to time-consuming litigation. In the McColl case, the Environmental Protection Agency tried to make a small number of parties liable for a cleanup that will cost $80 to $100 million. The idea was that those defendants would in turn sue other parties–including the U.S. government–for their share of the cleanup costs. But cleanup was continually put off, as various defendants wrangled in court over how much they would pay.

After the expenditure of nearly $21 million, the site is essentially unchanged since 1983. It is marked by a clay cap, a fence (which lawyers call an “institutional control”) and one of the largest libraries of technical and legal documents ever compiled at a hazardous waste site.

Superfund has been a similar disservice to Californians who live near the San Gabriel Basin, a polluted groundwater aquifer that underlies 16 square miles of Los Angeles’ densely populated San Gabriel Valley. In this case, there are so many hundreds of liable parties, and cleanup expenses are so high, that the cumbersome Superfund process has proved completely unworkable. The state government of California is now moving independently to clean up the aquifer, acknowledging that it could take well into the next century for Superfund to prompt any action.

To speed cleanup, the state of California is now asking that EPA avoid listing certain sites on its Superfund priority list. An example is Mare Island Naval Station, which is scheduled for closure in 1996. Like many military bases closing across the nation, Mare Island has a problem with hazardous wastes, such as landfills in closure, PCB spill areas and on-site groundwater contamination. Cal/EPA has determined that the best way to convert the naval base to an economic use is by circumventing the Superfund process.

TRIAL BALLOONS

President Clinton seems aware of the problem. He said in his first State of the Union address, “I’d like to use that Superfund to clean up pollution for a change and not just pay lawyers.” But, thus far, his aides are not taking the actions required to meet his goal.

Mr. Clinton’s EPA administrator, Carol Browner, impanelled a group to study Superfund, but then declared that the program’s liability standard should not be re-examined. This approach has resulted in subsequent trial-balloon launchings from EPA, such as suggestions that company executives, rather than their lawyers, meet with EPA to settle their cases. The premise is that the Superfund law itself is sound; problems have occurred because of the way the law has been enforced.

The position taken by the Clinton administration in 1993 was defensible in 1986. At that time, when Superfund was being reconsidered by Congress, supporters could credibly argue that the law had not been fully enforced. In 1989, however, the Bush administration performed a thorough management review, and then enforced the law vigorously–obtaining well over a billion dollars in legal settlements in each subsequent year. At this point, it won’t do to re-name the program, or change the management and hope for the best. The program is the problem.

If President Clinton wants to spend Superfund money on cleanup rather than lawyers, he will have to press for reform of its liability standards. Under the current system, too many individuals and businesses are potentially liable. And their actual, potential, and contingent liabilities are so staggering as to give defendants a powerful incentive to spend money on legal bills rather than incur the even higher costs of cleanup.

PRACTICAL DYSFUNCTION

The Superfund liability standard is unique in American law; it is necessary to understand its technical details to see why the law is faltering. In legal argot, liability under Superfund is strict, joint and several, and retroactive. Strict liability means that a person is liable for damages without respect to whether he or she was at fault. This is a conventional and established standard in dealing with hazardous materials or activities.

Joint and several means that where legal liability was created by more than one party, and it is difficult to apportion responsibility, then any party that had a hand in creating the problem may be liable for the entire remedy. In turn, that party may choose to sue others and litigate against them to assure that their contribution is paid. This, too, is a traditional standard.

So far so good. By all accounts, the prospective application of strict, joint and several liability has worked well in the area of toxic wastes. Companies and individuals are limiting the amount of hazardous substances they use and produce, improving environmental and occupational safety, and developing manufacturing processes that turn what was once waste into an economic resource.

The Superfund nightmare begins with retroactive liability, which means that individuals or companies are held liable for activity that was legal, or at least not illegal, at the time it occurred. Under Superfund, for example, past waste disposal undertaken in compliance with then-existing statutes would not shield a party from liability. Retroactive liability is constitutionally barred from criminal law, and it has been only rarely used in civil law. In the Superfund context, such liability is viewed by many potentially liable parties as outrageously unfair, particularly since, combined with the other features, it can make them liable for an entire cleanup.

Retroactive liability cannot change what has already occurred, or what is occurring now. It has no beneficial effects on behavior. But, when connected to the already broad Superfund liability net, it can certainly have immense economic consequences–and unintended environmental consequences.

Professor Alfred Light of St. Thomas University Law School has written an excellent treatise showing how Superfund’s liability scheme has moved from theoretical clarity to practical dysfunction. People who have owned a piece of property for a brief time in the distant past may be liable, because of actions they or their predecessors took. An owner who did not add to the contamination but held title while previously deposited material “reposed” in the environment may be liable. Municipalities may be liable for arranging for the transportation of hazardous wastes, even when they did not generate or transport the waste, and even if the municipality was required by law to dispose of the waste. Those who sell scrap metal to recyclers may become liable for spills at the recycler’s plant, if the sellers knew that the recycling process would include spillage.

The insurance industry has been hit with immense liabilities and huge litigation costs. Almost every old-time manufacturing business–shoemaking, printing, paints, auto parts, construction materials, aviation–and even more modern? industries, such as computer-chip production, face huge potential liabilities for toxic waste. Small businesses, many of which have only recently been regulated, such as dry cleaners, can watch their lines of credit vaporize overnight if they become potentially liable in a major suit, since the natural risk-aversion of lenders leads them to avoid financing where there is any hint of toxic liability.

Once imposed, the liability for cleanup of a waste site is open-ended. Today, cleanup typically costs more than $30 million per site. But even such a huge outlay does not prevent future liability if a remedy fails–as happened in Pennsylvania some years ago where a waste containment facility burst—or is judged in the future to be inadequate. Contingent liabilities are immense, and will become increasingly important as federal corporate accounting and reporting requirements are updated and strengthened.

COMMON SENSE REFORM

One of the reasons Superfund has been oddly impervious to reform is that the law is so complicated that many assume its reform would be equally so. In fact, there are a number of common sense actions that could be taken now to reform the program, and to begin the overdue process of taking the lawyers out of the law.

Repeal retroactive liability. For hazardous substances improperly handled after initial passage of Superfund in 1980, the current liability system should remain in place, in full force. The law is a positive force for changing behavior toward toxic exposure and contamination. But for actions taken before the law was passed, liability should be modified. Congress should calculate the cost of the cleanup, and allocate it among those who benefit from it–whether all of us, or specific sectors of industry–through a full legislative debate. Such an initiative would remove the sense of unfairness that motivates some to fight these cases without surcease.

Differentiate between those who pollute and those who are trying to clean up the mess: Winston Churchill once clarified a contested issue by explaining that while he may not have known everything, he certainly knew the difference between the fire brigade and the fire. Somehow that distinction has been lost in Superfund. The Superfund liability system, intended to reach the malefactors, also touches virtually anyone making an operational decision relating to a cleanup.

Cleanup contractors who are obeying the law should not face the same liability as the polluters who caused the problem in the first place. Where remedial action is taken in accordance with government mandate, the innocent should not have to fear being swept into the same liability dragnet as the initial polluters.

Create insurance mechanisms to terminate cleanup liability, At the time that even required remedial effort has been made to the satisfaction of the government, liability should cease. For remedies which are insufficient, but where there is not evidence of negligence or fraud, funding could be provided through a generic insurance mechanism. This would remove another part of the fire brigade-fire confusion.

Delegate the program to the states. The fact that Superfund discourages urban redevelopment in older areas–and subsidizes development of heretofore “green” areas–would move states rapidly into action if they were made accountable. If states are granted the lead, they will approach the issue as one of land use bounded by public health considerations. This is important because contamination of inactive waste sites, as opposed to “active” ones, tends to receive a relatively low priority when presented primarily as a public health issue.

States generally would welcome the challenge of taking the program over if they are assured that funding will be included, as well as a carefully limited role for the federal bureaucracy. Otherwise, the transfer would be rejected as a poisoned chalice.

Make cleanup of federal facilities a model for private sector. New cleanup technologies should be demonstrated on closed military bases and other federal facilities, then certified for broader application in similar private situations. The federal government should adopt a program like that recently approved by Governor Wilson, which allows Cal/EPA to certify new cleanup technologies. This will also provide new economic opportunities for environmentally protective products.

Establish an environmental regulatory budget: The costs, and benefits, of America’s national environmental and health programs are often dramatically understated, because they are presented as traditional budgetary measures. EPA’s annual budget, for example, is approximately $7 billion; the cost imposed on those complying with U.S. environmental laws is perhaps $130 billion annually. A regulatory budget, reflecting full costs and benefits–with line-items reflecting transaction costs, actual cleanup, etc.–should be submitted to and debated by Congress. The current debate over actual government spending is crabbed, misleading, and limits public accountability for all environmental programs including Superfund.

NO GOOD ANSWER

The Superfund law, in its current form, poses a grave threat to American environmental law as a whole. The fact is that of all the areas of domestic federal governmental activity of the past generation–crime prevention, the “war on drugs,” education, labor, social welfare, and housing–environmental protection stands alone as an area of dramatic and undeniable achievement.

But the day is coming when Americans will ask why so much money has gone to pay for lawsuits under Superfund, rather than, say, prenatal care. At present, there is no good answer, and some may conclude, wrongly if not tragically, that the same is true for the entire enterprise of environmental protection. All of us committed to the environment should act now to fix the roof while the sun is shining.

JAMES M. STROCK, California Secretary for Environmental Protection, was formerly the chief law enforcement officer of the U.S. Environmental Protection Agency.

Copyright Heritage Foundation Winter 1994

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