Superfund Reform Exempts Entities

New law is a small, quiet step in the direction of superfund reform.

With congratulatory fanfare, media attention and many kudos, President Bush last month signed into law House Resolution 2869 entitled "Small Business Liability Relief and Brownfields Revitalization Act." The primary, if not exclusive, focus surrounded Title II of the Act, the Brownsfields Revitalization and Environmental Restoration Program. While deserving of praise and attention as it establishes a new program to revitalize environmentally contaminated and abandoned industrial properties, Title II is not the only section of the bill that creates important new changes to the landscape of environmental law.

Title I of H.R. 2869 should be similarly trumpeted as equally significant, as it carves out certain long-awaited exceptions to the Comprehensive Environmental Response Compensation and Liability Act, commonly referred to as CERCLA — or more well-known as Superfund. These changes have been a long time in development, often delayed by becoming ensnared in the larger question of a more far-reaching Superfund reform.

Although they have not generated the same amount of controversy and are relatively limited in scope, the Title I amendments to Superfund are long overdue and will be a welcome relief to many in the state. Even hearing the word Superfund has historically left individuals, businesses and municipalities shuddering with fear of potential liability and escalating costs of cleanup of the state's superfund sites, proportionate or otherwise.

These sites include Yaworski Lagoon, Barkhamsted Landfill, Old Southington Landfill, Beacon Heights, Laurel Park, National Oil Services, to name a few. Most notorious are the Beacon Heights and Laurel Park Superfund sites, which resulted in a decade of acrimonious litigation involving municipalities, municipal waste haulers and hundreds and hundreds of businesses – large and small.

However, with the passage of H.R. 2869, some of these entities need no longer fear the "CERCLA 104e letter" or the designation as a "Potentially Responsible Party" ("PRP"). Nor should they tremor at the risk of a potential contribution action relating to their past waste disposal. Certain of these parties are now free from the reach of the Superfund dragnet.

Beyond The Reach Of CERCLA

House Resolution 2869 has carved out two exemptions from the reach of CERCLA § 107, which has broadly defined who becomes a PRP under CERCLA. Both exemptions are targeted at providing relief to small businesses. First, Congress created the "de micromis" exemption. If liability under CERCLA was founded upon a business' status as a generator or a transporter, then that business would be exempt if it can demonstrate that the total amount of hazardous substance that the business generated and sent to the Superfund site was less than 110 gallons of liquid materials or less than 200 pounds of solid materials and "all or part of the disposal, treatment or transport concerned occurred before April 1, 2001."

The second exemption is for "municipal solid waste" (MSW) which is defined as waste generated by a household (single or multi-family) or by a commercial, industrial or institutional entity, that is essentially the same as waste generated by a household. It has to be collected and disposed of with other MSW, and it must contain a relative quantity of hazardous substances no greater than that found in the waste of a single-family household. And Congress, rather than leaving us with an oblique description, provided examples of MSW, to include food and yard waste, paper, clothing, appliances, consumer product packaging, disposable diapers, office supplies, cosmetics, glass and metal food containers, school science laboratory waste and household hazardous waste. It does not include combustion ash generated by resource recovery facilities or municipal incinerators or waste from manufacturing or processing operations that is not essentially the same as household waste.

There are three categories of entities who are permitted to take advantage of this municipal solid exemption: an owner, operator or lessee of residential property; a business entity that, during its three taxable years preceding the written PRP notification, employed an average not more than 100 full-time individuals, or the equivalent thereof, and that is a small business concern under the Small Business Act, 15 U.S.C. 631 et seq; or a 501(c)(3) organization under the Internal Revenue Code of 1986 and exempt from tax under 501(a) of such code, provided that during the taxable year preceding the PRP letter, the organization employed not more than 100 paid individuals at the location from which all the MSW was generated.

Exclusions To Exemptions

And, as only Congress can, exclusions to these exemptions have also been created for each exemption. Although the exemptions are clear, the exclusions are less clear.

Under both exemptions, a party will not be exempt if the federal government determines that the waste contributed significantly — or could contribute significantly, either individually or in the aggregate — to the cost of the response action or natural resource restoration at the Superfund site. Additionally, the exemption does not apply if the person failed to comply with an information request or subpoena issued under CERCLA or if it is impeding the cleanup or natural resource restoration at the Superfund site.

The de micromis exception also adds another exclusion specific to it — if the person has been criminally convicted of a violation for the conduct to which the exemption would apply, the de micromis exemption does not apply.

These exemptions also apply to the reach of private party, nongovernmental third-party contribution actions (those arising under CERCLA § 113). In each case, the burden of proof is on the party instituting the action to demonstrate that the party claiming the exemption cannot meet the exemption prerequisites. A residential property owner, operator or lessee, however, is immune from all such contribution actions unless it is instituted by a federal, state or local government. In addition, the party instituting the action who fails to establish that the exempt party is not exempt must pay to the defendant all its reasonable attorneys' fees and expert witness fees.

Ability To Pay

As Congress was carving out these exemptions, it also recognized that another category of entities exist — those entities with a limited ability or inability to pay. Under CERCLA § 122(g), EPA has the authority to enter into de minimis settlement agreements with PRPs who contributed a minor portion of the hazardous substances to the site. As part of any such settlement, H.R. 2869 allows the EPA to consider the overall financial condition of the PRP in its calculation of the settlement. In addition, alternative payment methods are now authorized as may be necessary or appropriate. To take advantage of these new provisions, however, a party must provide EPA with all relevant information needed to demonstrate the inability of the party to pay.

Two additional points are worth mentioning. First, the President's (EPA's) determinations made under Title I are largely not judicially reviewable. For example, if a determination is made that a party falls within an exemption's exclusion, that determination is not appealable to court. Second, nothing in Title I affects any settlement lodged in, or judgment issued by a United States District Court, or any administrative settlement or order entered into or issued by the United States or any state prior to the date of enactment.

These changes have been a long time in development. They also are not as sweeping as had been expected during the last initiative to modify Superfund during the Clinton years. However, at least H.R. 2869 is a step, albeit a small and quiet one, in the right direction. Small businesses, generators of small amounts of hazardous substances, generators of municipal solid waste, households, apartment complexes and others falling within these two exemptions should finally see some relief.