The Path Ahead

The top waste management issues of 2006


2005 saw developments related to waste management in both the judicial, administrative, and regulatory contexts. These developments are likely to continue to influence policy and actions well into 2006. The following article summarizes some of these major developments, with an eye toward future effects.

CERCLA Actions Following Voluntary Cleanups
Since the U.S. Supreme Court issued its opinion in Cooper Industries, Inc. v. Aviall Services, Inc. in December 2004, there has been considerable speculation and debate on the effect that decision will have on voluntary cleanup actions conducted by potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), more commonly known as Superfund. The Court in Cooper Industries held that a private party that had engaged in a voluntary cleanup could not bring a contribution action under CERCLA Section 113(f)(1) because it had not first been subject to a judicial or administrative cleanup order. A major concern following this decision has been that it would discourage parties from entering into voluntary cleanup agreements as they may not be able to recover response costs from other potentially responsible parties. In what is likely to be only the first decision addressing this issue, the U.S. Court of Appeals for the Second Circuit revisited these issues following the U.S. Supreme Court's 2004 opinion in Cooper Industries.

As described in Consolidated Edison Co. v. UGI Utilities, Inc., No. 04-2409-cv (2nd Cir. 2005), Con Ed had entered into a Voluntary Cleanup Agreement with the New York State Department of Environmental Conservation to clean up a number of manufactured gas plants that it, or its predecessors, had operated. Before entering into that agreement, Con Ed filed suit against UGI to recover some of Con Ed's past and future cleanup costs associated with several of these Plants. While the case was pending at the Court of Appeals, the U.S. Supreme Court decided Cooper Industries. In light of that decision, the Second Circuit Court of Appeals held that Con Ed could not maintain a CERCLA contribution action against UGI under Section 113(f)(1) because Con Ed had not been subject to a judicial or administrative order compelling cleanup of the sites. The Court also held that Con Ed could not maintain a CERCLA action against UGI under Section 113(f)(3)(B), which establishes a contribution action for parties to an administrative or judicially approved settlement, because the Voluntary Cleanup Agreement did not constitute such a settlement. The Con Ed Court did hold, however, that Con Ed could seek to recover its response costs under Section 107(a) of CERCLA.

CERCLA § 107(a) allows an action by "any person" for recovery of necessary costs of response that he or she has incurred, if those costs are consistent with the National Contingency Plan. Courts previously had held that parties that were themselves potentially responsible under CERCLA, and therefore not "innocent," could not maintain a cost recovery action under Section 107(a). The Con Ed Court disagreed and held: "we believe we would be impermissibly discouraging voluntary cleanup were we to read section 107(a) to preclude parties that, if sued, would be held liable under section 107(a) from recovering necessary response costs." The Court therefore held that Con Ed could maintain an action against UGI pursuant to CERCLA § 107(a).

It will be interesting to see if other courts agree with the Second Circuit's decision in Con Ed. This decision in effect circumvents the disincentive to voluntary cleanups created by Cooper Industries. Until this issue is resolved, however, before entering into a voluntary cleanup agreement, parties should evaluate carefully whether they may want to seek cost recovery from other parties.

Definition of Solid Waste
In October 2003, the U.S. Environmental Protection Agency (EPA) proposed amendments to its definition of "solid waste" under the Resource Conservation and Recovery Act (RCRA). See 68 Fed. Reg. 61,588 (2003). That proposal would exclude from the definition of "solid waste," and therefore also from the definition of "hazardous waste," certain materials that are generated and reclaimed in a continuous process within the same industry. More than two years after EPA's proposed revision to the definition, however, the agency has not issued a final rule.

In February 2004, the Office of Management and Budget (OMB) initiated a government-wide effort to reform regulation of the U.S. Manufacturing Sector. As part of this effort, OMB solicited public comment to identify regulations, guidance, etc. that, if reformed, could improve the U.S. Manufacturing Sector. Numerous commenters noted that EPA should amend the hazardous waste rules to encourage recycling. The OMB Report, Regulatory Reform of the U.S. Manufacturing Sector (2005), summarizes the comments it received on this issue as stating that "the agency should clarify that a material that is being sent for recycling is not subject to regulation as a hazardous waste because it is not being 'discarded.' This reform would increase recycling rates while reducing the costs of managing hazardous wastes." The OMB report also contains EPA's response to these comments. EPA stated that it hopes to issue a final rule on the definition of solid waste by November 2006, or if the agency decides to make a revised proposal, by the winter of 2008.

In October 2005, EPA took additional steps in an effort to further clarify whether materials that undergo a limited amount of processing before use can still be excluded from regulation as a solid waste. See Guidance for Identifying Incidental Processing Activities, EPA, Office of Solid Waste (October 2005). Generally, materials that are processed or reclaimed before reuse constitute a solid waste under the RCRA regulations. The October guidance addresses situations when materials undergo only "incidental processing" prior to use. As described in this document, materials undergoing only limited processing may not be considered solid wastes. The guidance provides examples of such processing that would only be "incidental." EPA has indicated that it hopes this document will encourage more recycling activities and help overcome "a real or perceived barrier to recycling and pollution prevention efforts." This guidance, and an accompanying memorandum from Matthew Hale, director of EPA's Office of Solid Waste, is available at www.epa.gov/epaoswer/hazwaste/recycle/pro-guid.pdf.

EPA Taking Steps to Reduce Burden of Toxics Release Inventory Reporting
EPA has proposed a new rule to reduce the burden on facilities associated with reporting under the Toxics Release Inventory (TRI) reporting rules, required pursuant to the Emergency Planning and Community Right-to-Know Act (EPCRA). See 70 Fed. Reg. 57,822 (Oct. 4, 2005). The proposed rule allows certain facilities to use the shorter Form A for reporting rather than the longer Form R. In this rulemaking, EPA proposed two principal changes. First, the proposal creates circumstances in which facilities can use Form A to report persistent, bicoaccumulative, and toxic (PBT) chemicals. The current rules do not allow use of Form A for PBT chemicals at all. Under the proposed rules, facilities may be able to use the shorter Form A to report PBT chemicals (except dioxin and dioxin compounds) provided them do not manage more than 500 pounds (total) of the chemical by treatment, energy recovery, or recycling and have no disposal or other releases to the environment.

In addition, the proposed rule would allow facilities with non-PBT chemical to use Form A if they manage no more than 5,000 pounds (total) of the chemical by disposal or other releases to the environment, or by treatment, energy recovery, or recycling. This amount would be an increase from the current level of 500 pounds. Earlier in 2005, EPA took other steps in an effort to reduce the burden associated with TRI reporting with a final rule that modified the actual reporting forms. See 70 Fed. Reg. 39,931 (July 12, 2005).

"All Appropriate Inquiries" Rule
On Nov. 1, 2005, EPA published its final rule establishing standard and practices for the conduct of "all appropriate inquiries." See 70 Fed. Reg. 66,070 (Nov. 1, 2005). The "all appropriate inquiries" standard establishes the minimum level of inquiry necessary for prospective landowners to be eligible to claim protection under CERCLA's innocent landowner, bona fide prospective purchaser, and contiguous landowner provisions. EPA issued its proposed rule in August 2004, and the final rule closely resembles the proposed rule. EPA made a few modifications, however. For example, the final rule modifies the qualifications necessary for an environmental professional who is to conduct a site assessment. The final rule becomes effective on Nov. 1, 2006.

Revisions to EPA BEN Model
In August 2005, EPA announced changes to its BEN computer model, which is used in the computation of penalties for violations of environmental laws. Specifically, the BEN model computes the economic benefit to a violator from delaying or avoiding necessary pollution-control expenditures. See 70 Fed. Reg. 50,326 (Aug. 26, 2005). As a matter of policy, EPA intends any civil penalty it imposes to recapture at least the economic benefit that a violator may have gained from illegal activity to prevent that violator from obtaining an unfair financial advantage over its competitors. The BEN model is primarily used to calculate economic benefit for purposes of developing a penalty during settlement negotiations.

With the current revision, EPA is making eight changes to the model that it claims will improve its accuracy and function. Although the BEN model may be used to estimate delayed or avoided compliance costs, it does not calculate the benefit gained from any illegal competitive advantage that a violator may have accrued (e.g., selling an entirely illegal product that could not have been produced legally by incurring any pollution-control expenditures). Historically, EPA has not had a model to calculate illegal competitive advantage. In this notice, the agency confirmed that no such model is feasible and that it also will not be publishing any formal guidance at this time on how to recapture economic benefit based on illegal competitive advantage. EPA announced, however, that it is committed to seeking to recover these costs and will do so on a case-by-case basis.

EPA's BEN model, as well as its other economic programs for calculating the value of Supplemental Environmental Projects and a violator's ability to pay, are available on EPA's Web site at: www.epa.gov/compliance/civil/econmodels/index.html. When engaging in settlement negotiations with EPA over a civil penalty, it is often useful to prepare your own BEN model estimates, as the assumptions used in the model are subject to negotiation and can lead to markedly different results.

This article originally appeared in the 01/01/2006 issue of Environmental Protection.

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