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Volume 22, Issue 1 — January 1992


CERCLA Does Not Invalidate Contractual Allocations of Liability

by James W. Conrad

Editors' Summary: CERCLA § 107(e) recognizes that private parties may agree to limit or to insure against their CERCLA liability by using common law contract tools, including indemnification and hold harmless agreements. But what role did Congress intend such private party agreements to play in allocating CERCLA liability? The plainly contradictory language of CERCLA § 107(e) does not give a final answer to this question, because the first sentence of CERCLA § 107(e) appears to invalidate indemnities and the like, and the second sentence appears to save them. Recently, two federal district courts in AM International v. International Forging Equipment Corp. and CPC International v. Aerojet-General Corp. issued the first decisions to analyze CERCLA § 107(e)'s legislative history. In a dramatic departure from precedent first articulated by the Ninth Circuit in Mardan Corp. v. C.G.C. Music, Ltd., the courts in AM International and CPC concluded that § 107(e) should be read only to give effect to contracts binding parties otherwise not liable, and not to contracts between potentially liable parties. Before AM International and CPC, every court that had addressed CERCLA § 107(e) interpreted it as preventing a party liable under CERCLA from completely evading its liability, but allowing it contractually to allocate the ultimate financial burden of that liability among itself and others.

This Article argues that the
Mardan interpretation of CERCLA § 107(e) is correct. The Article first compares the Mardan interpretation with the contrary reasoning of AM International and CPC. It then explicates its preference for the Mardan view in light of CERCLA § 107(e)'s plain meaning and legislative history, as well as the language and legislative history of a comparable provision of the Oil Pollution Act of 1990. Finally, the Article explains why the Mardan view better advances the policies underlying CERCLA, particularly the goal of promoting private, voluntary cleanup, and why the AM International and CPC view has the opposite effect. The author concludes that the Mardan rule does not shift cleanup costs from private parties to the government, but only between private parties, and that equitable allocation of response costs does not require the wholesale invalidation of private contractual arrangements.

Naturally Occurring Radioactiave Material: Regulators Should Look Before They Leap

by Michael L. Goo and Anthony J. Thompson

Editors' Summary: The Atomic Energy Act does not regulate a variety of substances that occur routinely in nature or that may become radioactively enhanced through human activity. These substances, known as naturally occurring radioactive material or NORM, may exist in waste produced by key industrial activities involving petroleum, natural gas, geothermal energy, water treatment, and mining. The NRC, EPA, and some states are now attempting to regulate some of the hazards that they perceive are caused by NORM.

The authors first discuss the scientific aspects of NORM. They note that in a world bathed in radioactivity from natural sources, regulating potential risks from this radioactivity poses questions far different from those arising from environmental contamination solely due to human activities. They next discuss the regulatory efforts that have been made by the NRC, EPA, Texas, and Louisiana to control possible NORM hazards, and examine model state regulations drafted by the National Conference of Radiation Control Program Directors. They find that although huge amounts of NORM are being generated, the actual extent of radioactive hazards from these materials has not been fully verified. They recommend that the extent and nature of the NORM problem be studied further before federal and state governments adopt regulations to address potential NORM hazards. Next, they suggest that attempts to regulate NORM using regulatory programs designed to deal with other environmental problems, such as hazardous waste or nuclear waste from the nuclear power industry, should be abandoned. The authors urge that any NORM program be tailored to the NORM problem and that NORM regulations not be adopted as part of another regulatory program.

Keynote Address

by E. Donald Elliott

How to improve the federal/state "partnership" in the environmental area is a difficult subject. Despite my best attempts to devise simple solutions with resolving power, the situation is not amenable to easy fixes.

A consensus is developing that the concept of a "partnership" in the federal/state relationship on the environment is probably misleading, and in fact, this way of thinking about the relationship may even contribute to the problem. The relationship is not one among equal "partners." Rather, Congress has clearly established different roles for EPA and the states. Until we have a more realistic view of the relationship, we will not begin to improve its nature. So let us think of it not as a partnership, but rather as a working joint venture relationship. Some have suggested that we should think of the relationship in terms of client/contractor or principal/agent.

Regulation of Air Quality: Who is Leading Whom? Some States Have Adopted Greater Restrictions While Others Are Believed to Lag Far Behind

by Lee Dehihns, Michael Barr, and V. John White

LEE DEHIHNS: Rather than discuss the Clean Air Act amendments from the view of their relationship to the states, let me review some of the history of our federal air act legislation to illustrate how it frames our present situation. You will see in the history the underpinning of some of the proposed amendments. You also will see that the proposed amendments still won't solve the federal/state dilemmas.

The first federal clean air legislation was passed in 1955.

Regulation of Water Quality: Is EPA Meeting Its Obligations or Can the States Better Meet Water Quality Challenges?

by James R. Elder, B.J. Wynne, David Evans, and Victor M. Sher

JAMES R. ELDER: I am going to discuss what I want to describe as EPA's tightrope walk between the need for national consistency and state flexibility in implementation. I will discuss the obligations and roles of both EPA and the states.

The states need to be at the front line to take the lead on implementation, but what is the extent of this lead? What is the meaning of delegation? And what degree of responsibility is EPA left to retain?

Regulating Solid and Hazardous Wastes: Has Federal Regulation Lived Up to Its Mandate or Can the States Do a Better Job?

by Nancy Firestone, Philip F.W. Ahrens, III, Michael K. Slattery, and Karen Florini

NANCY FIRESTONE: I would like to discuss a recent EPA study. When Don Clay, the new Assistant Administrator for the Office of Solid Waste And Emergency Response, took office in November and Chris Holmes was designated his Principal Deputy, they already had before them the Superfund 90-day study. This became a blueprint for carrying out the Superfund program.

Because of the success of the Superfund study, they embarked on a RCRA implementation study. Eventually it should receive the same sort of distribution as did the Superfund study, presenting a vision of where we hope the RCRA program will be going.

Federal Versus State Environmental Protection Standards: Can a National Policy Be Implemented Locally?

by ABA Standing Committee on Environmental Law

Keynote Presentation: Making the Partnership Work

Panel Discussion: Regulation of Nuclear Materials

Regulation of Air Quality

Regulation of Water Quality: Is EPA Meeting Its Oblilgations or Can the States Better Meet Water Quality Challenges?

Regulating Solid and Hazardous Wastes

Regulation of Nuclear Materials: Should National Defense and Other National Policies Override State Standards?

by Mark C. Schroeder, John N. McMillan, and Dan W. Reicher

MARK C. SCHROEDER: Let me begin by putting in context the activities and mission of the U.S. Department of Energy. I will then review the current state of regulation of radionuclides and source, special nuclear, and by-product material, and will conclude with a discussion of the future directions at the Department.

Everyone would agree that the national defense and foreign policy have been exclusively in the federal domain, and that they typically do not admit of state intervention.


Civil Penalties and the Economic Benefits of Noncompliance: A Better Alternative for Attorneys Than EPA's BEN Model

by Philip Saunders

My object all sublime

I shall achieve in time —

To make the punishment fit the crime.

— Gilbert and Sullivan, The Mikado

Federal environmental laws provide for civil penalties based on a number of factors, including economic benefits, if any, that violators gain from noncompliance.1 This Dialogue describes how penalties based on the benefits of noncompliance are determined; explains how and why benefits gained (and therefore penalties incurred) can vary substantially from organization to organization and may be significantly miscalculated when based on standardized assumptions; and demonstrates the importance to the attorney, whether representing the plaintiff or defendant, of having a financial analysis performed specifically on the violating organization.

Environmental statutes that provide for penalties based on the benefits of noncompliance are the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund),2 the Federal Water Pollution Control Act (FWPCA),3 the Clean Air Act,4 and the Emergency Planning and Community Right-to-Know Act (EPCRA).5 The statutory objective is not only to penalize but to remove any economic incentive for noncompliance.