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Volume 27, Issue 4 — April 1997


Promise and Reality in the Enforcement of the Amended Clean Air Act Part II: Federal Enforceability and Environmental Auditing

by George Van Cleve and Keith W. Holman

Editors' Summary: This Article is the second in a two-part series that examines the promise and reality of Clean Air Act enforcement by reviewing four central enforcement issues: (1) the development of the "any credible evidence" rule; (2) the evolution of the compliance assurance monitoring proposal; (3) the controversy over the requirement of federal enforceability of limitations on a source's potential to emit pollutants for purposes of determining its status as a "major source" under the Act; and (4) the tension between state-law voluntary disclosure, immunity, andenvironmental audit privileges and EPA's enforcement policy for state Title V operating permit programs.

This Article briefly reviews some of the new enforcement tools created by Congress through the 1990 Clean Air Act Amendments. It then discusses the requirement of federal enforceability with respect to determination of a source's potential to emit under the Act. Next the Article reviews the controversy over the environmental-audit privilege and voluntary-disclosure policy that has erupted largely in response to the prospect of heightened enforcement of the Act. It concludes that although EPA probably has the legal authority to achieve its enforcement objectives, the Agency must adopt a pragmatic approach to maintain the partnership with the states that is critical to successful clean-air enforcement.

Taxing the Environment

by Howard M. Shanker and Sanjay Gupta

Editors' Summary: The tax treatment of a company's environmental remediation costs is crucial to its determination of what the total cost of a remedial action actually is. Whether costs are deductible expenses that the company can offset against current income or are capital expenditures that it must depreciate over time can have a significant impact on its bottom line. This Article examines the Internal Revenue Service's (IRS') current and historic treatment of these expenditures. The Article begins by examining the distinction between deductibility and capitalization of costs. It then discusses the IRS' historic treatment of cleanup costs as capital expenditures and the current trend of allowing these costs to be deducted. Finally, it analyzes the tax treatment of related expenses, such as consulting and legal fees, as well as the treatment of funds established by potentially responsible parties to finance remedial work at multiparty hazardous-waste sites.


Petroleum Waste Sites Revisited: Oiling the Gears of the CERCLA/RCRA Suit

by Gregory D. Trimarche

One of the more daunting tasks facing environmental practitioners over the past decade or two has been the recovery of cleanup costs and related relief at sites contaminated with petroleum substances. Parties seeking relief face significant hurdles under the federal environmental statutes. The key federal environmental cost-recovery statute, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) often provides little help because of its petroleum exclusion. Many litigants thus turn to the Resource Conservation and Recovery Act (RCRA), because it has no petroleum exclusion. RCRA §7002(a)(1)(B) offers private plaintiffs the right to bring citizen suits against persons who have "contributed to" the "disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment." This citizen-suit provision has provided one of the most fertile growth areas for plaintiff's rights in environmental cases. Recently, however, defendants in RCRA "imminent and substantial endangerment" suits have been arguing that the citizen-suit provision is subject to the five-year "catchall" federal statutory limitations period in 28 U.S.C. §2462. Unfortunately, as discussed below, a handful of courts have accepted this argument.

This Dialogue will address the two key issues that often determine the viability of suit under these statutes: (1) the breadth of the CERCLA petroleum exclusion; and (2) the extent to which RCRA citizen suits are subject to a statute of limitations. In particular, this Dialogue will focus on Nixon-Egli Equipment Co. v. John A. Alexander Co., in which a district court recently issued an important ruling on these issues that should have broad application to cases involving petroleum-waste sites nationwide. Specifically, as discussed in detail below, the Nixon-Egli court held that in a CERCLA cost-recovery suit, drilling muds, cuttings, and other wastes and byproducts that are not "capable of being refined" are not "petroleum" under CERCLA's petroleum exclusion and, moreover, that the defendant has the burden of proving the applicability of the petroleum exclusion. The court further held that citizen suits under RCRA §7002(a)(1)(B) are not subject to any specific statute of limitations but, instead, may be time barred only by equitable theories such as laches.