Dodging a Bullet: Lessons From the Failed Hazardous Substance Recycling Rider to the Omnibus Appropriations Bill

Adam Babich

Editors' Summary: It has become regular practice for federal legislators to insert into annual appropriations bills riders having little to do with the appropriations process. Last year, under the sponsorship of the Senate Majority and Minority Leaders, a bill that would have exempted recyclers from CERCLA "arranger" and "transporter" liability was almost enacted as a rider to the omnibus appropriations bill for fiscal year 1999. This Dialogue examines that rider and the changes it would have wrought to CERCLA. The Dialogue begins with a description of the rider's provisions, then analyzes the policy behind exempting recyclers from CERCLA liability. The Dialogue then examines the rider's distinction between certain kinds of CERCLA violations, as well as the likely impact of the rider's attorneys fee provision and the consequences the rider's recycler exemption would have had for other liable parties. Finally, the Dialogue evaluates the rider's approach of exempting a particular type of party from liability without engaging in more comprehensive reform of the Superfund statute.

Adam Babich practices environmental law with the Chicago office of Zevnik Horton Guibord McGovern Palmer & Fognani. He was ELR-The Environmental Law Reporter's editor-in-chief from 1993 until 1997. From 1984 through 1987, he was an Assistant Attorney General in then-Colorado Attorney General Duane L. Woodard's CERCLA Litigation Section. His practice has included representation of a client opposed to enactment of the recycling exemption discussed in this Dialogue.

[29 ELR 10139]

Legislation by appropriations rider is an inherently dangerous process, especially when the legislative subject involves complex environmental policy. The context of a last-minute, several hundred page appropriations bill does not lend itself to careful evaluation of substantive provisions, whether by legislators, agency personnel, or lobbyists.¹ Almost by definition, all of these players have a lot at stake during the appropriations process, and potentially controversial matters can easily escape attention. One of the many recent examples of this phenomenon is S. 2180² — the "Superfund Recycling Equity Act of 1998" — which Congress almost enacted as a rider to the omnibus appropriations bill for fiscal year 1999.³ This failed legislation also illustrates a danger inherent in the "stakeholder-consensus/global deal" approach to legislation that, by and large, the environmentalist community bought off on when seeking reauthorization of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) in 1994.⁴

The wisdom of the general thrust of S. 2180 — to exempt those who arrange for recycling of their industrial waste from liability under CERCLA⁵ — is debatable at best. Further, some of S. 2180's details are flatly inconsistent with long-standing principles of environmental policy. Specifically, language in the bill would have denigrated the importance of compliance with "procedural," as opposed to "substantive," provisions of environmental laws. Another provision would have chilled recourse to the courts, providing for attorney fee awards to contribution defendants who successfully asserted recycling defenses. Nonetheless, S. 2180 very nearly became law and probably will be back. Both Senate Majority Leader Trent Lott (R-Miss.) and Senate Minority Leader Tom Daschle (D-S.D.) supported the bill. It was cosponsored by a large number of Democrats and promoted by the former national chairman of the Republican party.⁶

[29 ELR 10140]

There have been many proposals to exempt recycling transactions from CERCLA liability.⁷ Much of the language of S. 2180 was taken from 1994's failed stakeholdercoalition attempt at Superfund reform, as reflected in H.R. 4916.⁸ Indeed, similarities between H.R. 4916 and S. 2180 may be one reason that many national environmental groups ignored this year's proposed recycling-exemption rider. S. 2180 could be presented as something that environmentalists had already agreed to. Never mind that the 1994 "agreement" had occurred only in the context of a global deal that, if enacted, presumably would have conferred other benefits on the environment. Agreeing once to a liability exemption, whatever the context, drains much of the moral force from any later attempt to argue that the exemption would harm public health or the environment.

Mechanics

Basically, S. 2180 would have created a new defense by adding a "liability clarification" to CERCLA, stating that a "person who arranged for recycling of recyclable material shall not be liable under section 107(a)(3) or 107(a)(4) with respect to the material."⁹ There are, of course, four categories of potentially liable parties under CERCLA § 107(a)(1)-(4): (1) current owners and operators of polluting facilities,¹⁰ (2) past owners or operators,¹¹ (3) generators (a.k.a. arrangers for disposal or treatment) of hazardous substances,¹² and (4) transporters.¹³ S. 2180 would have exempted recyclers from liability as generators and transporters. Thus, if arrangements for recycling led to releases of hazardous substances at the generators' own facilities, as opposed to somewhere further down the chain of commerce, CERCLA liability could have still attached. S. 2180 would have defined recyclable material broadly to include, inter alia, "scrap paper … plastic … glass … textiles … rubber … metal, or spent lead-acid, spent nickel-cadmium, and other spent batteries, as well as minor amounts of material incident to or adhering to the scrap …."¹⁴ Generators and transporters could only have taken advantage of the exemption if they proved by a preponderance of the evidence that (1) the recyclable material met a commercial grade; (2) a market existed for it; (3) a substantial portion of it was made available for use as feedstock for a new saleable product; (4) it could have been a substitute for a virgin raw material or could have been used to make a substitute for a product made from such raw material; and (5) for future transactions only, the recycler exercised reasonable care to determine that the receiving facility was in compliance with substantive (but not necessarily procedural) provisions of federal, state or local law.¹⁵ Generators or transporters who successfully asserted the exemption in contribution actions would have been entitled to recover their attorneys fees.¹⁶

Should Recyclers Be Exempt?

The proposed exemption of S. 2180 was intended to (1) "promote reuse and recycling," (2) "create greater equity in the … treatment of recycled versus virgin materials," and (3) "remove [liability-based] disincentives and impediments to recycling …."¹⁷ The extent to which such a provision would increase legitimate recycling is, however, open to question, since generators' desire to avoid potential liabilities will not necessarily increase the market for recyclable waste. Very probably, however, the potential liability associated with introducing dangerous materials into the stream of commerce does chill recycling of some materials — for example radioactive scrap metal.¹⁸ S. 2180 would have created a liability exemption without regard to the risk that may be inherent in reusing some contaminated materials. Although recycling is a good thing in general, it probably should not be promoted where it imposes significantly increased risks on the public or environment.

The goal of creating "greater equity" in the treatment of recycled versus virgin materials is also questionable. Recyclable materials that become contaminated or irradiated during use are simply different from most raw materials and, depending on the risks that they present, should be treated differently. To the extent that the recyclable material is essentially the same as raw material, current law may alreadyprovide the "equity" that proponents of S. 2180 sought.¹⁹ Thus, the wisdom of, and need for, fostering equal treatment of waste streams, without regard to risk, has not been established.

S. 2180's goal of removing "disincentives" from recycling should also be examined. CERCLA's liability system kicks in only when there is a threatened or actual release of hazardous substances. Thus, the only circumstance under which CERCLA creates disincentives for recycling is when recycling would create inherently greater risks of release than the alternatives — treatment or disposal. Moreover, CERCLA creates incentives for responsible businesses to minimize liabilities by being careful to send their wastes — whether for recycling, treatment, or disposal — only to well-run facilities with enough assets to cover liabilities that might arise from foreseeable accidents.²⁰ What S. 2180 characterizes as "removing disincentives … to recycling" might just as well be understood as removing incentives for recyclers to be careful about where [29 ELR 10141] they send their wastes.²¹ In any event, if Congress wishes to encourage recycling by creating a liability exemption, this goal could be accomplished by creating a defense to liability for future transactions. Eliminating liability for past waste handling or recycling practices would be a windfall for past generators of recyclable wastes.

Do Procedural Violations Matter?

In an unusual break with general practice in environmental law, S. 2180 treats "procedural" violations as less important than "substantive violations." Thus, recyclers who knowingly sent their scrap to facilities that are in procedural violation (e.g., those who have not bothered to file required certifications or monitoring reports) would still have been entitled to claim the exemption. This elevation of "substantive" above "procedural" can be dangerous. A facility that has failed to file required notifications or monitoring reports can essentially be operating outside of the compliance system. It may be impossible to adequately assess the "substantive" compliance of such a facility, which may or may not be imposing unreasonable risks on the public and environment. Thus, for example, the U.S. Environmental Protection Agency's (EPA's) Resource Conservation and Recovery Act (RCRA) penalty policy notes that violation of notification requirements may have "serious implications and merit substantial penalties."²²

Should Gray Areas Remain Gray?

Another unusual aspect of S. 2180 is a provision that would have awarded attorneys fees to contribution defendants who successfully asserted a recycling defense.²³ The effect of this provision would be to chill plaintiffs' attempts to exercise contribution rights whenever a defendant had a colorable claim to exemption. Thus, for example, contribution plaintiffs would be hesitant to seek judicial clarification of such gray areas as the scope of S. 2180's exemption for "minor amounts of material incident to or adhering to the scrap" or the provision that a "substantial" portion of the material "was made available" for use as feedstock for a "saleable" product.²⁴ Providing attorney fee awards to successful defendants in nonfrivolous suits would have been out-of-step with past practice under environmental laws and would have created an unfortunate precedent.²⁵ Moreover, the attorney fee provision of S. 2180 would have singled out recyclers as the only parties who could recover the cost of proving a CERCLA defense. If there is a policy justification for this special status, it is not obvious.

Who Should Pick Up the Difference?

Through silence on the issue, S. 2180 would have provided that other liable parties would pick up the liability share that otherwise would have been covered by exempt recyclers.²⁶ The potential unfairness of this situation would have been exacerbated by the fact that S. 2180 would have applied to pending contribution suits. Thus, S. 2180 would have dashed the expectations of contribution plaintiffs who had relied on the availability of CERCLA's contribution provision when deciding to settle with EPA. Moreover, by rewarding the recalcitrance of qualifying past generators who, by lying in the weeds, had avoided resolving their liability with EPA or a state, S. 2180 would have sent a problematic message to other potentially liable parties.

Are Such Special Interest Exemptions Consistent With Comprehensive Reform?

CERCLA's liability system is based on — and largely consistent with — long-standing common-law rules regarding strict liability for abnormally dangerous activities and landowner liability for abatable public nuisance conditions on private property.²⁷ Arguably, CERCLA earned its reputation for unfairness less because of its liability rules than for the statute's harsh procedural provisions. For example, CERCLA applies an unusual arbitrary-and-capricious, record-review standard to enforcement actions and often denies defendants the opportunity to seek effective judicial review of agency cleanup decisions or cross-examine agency experts.²⁸ Nonetheless, it is the liability system that [29 ELR 10142] receives the lion's share of attention from would-be reformers. Concerns about singling out recyclers for liability protection, without addressing the statute's fairness more broadly, may pose the greatest obstacle to ultimate enactment of the stand-alone exemption proposed by S. 2180.²⁹

Conclusion

The recycling-exemption rider to the omnibus appropriations bill for fiscal year 1999 would have been a significant departure from long-standing principles of federal environmental policy. S. 2180's provisions will doubtless be reintroduced, either as a stand-alone exemption or as part of a larger reform package. When this happens, the exemption should be carefully evaluated in terms of the risks that various kinds of recyclable material, including radioactive scrap, might pose to the public. Legislators should also think twice about creating a presumption that "procedural" environmental law violations are automatically less serious than "substantive" violations and about the chilling effect on enforcement that would flow from awarding attorneys fees to successful defendants in nonfrivolous actions. Although reasonable people may disagree about the merits of S. 2180's various provisions, the proposal's policy implications deserved a much more complete airing than could ever have been achieved during the appropriations process. The practice of attaching substantive riders to appropriations packages creates a kind of stealth legislative process that is inappropriate for reform of environmental law.

1. See Sandra Beth Zellmer, Sacrificing Legislative Integrity at the Altar of Appropriations Riders: A Constitutional Crisis, 21 HARV. ENVTL. L. REV. 457, 500-04 (1997).

2. 105th Cong. (1998).

3. H.R. 4328, 105th Cong. (1998), reprinted in 144 CONG. REC. Hl 1044 (daily ed. Oct. 19, 1998).

4. This process is described in Rena I. Steinzor, The Reauthorization of Superfund: Can the Deal of the Century Be Saved?, 25 ELR 10016 (Jan. 1995).

5. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA §§ 101-405.

6. David Rogers, Lobbyists Hurry to Put Changes in Year-End Bill, WALL ST. J., Oct. 19, 1998, at A4; Jennifer Silverman, Chairman Calls Lott Bill "Objectionable" in Response to Democrats' Markup Requests, Daily Env't Rep. (BNA), Sept. 28, 1998, at A-6.

7. See, e.g., Recent Developments: In the Congress, 25 ELR 10215 (Apr. 1995) (discussing introduction of H.R. 820, 104th Cong. (1995)); Recent Developments: In the Congress, 24 ELR 10414 (July 1994) (discussing introduction of H.R. 4360, 103d Cong. (1994)).

8. 103d Cong. (1994).

9. S. 2180, 105th Cong. § 3(a) (1998).

10. 42 U.S.C. § 9607(a)(1), ELR STAT. CERCLA § 107(a)(1).

11. Id. § 9607(a)(2), ELR STAT. CERCLA § 107(a)(2).

12. Id. § 9607(a)(3), ELR STAT. CERCLA § 107(a)(3).

13. Id. § 9607(a)(4), ELR STAT. CERCLA § 107(a)(4).

14. S. 2180, § 3(a).

15. Id.

16. Id.

17. Id. § 2.

18. Opponents of the recycling-exemption rider included the Nuclear Information and Resource Service, which warned of the consequences "if and when hazardous and radioactive materials get into the marketplace or out into unregulated facilities." Jennifer Silverman, Recycling Language Set for Omnibus Bill Triggers Debate on Its Threat to Industry, Daily Env't Rep. (BNA), Oct. 16, 1998, at A-5, A-6.

19. See Pneumo Abex Corp. v. High Point, Thomasville & Denton R.R., 142 F.3d 769, 28 ELR 21261, cert. denied, 119 S. Ct. 407 (1998).

20. See WILLIAM H. RODGERS JR., ENVIRONMENTAL LAW 59 (2d ed. 1994).

21. For what it would have been worth, however, S. 2180 would have required future recyclers to exercise "reasonable care" as to the substantive, but not procedural, compliance status of receiving facilities. S. 2180, § 3(a).

22. U.S. EPA, RCRA CIVIL PENALTY POLICY (Oct. 1990), ELR ADMIN. MAT. 35273, 35277.

23. See supra note 16.

24. S. 2180, § 3(a); see Orchard Lane Rd. Ass'n v. Pete Lien & Sons, 16 F.3d 416, 24 ELR 20804, 20805 (10th Cir. 1994) ("this type of lawsuit should not be chilled by attorney's fees being awarded to the defendant anytime that a plaintiff may be unsuccessful or just partially successful.").

25. When plaintiffs lost a "good faith, though unavailing attempt to test the parameters of [RCRA § 7002(a)(1)(B)]," the Fourth Circuit affirmed a district court's denial of the defendants' motion for fees. Palumbo v. Waste Techs. Indus., No. 94-1296, 1994 WL 577441 (4th Cir. Oct. 20, 1994); see also Natural Resources Defense Council v. Costle, 8 ELR 20881, 20884 (D.D.C. 1978) (attorneys fees available to defendants only if they have been victims of harassment or frivolous action).

26. Where other liable parties lack sufficiently deep pockets, this new orphan share presumably would be picked up by the taxpayers.

27. See, e.g., RESTATEMENT (SECOND) OF TORTS §§ 519-520 (1976) (liability for "abnormally dangerous" activities on property); id. § 839 (1977) (liability for "artificial conditions" on property); see also Norman W. Bernstein, Superfund Reform Needs Drastic Simplification, 25 ELR 10008, 10013 (Jan. 1995) (arguing that "Congress should let the [liability] system work instead of attempting to invent a new system. The courts have already taken steps [consistent with common law] to check government abuses of alleged joint and several liability.").

28. By issuing a CERCLA § 106 order (which § 113(h) insulates from timely court review) and threatening those who balk with treble damages under § 107(c)(3), the government can essentially bully potentially liable parties into agreeing to government cleanup plans. See 42 U.S.C. §§ 9606, 9607(c)(3), 9613(h), ELR STAT. CERCLA §§ 106, 107(c)(3), 113(h). This "preenforcement review bar" can also prevent community groups affected by government decisions from obtaining effective review. See Marianne Dugan, Are Citizen Suits CERCLA § 113(h)'s Unintended Victims?, 27 ELR 10003 (Jan. 1997); see also Deeohn Ferris, Communities of Color and Hazardous Waste Cleanup: Expanding Public Participation in the Federal Superfund Program, 21 FORDHAM URB. L.J. 671, 684-85 (1994).

Additionally, in CERCLA § 113(j)(2), Congress instructed the courts to defer to EPA decisions even when potentially responsible parties or citizen groups come up with better options — unless the Agency's actions are arbitrary and capricious. See 42 U.S.C. § 9613(j)(2), ELR STAT. CERCLA § 113(j)(2). Review is generally limited to the administrative record. Id. § 9613(j)(1), ELR STAT. CERCLA § 113(j)(1). Such extreme deference is common for review of agency rulemaking, but it is unusual for site-specific enforcement actions, especially when an adjudicative hearing is not available at the administrative level.

29. See Silverman, supra note 6, at A-6 (quoting Sen. John Chafee (R-R.I.) as expressing concern "that S. 2180 will exacerbate the unfairness of superfund liability for many parties who will not enjoy the bill's exemption.").