State & Local News Vol. 21, No. 1, Fall 1997 Environmental Update By Stephanie P. Brown Stephanie P. Brown practices environmental law in the District of Columbia and Baltimore offices of Piper & Marbury L.L.P. The U.S. Environmental Protection Agency ("EPA" or "Agency") recently announced two policies to limit local governmental liability under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund"), 42 U.S.C. 9601 9675. The policies are intended as guidance for EPA personnel involved in CERCLA settlement negotiations and enforcement decision-making. Because such policies do not involve rulemaking notice-and-comment procedures, they do not carry the force of law and, thus, do not shield one from private party CERCLA actions. Municipal Solid Waste Settlement On July 11, 1997, EPA published its proposed "Municipal Solid Waste Settlement Proposal" for public comment. See 62 Fed. Reg. 37,231. The proposal describes methodologies the Agency will use to calculate appropriate CERCLA settlement contributions for municipal Owner/Operators (O/Os), and Generators and Transporters (G/Ts) of municipal sewage sludge and municipal solid waste (collectively, "MSW"), at certain "co-disposal" landfills. Co-disposal landfills are those at which disposal of both MSW and other wastes, such as industrial wastes containing hazardous substances, has occurred. The policy pertains only to co-disposal landfills placed on CERCLA's National Priorities List (NPL). Although there are only approximately 250 such sites on the NPL, due to the severity of contamination at NPL sites in general, NPL landfills are among the most expensive landfills to remediate. For settlement contributions by MSW G/Ts, the proposal would apply a remediation "unit cost" formula. For municipal O/Os of co-disposal landfills, the proposal would establish a settlement range, from 20 to 35 percent, of the closure/post-closure costs for a "clean" landfill. Municipal solid waste is solid waste that is generated primarily by households, but that may include wastes from commercial, institutional, and industrial sources. Generally, MSW is composed of large volumes of nonhazardous substances (e.g., yard waste, food waste, glass, and aluminum) and may contain small quantities of household hazardous waste (e.g., pesticides and solvents) and other hazardous wastes. Sewage sludge is defined as any solid, semi-solid, or liquid residue removed during the treatment of municipal wastewater or domestic sludge. The proposed policy supplements EPA's "Interim Policy on CERCLA Settlements Involving Municipalities and Municipal Wastes" (the "1989 Policy"), issued in December 1989, which set forth principles EPA would apply to limit the liability of municipal O/Os and MSW G/Ts. MSW G/Ts. Consistent with the 1989 Policy, the new policy states that EPA will continue its practice of not identifying MSW G/Ts as CERCLA Potentially Responsible Parties (PRPs) unless there is site-specific evidence that the MSW contained hazardous substances derived from a commercial, institutional or industrial process or activity. The new proposal does not apply to MSW G/Ts who also generated or transported any non-MSW containing a hazardous substance. Such a G/T, however, may qualify for consideration under the policy if it can demonstrate that the MSW was completely and continually segregated from the non-MSW prior to and during disposal at the site. EPA's proposed methodology for calculating MSW G/T settlement offers requires multiplying the known (or estimated) quantity of MSW contributed by the G/T by an estimated "unit cost" of remediating MSW at a representative MSW-only landfill. The unit cost methodology is based on the costs of closure and post-closure activities at a MSW "Subtitle D" landfill (i.e., a landfill that is not subject to CERCLA response authorities, nor to the stringent hazardous waste corrective action requirements of RCRA, the Resource Conservation and Recovery Act). The unit cost may be increased slightly if certain site conditions exist. EPA estimates that the cost per unit of remediating MSW at a representative MSW-only landfill is $3.05 per ton. By comparison, it is not unusual for RCRA-type remediation to exceed $3.00 per barrel (i.e., 55-gallon drum) of waste. Municipal O/Os. EPA proposes to establish 20 percent of total site response costs as the baseline presumption for settlement contribution by an individual municipal O/O. By comparison, private CERCLA plaintiffs often seek an O/O contribution of at least 50 percent. EPA regional authorities will have discretion to deviate from the presumption based on site-specific factors, but may not exceed 35 percent of response costs. The 20 percent baseline is an individual cost share and pertains solely to a municipal O/O's liability as an O/O. A municipal O/O that also is liable as an MSW G/T will be required to provide an additional payment amount developed pursuant to the MSW G/T settlement methodology. EPA also proposes to consider documented municipal claims of limited ability to pay. Further, the Agency plans to entertain a municipality's offer to perform in-kind services at a site (e.g., mowing, road maintenance, structural maintenance) as partial settlement of the municipality's share of Superfund response costs. EPA's administrative proposal to cap municipal and MSW liability reflects efforts to reform Superfund legislatively in this regard. Involuntary Acquisition of Contaminated Sites On July 7, 1997, EPA published notice of its policy with respect to interpreting provisions in CERCLA under which governmental entities (and lenders) that acquire contaminated property involuntarily may avoid liability. See 62 Fed. Reg. 36,424. On April 29, 1992, the Agency published its Lender Liability Rule ("1992 Rule"), which addressed the same issue. See 57 Fed. Reg. 18,344. The 1992 Rule, however, was vacated on procedural grounds by the U.S. Court of Appeals for the District of Columbia. EPA continued to view the substantive provisions of the 1992 Rule as enforcement guidance. In 1996, the U.S. Congress enacted the Asset Conservation, Lender Liability, and Deposit Insurance Protection Act ("Asset Conservation Act"), which amended CERCLA and validated EPA's 1992 Rule. Among other things, the 1992 Rule clarified the circumstances under which EPA would deem a government's acquisition of contaminated property to constitute an "involuntary acquisition or transfer" within the meaning of Superfund and, thus, outside of Superfund's liability scheme. The preamble to the 1992 Rule states that "involuntary acquisition or transfer" means "any acquisition or transfer in which the government's interest in, and ultimate ownership of, a specific asset exists only because the conduct of a nongovernmental party as in the case of abandonment or escheat gives rise to a statutory or common law right to property on behalf of the government." Id. at 18372. As further illustration, EPA cited situations under which the government acquires a right of receivership or conservatorship (e.g., where a financial institution fails to meet regulatory requirements) and forfeiture (e.g., where a criminal or other violation subjects property to forfeiture). See id. EPA's July 1997 notice affirms the Agency's post-Asset Conservation Act view that it will look to its 1992 Lender Liability Rule to construe the statutory provisions under which governmental entities may avoid CERCLA liability arising from the acquisition of certain contaminated properties.