You own and operate Independent Plating, Inc.("IPI"), in Cincinnati, Ohio. Your company is small, and you have been very diligent at complying with the environmental laws. Through your cooperation with the local sewer district, Ohio EPA and U.S. EPA, you are in full compliance with all air and water discharge permits issued to your company. Everything is going well. Your company is making a nice profit, your sales are up, and your costs are down. Yesterday, however, you are surprised to receive a "notice of intent to sue" from the Regional Environmental Watch Dogs, Inc. ("REWDI"). REWDI has notified your company that it intends to sue your company for failing to submit form Rs for its toxic chemicals subject to the Emergency Planning and Community Right-to-Know Act ("EPCRA") during years 1993 through 1996.

You are not sure what a form R is, but you know what a lawsuit is, and you know that to defend your company, you need to talk to an environmental attorney. You find an attorney experienced in environmental law, and you meet with him to discuss the threatened lawsuit against your company. You ask the attorney to explain how your company could be violating an environmental law if it complies fully with all of the permits for air and water discharges issued to your company. Your attorney explains that EPCRA is a paper work law. Section 313 of EPCRA requires owners and operators of facilities using specified toxic chemicals to file toxic chemical release forms, which provide information about the storage and release of those chemicals, with the United States Environmental Protection Agency ("U.S. EPA") and designated state officials. 42 U.S.C. §§ 11023(a), 11023(g). The U.S. EPA created the "form R" as the toxic chemical release reporting form. 40 C.F.R. § 372.85. Form Rs for a given calendar year are due the following July 1. 42 U.S.C. § 11023(a). Violators of § 11023 are liable to the United States for civil penalties of up to $25,000 for each violation. 42 U.S.C. § 11045(c)(1). The EPA can seek civil penalties either administratively or by bringing an action in federal district court. 42 U.S.C. § 11045(c)(4).

Your attorney goes on to explain that EPCRA also authorizes citizen enforcement suits. The citizen suit provision relied upon by REWDI to threaten your company with a lawsuit provides that "any person may commence a civil action on his own behalf against . . . [a]n owner or operator of a facility for failure to . . . [c]omplete and submit a toxic chemical release form under section 11023(a) of this title." 42 U.S.C. § 11046(a)(1)(A)(iv). District courts have jurisdiction over citizen enforcement actions "to enforce the requirement concerned and to impose any civil penalty provided for violation of that requirement." 42 U.S.C. § 11046(c). Prevailing parties may recover reasonable costs and attorneys' fees. 42 U.S.C. § 11046(f).

To sue your company, the law requires that a citizen may not commence an enforcement action until sixty days after he or she provides notice of the alleged violation to U.S. EPA, state officials, and the alleged violator. 42 U.S.C. § 11046(d). The notice of intent to sue received by your company states that IPI uses some of the specified toxic chemicals that should have been reported on form Rs at its production facility in Cincinnati, Ohio. REWDI is a not-for-profit organization also based in Cincinnati, Ohio. On July 17, 1997, REWDI notified IPI of its intention to file a citizen enforcement action against IPI for violating EPCRA § 313. Specifically, the notice stated that IPI had failed to file the required form Rs for the years 1993 through 1996.

Your attorney asks you if you used the alleged chemicals, and if you filed form Rs. Sheepishly, you tell your environmental attorney that you did use the chemicals and that you have not submitted the data for any year, including 1997. You ask your attorney if you should simply contact REWDI and offer to pay money if REWDI will agree not to sue your company. Your environmental attorney smiles and says that he has a better idea. He proposes filing all of the past due form Rs within sixty days of July 17, 1997, the day you received the notice of intent to sue, and then telling REWDI that your company cannot be sued under the citizen suit provision of EPCRA for failing to submit form Rs. You are confused and ask for an explanation; after all, your company did not submit the form Rs as required by law. How can you possibly avoid being sued? Your company is guilty.

Your attorney agrees that it is undisputed that at the time IPI received the notice of intent to sue, IPI had not filed the required form Rs. However, if you file all past due form Rs before REWDI can file its complaint alleging that IPI failed to submit form Rs, REWDI's complaint against your company will be dismissed. According to your attorney, this is the law, not just wishful thinking.

Your attorney explains that EPCRA authorizes citizen suits for "failure to . . . [c]omplete and submit [form Rs] under section 11023(a) of this title." 42 U.S.C. § 11046(a)(1)(A)(iv). Although § 11023(a) requires submission of the form Rs by a certain date, the citizen suit provision emphasizes the completing and submitting of the forms. This language suggests that only the failure to complete and submit the required forms can provide the basis for a citizen suit. While among the provisions of 11023(a) is the requirement that the form be filed by July 1 for the preceding calendar year, the citizen suit provision speaks only of the completion and filing of the form. The form is completed and filed even when it is not timely filed. Therefore, your attorney explains, if your company can file all of the past due form Rs within sixty days of receiving the notice of intent to sue, REWDI will be precluded from suing you under the citizen suit provision.

Your attorney explains that in Atlantic States Legal Found. V. United Musical Instruments, 61 F.3d 473 (6th Cir., 1995), the court dismissed a lawsuit brought against a company that had neglected to file the appropriate form Rs. The court dismissed the claim since the defendant had managed to file the appropriate form Rs before the lawsuit was filed in court. In dismissing the lawsuit, the court in the Atlantic States Legal Found. V. United Musical Instruments concluded that if Congress had intended to authorize citizen suits for any violation of § 11023(a) -- such as a late submission -- it could easily have done so. Instead, Congress clearly gave U.S. EPA and citizen plaintiffs differing authority to enforce EPCRA. Congress authorized U.S. EPA to bring actions to assess and collect "any civil penalty for which a person is liable." 42 U.S.C. § 11045(c)(4). Rather than give citizen plaintiffs this same broad power, however, Congress limited citizen suits by emphasizing that it is the failure to submit the requisite forms that gives rise to a citizen action. Congress did not authorize citizen suits for other violations of § 11023. This difference between the grants of authority to U.S. EPA and citizen plaintiffs is significant because it indicates a congressional intent to limit citizen suits to ongoing violations and to give U.S. EPA sole authority to seek penalties for historical violations.

Your attorney advises you to prepare and submit the form Rs immediately as required by EPCRA. If your company can complete and submit all past due form Rs within sixty days of July 17, 1997, the date you received the notice of intent to sue, REWDI will be precluded from suing your company. You thank your attorney, and with the assistance of an environmental consultant, you file all past due form Rs within sixty days of receiving REWDI's notice of intent to sue. You send REWDI a copy of your form Rs that were submitted along with a copy of the court's decision in Atlantic States Legal Found. V. United Musical Instruments, 61 F.3d 473 (6th Cir., 1995). REWDI, whose objective was to bring your company into compliance, agrees that upon submission of the form Rs, a citizen suit is not proper under the law. You are thrilled, and relieved.

I always advise clients who are threatened with a citizen suit to seek legal advice immediately. Congress provided certain limitations on citizen suits, including time to achieve compliance and preclude a lawsuit in some cases. In this case, the company was able to avoid a citizen suit by simply filing the appropriate form Rs. In this example, U.S. EPA could still file suit against the company. However, after a company achieves full compliance, U.S. EPA often will focus its legal resources on companies that refuse to comply with the law, rather than those that were simply unaware of the law, and fully comply with the law when told what the law requires.

Your father founded a company in 1958 called Old Painters, Inc. From 1965 to 1976, Old Painters, Inc. disposed of hazardous waste from its paint plant in a lagoon located on the company property in Anytown, New York. In 1986, your father retired, and you took over the operation of the company. In 1988, the regulatory authorities investigated your company's property for the possible disposal of hazardous wastes. In 1990, Old Painters, Inc. entered into a Consent Order with the New York State Department of Environmental Conservation and the United States Environmental Protection Agency to investigate environmental impacts and to undertake remediation at your company's hazardous waste disposal lagoon.

In 1991, your company, Old Painters, Inc., contacted Litt & Gate, Inc ("Litt & Gate") the owner of the property adjacent to your plant and obtained permission to place a cluster of monitoring wells on the property. In 1992, your company, as part of the remediation effort and Consent Order published the "Site Status Report to the Public," which graphically illustrated that the plume of heaviest contamination extended under all of Litt & Gate's property. You sent a copy of the report to Litt & Gate with its property outlined in red ink. You specifically advised Litt & Gate in the transmittal letter accompanying the document that "all of your property is located within the hazardous waste plume."

Between 1991 and 1992, your company took additional remedial measures to stop the migration of the hazardous waste onto Litt & Gate's property. In an attempt to minimize further contamination of Litt & Gate's property, your company installed a groundwater cutoff or slurry wall to vertically enclose the original disposal pit on your property. This measure was completely unsuccessful.

In 1993, as part of the Consent Order, you sent Litt & Gate extensive technical data on the remediation effort, the failure of the slurry wall to stop the migration of hazardous wastes onto its property and enclosed a map on which you again identified Litt & Gate's impacted property by outlining the property in red ink. In your correspondence, you notified Litt & Gate that all of the wells installed on its property indicated that extensive contamination was present. You expected to be in litigation with Litt & Gate over the impact that your site had on the property during the time of the remediation, but you never heard a word regarding any kind of litigation, until yesterday.

Yesterday, a sheriff's deputy served a summons and complaint on your company. Litt & Gate has sued your company alleging that the hazardous wastes deposited by Old Painters, Inc. had contaminated Litt & Gate's property. Litt & Gate alleges in the complaint that your company is also continuing to contaminate its property due to the continued presence of these hazardous wastes which constitute a continuing trespass and a continuing nuisance on Litt & Gate's property. Litt & Gate seeks compensatory and punitive damages from your company due to the diminished value of its property, and compensatory and punitive damages for the continuing trespass and continuing nuisance, and an injunction ordering your company to prevent any further contamination of Litt & Gate's property. As you read the Summons and Complaint served on your company, you say to yourself, "I can't say that I didn't expect it."

You contact your environmental attorney, and you explain that you have been sued by Litt & Gate. You tell your attorney that clearly the contamination is from your company, and that you do not expect that you have any defenses to the lawsuit. Your attorney reads over the allegations in the complaint, reviews your entire file on the remediation, including the notices sent to Litt & Gate in 1991 and in 1993, and cautions you not to be so quick to concede defeat on this matter.

Your attorney explains that you have a real possibility of winning this case. Your attorney explains that the outcome of this case will depend on how the New York Courts apply and interpret New York's following law:

Notwithstanding the provisions of section 214, the three year period within which an action to recover damages for personal injury or injury to property caused by the latent effects of exposure to any substance or combination of substances, in any form, upon or within the body or upon or within property must be commenced shall be computed from the date of discovery of the injury by the plaintiff or from the date when through the exercise of reasonable diligence such injury should have been discovered by the plaintiff, whichever is earlier

(CPLR 214-c[2]).

Your attorney explains that the above type of law is called a "statute of limitations." Such a statute limits someone's time within which he or she may recover damages from someone else. To determine if this statute will prevent Litt & Gate from recovering its damages from your company, your attorney tells you that the courts must look for "clarity and certainty of expression" when construing the statute. As to the very statute at issue, the most powerful court in New York, the New York Court of Appeals, stated:

CPLR 214-c is a remedial statute and such statutes should be liberally construed to effectuate their aims * * * [and] must be given a meaning consistent with the words chosen by the Legislature -- those words define the scope of the remedy that the Legislature deemed appropriate.

Enright v Lilly & Co., 77 NY2d 377, 385 (19__), cert denied 112 S Ct 197 (19__).

Therefore, your attorney explains, by its very terms, CPLR 214-c[2] applies to actions "for damages for * * * injury to property caused by the latent effects of exposure to any substance." The all-encompassing words chosen by the New York Legislature leaves no room for judicial insertion of qualification or exceptions by interpretation, especially when the context and evolution of this particular statute of limitations is examined (Enright v Lilly & Co., supra, at 385)

You ask your lawyer if this statute affects the claims against your company for continuing trespass and continuing nuisance. Those are not environmental claims. What good is it to get some claims thrown out if you can't get all of the claims thrown out. Your attorney agrees with you. Continuing nuisance and continuing trespass are not "environmental claims" unless the claims involve environmental harm. If the claims involve environmental harm, the court held in Jensen et. al., v. General Electric Company, 82 N.Y.2d 77, (1993) that:

[W]e discern no evidence in explicit words, legislative history or manifest intent that the Legislature chose to exempt continuing nuisance and continuing trespass actions from the comprehensive scope and language of this intensely negotiated legislation. . . . The statute was enacted to "provide relief to injured New Yorkers whose claims would otherwise be dismissed for untimeliness simply because they were unaware of the latent injuries until after the limitation period had expired" (Mem of Senator R.B. Stafford, reprinted in 1986 Legis Ann at 287).

Prior to enacting this legislation, a New Yorker had to file suit within three years of the hazardous substances becoming located on the property. After the law was changed in 1986, a person had three years to file suit after the person discovered the existence of the hazardous substance on his or her property. Governor Cuomo emphasized in his Approval Memorandum when attending the signing of this long-awaited legislation:

[CPLR 214-c(2) is] a fair and simple rule which permits a person to discover his or her injury before the statutory time period for suit begins to run.

(1986 Legis. Ann. at 288).

Prior to the enactment of CPLR 214- c[2], the Statute of Limitations began to run as of the date of exposure, regardless of the date on which the injury was discovered (Snyder v Town Insulation, Inc., 81 NY2d 429 (19__). You ask your attorney to explain how this law will impact the litigation with Litt & Gate. Your attorney explains that it is undisputed that Litt & Gate was aware of the injury to its property as early as 1991, six years before filing its lawsuit against your company. Thus, Litt & Gate's causes of action for damages could have been and should have been timely brought within three years after it first learned of the injury to its property. Since Litt & Gate chose not to litigate within the three years after learning of the injury to its property, they are time-barred by CPLR 214-c[2]. In other words, your company wins because Litt & Gate chose to sit on its rights instead of pursuing the rights given to all citizens -- the right to recover damages from the person who caused the harm within the governmentally established time for pursuing those rights. Because Litt & Gate did nothing within the three years after it first learned of the harm to its property, Litt & Gate can now recover nothing on its claim against your company, regardless of whether your company is to blame for the harm.

Statutes of limitations get more clients, and more lawyers, into serious trouble than almost any other law. I always advise clients about the statutes of limitation when a client is trying to decide whether or not to sue someone. Some states, such as New York, have passed specific environmental statutes of limitation. These statutes are designed to encourage timely action with ample time allowances by injured parties with knowledge of their injuries. These laws are designed to discourage people from sitting on their rights and inhibiting early intervention by the courts for redressing the harm done to a person. In New York, the statute of limitations for environmental harm is three years. The time in which to bring a lawsuit in other states will vary depending on what the legislature has set forth in its laws.

If you believe that you may have a cause of action for environmental damage against a person or company, do not sit on your rights. Determine when the applicable statute of limitations will prevent you from litigating to recover your damages, and then decide whether or not to go forward with the litigation. Do not do as Litt & Gate did -- file a lawsuit and then realize that there is no chance of recovery. Of course, if you happen to be Old Painters, Inc., the best thing to do is lay low and hope for the best -- at least until the statute of limitations expires.

You own Neighbors' Heat Treating, Inc. ("Neighbors") just outside of New York City. Your property consists of about 0.8 acres, is zoned industrial, and includes a 9,500 square-foot single-story building. Neighbors is in the business of heat-treating metal objects and ball bearings to harden them for military and industrial uses. In its treatment process, Neighbors uses several large concrete furnaces that leave a sludge residue containing high levels of barium chloride. From time to time, those furnaces needed to be cleaned and/or replaced. As part of that process, Neighbors' took the old furnaces outside the building and washed them down with water, in close proximity to the property next door, which is owned by Fences' Trucking. In addition, from 1979 until 1990, Neighbors' used jackhammers to break up the old furnaces outside the building so that they could be more easily transported off site for disposal. A drain, which empties into a swale, is located on the concrete pad where the furnaces were cleaned and demolished.

In 1986, the New York State Department of Environmental Conservation ("NYDEC") designated barium as a hazardous waste. Several years later, the NYDEC began investigating Neighbors' facility. By 1994, Neighbors' property was declared a hazardous waste site and Neighbors' was ordered to remove the barium contamination from the soil and groundwater in the area. After many months and several million dollars of expenditures, your company successfully removed the contamination to the satisfaction of the NYDEC. You assumed that your environmental problems were over, until today.

Today, you were sued by the owner of the property next door for trespassing. You and the property owner next door have never really gotten along. The property owner next door is a retail fencing company called Fences by Fred, Inc. ("Fences"). After a property line dispute, zoning variances, surveyors, and lawyers, Fences erected a display of dozens of different kinds of fences along the property line between your property and Fences' property. Needless to say, with dozens of different kinds of fences on display on the property line, it looks pretty ridiculous. This time, however, you believe the Fences have really "stepped over the line." The Fences sued Neighbors in the United States District Court for the Western District of New York, claiming that Fences' property had been contaminated by Neighbors' waste disposal practices. In particular, the Fences asserted a claim against Neighbors for trespass under New York common law. Since you have already removed the contamination, you fail to see how you could possibly be liable for "trespassing." You decide to contact your company's attorney and fight this form of legalized extortion.

You make an appointment with your attorney, explain the facts, including the part where you had to pay millions of dollars to clean up the contamination on the Fences' property, and then you ask your attorney if you will have to pay the Fences' for trespassing. Your attorney sighs and simply states, "Yes."

Under New York law, trespass is the intentional invasion of another's property. See Ivancic v. Olmstead, 66 N.Y.2d 349, 352 (1985), cert. denied, 476 U.S. 1117 (1986); Phillips v. Sun Oil Co., 307 N.Y. 328, 331 (1954); see also New York State Nat'l Org. for Women v. Terry, 886 F.2d 1339, 1361 (2d Cir. 1989), cert. denied, 495 U.S. 947 (1990). To be liable, the trespasser "need not intend or expect the damaging consequences of his intrusion[;]" rather, he need only "intend the act which amounts to or produces the unlawful invasion." Phillips, 307 N.Y. at 331; see New York State Nat'l Org. for Women, 886 F.2d at 1361. The intrusion itself "must at least be the immediate or inevitable consequence of what [the trespasser] willfully does, or which he does so negligently as to amount to willfulness." Phillips, 307 N.Y. at 331; see also Ivancic, 66 N.Y.2d at 352.

Your attorney explains that there is a body of law on trespass claims arising from the movement of noxious liquids from one property to another. The New York Court of Appeals has held that:

even when the polluting material has been deliberately put onto, or into, defendant's land, he is not liable for his Neighbors' damage therefrom, unless he (defendant) had good reason to know or expect that subterranean and other conditions were such that there would be passage from defendant's to plaintiff's land.

Phillips, 307 N.Y. at 331.

You ask your attorney if it matters that your company never intended for the water used in the cleaning process to enter Fences' land. In fact, there is no proof that anyone ever observed water running off of your property onto Fences' property. You explain to your attorney that even if water that had been contaminated by Neighbors' seeped into the soil on your property and thereafter migrated through the soil onto Fences' property, there is no proof that Neighbors' intended that to occur or that Neighbors' acts were so reckless that they should be charged with trespass. Your attorney explains that, unfortunately for you, in determining whether Neighbors' had the requisite intent for trespass under New York law, the issue is not whether Neighbors intended the contaminated water used in its cleaning process to enter plaintiffs' land. Rather, under Phillips, the appropriate standard is whether Neighbors': (i) "intend[ed] the act which amounts to or produces the unlawful invasion," and (ii) "had good reason to know or expect that subterranean and other conditions were such that there would be passage [of the contaminated water] from defendant's to plaintiff's land." Phillips, 307 N.Y. at 331 (emphasis added).

When this standard is applied, your attorney explains that Neighbors' is liable to the Fences in trespass. Your attorney explains that this is the likely conclusion that the court would reach since, in 1986, the NYDEC listed barium as a hazardous waste. Nonetheless, from 1986 until 1990, Neighbors' continued to take its barium-tainted furnaces outside its building and demolish them on site using jackhammers. Moreover, it was Neighbors' practice to wash the furnaces down with water on site in close proximity to the Fences' property. Your attorney explains that Neighbors' would have to concede in court that in the process of removing and breaking up the worn out furnaces, small amounts of barium salts escaped onto the pavement. These barium particles were carried by moving water into a swale on Neighbors' land, but near the boundary with plaintiffs. Your attorney explains that one conclusion is inescapable: the barium in the Fences' soil and groundwater came from the Neighbors' site.

Under Phillips, your attorney explains that the court is likely to conclude that Neighbors' intended the acts which caused the invasion of the Fences' property, and, on these facts, the court is likely to conclude that Neighbors' "had good reason to know or expect," see Phillips, 307 N.Y. at 331, that barium particles would pass from the pavement where the furnaces were washed and demolished, into the swale, and onto to the Fences' property.

You are thoroughly frustrated. Even after spending millions of dollars to eliminate the contamination on Fences' property, you are still being sued for "trespass." You tell your attorney to negotiate a "reasonable" settlement and to get your company out of this mess. Your attorney agrees.

You ask your attorney if he remembers how Robert Frost counseled that "good fences make good neighbors" in "Mending Wall," from The Poetry of Robert Frost 33-34 (Edward Latham ed., 1969). You look at your attorney and advise him that if Robert Frost had been familiar with your lawsuit, Robert Frost might have stated, "some Fences make poor Neighbors."

You are the plant manager of Coaters and Platers, Inc. Your company recently acquired six acres of a fifty acre industrial site next to your current location for the construction of a new warehouse and parking lot. During the initial excavation of the acquired property, you receive a report that your workmen have excavated several buried drums. You go to the excavation site and find that a bulldozer has unearthed five drums, puncturing them in the process. Your familiarity with chemicals helps you identify the contents of the buried drums as an industrial solvent never used by your company, but commonly known to be a hazardous substance.

You immediately notify the property owner who sold you the six acres. Although he denies liability, he agrees to take responsibility for the soil contaminated by the incident. He allows your company to place the contaminated soils on an asphalt parking lot located on the remaining 44 acres of industrial property that you did not purchase. After this unpleasant discovery, you have an environmental consultant survey the remaining six acres with a magnetometer to locate additional buried drums. Fortunately, none are found.

You mostly forgot the incident until a representative of U. S. EPA showed up at your plant to ask you what you knew about the contaminated soil located on your neighbor's property. Apparently, rains washed the contamination out of the soil and into a local stream causing a major fish kill. U. S. EPA and the Department of Justice are doing an investigation to determine the responsible parties. You feel that your neighbor is really in big trouble.

A few days later, you are notified that you are being investigated for environmental crimes related to the buried drums that caused the fish kill. Your attendance at a meeting with the prosecutor is requested, and you are advised to bring your lawyer. U. S. EPA is seeking an enforcement action against you for failing to report the release of a hazardous substance. You call an attorney and explain to him what happened.

Your attorney explains that under section 103(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), the person in charge of a facility must, as soon as such person has knowledge of a release of a hazardous substance in a quantity that equals or exceeds its reportable quantity (RQ) in a twenty-four hour period, immediately report the release to the National Response Center. Section 102(b) of CERCLA establishes an RQ of one pound for releases of hazardous substances, except for hazardous substances whose RQs were established pursuant to section 311 of the Clean Water Act (CWA), and hazardous substances whose RQs were adjusted by the Administrator of U.S. EPA pursuant to the authority granted by section 102(a) of CERCLA. Section 109 of CERCLA authorizes U.S. EPA to assess civil penalties for failure to report releases of hazardous substances that equal or exceed their RQs. Section 103(b) of CERCLA authorizes EPA to seek criminal penalties for failure to notify pursuant to CERCLA section 103(a).

Your attorney explains that to be convicted criminally on a CERCLA section 103(a) count the United States must establish that a) you are a person; b) you were in charge of a facility from which there was a release of a hazardous substance; (c) the quantity of the substance released was equal to or exceeded the reportable quantity for that substance; and d) you did not notify the National Response Center as soon as you had knowledge of the release. Your attorney explains that many of the elements of the crime are defined by statute, while other terms have been left to judicial interpretation. A "Person" is defined at 42 U.S.C. §9601(21) to include individuals, firms, corporations, associations and other entities, such as federal, state and local government units. Your attorney explains that U.S. EPA will have no trouble proving that you are a person. A "Facility" is defined at 42 U.S.C. §9601(9) to include any building, structure, installation, impoundment, landfill or site where a hazardous substance is located. The six acres where the hazardous substance was buried would be a facility under the statute. As defined by 42 U.S.C. §9601(22), a "Release" covers virtually any contact with the environment, including any spilling, leaking, pumping, pouring, emitting, discharging, injecting, escaping, leaching, dumping or disposing into the environment. By puncturing the drums with the bulldozer, there was a release at your company's facility. The "Environment" includes by definition the navigable waters, ocean waters, surface waters, the drinking water supply, groundwater, land surface or subsurface strata, or ambient air per 42 U.S.C. §9601(8).

As indicated, CERCLA provides definitions for most of the pertinent 103(a) terms. Neither the statute nor the regulations, however, give meaning to the phrase "in charge. . .of [a] facility." One court has ruled that the reporting requirements extend to any person able to discover, prevent and abate the release of a hazardous substance. United States v. Carr, 880 F.2d 1550 (2nd. Cir. 1989). Similarly, although section 103(a) liability requires that a person have knowledge of the release, CERCLA does not define the knowledge requirement. The Eleventh Circuit Court of Appeals considered the issue of knowledge in an environmental crimes case in United States v. Hayes Intern Corp., 786 F.2d 1499 (11th Cir. 1986), and concluded that the United States met its burden of proof by demonstrating that a) the defendant knew what the hazardous substance was (in that case, a mixture of paint and solvent) and b) the defendant knew that the hazardous substance was regulated by environmental laws. The court further noted that the United States may prove knowledge with circumstantial evidence. Id. Your attorney explains that U.S. EPA will have little trouble proving any of the necessary elements required to convict you of failing to report the release of a reportable quantity of a hazardous substance.

You cannot believe that simply failing to call U.S. EPA to report the release of a CERCLA hazardous substance could be a crime. You ask your attorney if anyone else has ever been convicted of such a crime. Your attorney explains that three people in Pennsylvania were sentenced in July 1996 for facts very similar to yours. In that case, two township supervisors and a fire chief were sentenced. The township administrators received eight months of confinement; the fire chief received four months of confinement and two years of probation. Their criminal convictions arose out of an incident, when the defendants unearthed five drums of waste buried on a tract of land owned by the township. Each drum was punctured in the process, releasing chemicals into the environment. A town laborer was ordered to crush the drums and rebury the waste. No required report was made of the incident to the proper authorities. Subsequent testing of the drums by the Pennsylvania Department of Environmental Protection determined that at least three of the drums contained hazardous substances. In a plea bargain agreement, all three defendants pleaded guilty to failing to report the release of hazardous substances into the environment. Your attorney explains that his goal is to minimize your criminal penalty; the chances of you being found not guilty are almost impossible.

My advice to clients is to be aware of the reporting requirements -- not just under CERCLA, but all the environmental laws. In addition to the reporting requirement under CERCLA, section 304 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), 42 U.S.C. 11001 et seq., also known as SARA title III, requires owners or operators of certain facilities to report certain releases of extremely hazardous substances and CERCLA hazardous substances to State and local authorities. EPCRA section 304 notification must be given immediately after releases of hazardous substances in quantities equal to or greater than their RQs to the community emergency coordinator for each Local Emergency Planning Committee for any area likely to be affected by the release, and to the State Emergency Response Commission of any State likely to be affected by the release. These notification requirements apply to releases that extend off-site and that are from facilities at which a "hazardous chemical" (defined by regulations under the Occupational Safety and Health Act of 1970 (29 CFR 1910.1200(c)) and section 311(e) of EPCRA) is produced, used, or stored. In addition, section 311(b)(5) of the CWA requires the person in charge of a vessel or facility, as soon as that person has knowledge of any discharge of a CWA hazardous substance, to notify immediately the appropriate Federal agency. There may be other agencies with reporting requirements applicable to releases at your facility, and your state may have other reporting requirements along with the federal requirements. I suggest that you learn what the reporting requirements are for your facility, make a list of phone numbers for emergency use and keep it available at all times. Furthermore, never assume that a release of a hazardous substance at your facility is not reportable without verifying your assumption with your environmental consultant and attorney. The expense your company incurs for determining if a release is reportable is very inexpensive compared to the cost of defending against a criminal prosecution, or sitting in prison.

Employers have been known to ask employees to violate environmental laws. Sometimes, the request occurs because of an honest misunderstanding of the law and should be considered an innocent mistake. Less scrupulous employers have been known to ask employees to perform an activity that is in violation of an environmental law because it is a cheaper way of doing business. In either case, the employee faces both a moral and a legal dilemma. Questions like, "Could I go to jail for this?" or "If I refuse will I be fired, or passed over for a raise or promotion?" and "Who is responsible if someone gets hurt?" often haunt the employee. As he wrestles with his conscience, the employee may not know where to turn, or what to do. The employee may not even be certain that what the employer is requesting is illegal. The employee may only suspect that the activity is illegal because of something he heard, or something he read. In such situations, the employee must know for what he has legal responsibility, and for what his employer has legal responsibility. The employee must also know what to do if he finds that his employer is retaliating against him for not violating the law.

The law holds that a person responsible for compliance with a law must also answer for violations of the law. An employee who has no responsibility for compliance with a law, when directed to violate the law, is usually not held responsible for the violation unless the employee knew or should have known that his conduct was illegal. For example, an employee who uses anillegal type of paint when ordered to do so would probably not be held responsible for a violation of the Clean Air Act if the employee was not responsible for maintaining company compliance with the Clean Air Act. However, an employee performing midnight dumping of drums of used solvent into a vacant field when ordered to do so could be held liable since such activity is without question known to be illegal.

If a supervisor asks an employee to perform an act, such as using a paint that the employee believes to be illegal, the employee should state the concern to the employer. He should specifically tell the person requesting the activity that the environmental laws could prohibit the requested activity. The employee should determine if the person making the request is responsible for environmental compliance. If the person making the request is not responsible for environmental compliance, the employee and the person making the request should consult the person with responsibility for environmental compliance before proceeding. The employee should state that he is only requesting the consultation to protect the company. If the person making the request refuses to consult with the company's environmental compliance officer, or if the person making the request happens to be the company's environmental compliance officer, the employee should remind the person that if EPA later determines that the activity was illegal, the company and the person ordering the illegal activity will be liable, but usually not the employee who simply follows the order.

If the person ordering the activity states that he knows the activity is illegal, but ordersthe employee to perform the activity anyway, the employee has a difficult decision to make. If he continues, he is committing a knowing violation of the law, possibly exposing himself to criminal sanctions. If he does not continue, he is subjecting himself to retaliation by his employer for not following directions, albeit illegal directions. Congress contemplated such a problem and passed "whistle-blower" laws to protect the employee. The Clean Water Act (33 U.S.C. § 1367(a)), the Clean Air Act (42 U.S. C. § 7622), the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9610), the Safe Drinking Water Act (42 U.S.C. § 300(j)-9(i)), the Resource Conservation and Recovery Act (42 U.S.C. § 6971), and the Toxic Substances Control Act (15 U.S.C § 2622) all contain whistle-blower provisions. Other state and federal laws also contain whistle-blower provisions that could be applicable depending on the specific situation.

Under the whistle blower laws, no employer may discharge or otherwise discriminate against any employee concerning his compensation, terms, conditions, or privileges of employment because the employee reported, or is threatening to report suspected illegal activity of the employer. Such whistle-blower provisions promote a working environment in which employees are relatively free from the debilitating threat of employment reprisals for publicly alleging violations of laws protecting the environment. The whistle-blower laws encourage employees to aid in the enforcement of the underlying laws by allowing employees to raiselegitimate concerns through protected procedural channels. It is usually not necessary for the employee to know that the activity is illegal, provided the employee substantiated the allegation and was not merely harassing the employer. The courts scrutinize an employer's motivation for his actions regarding an employee who reports, or threatens to report a violation. Hence, after an employee "blows the whistle," the employer must show that a legitimate reason exists for taking action against an employee. Even if an employer had compiled enough information to terminate an employee, but failed to do so until the employee reported a violation of an environmental law, the whistle-blower statutes would protect the employee from being terminated as a result of reporting theviolation of the environmental law.

In the case of Passaic Valley Sewerage Commissioners v. U. S. Department of Labor, 992 F. 2d 474 (1993), the third circuit court of appeals extended the whistle-blower protection to reports made internal to an organization. Thus, an employee can make his initial report to upper management where he feels that such reporting could result in correction of the illegal activity. There is no legal requirement that the employee start within the organization to report the alleged illegal activity.However, some employment contracts require that an employee report all grievances internally before being reported outside the company. It is important that the employee be aware of such requirements since disciplinary action for not following company procedures are at least arguably not covered by the whistle-blower statutes.

Whistle-blower statutes do not apply to an employee who, acting without direction from his employer, deliberately violates the law. Thus, an employee who initiates the violation and then threatens to report the "company's" illegal activity to save his job when the employer finds out, cannot rely on the whistle-blower statute for protection. It is also important to remember that the law affords no protection to a person who sits on his rights. An employee only has a limited amount of time to file a claim under the whistle blower statutes. For example, an employee must file within thirty days under the Clean Air Act's whistle-blower statute.

I recommend the following course of action to any employee who is asked to perform an illegal activity:

1) If the employee does not know, but merely suspects the activity to be illegal, question the person making the request as to the legality of the activity. The employee should ask to speak to the environmental compliance officer "to protect the company." If possible, the employee should try to have a witness present during the conversation. If the employer tells the employee that the activity is legal, then the employee should perform the task. The employee is not the person responsible for making the determination of compliance with the law.

2) If the employee knows that the activity is illegal, but the employer orders the employee to perform the illegal activity anyway, the employee should only perform the task if retaliation is likely, and performing the task is not likely to put others in danger. If possible, the employee should try to have a witness present during the conversation. On the employee's own time, the employee should write down the sequence of events leading up to the violation, and all details related to what violation occurred. The employee should pay particular attention to who ordered the violation, witnesses, times, dates and details about the violation in his writing. When practical, the employee should report the situation to management and/or EPA for resolution. Reporting is important since it negates any inference that the employee was the person initiating or responsible for the illegal activity.

3) If the illegal activity is one that could result in someone being hurt, the employee should simply refuse. An employee should never knowingly endanger anyone by creating an environmental hazard. The employee should report the situation to management immediately before someone with less integrity performs the activity. If management does not take immediate steps to prevent the illegal activity, immediately report the situation to EPA. If the employee believes that the activity endangers employees of the company, the employee should also report the situation to OSHA. OSHA gives any matter in which there is an imminent danger of employee harm first priority. Furthermore, under OSHA's interagency sharing of information agreement, OSHA will cooperate with EPA by providing EPA with information regarding violations of environmental law. If the company retaliates against the employee for reporting or threatening to report the illegal activity, the employee should immediately seek legal assistance. Congress designed the whistle-blower statutes to protect and to compensate employees in such situations, but the employee may only have thirty days in which to act after retaliation occurs.

In addition, I offer the following advice to employers. When any employee comes forward with an allegation that a supervisor asked the employee to violate the law, treat the matter seriously. Investigate the facts and the law. If the supervisor did request that the employee violate the law, try to determine if the supervisor understood that the action was illegal. If he did, consider the supervisor's value to the company compared to the potential environmental liability your company could have faced. Furthermore, if your company or the supervisor does anything which might even appear to be retaliatory against the employee who reported the incident, the company is again exposed to liability under the whistle-blower statutes. The best businesses are those that find cost effective ways to comply with the law, not those that look for employees who are willing to violate the law.

You are the owner of Chromers and Platers, Inc., a business that you started thirty years ago and have grown to employ sixty people on a full time basis. You have diligently tried to comply with the environmental laws over the years, but with the myriad of paperwork associated with the environmental laws, you really are not sure if you have been successful.

Recently, you decided to sell the business, but before listing the business for sale, you decided to have a compliance audit of your facility completed by a local environmental consulting company. After the audit, the environmental consultant revealed that your company was in violation of several different environmental laws. The violations are mostly caused by failure to maintain appropriate records. None of the violations would result in a criminal prosecution, but some of the violations could result in a significant civil penalty if discovered by U.S. EPA. You immediately make plans to ensure that future violations will not occur. However, selling the business with the potential for U.S. EPA to come in and levy large civil penalties against your company will certainly affect the selling price.

Unsure of what to do, you contact an environmental attorney for assistance. The attorney explains that since you are aware of the past violations and the possibility that an enforcement action could be brought against the company because of the violations, you must disclose the violations to any potential buyer. If you choose not to disclose the past violations, the buyer could sue you for fraud if U.S. EPA brings an enforcement action against the company after you sell. The attorney explains that his recommendation is for you to report the violations to U.S. EPA yourself. Your attorney explains that under a new U.S. EPA policy, if you self-report the violations, you may be entitled to a complete waiver of any penalty that would otherwise be assessed against the company.

Your attorney explains that on May 23, 1996, U.S. EPA implemented one of the twenty-five regulatory reform initiatives announced by President Clinton on March 16, 1995. The regulatory reform initiative recently implemented was EPA's Policy on Compliance Incentives for Small Businesses and implements, in part, the Executive Memorandum on Regulatory Reform, issued on April 21, 1995, by President Clinton.

The new policy sets guidelines to reduce or waive penalties for small businesses that make good faith efforts to correct violations under most EPA statutes. The policy does not apply when public health or the environment is seriously threatened, or when the violation involves criminal conduct. Since the violations at your business are unintentional paperwork violations that did not involve criminal conduct, your attorney explains that your case is a good candidate for a penalty waiver under the new policy.

For a facility to be eligible for a penalty waiver, the company must be a "small business." The policy defines a small business as a company that employs one hundred or fewer persons on a company-wide basis. Furthermore, a facility must demonstrate a good faith attempt at complying with the environmental laws. Facilities can demonstrate good faith in two ways: either by conducting a self or third-party compliance audit and promptly disclosing and correcting the violations or by getting on-site compliance assistance from a state, federal or other government-sponsored compliance assistance program. Assuming the company discovered the violation as part of a self-compliance audit, the company must report the violation promptly to U.S. EPA in writing.

The violation itself must be a first time, non-criminal violation that does not pose a significant threat to public health, safety or the environment for the policy to apply. For purposes of a first time violation, within the past three years the facility must not have received or been subject to an information request, warning letter, notice of violation, field citation, citizen suit or other enforcement action or received penalty mitigation pursuant to the new policy for the current violation and, in the past five years, has not been subject to two or more enforcement actions for violations of environmental requirements.

In addition, the company must correct the violation remedy any harm caused to the environment within 180 days of being discovered, or 360 days if the company must install pollution prevention equipment. If a business meets all the criteria but takes additional time to correct the violation or, in the rare event that a business obtains a significant economic benefit from the violation, U.S. EPA will waive up to 100 percent of the gravity or punitive portion of the penalty, but may seek the amount that company saved through its non-compliance. According to U.S. EPA, this will eliminate any economic advantage that violators have over those companies that do comply with the law.

You explain to your environmental attorney that you believe your company meets all the requirements. You employ less than one hundred people, attempt in good faith to comply with the environmental laws, discovered the violations during a self-audit, and have never been party to a prior enforcement action. In addition, your company received no economic advantage from the violation, did nothing criminal, and never harmed the environment, nor did your company pose a significant threat of harm to the environment. Under the circumstances, your company should be eligible to have the entire penalty that would otherwise be applicable to your situation waived by U.S. EPA after you report and correct the violations. You feel relieved; finally, a policy from U.S. EPA that could actually improve your company's profitability.

My advice to clients who are performing self-audits is to be aware of the latest environmental policies coming out of U.S. EPA. U.S. EPA's latest policies are designed to save you money. However, U.S. EPA has no track record under the new policy, and many of the criteria necessary for a company to be eligible for a penalty waiver are subjective. I would never recommend that any company cover-up its violations of the environmental laws. However, proceed with caution when reporting violations to U.S. EPA and remember that you are making admissions that you will be held accountable for if U.S. EPA later decides that your company is not eligible for a penalty reduction. What is more important, if U.S. EPA decides that the conduct is a criminal violation, you may have made the admission necessary to prosecute the case against you.

In addition, policies come and policies go for various reasons such as court challenges, election year campaign promises, and federal budget balancing considerations. U.S. EPA's new policy on Small Business Compliance Incentives is a good idea, in my opinion. However, it has not yet withstood the test of time. As for now, if your company has discovered violations that must be reported, such as in this case due to a pending sale of the business, be aware that President Clinton has promised relief to those small businesses who meet the above criteria. As for large businesses, you may want to write to the President and ask him why his new policy does not apply equally to you.

You own and operate Ace Plating and Painting, Inc. Your company specializes in coating materials for the secondary automotive parts market. You rechrome bumpers and grills, and strip and paint body parts for antique cars. You have been operating the business for over twenty years and have become one of the Midwest's largest secondary automotive refinishing suppliers. Business is good, and your reputation for being a quality supplier keeps it that way.

Your facility has an air permit for the emission of particulates and volatile organic chemicals. Your company has tried to comply with its permit. Occasionally, your company has problems with its air pollution control equipment and there will be times when the facility is not in compliance. However, because you are not required to monitor your results continuously, you take the position that there is no evidence to show that you have violated your air permit. When you are required to monitor, you make certain that all of your pollution control equipment is working before you collect the necessary test date required by your air permit. While the ethical issues raised by this approach could be troubling if you really stopped to ponder, legally, you feel like you are on solid ground. You have operated this way uninterrupted for several years without a problem, until yesterday.

Yesterday, your company, Ace Plating and Painting, Inc. received a Notice of Intent to Sue pursuant to the Citizen Suit provision of the Clean Air Act. You are outraged. "They've got no proof that I ever violated the Clean Air Act," you say to yourself. "There's no definitive evidence that I violated my air permit. A good strong letter from my lawyer should shut these people up," you say, and off you go furiously to your lawyer's office.

Your attorney reviews the notice of intent to sue letter, and asks you to explain the allegations in the letter that your facility emits "obnoxious and hazardous odors," and "particulates that settle on automobiles, sticking thereto and ruining the automotive finish." Your attorney further asks you to explain the photographs that your neighbors were kind enough to enclose with their Notice of Intent to Sue showing your air emission stack belching black smoke. Your response is quick and definitive. "They can't prove a thing. All of my monitoring results show that I am in complete compliance with my air permit," you say. "There is no definitive evidence proving that I have violated any of EPA's laws," you remind your lawyer.

Your lawyer tells you that if he is too defend you, you must be honest with him. You proceed to tell him confidentially that your pollution control equipment does not work all of the time, but that it always works on days when you perform tests to demonstrate compliance with the terms and conditions of your air permit. You admit that occasionally your factory does belch black smoke, but this is just the type of business you own. To install equipment that would capture every such release would be cost prohibitive. Similarly, you explain that the cost of installing new VOC capturing equipment that would work continuously as needed would also be cost prohibitive. Your philosophy has been that if the other side cannot prove the violation, which your data shows they cannot, then you intend to keep operating as you have for the last ten years. When you finish, your attorney sighs and says that you used to be correct. Until February of 1997, the citizens probably could not have pursued a citizen suit without test data showing that Ace Plating and Painting, Inc. violated the terms of its permit. However, in February 1997, EPA changed the law and made it a lot easier for citizens to sue and win in court based on information regarding violations obtained from sources other than your monitoring data.

Your attorney explains that EPA promulgated another regulation in 1997 that will aid citizen suits. On February 24, 1997, EPA promulgated a final version of the "any credible evidence" rule, 62 Fed. Reg. 8314. The any credible evidence rule specifically amends four different parts of the Code of Federal Regulations, 40 C.F.R. Parts 51, 52, 60, and 61, and allows the use of any credible evidence in enforcement actions brought under the Clean Air Act by EPA, state enforcement agencies, or citizens. The key language added by the rule states that nothing in those regulations "preclude[s] the use, including the exclusive use, of any credible evidence or information, relevant to whether a source would have been in compliance with applicable requirements if the appropriate performance or compliance test procedures or methods had been performed." Previously courts applying this rule would only find reference test data admissible as evidence in enforcement suits. The any credible evidence rule establishes that nonreference test data may also be admitted as evidence in an enforcement action, including a citizen suit action.

Your attorney explains that even beyond the basic impact of the rule in changing what constitutes compliance under many standards, certain portions of EPA's preamble to the new rule raises additional concerns about how the new rule may be used in enforcement actions. In particular, Agency officials had previously stated that credible evidence could properly be used to prove a violation only if the plaintiff could demonstrate "a strong correlation between reference test results and the credible evidence in question." In otherwords, the credible evidence had to correlate with test results. However, nowhere in the preamble to the any credible evidence rule is there a statement that the role of credible evidence is limited in this manner. Instead, the preamble refers to the specified reference test method as merely constituting a "benchmark" against which other data or methods may be compared when they are used to establish that a violation has occurred. The preamble emphasizes that "by law the Agency is limited only by general evidentiary rules in what it can use to prove a violation alleged in an enforcement action." 62 Fed. Reg. 8320. Also troubling is the portion of the preamble that states if credible evidence indicates the existence of possible "deviations" from a limit, a source may "be out of compliance with an applicable requirement even though the unit's permit-identified data indicates compliance." 62 Fed. Reg. 8320. In other words, your attorney explains that even if your data indicates that you are in compliance, the evidence to be produced by the citizens indicating that you are not in compliance can be used to prove violations if it is credible. As your attorney looks at the photographs sent by the plaintiffs, he sighs and mumbles to himself, "This could be tough to discredit." Furious, you tell your attorney that you are willing to upgrade your equipment if that will make the lawsuit go away. Unfortunately for you, your attorney explains that the Supreme Court decided this issue in the case of Gwaltney v. Chesapeake Bay Foundation, 484 U.S. 49 (1987). The issue in Gwaltney was whether the citizen suit provisions of the Clean Water Act, permitting private citizens to bring suit against any person alleged to be in violation of the Act, required that a defendant be violating the Act at the time of suit. The Court concluded that the CWA did not permit citizen suits for wholly past violations. However, the Court stated that the provisions required that a citizen plaintiff allege a state of either continuous or intermittent violation. In other words, there must be a reasonable likelihood that a past polluter will continue to pollute in the future. In your case, the attorney explains, simply upgrading the equipment will not be enough unless you can upgrade within sixty days from the Notice of Intent to Sue, and the upgrades guarantee that there is no possible way that the plant could operate in violation of the limits set by your air permit.

You look at your attorney and state, "No system can guarantee that." Your attorney in response simply states, "And that is why you are likely to lose. There is credible evidence of past violations, and no way to insure that future violations will not occur."

Be advised that EPA has lowered the standard to bring citizen suits and win. Under the new "Any Credible Evidence" rule, enforcement actions, including citizen suits, are a lot easier to win. Further, unless it can be demonstrated that the violation will never reoccur, they are even more difficult to stop. The new rule is referred to as the "Any Credible Evidence" rule or ACE rule. The "ACE" rule will undoubtedly become the ace in the hole for citizens pursuing enforcement actions against companies like the one in this article, Ace Plating and Painting, Inc.

Your company, Deep Dutch Metal Finishing Company ("Deep Dutch") operates an electroplating operation in Deep Dutch, Illinois. Deep Dutch's electroplating operation generates wastewater that is treated before discharging into the Publicly Owned Treatment Works, the "sewer system." Your company has operated at its current location since 1969. In 1995, your company learned that the factory across the street was closing. You learn that the closing factory's facility is for lease, and with its less expensive rent, you calculate that you can easily save about forty thousand dollars per year. The cost of moving will be made up in the reduction of the lease payments for the first year.

The move went smoothly, with only a minimal impact on production. You moved your electroplating lines one at a time so that your production was never shut down completely. After the move, you notify everyone that your address has changed from 1953 Industrial Boulevard to 1948 Industrial Boulevard. Your company disassembled and reassembled its pretreatment equipment for its wastewater and moved it across the street as well. Instead of watching the sunrise, you now watch the sunset, and instead of discharging pretreated wastewater on the east side of the street, you now discharge your pretreated wastewater on the west side of the street. Other than that, your operation is exactly as it was before the move. Everything was going according to plan, until yesterday. Yesterday, you received a notice in the mail that your local Water District expected you to upgrade your wastewater pretreatment equipment as a "new source" of pollution. You are stumped, and anticipate that a clerical error has occurred.

The day following receipt of the notice, you notify the Water District to determine why the Water District is demanding that you upgrade your pretreatment equipment. After a rather long and somewhat heated exchange with a technical staff employee of the Water District, you eventually learn that after Deep Dutch's move, the Water District is taking the position that Deep Dutch's operation is subject to more rigorous treatment standards now as a "new source" with respect to its discharges into the sewer system. According to the Water District, as a result of its move to a new location, Deep Dutch's operation became a "new source" under U.S. EPA's regulations rather than an "existing source," which it had been classified as prior to its move. The "new source" classification subjects your manufacturing operation to stricter waste treatment standards than the "existing source" classification. Just before telling the Water District employee exactly what you thought of his opinion, you explained that you believed Deep Dutch remained an "existing source" because it had merely moved its existing equipment from one building to another and this in your opinion should not be considered a "new source."

The Water District immediately initiated a series of administrative actions before the Water District's Board of Commissioners to determine whether Deep Dutch was subject to the Metal Finishing Point Source Category (a pretreatment standard for "new sources"), 40 C.F.R. § 433.17, or instead, as you maintain, to the less stringent Electroplating Point Source Category (a pretreatment standard for "existing sources"), 40 C.F.R. § 413.14. Because the Water District is required by law to enforce U.S. EPA's regulations, U.S. EPA's regional office, Region V, took an interest in the Water District's administrative actions relative to Deep Dutch's Operations and issued a letter in which Region V gave an informal interpretation of the applicable regulations (an "interpretative ruling"). The interpretative ruling indicated how Region V, as opposed to the Water District, would characterize your operation in the course of independent review, such as during an audit of the Water District's enforcement program. In its interpretative ruling, Region V concluded that Deep Dutch became a "new source" as defined by the Clean Water Act and 40 C.F.R § 403.3(k) once it moved across the street.

The Water District, not about to do anything contrary to an interpretive ruling from Region V, immediately concludes that Deep Dutch's new location is a new source and orders that Deep Dutch must meet the new source wastewater standards. This ruling could cost Deep Dutch over five hundred thousand dollars in equipment and operating costs over the next several years. In response, you immediately contact U.S. EPA's Region V headquarters seeking a hearing to reconsider the interpretive ruling from Region V. Region V responded by confirming its initial determination that Deep Dutch's operation at 1948 Industrial Boulevard constitutes a "new source" under the law. When Region V confirmed its interpretive ruling that your move from 1953 Industrial Boulevard to 1948 Industrial Boulevard constituted a "new source" under the law, you decide to hire an attorney and fight Region V's interpretation.

You arrive at your attorney's office and explain the problem. You want your attorney to file suit against U.S. EPA and get Region V's interpretative ruling reversed so that the Water District will allow your plant to be classified as an existing source. You emphatically explain to your lawyer that Deep Dutch is not a "new source" and should not be subject to the more stringent effluent limitations set forth in 40 C.F.R. § 433.17. Your attorney cringes when you tell him the facts and what you want.

Your attorney explains that Congress passed the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387, also known as the Clean Water Act, in order "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251. To this end, Congress established a comprehensive regulatory scheme to control the direct and indirect discharge of waste and pollutants into navigable waters. To curtail indirect discharges into sewer systems and POTWs, U.S. EPA promulgated pretreatment standards for various industrial categories. 33 U.S.C. § 1317. These "categorical" pretreatment standards typically specify the maximum amounts of certain pollutants that a source in a particular industrial category may discharge into a sewer via its wastewater. Generally, "new sources" must adhere to more stringent pretreatment standards than "existing sources," e.g., compare 40 C.F.R § 433.17 (pretreatment standards for new sources) with 40 C.F.R § 433.15 (pretreatment standards for existing sources). According to U.S. EPA's logic, new sources are subject to more rigorous controls because, as a practical matter, it is much easier to design and build new equipment to meet the tougher standards than it is to upgrade existing equipment to meet those same standards.

Your attorney explains that the statute granting a court jurisdiction to review EPA's decisions, Section 509(b)(1) of the Clean Water Act, 33 U.S.C. § 1369(b)(1), does not afford the court jurisdiction to review the agency's informal interpretative rulings such as the one issued in your case. You are astounded, the Water District will not change its position regarding your status as a "new source" unless you can get Region V to change its position, and your attorney is telling you that you can't even sue U.S. EPA to determine the correctness of Region V's position. Your attorney explains that in determining if a court has jurisdiction, the question the court must address is whether Region V's interpretative ruling constitutes a reviewable issue under the law. If it does not, the courts have no jurisdiction. In American Paper Institute v. EPA, 882 F.2d 287 (7th Cir. 1989), Region V issued a policy statement concerning dioxin discharges from pulp and paper mills. The American Paper Institute sought review of Region V's policy statement, believing it to be too onerous. U.S. EPA argued that the court system had no jurisdiction over the matter since the policy statement was not reviewable under Section 509(b)(1)(E) of the Clean Water Act, which at the time provided: "Review of the Administrator's action . . . in approving or promulgating any effluent limitation or other limitation under section 1311, 1312, or 1316 of this title . . . may be had by any interested person in the Circuit Court of Appeals of the United States."

The court agreed that it had no jurisdiction to determine the matter and determined that Section 509(b)(1)(E) did not cover Region V's policy statement. The court reasoned that "promulgation" means issuing a document with legal effect. Region V's policy statements, while issued to warn, threaten and possibly harass, have no legal effect. The court in American Paper Institute went further to hold that Region V's policy statement was not a "limitation" within the meaning of Section 509(b)(1)(E) because it was advisory, and thus it had no independent legal effect. Id. at 289. Your attorney explains that the same reasoning that the court applied to Region V's "policy statement" in American Paper Institute applies with equal force in the present case to Region V's "interpretative ruling." Since Region V's interpretative ruling has not been adopted by U.S. EPA, the ruling cannot be considered the "Administrator's action." Second, like the policy statement at issue in American Paper Institute, Region V's interpretative ruling was not "promulgated." Third, the interpretative ruling is not an "effluent standard, prohibition, or pretreatment standard." Instead, the ruling is Region V's opinion concerning which pretreatment standard U.S. EPA would deem applicable to Deep Dutch based on whether Deep Dutch is a "new source" or an "existing source." Policy statements do not appear in the Federal Register and will not be codified in the Code of Federal Regulations. A policy statement simply tells the regulated community how U.S. EPA's Regional Office thought it might react to particular proposals. However, as stated by your attorney, "Telegraphing your punches is not the same as delivering them." A lawsuit against U.S. EPA to force it to withdraw Region V's interpretive ruling would clearly and quickly be thrown out of court.

You are furious. You tell your attorney that you intend to move your operation back across the street where you were an "existing source." Your attorney sighs and reminds you that after you left, any business relocating in your former location would be subject to the "new source" standards. Your attorney simply looks at you and says, "No matter where you go, there you are." After you moved, you will always be a "new source."

You are the President and owner of Barrel Finisher's Inc., a drum recycling company. Your company has been operating at the same location since World War II. Your company receives metal 55-gallon drums from companies, removes the contents left in the drum and then paints the drums for use again. Your company has its share of environmental problems from the past operating techniques of its founders. Initially, the contents of drums brought into the plant were washed out with a cleaning solution that was discharged to a settling pond where it was treated on site. Naturally, this created a toxic and hazardous waste due to the multiplicity of small amounts of chemicals left in the drums. The groundwater and the soil at your plant are contaminated with solvents, pesticides, metals and petroleum products from the more than fifty years of industrial activity at the site.

U.S. EPA is well aware of your site, and has repeatedly requested that you voluntarily enter into an agreement for the necessary work to protect human health and the environment from the presence of the many contaminants at the site and in the groundwater. However, you view the need to spend money on past environmental problems differently than U.S. EPA. You see the problem as one that strictly happened before the environmental laws and regulations were in effect. Furthermore, your plant is located in an industrial park where all of the land is contaminated, not just your land. In addition, nobody within three miles of your plant uses the groundwater because everyone knows the water is too polluted to drink. The bottom line is, you do not share U.S. EPA's sense of urgency as to any type of environmental restoration project at your plant. You expect that it will be at least another five years before U.S. EPA sues you in court to force you to clean up the property. With all of the court delays in today's legal system, you expect that you will be retired before you have to deal with the removal of any contaminated soil or groundwater from your property. You had everything figured out, until yesterday.

Yesterday, you received via Certified Mail from U.S. EPA something called a unilateral administrative order requiring that you immediately begin the environmental restoration of the contaminated soil and groundwater at your plant site. The order states that if you do not perform the tasks required by the terms of the order, you can be assessed $25,000 per day in penalties, and if you willfully violate the unilateral administrative order, you can be assessed three times the cost of clean up as a punitive fine. You had never heard of such a thing. You thought only a court could issue an order, and you have not been sued so how could you be subject to an order. You decide that this cannot possibly be legal, so you call an environmental attorney to see how best to avoid the U.S. EPA's unilateral administrative order. What you learn is very sobering.

The attorney that you hire to get you out of the unilateral administrative order explains that U.S. EPA prefers to obtain private-party response action through the negotiation of settlement agreements with parties willing to do the work. Your attorney explains that unilateral administrative orders issued under section 106 of CERCLA may be issued if a release or threat of a release of a hazardous substance from a facility may present an imminent and substantial endangerment to public health, welfare, or the environment. The order must include findings on the hazardous substances at the site, the nature of the release or threat of a release, the location of the release, the nature of, and basis for the finding of a possible imminent and substantial endangerment.

Your attorney explains that U.S. EPA uses unilateral administrative orders when viable private parties exist and are not willing to reach a timely settlement to undertake work under a consent order or decree. At that time, U.S. EPA has the authority to compel private-party response through unilateral administrative orders. If the responsible party does not comply with the order, U.S. EPA may refer the case for judicial action to compel performance and recover penalties. Your attorney explains that because of the presence of hazardous wastes in the soil and groundwater at your property, U.S. EPA should have little trouble showing an imminent and substantial endangerment to public health, welfare, or the environment at your facility.

Your attorney's review of the unilateral administrative orders issued by U.S. EPA against your company appear to be legally enforceable. Based upon what your attorney perceives as the validity and enforceability of the orders, your attorney explains that if your company, as a responsible party, does not comply with the unilateral orders, U.S. EPA can perform a cleanup using government money and then seek to recover those costs from your company through the courts. In addition, U.S. EPA can seek to recover punitive damages, and penalties.

You immediately ask your attorney what type of punitive damages and penalties your company might be responsible for if it refused to perform the clean up. Your attorney explains that under CERCLA §107(c)(3), U.S. EPA is authorized to collect punitive damages from one to three times the costs incurred by the government. This means that if the government spends one million dollars performing the clean up, you could be responsible for an additional punitive amount of three million dollars for not complying with the order to clean up the site. Furthermore, your attorney explains that under CERCLA section 106(b)(1), "any person who, without sufficient cause, willfully violates, or fails or refuses to comply" with any order, may be fined up to $25,000 for each day in which the violation occurs or the failure to comply continues. In other words, for every 30 day period that you refuse to comply with the unilateral order, U.S. EPA could recover an additional $750,000 in penalties.

You tell your lawyer that at least the government has to spend its money to cleanup the site before it can go after your company's money. By the time U.S. EPA finishes, you will have sold everything off and there will be no assets to pay fines and penalties. Your attorney explains that U.S. EPA has the option to request an enforcement order through the court pursuant to section 106, to compel compliance and to assess and to collect penalties so as to prevent you from stalling and liquidating company assets. In other words, if U.S. EPA goes to court to force you to comply with the order, and you refuse to comply with the order by stalling, you can be held in contempt of court. If you are held in contempt of court, the judge can throw you in jail if you do not comply with U.S. EPA's order when so ordered by the court. Regardless of the route U.S. EPA chooses to take upon noncompliance with a unilateral order, your attorney explains that your company will remain potentially liable for the response action, and in the worst possible scenario, you could go to jail for refusing to comply with the court's order to enforce the unilateral administrative order.

You tell your attorney that you would rather pay him to fight U.S. EPA's unilateral administrative order than to pay for what you consider a senseless cleanup. To your amazement, your attorney informs you that CERCLA precludes a responsible party from initiating court proceedings to challenge a unilateral order upon receipt. Under CERCLA section 113(h), courts may review section 106 orders only when U.S. EPA seeks to enforce the order, or if U.S. EPA seeks penalties for violation of the order, or if the responsible party attempts to recover money from U.S. EPA for response costs incurred after compliance with the order. Therefore, if responsible parties refuse to comply with a unilateral order, the Agency may use the government money in the "Superfund" to clean up the site, without first defending its actions in court. Furthermore, your attorney explains that once in a court proceeding where the validity of the order is properly at issue, section 113(j)(1) of CERCLA provides that judicial review of any issues concerning the adequacy of any response action is limited to the administrative record. U.S. EPA already will have compiled the administrative record for the selection of the remedy. Therefore, where U.S. EPA expects a court challenge to a clean up, it is U.S. EPA that prepares the evidence for the court to review. This record will include information on the release, the possible endangerment, and the response action required. The court will consider no other evidence outside of the administrative record.

You ask your attorney what, if anything, can be done, and your attorney explains that it is U.S. EPA's policy to provide responsible parties with an opportunity to discuss with the U.S.EPA regional office issuing the order, implementation of the response actions required by the order, and the extent to which the respondent intends to comply. However, your attorney cautions you that U.S. EPA will not participate in the conference for the purpose of resuming settlement negotiations or negotiating the terms of the order. Your opportunity to negotiate a settlement on terms better than those required by the order expired when your company refused to negotiate a timely consent decree. Furthermore, the conference is not an evidentiary hearing, and the opportunity to confer does not give your company any type of right for a court to perform a pre-enforcement review. In addition, the conference is not intended to be a forum for discussing liability issues or whether the order should have been issued. Instead, U.S. EPA views the conference as a way to ensure that the order is based on complete and accurate information, and to facilitate understanding of implementation. Essentially, your attorney explains, the conference is merely a mechanism for U.S. EPA to explain how you will comply with the order. In other words, the conference is where U.S. EPA tells you that settlement negotiations are over - now you will do it the way U.S. EPA's order dictates.

U.S. EPA's authority to issue unilateral orders has become one of its most powerful tools for forcing companies to undertake a clean up. Unilateral administrative orders are primarily used against responsible parties who delay, stall and otherwise thwart efforts by U.S. EPA to obtain a voluntary clean up. I advise clients who are involved in settlement negotiations with U.S. EPA to be aware that if the negotiations break down, U.S. EPA has the authority to issue a unilateral administrative order. Once a unilateral administrative order is issued, all negotiations are over and the U.S. EPA will get practically whatever it wants, at your expense.

You are the owner of Acme Metal Coating, Inc., a metal coating plant. A river runs next to your plant into which you discharge your treated wastewater. You are very conscientious about your waste water discharge and have put a lot of money into wastewater treatment systems. The water that you discharge is actually cleaner than the water in the river that you use as make up water for your cooling towers.

You received permission to begin your wastewater discharges on January 10, 1987, from your state Environmental Protection Agency (the "state EPA"). Your state EPA issued your company a National Pollution Discharge Elimination System (NPDES) permit to discharge effluents into the River. The NPDES permit expired exactly five years later on January 10, 1992. For whatever reason, you neglected to apply for a new permit, even though the normal procedure for permit renewal is to reapply 180 days before expiration. Admittedly, you continued to discharge effluents into the river after January 10, 1992, but all of your wastewater monitoring data shows that your discharges were within the federal categorical pre-treatment standards for your industry

Yesterday, you received a letter from the Local River Defense Fund ("LRDF") notifying you, the Administrator of the U.S. EPA, the Regional Administrator of your U.S. EPA Region and your state EPA of your company's alleged violations of the Clean Water Act for discharging without an NPDES permit. The notice also explained LRDF's intent to file a lawsuit against your company. You are not sure what to make of the letter. You expect it is either a joke, or a baseless claim since your wastewater discharges have always been acceptable for your type of operation, regardless of whether you had a permit. Besides, you figure that if there was a real problem with your operations, your state EPA would have done something by now over the fact that you have operated over three years without a permit. Just to be safe, you decide to get your attorney's opinion of the letter.

After your attorney has accumulated all the necessary information, he meets with you to explain exactly what is happening. He explains that the LRDF is an organization consisting of about one hundred local activists who are bringing lawsuits against local businesses under the citizen suit provision for violations of the Clean Water Act. The statute provides that LRDF may request an injunction to shut down your wastewater discharges, a $25,000 per day civil penalty payable to the U.S. Treasury, and its costs and attorney fees. You immediately realize that operating without a permit for over three years could mean over $30,000,000 in penalties. Furthermore, if required to shutdown for any extended time, you are out of business. Your attorney assures you that $30,000,000.00 penalties, although possible, are not likely. However, an injunction requiring you to cease discharging wastewater into the river until the state EPA issues your permit is likely. Besides, your attorney reminds you that LRDF has not sued your company yet. You have only received a notice that LRDF intends to sue you under the citizen suit provision of the Clean Water Act. Your attorney has some ideas that may prevent LRDF from suing you at all since the Clean Water Act limits a citizen's right to sue.

The purpose of the Clean Water Act is to ensure that the nation's waters are not polluted through industrial effluents. Thus, Congress made unlawful the discharge of any pollutants into the navigable waters except as authorized by the Act. Under 33 U.S.C. § 1342, U.S. EPA may issue permits allowing waste water discharges into the nation's waters. A state can institute its permit program as part of the federal program, which your state did by enacting laws that U.S. EPA approved. The citizen's suit provision of the Clean Water Act allows citizens to bring suit against violators. Section 1365(b) provides that a citizen must give sixty days notice of the alleged violation before the initiation of any lawsuit. The notice must be given (i) to the Administrator of U.S. EPA, (ii) to the State in which the alleged violation occurs, and (iii) to any alleged violator of the standard, limitation, or order. It is likely that LRDF is aware of this requirement and will wait the requisite sixty days before filing a lawsuit.

A citizen is "a person or persons having an interest which is or may be adversely affected" by the discharge according to 33 U.S.C. § 1365(g). To be adversely affected, your attorney explains that a member of LRDF need only plead that he uses the river for recreational purposes into which your wastewater discharges. Thus, this will be easy for LRDF to prove. The Second Circuit has held that to have standing to sue as a citizen, a plaintiff must allege an injury, whether it be aesthetic, environmental well-being, or an economic injury. Since members of LRDF will undoubtedly assert that they use and enjoy the water resources into which Acme is discharging, this requirement is also likely to be satisfied.

If your state EPA or U.S. EPA initiates an enforcement action against you within the sixty days before LRDF sues you, the statute would bar LRDF's citizen suit. Section 1319(g)(6) "bars citizen suits where a state agency conducting enforcement proceedings against the defendant has authority to assess civil penalties, regardless of whether the agency has assessed such penalties." You ask your attorney whether immediately submitting a permit application to the state EPA would bar a citizen suit. To invoke section 1319(g)(6) to limit a citizen suit, it is imperative that a state commence actual enforcement proceedings. Review of a permit application is not an enforcement proceeding. Therefore, section 1319(g)(6) does not bar a citizen suit action pending the issuance of a permit. The only way to stop the citizen suit action under this provision would be for the state EPA or U.S. EPA to sue you. This admittedly is not a great option since you still end up being sued for civil penalties and possibly an injunction against wastewater discharges. However, unlike a citizen suit, at least you do not pay the other side's attorney fees, which admittedly, can be substantial.

The other possibility of avoiding being sued by LRDF is to cease violating the Clean Water Act. You explain to your attorney the situation with your permit, and that the state EPA will not expedite your permit application, even under these circumstances. Therefore, it is not likely that you will have your permit within the next sixty days. However, your attorney explains that a citizen suit may be brought in federal court only if the citizens make a good-faith allegation of continuous or intermittent violations of the Clean Water Act as required by 33 U.S.C. § 1365(a). The Supreme Court of the United States interpreted the phrase "alleged to be in violation" as imposing a jurisdictional requirement "that citizen-plaintiffs allege a state of either continuous or intermittent violation -- that is, a reasonable likelihood that a past polluter will continue to pollute in the future." Consistent with this requirement, the Court held that jurisdiction will not lie where a plaintiff alleges claims for "wholly past" violations.

The Supreme Court explained that the harm sought to be addressed by the citizen suit lies in the present or the future, not in the past. Thus, LRDF must be able to prove a continuing likelihood that you will continue to discharge without a permit to state a cause of action under the facts here. Thus, to avoid being sued by LRDF, you must be able to prove that you will not be discharging without a permit in the future. Since no one knows when your permit will show up from the state EPA after you apply, you must stop discharging, thus eliminating the need for an NPDES permit altogether. You could (a) permanently shut down your plant until you receive an NPDES permit, or (b) find a way to eliminate your waste water discharge.

After evaluating your options with a waste water consulting company, you discover that you can divert your waste water into your cooling tower as makeup water, thus eliminating the need for an NPDES permit. All the plumbing changes can occur within thirty days. Upon completion of these changes, your attorney puts the attorney for LRDF on notice that your company has eliminated all discharges requiring NPDES permits. Your attorney also puts the LRDF attorney on notice that if LRDF does sue, knowing that no regulated discharges are coming from the plant, your attorney will move for dismissal and sanctions against LRDF, including the reimbursement of your attorney fees. Without a regulated discharge, there is no basis for believing a "continuing" violation exists. Reluctantly and begrudgingly, LRDF agrees not to sue your company since it cannot prove a "continuing" violation of the Clean Water Act.

My recommendation to companies is to be careful about renewing your permits. Do not miss renewal deadlines. Operating without a permit can put you in serious legal trouble, even if you operate within acceptable discharge limits. Sometimes your enforcement agencies can be the least of your trouble. Collecting attorney fees interests some environmental groups more than protecting the environment. Furthermore, remember to get expert advice on legal issues. The company in this scenario implemented an affective alternative to a waste water discharge that prevented it from being sued, saved it money, and allowed it to continue operating legally. Also, review your operations periodically to see if you can combine water uses and eliminate a waste water discharge. With fewer discharges, there are fewer chances of problems from regulators and environmental action groups looking for a lawsuit.

The 1990 Amendments to the Clean Air Act (CAA), including the title V operating permits program, have made source status as a "major source" of considerably greater relevance to facilities that emit regulated pollutants. The 1990 Clean Air Act Amendments significantly lowered the threshold for being classified as a major source. The lower major source thresholds now included in the CAA have made an unprecedented number of sources "major sources." Many of these sources are emitting air pollutants in amounts less than the major thresholds but are major due to their "potential to emit" hazardous air pollutants. Many of these major sources are in fact rather small. Examples include auto body shops, dry cleaners, printers, and surface coaters.

Section 112 of the Clean Air Act defines a "major source" as any stationary source or group of stationary sources located within a contiguous area and under common control that emits or has the potential to emit considering controls, in the aggregate, 10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants. The term "area source" means any stationary source of hazardous air pollutants that is not a major source. The term "potential to emit" is defined in the section 112 general provisions (40 CFR Part 63.2) as the maximum capacity of a stationary source to emit a pollutant under its physical or operational design, considering controls and limitations that are federally enforceable.

Although maximum achievable control technology (MACT) is required for all major sources of hazardous air pollutants, lesser controls or no controls may be required of area sources in a particular industry. In addition, whether a facility is a major or area source of hazardous air pollutants may affect the applicability of other CAA requirements. For example, the CAA requires all major sources to obtain a Part 70 operating permit. Section 501(2) provides that any source that is major under section 112 will also be major under title V. Therefore, a source that is major for purposes of any MACT standard will be subject to title V as a major source. Most MACT standards explicitly require operating permits for major sources. However, this principle applies regardless of whether it is specified in the particular standard. Therefore, a source required to comply with MACT requirements applicable to major sources will also be required to obtain a Part 70 permit for that MACT requirement.

Under the 1990 Clean Air Act, U.S. EPA must enact regulations establishing emission standards for categories and subcategories of sources as expeditiously as practicable. Pursuant to Section 112(e)(1)(E), emission standards for one half of all categories and subcategories must be in place and enforceable by November 15, 1997, and emission standards for all categories and subcategories must be in place and enforceable by November 15, 2000. Until U.S. EPA promulgates a particular industry's emission standards, a window of opportunity exists for facilities within the industry to modify operations so as not to be regulated as a major source, according to U.S. EPA.

Although certain environmental advocacy groups interpret the statute differently, U.S. EPA believes that it was the intent of Congress not to designate a source as either a major source or an area source until after U.S. EPA's emission standards for any particular industry are finalized. Therefore, if you own or operate a facility which has the potential to emit more than the threshold amount of hazardous air pollutants, your facility may be able to avoid the major source designation and all of the regulatory red tape associated with the designation if you can change your operations so as to eliminate your potential to emit the threshold amount of a hazardous air pollutant before U.S. EPA promulgates a rule affecting your particular industry.

For example, suppose you own a metal finishing business, and like every other person in the metal finishing business, you would like your facility to avoid being classified as a major source. However, your facility has degreasing operations that emit 30 tons per year of volatile organic chemicals (VOCs) which the CAA designates as hazardous air pollutants under Section 112(b)(1). Your facility also emits a maximum of 5 tons per year of VOCs from the coating of miscellaneous metal parts. Since you emit more than 25 tons per year of hazardous air pollutants, your facility will be classified as a major source under the CAA and you will be required to comply with the U.S. EPA's MACT requirements for your industry unless you can find a way to avoid being classified as a major source.

You have decided to implement controls on your degreasing operation that will reduce your emissions from the degreasing operations to 3 tons per year. After your operating changes, the total federally enforceable potential emissions from your facility would now be 8 tons per year which falls below the threshold for being characterized as a major source. Based on your reduced emissions, you can avoid major source designation under the CAA.

This interpretation is found in U.S. EPA's May 16, 1995, Guidance Document titled "Potential to Emit for MACT Standards -- Guidance on Timing Issues." Under U.S. EPA's guidance document, a source that would otherwise be a major source subject to MACT requirements may switch to area source status at any time until the "first compliance date" of the standard. The "first compliance date" is defined as the first date a source must comply with an emission limitation or other substantive regulatory requirement (e.g., leak detection and repair programs, work practice measures, housekeeping measures, etc. . . , but not a notice requirement) in the applicable MACT standard. To avoid being classified as a major source, a facility can avoid MACT requirements by showing that its potential emissions are below major source thresholds. Therefore, the facility in the example above would not be subject to the major source requirements of the miscellaneous metal parts MACT standard provided the plant made its modifications before the enforceability of the MACT standard for the particular industry.

However, if your facility is not under the major source threshold on the date required for compliance with MACT requirements for your industry, according to U.S. EPA, your facility is eternally destined to be a major source. This is true even though you make major modifications to your facility to reduce its potential to emit hazardous air pollutants below the major source threshold. U.S. EPA refers to this as its "once in, always in" policy. U.S. EPA believes that after requiring a source to install controls or take other measures to comply with a MACT standard, the facility should not be able to substitute different controls or measures that happen to bring the facility below major source levels. According to U.S. EPA, a once in, always in policy ensures that reduced emissions from MACT controls are permanent, and that the environmental protection provided by MACT standards is not undermined.

If a source is fortunate enough to avoid being classified as a major source, there is still no guarantee that U.S. EPA will not require some form of control technology in the future. Section 112(f), the residual risk program, allows U.S. EPA discretion within 8 years after promulgation of the MACT standard to evaluate the risk to human health and the environment from any category or subcategory. If U.S. EPA believes there is not an ample margin of safety to protect public health, U.S. EPA will promulgate additional standards for area sources within the category or subcategory to be regulated.

My advice to clients who will be classified as a major source when U.S. EPA establishes MACT for the client's particular industry is to evaluate operations, to change processes, and/or to implement federally enforceable controls on the facility's potential to emit that puts the facility below the major source threshold immediately. Any facility that waits and is categorized as a major source, according to U.S. EPA's guidance documents, will always be a major source subject to MACT requirements, and subject to all of the licensing requirements of section 112 and title V. U.S. EPA has written several guidance documents on how a facility can avoid being categorized as a major source. For more information, consult U.S. EPA's Guidance for State Rules for Optional Federally Enforceable Emissions Limits Based on Volatile Organic Compound Use dated October 15, 1993, Options for Limiting the Potential to EMIT (PTE) of a Stationary Source Under Section 112 and Title V of the Clean Air Act dated January 25, 1995, and Potential to Emit for MACT Standards -- Guidance on Timing Issues dated May 16, 1995.

You are the president of Poly Painters, Inc., a polymer based metal coating facility. Your facility generates approximately two thousand kilograms of hazardous waste per month that you properly handle and send out for disposal. Your business operates profitably, but as with so many industries, you would like to reduce your hazardous waste disposal costs.

Recently, an EPA representative visited your site to evaluate your waste disposal practices. Regarding hazardous wastes, the EPA representative evaluated your record keeping, your storage area, and your emergency plan. The EPA representative found no violations with the law in these areas. However, the EPA representative then asked to see your "waste minimization plan." You informed the EPA representative that you did not know what he was talking about, but you assured him that your company does not generate more waste than any other similarly situated business, at least not intentionally. The EPA representative then informed you that he would not issue you a violation for not having a written "waste minimization plan," but he would like you to put your waste minimization plan in writing and send it to him within thirty days. You are baffled; since when does EPA care if you have a waste minimization plan provided you are properly handling the waste you generate? You call your environmental consultant and your environmental attorney and ask if EPA can force you to have a waste minimization plan. Much to your surprise, the answer is yes, and every time you sign a hazardous waste manifest, you are certifying that your waste minimization plan is in place.

Your attorney explains that with the passage of the Hazardous and Solid Waste Amendments of 1984, (HSWA), Congress established a significant new policy concerning hazardous waste management. Specifically, Congress declared that the reduction or elimination of hazardous waste generation at the source should take priority over the management of hazardous wastes after they are generated. Congress codified this requirement in the Resource Conservation and Recovery Act (RCRA) in which Congress declares it to be the national policy of the United States that, wherever feasible, the generation of hazardous waste is to be expeditiously reduced or eliminated. (42 U.S.C. § 6902(b)). In 1990, Congress further clarified the role of pollution prevention in the nation's environmental protection scheme, by passing the Pollution Prevention Act (PPA) (42 U.S.C. §§ 13101, et seq.). In 42 U.S.C. § 13101(b), Congress stated again that the national policy of the United States is to prevent pollution or reduce pollution at the source whenever feasible.

To enforce the waste minimization policy, Congress passed the certification requirements found at sections 3002(b) and 3005(h) of RCRA, as amended by HSWA. (42 U.S.C. §§ 6922(b) and 6925(h)). Section 3002(b) requires hazardous waste generators who transport their wastes off-site to certify on their hazardous waste manifests that they have programs in place to reduce the volume or quantity and toxicity of hazardous waste generated to the extent "economically practicable" for those who generate more than 1000 kilograms of hazardous waste per month. Those who generate between 100 and 1000 kilograms of hazardous waste per month certify that they had "made a good faith effort to minimize" their waste generation. (See item number 16 of the Uniform Hazardous Waste Manifest, EPA Form 8700-22.) Certification of waste minimization is also required as a condition of any permit issued under section 3005(h) for the treatment, storage, or disposal of hazardous waste at facilities that generate and manage hazardous wastes on-site.

For many companies, certification was a rather unnerving experience since EPA never defined what was necessary in a waste minimization program to assure compliance, nor did EPA define what "economically practicable" meant. Finally, on May 28, 1993, EPA published its guidance on what basic elements of a waste minimization program will allow persons to certify properly that they have implemented a program to reduce the volume and toxicity of hazardous waste to the extent "economically practicable."

In the guidance document published by EPA at 58 Federal Register 31114 on May 28, 1993, EPA lists many general elements that hazardous waste generators should include in a waste minimization program. EPA does not list any required elements, and recognizes that companies may implement any of the elements in any number of different and unique ways. EPA also recommends, but does not require that the generator or treatment, storage, or disposal facility document its program in writing. EPA also believes, but does not require that the waste minimization program be signed by that corporate officer who is responsible for ensuring RCRA compliance.

According to EPA, a proper waste minimization program includes Top Management Support. According to EPA, this means making waste minimization a part of the organization policy and setting explicit goals for reducing the volume and toxicity of waste streams that are achievable within a reasonable period, and implementing recommendations identified through assessments, evaluations, and waste minimization teams. EPA also recommends designating a waste minimization coordinator who is responsible for facilitating effective implementation, monitoring and evaluation of the program. EPA believes that companies should publicize success stories by establishing a forum where creative ideas can be heard and tried, and where individual and collective accomplishments can be recognized and rewarded. EPA also believes that training should be a part of the waste minimization plan to ensure that employees understand how waste generating affects the environment.

EPA also believes that a proper Waste Minimization Plan should include the characterization of waste generation and waste management costs. EPA believes that a company should maintain a waste accounting system to track the types and amounts of wastes as well as the types and amounts of the hazardous constituents in wastes, including the rates and dates of generation. EPA believes that a waste generator should determine the true costs associated with waste management and cleanup as part of its waste minimization plan. EPA believes that the costs of regulatory oversight compliance, paperwork and reporting requirements, loss of production potential, costs of materials found in the waste stream, and potential environmental liability costs should be included in this calculation.

Another element that EPA considers important in a waste minimization plan is periodic waste minimization assessments. EPA believes that periodic waste minimization assessments will identify sources of waste and will help determine the true costs of waste generation and management as part of a waste minimization plan. The assessment should also identify every opportunity in a process to prevent hazardous waste generation. As a part of this effort, EPA believes that waste minimization opportunities must be analyzed based on the true costs associated with waste management and cleanup, focusing especially on the true costs of treatment, storage and disposal.

Accounting and cost allocations are also important to EPA's ideal waste minimization plan. EPA believes that, where practical and implementable, organizations should appropriately allocate the true costs of waste management to the activities responsible for generating the waste. According to EPA, cost allocation can properly highlight the parts of the organization where the greatest opportunities for waste minimization exist.

EPA also believes that companies should encourage the exchange of technical information on waste minimization from other parts of the organization, from other companies, from trade associations, from professional consultants and from university or government technical assistance programs. Accordingly, EPA expects to find such items in an approvable waste minimization program.

EPA also believes that a company forum should be provided to respond to hazardous waste issues and to identify potential areas for improvement. EPA also expects each organization to implement recommendations identified both within and outside the organization.

Your attorney and your environmental consultant assist you in preparing a waste minimization program that meets the requirements of EPA. In so doing, you discover that you can reduce the amount of hazardous waste that your company generates by eleven percent. After submitting the completed waste minimization program to EPA, both you and EPA are happy with the result.

My recommendation to clients is to put together a waste minimization program that meets the minimum EPA expectations. To date, I know of no enforcement efforts by EPA against any company for failure to have a waste minimization program, even though each hazardous waste manifest signed for the last several years requires certification that one exists. However, no company wants to be the first reported case of an enforcement action for failure to have a waste minimization program. I recommend to my clients that they prepare a waste minimization program to comply with 42 U.S.C. §§ 6922(b) and 6922(h). The scope of the program need not include all the elements in EPA's wish list, but it should be written, and it should make a good faith effort at determining areas in the facility where waste can be minimized and money can be saved. If you do not have such a plan, but you are signing hazardous waste manifests that certify such a plan exists, not only are you subjecting your company to potential liability, but you are potentially incurring personal liability for something with which it is not difficult to comply, and with which compliance could result in a net savings to your company.

You are the owner of Multi-Step Platers of Ohio, Inc. Your business has several plating lines where it processes materials. Three of the plating lines are in one building, and one of the plating lines is three miles away at another facility. Your company generates very little hazardous waste and what it does generate it accumulates at three different satellite accumulation areas. U.S. EPA defined satellite accumulation areas as locations where waste is initially generated and accumulated, often in small amounts, prior to consolidation at centralized accumulation areas (See 48 Fed. Reg. 118, January 3, 1983, and 49 Fed. Reg. 49568, December 20, 1984). These satellite accumulation areas allow your company to accumulate waste in containers at or near the point of generation where wastes initially are generated without a permit and without complying with the maximum storage time for hazardous wastes specified in OAC 3745-52-34. (See Legal Alert for December 1996 and April, 1997).

Your company has established three satellite accumulation areas. The first two satellite accumulation areas your company has established are from two different waste streams from the same production process. The employees place the wastes into two 55-gallon drums placed side-by-side. Each drum, as you see it, would constitute a separate satellite accumulation area. When a drum is full, it is dated, and shipped off as hazardous waste.

The third satellite accumulation area is at the company's main facility. However, it receives waste from the facility located three miles away in addition to the waste generated at the main plant. At the facility three miles away, your company generates ignitable waste in small batches. When a batch is generated, the waste is moved to your main facility. Since the waste generated three miles away is identical to the ignitable waste generated at the main facility, you combine it with the ignitable waste generated on an occasional basis at the main facility. You have constructed a locked area in a separate building approximately 20 feet away from the point of generation at the main facility for storing this ignitable waste. Previously, you had located this satellite accumulation area inside the main facility, but a forklift operator pierced the accumulation drum, causing a fire and injuring a worker. In your opinion, moving the satellite accumulation area for this ignitable waste outside is much safer than the previous location.

To remain satellite accumulation areas, U.S. EPA and the State of Ohio set the maximum accumulation limit for hazardous waste at any satellite accumulation area to be 55 gallons for hazardous wastes, the size of a common industry container. Acutely hazardous wastes are limited to one quart, but fortunately your company uses no acutely hazardous wastes. So far, you have had no problem shipping your wastes each time a 55-gallon drum is filled.

Your satellite accumulation areas are, in your opinion, "safe and legal." Yesterday, however, an Ohio EPA inspector showed up to inspect your facility and informed you otherwise. After inspecting your satellite accumulation areas, the inspector advised you that you are in violation of the hazardous waste laws and you must make immediate changes or face enforcement action. You are shocked and ask for an explanation.

The inspector explains that for an area to be considered a satellite accumulation area for hazardous wastes, and thus not subject to the more stringent requirements found in the regulations, the satellite accumulation area must be on-site, at or near the point of generation and under the control of the operator of the process generating the hazardous waste. The inspector explains that with respect to the term, "under the control of the operator," the word "operator" in this context does not refer to the definition in OAC Rule 3745-50-10(78). The definition in OAC Rule 3745-50-10 refers to the person responsible for the overall operation of a facility. The term "operator" used in OAC Rule 3745-52-34(c) with respect to a satellite accumulation area refers to the operator of the process generating the waste, i.e., the actual employee operating the production process generating the waste or the immediate supervisor.

The inspector further explains that he examines several factors when looking at the acceptability of a satellite accumulation area. Safety is the factor given the highest priority in making satellite accumulation area determinations. Normally, a satellite accumulation area must be at the point of production. However, if the waste poses a storage hazard or a danger to workers when stored directly next to the process area, then a satellite accumulation area removed from the point of production may be acceptable.

Other factors are also considered when evaluating the point of production requirement. A container at or near the point of generation could force the generator to violate OSHA requirements, insurance requirements or might otherwise create a safety hazard to employees or neighbors. In such cases, allowing a satellite accumulation area away from the immediate point of production is warranted. However, if accumulating the waste farther away creates a safety problem, or if the container is out of visual range from the operator or is not secured, the issues of how would the generator prevent an accident or mismanagement of the waste must be addressed.

The physical features of the satellite accumulation area must also be considered. If the satellite accumulation area at the point of generation is less protective than an area farther away, an area farther away might be acceptable. If the area farther away has additional safety features like a secondary containment system, closer to emergency equipment or spill control equipment, a sealed floor, or out of employee traffic, it may be the preferable satellite accumulation area.

Management controls of the container to be used by the generator is also an important factor to be considered. If a 55-gallon drum is outside visual range of the operator, access to the container must be limited by some means, such as placing it in a locked enclosure or securing it with a locked bung lid. Administrative controls over the drum alone, such as a sign or a written administrative procedure, are not considered adequate. Although not required by the regulations, routine documented inspections may alleviate concerns that leaks or spills will not be detected in a reasonable time period. If waste is added frequently to the drum, this again may alleviate concerns that leaks or spills will not be detected. Although not required in OAC Rule 3745-52-34(C) for satellite accumulation areas, training employees who handle hazardous wastes may alleviate concerns that inadequately trained employees may cause an accident.

The inspector also explains that the farther away from the point of generation, the less acceptable the area will be as a satellite accumulation area. If the area is too far from the production process that generated the waste, the practicality of requiring the generator to operate the area as a 90-day (or 180-day) accumulation area will be evaluated. If the operator has a ninety day accumulation area just feet away from the satellite accumulation area, it may be more practical to require the operator to forego designating a satellite accumulation area.

The inspector also explains that previous compliance problems with the generator will be considered. A facility operator who has been out of compliance will receive less flexibility from the regulators with respect to satellite accumulation areas than will an operator who has been cooperative and compliant in the past.

Using the above guidelines, the inspector goes on to inform you that certain changes must be made to your satellite accumulation areas. With respect to your side-by-side satellite accumulation areas, the inspector informs you that the 55 gallon limit for a satellite accumulation area applies to the area itself and not to each individual waste stream accumulated in the area. Two waste streams may be stored in one satellite accumulation area in different containers as long as the drums are dated when the total quantity of waste exceeds 55 gallons and the waste in excess of 55 gallons is removed within three days of that date. When the inspector informs you of this, you propose establishing two satellite accumulation areas by moving one of the drums a couple of feet away from the other. The inspector informs you that since the only reason you are separating the drums is to avoid the 90-day accumulation area standards, and since the waste streams were generated from the same point of generation, this would not be acceptable. If wastes are generated at two distinct points in a process line, a company may be able to operate two satellite areas along one process line, but where the wastes are generated at the same point, and the wastes are then physically separated to create multiple satellite accumulation areas, the sites are treated as a single satellite accumulation area. However, since no specific distance is defined in the regulations, the distance between the point where the wastes are generated and the location of the satellite accumulation area will be left to the inspector's best professional judgment as to whether there are two distinct points of generation. Ultimately, you agree that when the cumulative total of the wastes in the two drums reaches 55 gallons, under OAC 3745-52-34(C)(2), your company will remove the excess over 55 gallons from the satellite accumulation area within three days. As a practical matter, this means that you will date and ship whichever drum first reaches the point of being half full.

As to your satellite accumulation area that receives wastes shipped to it from your facility three miles away, the inspector informs you that this does not meet the requirements of being "at or near the point of generation" or "under the control of the operator" as required by the regulations. A satellite accumulation area must be on contiguous property to the generator to meet the definition of "on-site" in OAC Rule 3745-50-10. Therefore, a satellite accumulation area must either be located at the point of generation, or the area where the waste is currently being stored must be operated as a 90-day (or 180-day) accumulation area. You agree to locate the satellite accumulation area at the point of generation.

Finally, with respect to the wastes generated at the main facility, but stored outside in a separate building, the inspector is willing to leave this area as a satellite accumulation area provided that a daily inspection is conducted of the container and recorded. The inspector explains that this will alleviate the agency's concern that a spill or problem with the container would not be addressed promptly. Since the facility had previously stored the drum directly at the point of generation and the forklift had run into it, causing a fire and injuring an employee, the inspector agreed that the accumulation area could be located slightly away from the point of production, but still under the control of the operator provided a recorded daily inspection occurs. After you agreed to make all of the changes recommended by the inspector, the inspector advises you that he considers your modified satellite accumulation areas "safe and legal."

The above information was derived from "Guidance on the Location of Satellite Accumulation Areas - DHWM-008," published by Ohio EPA in November of 1994. I always advise clients that satellite accumulation areas are a way of saving money, but that the agency can cause a lot of trouble for companies due to the wide degree of latitude given to the inspectors to declare a satellite inspection area inadequate. I encourage people to work with their attorneys, the agency, and the inspectors to determine what is and is not acceptable as a satellite inspection area. In the above examples, only minor modifications had to be made to accommodate the agency's regulatory intent with respect to all but one of the waste streams being generated. As to the off-site waste stream which was being combined with the waste stream at the main facility, it may seem logical, and maybe even safer, to combine identical waste streams and operate only one satellite accumulation area, but it's not legal.

You are starting your own business, Tinters, Inc. Your new business will specialize in tinting various metals, plastics and ceramics for other industries. Your process involves the application of various tints to achieve custom color combinations. You have secured several contracts for your services.With these contracts as collateral, you approach your friendly neighborhood banker for financing. After reviewing your business plan and collateral, your banker requests information on how you are handling your hazardous wastes. You ask your banker how this could affect your loan. Your banker politely answers that because of problems with the way companies have handled hazardous wastes in the past, the bank has had several companies default on their loans due to EPA enforcement activities for improper handling or disposal of hazardous wastes. You agree that before you open your doors for business, you will have a qualified attorney and environmental consultant analyze the wastes being generated by your business, and you will implement an appropriate hazardous waste management program.

Your environmental consultant and attorney inform you that under the EPA regulations, the first question that you must answer is whether you are handling any "solid waste" as defined by the Resource Conservation and Recovery Act (RCRA). Under RCRA, "Solid waste" is:

. . . any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility and other discarded material, including solid, liquid, semi-solid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations, and from community activities, but does not include [1] solid or dissolved material in domestic sewage, or [2] solid or dissolved materials in irrigation return flows or [3] industrial discharges which are point sources subject to permits under section 1342 of title 33, or [4] source, special nuclear, or byproduct material as defined by the Atomic Energy Act of 1954, as amended (68 Stat. 923) (42 U.S.C. 2011 et seq.).

42 U.S.C. § 6903(27).

Your business generates material that will be discarded; therefore, your business is generating a solid waste under the law. Since your business generates solid wastes, your business must now determine if any of the solid waste being generated is a hazardous waste. RCRA defines a "hazardous waste" as:

[A] solid waste, or combination of solid wastes, which because of its quantity, concentration, or physical, chemical, or infectious characteristics may--
(A) cause, or significantly contribute to an increase in mortality or an increase in serious irreversible, or incapacitating reversible, illness; or
(B) pose a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported or disposed of, or otherwise managed.

42 U.S.C. § 6903(5). Using this definition, EPA has promulgated detailed regulations listing the chemicals and waste characteristics that are to be treated as hazardous waste. The chemicals that must be treated as hazardous waste are found at 40 C.F.R. § 261.30-33, and the "characteristics" that result in waste being classified as hazardous are found at 40 C.F.R. §§ 261.3 and 261.20-24. These characteristics are: ignitability, corrosivity, reactivity, and toxicity.

You check the list of specific chemicals to determine if you are generating a hazardous waste, and much to your disappointment, you find that a chemical in one of your tinting solutions is a listed hazardous waste. Now that you have determined that you will be generating a hazardous waste, the next question that you must answer is what program do you need for handling the hazardous waste that you generate?

The very first program requirement that you must fulfill after determining that your business is a generator of hazardous wastes is to obtain an EPA hazardous waste identification number. 40 C.F.R. § 262.12. This number tracks the waste from its generation to its disposal, in other words, from "cradle to grave." 40 C.F.R. § 262.12(c). EPA assigns identification numbers after a proposed generator submits EPA Form 8700-12.This is the same form used to notify EPA that one is engaging in hazardous waste management. 42 U.S.C. § 6930(a).

EPA developed regulations that provide cradle to grave control of hazardous wastes "to protect human health and the environment," as mandated by Congress. 42 U.S.C. § 6922(a). These cradle to grave regulations include record keeping on the quantity and disposition of hazardous wastes, 42 U.S.C. § 6922(a)(1); labeling and container standards for the storage, transport, or disposal of hazardous wastes, 42 U.S.C. § 6922(a)(2)-(a)(3); furnishing of waste characterization information to transporters and treatment, storage and disposal facilities (TSDFs), 42 U.S.C. § 6922(a)(4); manifesting requirements (the paperwork required to be kept whenever a hazardous waste is shipped, 42 U.S.C. § 6922(a)(5); and biennial submission of data on waste quantities, dispositions, and waste minimization efforts, 42 U.S.C. § 6922(a)(6). In addition, since 1984, 42 U.S.C. § 6922(b) requires each generator to certify, on each shipment of hazardous waste, (1) that the generator has a program in place to minimize waste generation as much as economically practicable and (2) that the proposed method of treatment, storage, or disposal of the waste "minimizes the present and future threat to human health and the environment." (See Legal Alert, "Waste Minimization Plans -- A Regulatory Requirement" in the November 1996 issue of Metal Finishing Magazine.).

Your environmental consultant recommends that you ship your hazardous waste off-site for disposal. Therefore, you must comply with the manifest system requirements found at 40 C.F.R. § 262.20-.23. Most importantly, you must designate an authorized facility on the manifest to accept the waste for treatment, storage, or disposal. 40 C.F.R. § 262.20(b). Generally, only a facility that has a RCRA TSDF permit may accept hazardous wastes generated off-site. 40 C.F.R. § 260.10. You must sign the manifest, retain a copy, and give the manifest to the transporter. 40 C.F.R. § 262.23. Each transporter or intermediate storage facility along the way signs the manifest, thereby creating a paper trail of your hazardous waste's cradle to grave history. You must also properly package, label, and mark the waste according to Department of Transportation requirements. 40 C.F.R. § 262.30-.33. The Department of Transportation's regulations regarding the shipment of hazardous wastes are found at 49 C.F.R. parts 172, 173, 178, and 179.

Your environmental consultant also informs you that generally, provided your hazardous wastes are stored in containers or tanks that meet RCRA standards, you may accumulate and store your hazardous wastes on site for up to 90 days before transporting. 40 C.F.R. § 262.34(a). As with practically every environmental law, you must comply with certain reporting and record keeping requirements. 40 C.F.R. § 260.40-.43.

As you dig deeper into the regulations, you learn that EPA has imposed relaxed requirements on facilities that generate and accumulate only small quantities of hazardous wastes. Under the current regulations, any hazardous waste generator who generates more than one hundred, but less than one thousand kilograms per month of hazardous waste is designated a "small quantity generator." 40 C.F.R. §260.10. After reading the requirements for small quantity generators, you realize that virtually all the part 262 standards applicable to generators of large quantities of hazardous wastes are applicable to small quantity generators. See 51 Fed. Reg. 10146 (Mar. 24, 1986). Only certain reporting and record keeping requirements for small quantity generators have been relaxed. 40 C.F.R. § 262.44. The only other benefit to being a small quantity generator is being allowed to accumulate hazardous wastes for up to 180, rather than 90 days. 40 C.F.R. § 262.34(d).

After evaluating your production program, implementing certain recycling programs, and agreeing on a cost effective hazardous waste minimization program, you and your environmental consultant agree that your new business will generate less than one hundred kilograms of hazardous waste each month. As a generator of less than one hundred kilograms of hazardous waste per month, your facility will be designated a "conditionally exempt small quantity generator." Conditionally exempt small quantity generators managing less than one hundred kilograms per month of hazardous waste are exempt from RCRA's cradle to grave regulations 40 C.F.R. § 261.5(b). However, just because your business is a conditionally exempt small quantity generator does not mean that you can throw your waste down the drain or out the back door. The conditionally exempt small quantity generator must still make the initial determination whether the waste is hazardous (40 C.F.R. § 261.5(g)(1)) and must ensure that disposal will be either properly handled on site or sent to an off-site facility authorized under state law to accept the waste. 40 C.F.R. § 261.5(g)(2).

Your environmental consultant and attorney warn you that a conditionally exempt small-quantity generator may unknowingly become subject to the more stringent regulations for small-quantity generators if it does not monitor its waste inventory carefully. When the conditionally exempt small-quantity generator accumulates over 1,000 kilograms of hazardous waste on site, or if it accumulates hazardous waste on site for more than 180 days, it automatically, by operation of law, loses its conditionally exempt small quantity generator status. As a practical matter, your environmental consultant advises you to monitor your waste production and inventory very closely if you want to remain a conditionally exempt small quantity generator.

You present your hazardous waste plan to your banker who is impressed that you will be able to achieve the conditionally exempt small quantity generator status. Your loan is approved, and by following the advice of your environmental consultant and attorney, your hazardous waste program is one less thing that you have to worry about.

This article does not cover every detail of an effective hazardous waste program. Where a company can achieve generating less than one hundred kilograms of hazardous waste per month, the company need not worry about many of the hazardous waste laws. I recommend that all of my clients minimize the generation of hazardous waste. A few of the more fortunate ones have been able to achieve conditionally exempt small quantity generator status. Generally, being a conditionally exempt small quantity generator will increase your profitability by minimizing your hazardous waste disposal costs through waste minimization, and by eliminating most of the man hours needed for regulatory compliance.

You are the plant manager of Widgets, Inc. Your company produces painted widgets in a patented two step process. The first step produces the widget and the second step paints it. Producing the widget generates a dry solid waste which looks a lot like sand. This dry solid waste is collected in dumpsters and stored on site pending disposal as non-hazardous waste. Your paint facility uses a degreasing solvent consisting mainly of toluene prior to painting. The spent solvent is collected in an on-site underground storage tank and then shipped off site as an F005 hazardous waste for recycling. You have had analytical tests performed on the waste streams and you are confident that the waste is being handled properly.

Today, as you are walking toward the plant from your car, you observe a tractor trailer loading the spent solvent to take away for recycling. You think little about it until your pager goes off and an employee informs you that a loose coupling at the loading dock caused several gallons of the spent solvent to leak onto the concrete floor. The employee informs you that several buckets of the dry solid waste were taken out of a dumpster and were poured on the spill to absorb the spilled hazardous waste. The employee informs you that he and another employee shoveled the material. that absorbed the spill back into the dumpsters which are filled with the sand-like material.

Your first reaction is that you are thankful that no one was hurt. You go to the loading dock to investigate the situation. Your environmental manager is already there and together you look at the material shoveled into the dumpster which absorbed the solvent spill. Your environmental manager quietly takes you aside and indicates that you could have a problem. He believes that by shoveling the mixture of solid waste and hazardous waste into the dumpster, your employees may have caused the entire dumpster of solid waste to become regulated as a hazardous waste, thus requiring disposal as a hazardous waste. You realize that if your company is required to dispose of all the solid waste in the two dumpsters as hazardous waste, your cleanup costs for this single incident will be enormous. You contact your company's environmental attorney and ask him if the solid waste contaminated with the hazardous waste must be handled and disposed of as a hazardous waste. Your environmental attorney researches the question and informs you as follows.

To become subject to RCRA's comprehensive regulatory system, a material must be a hazardous waste, which RCRA defines, in part, as a solid waste, or combination of solid wastes, which because of its quantity, concentration, or physical, chemical, or infectious characteristics may pose a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported, or disposed of, or otherwise managed. 42 U.S.C. § 6903(5) (1976).

In determining what would be a hazardous waste and what would not be a hazardous waste, EPA relied almost exclusively on the dangers that such wastes pose. 45 Fed. Reg. 33,121 (40 C.F.R. §§ 261.10 and 261.11). EPA compiled a list of toxic constituents as a starting point and required that a waste be listed as hazardous if it (1) exhibits one of the four characteristics of hazardous waste identified in Subpart C of the regulations ("hazardous characteristics"), (2) meets certain toxicity criteria, or (3) contains any of the toxic constituents listed in Appendix VIII of 40 C. F. R. Part 261, unless EPA determines that the waste is not capable of posing a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported or disposed of, or otherwise managed. (40 C.F.R. § 261.11(a)(1)-(3)).

A waste under the third criteria above is a listed hazardous waste. A listed hazardous has specifically been designated by EPA in the regulations as hazardous. Often times, testing of the waste is not required since the waste is, by definition, a hazardous waste. The listed hazardous wastes are grouped into certain categories. For example, the spent solvents are "F" listed wastes. The waste being handled in this example was an F005 listed waste due to its toluene content. EPA takes the position that once wastes are listed as hazardous they are presumed to remain hazardous forever, even if mixed with other non-hazardous substances. EPA's rationale for this rule is to prevent industry from using the "Dilution is the solution to pollution" philosophy that occurred within certain industries prior to the promulgation of the hazardous waste regulations. EPA specifically stated its intent to continue to classify mixtures of hazardous and non-hazardous wastes as hazardous wastes, regardless of the ratio of hazardous to non-hazardous material, in 45 Fed. Reg. 33095-96 (1980); and the courts have upheld this determination. Chemical Waste Management, Inc. v. U.S. EPA, 869 F.2d 1526, 1538-40, (D.C. Cir. 1989).

Holding that a mixture of a non-hazardous waste and a hazardous waste is a hazardous waste, regardless of the quantity of hazardous waste in the mixture is known as EPA's so called "mixture rule." It was originally adopted in 1980 as part of EPA's first regulation defining hazardous wastes. In Shell Oil Co. v. Environmental Protection Agency, 950 F.2d 741, (D.C. Cir. 1991, as amended 1992), the rule was struck down due to a problem with how the rule was originally enacted, and then immediately reenacted by EPA on March 3, 1992. The new mixture rule, which for purposes of its effect on the regulated community today is identical to the old mixture rule was published in 57 Fed. Reg. 7628 (Mar. 3, 1992), and continues to have the same inequities and harsh effects on the regulated community as the original rule.

In this case, when the spent solvent, an F005 hazardous waste, spilled at the loading dock, the employees used the sand-like material, a non-hazardous waste, to clean it up. The effect of the spill was to convert the non-hazardous waste used to perform the clean up into a hazardous waste under EPA's mixture rule. The effect of shoveling the material into the dumpster converted all of the non-hazardous waste in the dumpster into hazardous waste. If the dumpster were taken to the landfill, arguably, everything in the landfill would be a hazardous waste since it is mixed with a hazardous waste. And your company could be liable for the clean up and disposal of everything in the landfill as a hazardous waste if EPA chose to take the mixture rule to its extreme. Although this may seem ridiculous, there are examples where companies have excavated and hauled waste from landfills to hazardous waste disposal sites because of the mixture rule in examples no more serious than this one. This result is neither logical, nor equitable, nor does it protect human health or the environment. However, until EPA comes up with a better way of preventing the less scrupulous people in industry from diluting hazardous wastes to avoid disposing of hazardous wastes properly, industry is stuck with the mixture rule.

My advice to clients is to be aware of the mixture rule. Never put anything which contains a hazardous waste or could even arguably contain a hazardous waste into a dumpster destined for a landfill. Make sure that your employees are properly trained in cleanup procedures for hazardous waste spills and make certain that your employees understand that no chemical spill is disposed of until the environmental manager or your outside consultant or environmental attorney has determined if the material should be treated as a hazardous waste. If you are faced with a situation that involves a spill, I recommend treating the material initially as a hazardous waste, isolated from all other wastes. If it is determined later that the material is not hazardous, you have lost nothing, but if you treat it as a non-hazardous waste and later find out you were wrong, you could find yourself paying to dispose of large amounts of harmless waste as hazardous waste, or you could even find that you are required to clean up a landfill.

After years of saving your hard earned cash, you finally achieved one of the great American dreams; you bought your own business. With your experience in the metal finishing industry, you financed and purchased a business called Platers and Coaters. Platers and Coaters has been owned and operated as a sole proprietorship by the same person for 15 years at the same location. The financial data on the company looks good. The previous owner is able to make a fantastic profit while undercutting his competitors' prices substantially. The previous owner told you, "If you know how to work the business, you can make a lot of money."

After the purchase, the previous owner agrees to teach you how to run the business by working with you for a few weeks. During this time, you notice that the previous owner dumps what you suspect to be hazardous waste out the back door into a ditch. You ask the previous owner if this is legal. His reply is, "You want to make money, don't you?" You immediately contact an environmental consultant to determine if what the previous owner was doing was legal. Unfortunately for your cash flow, the environmental consultant informs you that you must cease these illegal disposal practices. You immediately contract with a waste disposal company to dispose of your hazardous waste. The previous owner learns of your decision to handle your waste properly and informs you that by doing so you will never make a profit unless you substantially raise your prices, which will drive away business.

The previous owner is right, given what you paid for the business and the cost of waste disposal, you can barely make the payments on the purchase of the business and the waste disposal with the business that you keep after raising your prices. Your analysis of the business was based on a net profit which did not include waste disposal, mainly because the previous owner neglected to mention that his waste disposal practices were illegal.

In addition to disposing of your hazardous wastes legally, your environmental consultant recommends a soil and groundwater analysis to determine if any of the previous owner's activities have affected the property you bought as part of the business. After installing a single groundwater well, you learn that the soil and groundwater are severely polluted, and will costs up to two million dollars to cleanup. You now realize that your great American dream has become a great American nightmare. Faced with certain bankruptcy, you approach the previous owner and ask him to take back the business. The previous owner refuses and states that you bought the business and property "as is" without any warranty.

Distraught, you seek the assistance of an attorney who practices environmental law. You explain to the attorney that you really do not care if the property gets cleaned up provided the attorney can force the previous owner to pay for your losses and take back the business. Your attorney explains that while that may seem like good logic, and you may not think you have any interest in getting the property cleaned up, this in fact should be your biggest worry. The previous owner operated the facility for 15 years, which caused significant pollution to the soils and the groundwater. You have owned and operated the facility for less than one year. Under the Superfund laws, since you are the owner of a facility from which a release of a hazardous substance has occurred, you are jointly and severally liable for the cleanup even though the waste was deposited by the previous owner. Since the previous owner is now an elderly man, if he were to die, and his estate were to be settled prior to the property being cleaned up, you could be forced to pay for the entire cleanup. Therefore, your attorney advises that you do something quickly to force the previous owner to pay for the cleanup while he is still alive and still has the money from your purchase of the business to pay for the cleanup.

Your attorney advises you that your best approach is to proceed with a citizens suit against the previous owner pursuant to the Resource Conservation and Recovery Act (RCRA) under 42 U.S.C. § 6972 (a)(1)(b). You cringe at the thought of a citizens suit action and ask if these are the same types of actions pursued by overzealous environmental groups for technical violations of the law just to generate fees for lawyers. Your attorney explains that these citizens suit laws do get abused sometimes, but occasionally, someone like yourself needs help with enforcing the law against someone, and the only economical way to do it is to pursue a citizens suit against the wrong-doer.

You ask your attorney how a citizens suit works, and he explains. RCRA § 7002(a)(1)(B), authorizes suit against any person including any past or present generator of hazardous waste who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment. Essentially, as your attorney explains, congress intended the citizens suit provision of RCRA to be analogous to the common law tort of public nuisance.

To be entitled to relief, your attorney explains that you must be able to prove (1) the existence of "discarded material," hazardous waste in this case, ; (2) that the previous owner contributed to the disposal of the waste; and (3) that the situation may present an eventual, significant risk to public health or the environment.

With respect to the requirement that the situation may present an eventual, significant risk to public health or the environment, your attorney explains that the courts have interpreted this requirement to mean a threatened or potential harm and does not require proof of actual harm. When one is endangered, harm is threatened; no actual injury need ever occur. Furthermore, a finding of "imminence" does not require a showing that actual harm will occur immediately so long as the risk of threatened harm is present. Finally, the word "substantial" does not require quantification of the risk if there is some cause for concern that someone may be exposed to risk. Since your facility has severely contaminated groundwater, your attorney explains that you should have no problem meeting this requirement, especially after you inform him that here are drinking water wells in the area that may already be impacted.

You tell your attorney that as a result of paying hazardous waste disposal fees, you are financially impaired and cannot afford to finance a major lawsuit. Your attorney smiles sheepishly and states that the beauty of forcing someone to do a cleanup under the RCRA citizens suit provision is that they have to pay your legal fees. Therefore, you risk very little in allowing the attorney to pursue the case for you.

You ask your attorney what you are likely to get if you win your case. Your attorney informs you that, as is generally the case in citizen enforcement lawsuits under antipollution laws, RCRA authorizes awards of litigation costs, including attorneys fees and expert witness fees, to the substantially prevailing party. The court is also empowered to issue orders against anyone who has illegally disposed of hazardous waste to take such other action as may be necessary o abate the imminent hazard created thereby. Therefore, since your attorney considers your case a sure winner, he is willing to be somewhat forgiving on the requiring you to pay your legal fees up front, since he will recoup all of the legal fees reasonably necessary in pursuing your claim from the previous owner at the end of the litigation.

With respect to your other damages, your attorney explains that he will add claims for violations of state environmental laws, as well as claims for fraud , nuisance, trespass, negligence, and whatever else he can thick of prior to filing the complaint to try and recoup your losses. However, even if you lose on these claims, at least you will be getting the real estate cleaned up by the person who caused the problem, and by filing the lawsuit now, you can be assured that the previous owner will be able to pay for the cleanup, instead of you.

My advice to anyone considering buying an ongoing business is to have adequate legal and environmental representation prior to the purchase. Despite the best of advice, however, even the most careful business person can face substantial liabilities due to past conduct, human error, bad luck, and the acts and omissions of others, including previous owners. In such situations, it is only natural to seek to shift, share, and otherwise minimize those liabilities, ideally while someone else is still capable of paying. Not only does bringing such suits early ensure that you are not foreclosed by the statute of limitations which could forever bar any recover, it also ensures that the facts are still fresh in the minds of witnesses, and it ensures that your conduct can be distinguished from that of prior owners. RCRA's citizens suit is a good way for businesses facing substantial cleanup cost to shift not only the cost of the cleanup to the responsible party, but also to shift the cost of the litigation to get the cleanup performed to the other party. While awarding attorneys fees as part of an environmental citizens suit makes most business people shudder, don't forget that the previous owner in this case made his fortune by violating the hazardous waste disposal laws, thus allowing him to set his prices below the competition which drove his competitors who tried to comply with the law, such as yourself, out of business.

In the February 1996, edition of Metal Finishing, I wrote an article entitled "A Good Side of RCRA." On March 19, 1996, the Supreme Court of the United States published an opinion on RCRA cleanups that could change the way companies and their attorneys approach RCRA cleanups. This article will briefly outline the Supreme Court's decision and the potential changes that it will have on RCRA cleanups.

The case heard by the Supreme Court was Meghrig, et al., v. KFC Western, Inc., Case No. 95-83. The facts that caused the lawsuit involved the purchase of real estate by KFC Western, Inc. (KFC), on which KFC desired to construct and operate a restaurant. KFC discovered during construction that the property was contaminated with RCRA regulated wastes. The County of Los Angeles Department of Health Services ordered KFC to attend to the problem, and KFC spent $211,000 removing and disposing of the RCRA wastes. KFC brought suit under the citizen suit provision of RCRA, 42 U. S. C. § 6972(a), seeking to recover these cleanup costs from those responsible for placing the RCRA regulated wastes on the property, the Meghrigs.

In its complaint against the Meghrigs, KFC claimed that the contaminated soil was a "solid waste" covered by RCRA pursuant to 42 U. S. C. § 6903(27), that it had previously posed an imminent and substantial endangerment to health or the environment, pursuant to 42 U.S.C. § 6972(a)(1)(B), and that the Meghrigs were responsible for equitable restitution of KFC's cleanup costs under 42 U.S.C. § 6972(a) because, as prior owners of the property, they had contributed to the waste's past or present handling, storage, treatment, transportation, or disposal.

The District Court held that 42 U.S.C. § 6972(a) does not permit recovery of past cleanup costs and that 42 U.S.C. § 6972(a)(1)(B) does not authorize a cause of action for the remediation of toxic waste that does not pose an "imminent and substantial endangerment to health or the environment" at the time suit is filed, and dismissed KFC's complaint. The Court of Appeals for the Ninth Circuit reversed, over a dissent, 49 F. 3d 518, 524-528 (1995) and found that a district court had authority under 42 U.S.C. § 6972(a) to award restitution of past cleanup costs, and that a private party can proceed with a suit under 42 U.S.C. § 6972(a)(1)(B) upon an allegation that the waste at issue presented an "imminent and substantial endangerment" at the time it was cleaned up. The Supreme Court of the United States agreed to hear the case, and reversed the ninth circuit's decision, thus making it impossible for KFC to recover its clean up costs under RCRA. The Supreme Court considered the following in reaching its decision.

First, the Supreme Court noted that RCRA is a comprehensive environmental statute that governs the treatment, storage, and disposal of solid and hazardous waste. Unlike the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U. S. C. § 9601 et seq., RCRA is not principally designed to effectuate the cleanup of toxic waste sites or to compensate those who have attended to the remediation of environmental hazards. The Supreme Court noted that the two main purposes of CERCLA are prompt cleanup of hazardous waste sites and imposition of all cleanup costs on the responsible party. The Supreme Court contrasted CERCLA's two main purposes with what it considered RCRA's primary purpose to be. According to the Supreme Court, the main purpose of RCRA is "to reduce the generation of hazardous waste and to ensure the proper treatment, storage, and disposal of that waste which is nonetheless generated, so as to minimize the present and future threat to human health and the environment." 42 U. S. C. § 6902(b).

The Supreme Court noted that chief responsibility for the implementation and enforcement of RCRA rests with the Administrator of the Environmental Protection Agency (EPA). However, the Supreme Court noted that like other environmental laws, RCRA contains a citizen suit provision that permits private citizens to enforce its provisions in some circumstances.

Unfortunately for KFC, the Supreme Court found that two requirements of RCRA's citizen suit provision defeated KFC's suit against the Meghrigs. The first concerned the necessary timing of a citizen suit brought under 42 U.S.C. § 6972(a)(1)(B). That section permits a private party to bring suit against certain responsible persons, including former owners, "who ha[ve] contributed or who [are] contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment." The second requirement that defeated KFC's claim under RCRA against the Meghrigs concerned the remedies a district court can award in a suit brought under 42 U.S.C. § 6972(a)(1)(B). According to the Supreme Court, 42 U.S.C. § 6972(a) authorizes district courts "to restrain any person who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste . . . , to order such person to take such other action as may be necessary, or both."

From the two remedies described in 42 U.S.C. § 6972(a), the Supreme Court ruled that RCRA's citizen suit provision is not directed at providing compensation for past cleanup efforts. According to the Supreme Court, a private citizen suing under 42 U.S.C. § 6972(a)(1)(B) could seek a mandatory injunction, i. e., one that orders a responsible party to take action by attending to the cleanup and proper disposal of toxic waste, or a prohibitory injunction, i. e., one that restrains a responsible party from further violating RCRA, but, a private citizen suing under 42 U.S.C. § 6972(a)(1)(B) could not recover its past response costs, nor could the private citizen recover its cost of remediation at the site, even if the remediation would have otherwise been required to be performed at the site by the responsible parties.

To rationalize its holding, the Supreme Court compared the relief available under RCRA's citizen suit provision and that which Congress has provided in the analogous, but not parallel, provisions of CERCLA. Under the Supreme Court's analysis of available remedies, the court noted that CERCLA's citizen suit provision mimics RCRA's citizen suit provision in providing district courts with the authority to order such action as may be necessary to correct the violation of any CERCLA standard or regulation. 42 U. S. C. § 9659(c). However, the Supreme Court noted that CERCLA expressly permits the recovery of "all costs of removal or remedial action," 42 U.S.C. § 9607(a)(4)(A), and it expressly permits the recovery of any "necessary costs of response, incurred by any . . . person consistent with the national contingency plan," 42 U.S.C. § 9607(a)(4)(B). Since CERCLA also provides that "[a]ny person may seek contribution from any other person who is liable or potentially liable" for these response costs, 42 U.S.C. § 9613(f)(1), the Supreme Court ruled that Congress, by passing the cost recovery provision of CERCLA, demonstrated in CERCLA that it knew how to provide for the recovery of cleanup costs, and that the language used to define the remedies under RCRA does not provide that remedy.

The Supreme Court further held that waste which has been removed before filing a lawsuit cannot present an imminent and substantial endangerment to health or the environment. According to the Supreme Court, RCRA's citizen suit provision was intended only to provide a remedy for solid or hazardous waste which either currently or in the future "may present an imminent and substantial endangerment to health or the environment," 42 U.S.C. § 6972(a)(1)(B). Therefore, the Supreme Court ruled that 42 U.S.C. § 6972(a) did not provide a remedy that compensates private citizens for past cleanup efforts. As a result, since KFC took the initiative, acted responsibly, and cleaned up the hazardous wastes, KFC could not recover its cleanup costs pursuant to RCRA's citizen suit provisions.

Because of its holding, the Supreme Court has created a no win result for people and businesses facing a clean up of RCRA wastes. In this case, the County of Los Angeles Department of Health Services ordered KFC to clean up the site. Had KFC not performed the clean up, it faced potential enforcement action from the regulators, but by performing the clean up, it lost the opportunity to sue under RCRA to recover its clean up costs. My advice to clients is not to perform the clean up if a RCRA citizen suit is being contemplated. However, one must evaluate this recommendation in light of other considerations. For example, the potential for immediate harm to others that could occur as a result of leaving the hazardous wastes in place might require an immediate response, and the possibility and consequences of an enforcement action certainly must be considered. If the hazardous wastes cannot be left in place, then a party should attempt to clean up the site pursuant to the National Contingency Plan as required by CERCLA. At least under CERCLA, a cost recovery action for the clean up can be pursued after the clean up is complete. However, unlike RCRA, CERCLA does not allow for the recovery of attorneys' fees, which unfortunately can be substantial. See "A Good Side of RCRA," Metal Finishing, February, 1996, for a discussion of the recoverability of legal fees under RCRA.

After years of saving your hard earned cash, you finally achieved one of the great American dreams; you bought your own business. With your experience in the metal finishing industry, you financed and purchased a business called Platers and Coaters. Platers and Coaters has been owned and operated as a sole proprietorship by the same person for 15 years at the same location. The financial data on the company looks good. The previous owner is able to make a fantastic profit while undercutting his competitors' prices substantially. The previous owner told you, "If you know how to work the business, you can make a lot of money."

After the purchase, the previous owner agrees to teach you how to run the business by working with you for a few weeks. During this time, you notice that the previous owner dumps what you suspect to be hazardous waste out the back door into a ditch. You ask the previous owner if this is legal. His reply is, "You want to make money, don't you?" You immediately contact an environmental consultant to determine if what the previous owner was doing was legal. Unfortunately for your cash flow, the environmental consultant informs you that you must cease these illegal disposal practices. You immediately contract with a waste disposal company to dispose of your hazardous waste. The previous owner learns of your decision to handle your waste properly and informs you that by doing so you will never make a profit unless you substantially raise your prices, which will drive away business.

Unfortunately for you, the previous owner is correct. Given what you paid for the business and the cost of waste disposal, you can barely make the payments on the purchase of the business and the waste disposal with the business that you keep after raising your prices. You based your decision to purchase the business on a net profit that did not include waste disposal, mainly because the previous owner neglected to mention that his waste disposal practices were free, but highly illegal.

Along with disposing of your hazardous wastes legally, your environmental consultant recommends a soil and groundwater analysis to determine if any of the previous owner's activities have affected the property you bought as part of the business. After installing a single groundwater well, you learn that the soil and groundwater are severely polluted, and will costs up to two million dollars to cleanup. You now realize that your great American dream has become a great American nightmare. Faced with certain bankruptcy, you approach the previous owner and ask him to take back the business. The previous owner refuses and states that you bought the business and property "as is" without any warranty.

Distraught, you seek the assistance of an attorney who practices environmental law. You explain to the attorney that you really do not care if the property is cleaned up provided the attorney can force the previous owner to pay for your losses and take back the business. Your attorney explains that while that may seem like good logic, and you may not think you have any interest in getting the property cleaned up, this should be your biggest worry. The previous owner operated the facility for 15 years, which caused significant pollution to the soils and the groundwater. You have owned and operated the facility for less than one year. Under the Superfund laws, since you are the owner of a facility from which a release of a hazardous substance has occurred, you are jointly and severally liable for the cleanup even though the waste was deposited by the previous owner. Since the previous owner is now an elderly person, if he were to die, and his estate was settled before you filed a lawsuit against him to cleanup the property, you could be forced to pay for the entire cleanup. Therefore, your attorney advises that you do something quickly to force the previous owner to pay for the cleanup while he is still alive and still has the money from your purchase of the business to pay for the cleanup.

Your attorney advises you that your best approach is to proceed with a citizen suit against the previous owner pursuant to the Resource Conservation and Recovery Act (RCRA) under 42 U.S.C. § 6972 (a)(1)(b). You cringe at the thought of a citizen suit action and ask if these are the same types of actions pursued by overzealous environmental groups for technical violations of the law just to generate fees for lawyers. Your attorney explains that these citizen suit laws are abused sometimes, but occasionally, someone such as yourself needs help with enforcing the law against a wrongdoer, and the only economical way to do it is to pursue a citizen suit against the wrong-doer.

You ask your attorney what would happen if you agreed to proceed with a citizen suit, and he explains. Most Federal environmental laws provide for citizen enforcement by private parties who have been harmed by the wrongful activity of another. These lawsuits are called citizen suits because the laws authorize a citizen to step into the role of the attorney general for purposes of enforcing the environmental laws. Specific to your situation, RCRA allows a citizen to proceed in court against any past or present generator of hazardous waste who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment. Essentially, as your attorney explains, congress intended the citizen suit provision of RCRA to be analogous to the common law tort of public nuisance.

To be entitled to relief, your attorney explains that you must be able to prove (1) the existence of "discarded material," hazardous waste in this case; (2) that the previous owner contributed to the disposal of the waste; and (3) that the situation may present an eventual, significant risk to public health or the environment.

Regarding the requirement that the situation may present an eventual, significant risk to public health or the environment, your attorney explains that the courts have interpreted this requirement to mean a threatened or potential harm and does not require proof of actual harm. When one is endangered, harm is threatened; no actual injury need ever occur. Furthermore, a determination of "imminence" does not require a showing that actual harm will occur immediately so long as the risk of threatened harm is present. Finally, the word "substantial" does not require quantification of the risk if there is some cause for concern that someone may be exposed to risk. Since your facility has severely contaminated groundwater, your attorney explains that you should have no problem meeting this requirement, especially after you inform him that there are drinking water wells in the area that may already be impacted.

You tell your attorney that as a result of paying hazardous waste disposal fees, you are "financially impaired" and cannot afford to finance a major lawsuit. Your attorney smiles sheepishly and states that the beauty of forcing someone to do a cleanup under the RCRA citizen suit provision is that if you win, they have to pay your legal fees. Therefore, given the specific facts in your case, you risk very little in allowing the attorney to pursue the case for you.

You ask your attorney what you are likely to get if you win your case. Your attorney informs you that, as generally happens in citizen enforcement lawsuits under anti-pollution laws, RCRA authorizes awards of litigation costs, including attorney's fees and expert witness fees, to the substantially prevailing party. The court is also empowered to issue orders against anyone who has illegally disposed of hazardous waste to take such other action as may be necessary o abate the imminent hazard created thereby. Therefore, since your attorney considers your case a sure winner, he is willing to be somewhat forgiving about requiring you to pay your legal fees up front, since he will recoup all of the legal fees reasonably necessary in pursuing your claim from the previous owner at the end of the litigation.

Regarding your other damages, your attorney explains that he will add claims for violations of state environmental laws, as well as claims for fraud, nuisance, trespass, negligence, and whatever else he can think of before filing the complaint to try to recoup your losses. However, even if you lose on these claims, at least you will be getting the real estate cleaned up by the person who caused the problem, and by filing the lawsuit now, you can be assured that the previous owner will be able to pay for the cleanup, instead of you.

My advice to anyone considering buying an ongoing business is to have adequate legal and environmental representation before the purchase. Despite the best of advice, however, even the most careful business person can face substantial liabilities due to past conduct, human error, bad luck, and the acts and omissions of others, including previous owners. In such situations, it is only natural to seek to shift, share, and otherwise minimize those liabilities, ideally while someone else is still capable of paying. Not only does bringing such suits early ensure that you are not foreclosed by the statute of limitations which could forever bar any recover, it also ensures that the facts are still fresh in the minds of witnesses, and it ensures that your conduct can be distinguished from that of prior owners. RCRA's citizen suit provision is a good way for businesses facing substantial cleanup cost to shift not only the cost of the cleanup to the responsible party, but also to shift the cost of the litigation to get the cleanup performed to the other party. While awarding attorneys fees as part of an environmental citizen suit makes most business people shudder, remember that the previous owner in this case made his fortune by violating the hazardous waste disposal laws, thus allowing him to set his prices below the competition which drove his competitors who tried to comply with the law, such as yourself, out of business.

Your company, Heavy Metal Plating, Inc., operates the Old Alabama Plating Facility. a hard chromium plating plant in Alabama. The prior owner of the plant, Dirty Operators, Inc., operated the Old Alabama Plating Facility as a hard chrome plating facility from 1905 until 1978. In 1978, the Dirty Operators, Inc. sold the Old Alabama Plating Facility to your company, Heavy Metal Plating, Inc. Heavy Metal Plating, Inc. purchased the Old Alabama Plating Facility under an agreement in which your company, as buyer, assumed certain liabilities, but would be indemnified as to other liabilities. At the time, you believed such an arrangement was perfect. You knew exactly what you were responsible for paying, and everything else was the responsibility of Dirty Operators, Inc. The indemnification agreement provided:

Indemnity Against Unassumed Liabilities. Dirty Operators, Inc. hereby indemnifies Buyer against and hereby agrees to hold Buyer harmless from and to reimburse Buyer for any and all liabilities, losses, damages, costs of settlement and expenses which may be imposed upon or incurred by Buyer in connection with any liabilities or obligations of the Old Alabama Plating Facility other than those expressly assumed by Buyer.

In 1990, twelve years after the sale, the United States Environmental Protection Agency ("U.S. EPA") and the Alabama Department of Environmental Management began to investigate the Old Alabama Plating Facility site for toxic substances. No surprise to you, U.S. EPA found multiple solid waste management units from Dirty Operators' operations at the facility. As a result, U.S. EPA asked your company, Heavy Metal Plating, to sign an Administrative Order on Consent (the "Order") requiring Heavy Metal Plating to do a site-wide environmental investigation and eventually cleanup the site. The cost of the testing and clean up is expected to cost ten million dollars. Because you have an indemnification agreement from Dirty Operators, Inc., you inform U.S. EPA that you will not sign the Order. You inform U.S. EPA that Dirty Operators, Inc. is responsible for the cost of the cleanup pursuant to the indemnification agreement, and especially in light of the fact that your company conducted no on site disposal of wastes. U.S. EPA promptly responded by issuing a Unilateral Order against your company, Heavy Metal Plating, Inc., to begin the investigation and clean up.

You immediately consult with your environmental attorney to determine if the Order issued by U.S. EPA can be enforced in light of the indemnification agreement you received from Dirty Operators, Inc. when you purchased the facility. Your environmental attorney informs you that Section 9607(e)(1) of CERCLA provides:

No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.

42 U.S.C.A. § 9607(e)(1). After reading the provision several times, you tell your attorney that this provision of CERCLA appears internally inconsistent, and ask how the courts have interpreted this clause. Your attorney explains that the two sentences of Section 9607(e)(1) have been construed by the courts to mean "agreements to indemnify or hold harmless are enforceable between the parties but not against the government." Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86, 89 (3d Cir. 1988), cert.denied, 488 U.S 1029 (1989). In United States v. Hardage, the court held that under section 9607(e)(1) "responsible parties may not altogether transfer their CERCLA liability, [but] they have the right to obtain indemnification for that liability." United States v. Hardage, 985 F.2d 1427, 1433 (10th Cir. 1993). Your attorney further explains that the district court in Hatco Corp. v. W.R. Grace & Co.--Conn., 801 F. Supp. 1309 (D.N.J. 1992) held that:

Because § 9607(e)(1) renders ineffective any attempt to completely "transfer" liability, the most a party can do to limit its liability under CERCLA is to obtain from another an agreement "to insure, hold harmless, or indemnify" it from any liabilities established against it.

Id. at 1317 (quoting 42 U.S.C.A. § 9607(e)(1)).

Thus, Dirty Operators, Inc. could have lawfully agreed to indemnify Heavy Metal Platers, Inc., for its CERCLA liability. However, the indemnification is ineffective as a shield against liability imposed on your company by the government. In essence, an indemnification agreement, explains your attorney, only gives you the potential right to collect from the person who agreed to indemnify you. This means that the indemnification is only as good as the person who gives it; an indemnification will not protect you from governmental liability.

Having concluded that your company is responsible for complying with the Order, your attorney now turns to the issue of whether or not you can shift the responsibility for the compliance to Dirty Operators, Inc. The indemnification agreement that Heavy Metal Plating relies on for shifting liability was executed before CERCLA was enacted. Therefore, your attorney explains, the court must, at the outset, resolve the preliminary issue of whether a contract of indemnity that predates CERCLA can be construed to include indemnity against CERCLA liability. Your attorney explains that the courts that have analyzed pre-CERCLA indemnity provisions and have uniformly held that a pre-CERCLA agreement can, given the right language in the agreement, require one party to indemnify another against CERCLA liability. See, e.g., Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 F.3d 321, 327 (7th Cir. 1994); Hatco Corp., 801 F. Supp. at 1317-18; Purolator Prods. Corp. v. Allied-Signal, Inc., 772 F. Supp. 124, 132 (W.D.N.Y. 1991); Mobay Corp. v. Allied-Signal, Inc., 761 F. Supp. 345, 356-58 (D.N.J. 1991). However, your attorney cautions, not all pre-CERCLA promises to indemnify cover CERCLA liability. The court will look to see whether an indemnification provision is either specific enough to include CERCLA liability or general enough to include any and all environmental liability which would, naturally, include subsequent CERCLA claims.

You ask your environmental attorney if the specific indemnification agreement between Heavy Metal Plating, Inc. and Dirty Operators, Inc. can be used to shift your liability to Dirty Operators, Inc. Your attorney informs you that different courts look to different laws to determine if an indemnification agreement is enforceable. Under Alabama State law, if the court finds that the indemnification paragraph is ambiguous under the principles of Alabama law that guides determinations of contracts, Dirty Operators will not be required to indemnify your company as to the clean up. SeeReeves Cedarhurst Dev. Corp. v. First Amfed Corp., 507 So. 2d 184, 186 (Ala. 1992). The Alabama courts have held that "An instrument is unambiguous if only one reasonable meaning clearly emerges." Vainrib v. Downey, 565 So. 2d 647, 648 (Ala. Civ. App. 1990). Your attorney warns you that because CERCLA liability was not in existence at the time your compnay entered into the indemnification agreement with Dirty Operators, Inc., the indemnification provision in your agreement is probably subject to more than one reasonable interpretation, i.e., it may or may not have covered liabilities for laws not yet passed. Therefore, the indemnification agreement is not plain enough to be construed as an unambiguous promise by Dirty Operators to indemnify Heavy Metal Plating against all environmental liability associated with the site of the Old Alabama Plating Facility, including liability without fault under laws like CERCLA, which were not yet passed when the agreement was signed. Your attorney explains that expecting Dirty Operators, Inc. to indemnify your company against CERCLA liability does not square with the principle of Alabama law that promises to indemnify are limited to subjects plainly and unambiguously expressed.

Generally, your attorney explains, only indemnity clauses with much broader and more inclusive language than here will shift liability under CERCLA. The Olin Corp. case provides one recent example of what the court expects to see in an indemnification agreement before it will shift liability pursuant to an indemnification agreement. The sale agreement in Olin Corp. provided:

[The buyer] hereby assumes and agrees to be responsible for and to pay, perform, discharge and indemnify [the seller] against, all liabilities (absolute or contingent), obligations and indebtedness of [the seller] related to the Aluminum Assets . . . as they exist on the Effective Time or arise thereafter with respect to actions or failures to act occurring prior to the Effective Time.

Olin Corp., 5 F.3d 12-13 (__ Cir. 19__). The court of appeals held that this provision evidenced a "clear and unmistakable intent" to transfer the seller's environmental liability to the buyer, even future and unknown liability. Olin Corp., 5 F.3d at 15-16. Amazingly, your attorney informs you that the indemnification provision in your Agreement is probably not specific enough to impose on Dirty Operators, Inc. a duty to indemnify Heavy Metal Plating for its CERCLA response costs. Since the indemnification language in your agreement does not clearly state that Dirty Operators, Inc. has agreed to assume all liability for toxic wastes under present or future laws protecting the environment, the best that you can hope for is to sue Old Alabama Plating for a fair contribution to the clean up costs under CERCLA since nothing demonstrates a clear and unambiguous intent to transfer all CERCLA liability to Dirty Operators, Inc. According to the courts anyway, this result reinforces CERCLA policy. "Congress enacted CERCLA, a complex piece of legislation . . . to force polluters to pay for costs associated with remedying their pollution." United States v. Alcan Aluminum Corp., 964 F.2d 252, 258 (3d Cir. 1992). The fact that you were not the polluter, but the victim of the pollution, is irrelevant in the eyes of CERCLA's liability scheme.

I always recommend that anyone purchasing a facility get the broadest indemnification possible as to past, present, future, known and unknown liability, contingent and otherwise. Although not touched upon in this article, I always warn clients to remember that an indemnification is only as good as the person giving it. If Dirty Operators, Inc. had been out of business or bankrupt, the indemnification would have been worthless since there would have been no assets to collect a judgment against. Although many people rely on indemnification agreements when purchasing a site, the reliance is often overstated, especially in light of cases like Beazer East, Inc. v. The Mead Corporation, ____ F. 3d ____ ( 3d Cir. 1994). The Beazer case upon which the above facts were taken, demonstrate just how broad an indemnification must be written before liability will shift.

You are the owner of Metal Painters, Inc. Like most metal finishing companies, you use solvents in your operations for cleaning certain metal parts prior to coating. Thomas Solvent, a producer and seller of solvents, sold virgin solvents to numerous customers, including your company from 1963 to 1984. In 1984, Thomas Solvent filed for bankruptcy protection. After Thomas filed for bankruptcy protection, you expected that you had heard the last of Thomas Solvent, until yesterday. Yesterday, you received a complaint via certified mail from U.S. EPA. Apparently, you are being sued by U.S. EPA for the cleanup of the Thomas Solvent facility. You immediately contact your environmental attorney and explain that you are being sued. Your environmental attorney requests that you meet with him to discuss the facts of your relationship with Thomas Solvent.

You arrange a meeting with your environmental attorney and a former employee of Thomas Solvent accompanies you to the meeting. At the meeting, you and the former Thomas Solvent employee explain to your attorney that Thomas Solvent owned a facility where it conducted storage, transfer, and packaging of solvents. Thomas Solvent delivered solvents to you in fifty-five gallon drums from its facility. Through a drum-deposit arrangement, Thomas Solvent shipped the solvents to you in its re-usable drums and charged you a deposit. Most often, the Thomas Solvent delivery person retrieved the used drums when delivering new, full drums. The returned drums were usually taken to Thomas' facility for refurbishing and re-use. Your company was credited for the amount of the drum deposit, when it returned the old drums to Thomas Solvent.

The contents of your returned drums varied. Some of the drums' contents had been emptied as much as possible, while others contained unused solvents of up to fifteen gallons. Thomas Solvent employees inspected the drums when the drums reached its facility. Thomas Solvent would send drums in need of reconditioning to a reconditioner, often without being rinsed or cleaned. Drums not in need of reconditioning were emptied of any remaining contents, often, onto the ground. The emptied drums were either immediately refilled with solvent or cleaned with a rinseate solution. Prior to 1978, the used rinseate was usually dumped onto the ground. In later years, Thomas Solvent began to recycle the rinseate at off-site locations.

Your attorney listens to the facts carefully, and then reviews the complaint that was filed against your company. U.S. EPA filed a complaint against your company, alleging that your shipping of drums with small amounts of solvent in them constituted the illegal disposal of hazardous substances which makes you liable for the cost of remediation at Thomas' facility pursuant to CERCLA § 107, 42 U.S.C. § 9607. U.S. EPA is requesting over $5 million in past response costs for cleanup activities at the Thomas Facility plus a declaratory judgment for future response costs. Your heart sinks into your feet as you tell your attorney, "I don't have $5 million laying around with U.S. EPA's name on it." Your attorney agrees that it would be cheaper to fight, because losing means certain ruination of your business. You ask your attorney whether fighting is futile, or should you just turn the corporate assets over to U.S. EPA and get on with your life.

Your attorney explains that U.S. EPA is asking the court in the complaint filed against you to declare that recycling the fifty-five gallon drums constitutes disposal The court will be called upon to interpret the scope of CERCLA arranger liability. The relevant provision of CERCLA states that:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section--

* * *

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, . . .shall be liable . . . .

42 U.S.C. § 9607(a).

You tell your attorney that you never had a contract to dispose of anything with Thomas Solvent. Your attorney explains that U.S. EPA does not contend that you arranged for disposal by contract or agreement; rather, U.S. EPA asserts that you "otherwise arranged for disposal" of the unused hazardous solvents through the drum-deposit arrangement. U. S. EPA's assertion is that your company entered into an arrangement, whereby Thomas Solvent would pick up the residue-containing drums, take them to its facility, dispose of the residue, and then credit your company with the drum deposit. Therefore, to the extent that you had the "intent" to dispose of this residue, you would be liable for "arranging for disposal."

Your attorney explains that CERCLA does not define the phrase "arrange for." Therefore, the courts have concluded that the requisite inquiry is whether the party intended to enter into a transaction that included an element of "arranging for" the disposal of hazardous substances as held by the court in Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746, 751 (7th Cir. 1993). Your attorney explains that your company's intent need not be proven by direct evidence, but can be inferred from the totality of the circumstances -- in other words, not by one piece of evidence but by looking at all of the evidence collectively.

You are confused at this point and tell your attorney that you thought CERCLA was a strict liability statute. Discussing state of mind in a CERCLA case appears crazy to you. After all, cases like United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1507 (6th Cir. 1989), cert. denied, 494 U.S. 1057 (1990); and J.V. Peters & Co. v. Administrator, EPA, 767 F.2d 263, 266 (6th Cir. 1985) taught companies long ago that CERCLA is a strict liability statute.

Your attorney explains that your are correct; CERCLA is a strict liability statute in most instances. However, notwithstanding the strict liability nature of CERCLA, the court must recognize the indispensable role that state of mind must play in determining whether a party has "otherwise arranged for disposal . . . of hazardous substances." 42 U.S.C. § 9607(a). Your attorney explains that intent in this context is no stranger to U.S. EPA or the courts. The Sixth Circuit has read an intent or state of mind requirement into the "otherwise arranged for disposal" concept, although U.S. EPA keeps filing cases hoping that it can somehow disregard the intent portion of "otherwise arranged for" disposal. In AM Int'l, Inc. v. International Forging Equip. Corp., 982 F.2d 989 (6th Cir. 1993), the Sixth Circuit was called upon to decide the applicability of arranger liability. In that case, AM International (AMI) entered into an agreement to sell a manufacturing facility to a realty company. In the AMI case, your attorney explains, the facility contained several types of machinery and fixtures necessary for the manufacture of component parts for offset duplicating machines. After ceasing their manufacturing process, AMI cleaned up the facility and cleared it of industrial wastes. Nevertheless, because the facility was sold on an "as is, where is" basis, certain manufacturing features, including electroplating baths, salt pots for heat-treating, and the waste water treatment plant, were left by AMI containing the appropriate solutions, so that the lines would be prepared for an immediate start-up of the facility by a new owner. In the AMI case, the court held that AMI had not arranged for disposal of the hazardous substances that it left in the building. The court stated: "Liability only attaches to parties that have 'taken an affirmative act to dispose of a hazardous substance . . . as opposed to convey a useful substance for a useful purpose.'" Id. (quoting Prudential Ins. Co. v. United States Gypsum, 711 F. Supp. 1244, 1253 (D.N.J. 1989)). Therefore, your attorney explains, in the absence of a contract or agreement, a court must look to the totality of the circumstances, including any "affirmative acts to dispose," to determine whether a company intended to enter into an arrangement for disposal.

In concluding that the transaction in AM Int'l was not a disposal, the Sixth Circuit relied on two findings of the district court. First, the court relied on the finding that "'both [the buyer] and AMI intended that the chemicals would be used for the purposes for which they had been bought--the continued operation of the electroplating, heat-treating, and other processes.'" AM Int'l, 982 F.2d at 999. Second, the court found that "the chemicals "'were useful and had value.'" Id. Your attorney explains that basically, the district court determined that the chemicals were not left at the facility with disposal in mind. Your attorney explains further that other Circuit Courts have held similarly. For example, your attorney explains that the Seventh Circuit held that an "intentional action" requirement for arranger liability was required as announced in Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 756, 751 (7th Cir. 1993), cert. denied, 114 S.Ct. 691 (1994).

Your attorney concludes that the court will not find you liable under section 107(a)(3) of CERCLA absent a showing by U.S. EPA that your company intended to dispose of the residual amounts of the hazardous substances remaining in the returned drums. The fact that you incidentally got rid of these residues does not mean that it was your purposeful intent to dispose of the residues; rather, this was merely incidental to the drum return. You agree and direct your attorney to begin the litigation to oppose U.S. EPA's attempt at collecting cleanup costs from your company. Ultimately, after the discovery process of the litigation is concluded, you are dismissed from the lawsuit, having to pay U.S. EPA no cleanup costs for the Thomas Facility remediation.

The above case was taken from United States of America v. Cello-Foil Products, Inc., et al., ____ F.3d _____ (6th Cir., 1996). I tell clients that examining state of mind or ascertaining intent at the contract, agreement, or other type of arrangement stage does not undermine the strict liability nature of CERCLA. The intent inquiry is geared only towards determining whether the party in question is a potentially liable party. Once a party is determined to have the requisite intent to be an arranger, then strict liability takes effect. If an arrangement has been made, that party is liable for damages caused by the disposal regardless of the party's intent that the damages not occur. I often warn clients about the fine line distinctions in some of the environmental cases. For a discussion on how a party can inadvertently "arrange for" disposal and be liable for cleanup costs, see the very first issue of Legal Alert published in the April 1995 edition of Metal Finishing entitled "Off-Color Paint." In that article, a company that sold material that did not meet specification "just to get rid of it" was held liable for clean-up costs. The distinctions in these cases are subtle, but the difference in outcome can be devastating to your company.

Your company, Silvers, Inc. formerly operated a silver plating facility in Anytown, USA. Your company sold the plant to Chromers, Inc. in 1978. Chromers, Inc. used the facility exclusively for chrome plating. In 1990, a citizen in your community complained to U.S. EPA about discolored drinking water. U.S. EPA conducted an investigation, ultimately focusing on the plating shop that your company operated. U.S. EPA's investigation showed that during the chrome-plating process used by Chromers, Inc., rinse water from finished parts was pumped out of the building onto the ground. This activity created a vast contamination plume emanating from the plant. In addition, U.S. EPA found low levels of silver in the groundwater, presumably from your company's past operations. The estimate for removing the silver and chrome from the groundwater is ten million dollars. About ten percent of the contamination in the groundwater is from the silver, and about ten percent of the cost of the cleanup is for the silver. The remainder is strictly for the chromium. If there were no chromium in the groundwater, the silver would not have to be removed since the concentrations are below that required for a cleanup. The chromium, however, would require a cleanup, regardless of whether the silver was present or not.

Six months ago, U.S. EPA filed a CERCLA cost-recovery action against your company, Silvers, Inc. and against Chromers, Inc. U.S. EPA seeks to hold your company and Chromers, Inc. jointly and severally liable for remedying the groundwater contamination from the site. Yesterday, Chromers, Inc. filed for bankruptcy protection., shut down production, and turned over all of its assets to the bankruptcy court. Chromers, Inc. turns out to have less than one million dollars in assets, and more than 2 million dollars in debt, excluding the cost of cleaning up the contamination in the groundwater. Since the estimated cleanup cost is going to be at least ten million dollars, you realize that little if any money will be paid to cleanup the site by Chromers, Inc.

You are well aware of CERCLA's joint and several liability provisions. You ask your attorney what, if anything, can be done to avoid having to pay more than your fair share of the costs of the removal action at the site. You explain to your lawyer that it simply does not seem fair that your company should pay a disproportionately larger share of the cost of the cleanup when the cost of removing the silver from the groundwater is so much less than the cost of removing the chromium contamination. Furthermore, but for the chromium, you would not have to be involved at this site since standing alone, the silver need not be cleaned up.

Your attorney tells you that joint and several liability can be imposed under CERCLA, but need not always be imposed. Your attorney explains that the courts around the country have developed three distinct, although closely-related, approaches to the issue of joint and several liability under CERCLA. The first is the "Chem-Dyne approach" which requires a defendant who seeks to avoid the imposition of joint and several liability to prove the amount of harm it caused. The defendant's contribution to the cleanup is then based on that amount of the cleanup cost. The second approach, the "Alcan approach," is adopted by the Second and Third Circuits and is similar to the Chem-Dyne approach except that the Alcan approach recognizes that, under the unique statutory liability scheme of CERCLA, the plaintiff (usually U.S. EPA) is not required to prove causation of the injury. Under the Chem-Dyne approach, the plaintiff must first prove that the defendant's conduct was a substantial factor in causing the harm; the defendant may limit its liability by proving its contribution to the harm. In contrast, the Alcan approach suggests that a defendant may escape liability altogether if it can prove that its waste, even when mixed with other wastes at the site, did not cause the incurrence of response costs. The third approach is the "moderate" approach. Under that approach, the court applies the principles enunciated in the Chem-Dyne approach in determining whether there is a reasonable basis for apportionment. If there is not, the court may impose joint and several liability; the court, however, retains the discretion to refuse to impose joint and several liability where such a result would be inequitable.

You are intrigued by the idea that you may not be liable for the cleanup costs of the now defunct Chromers, Inc., and you ask your attorney to explain in further detail. Your attorney informs you that the first published case to address the scope of liability under CERCLA is United States v. Chem-Dyne Corp., 572 F.Supp. 802 (S.D. Ohio 1983), which was cited approvingly in the legislative history of the SARA amendments to CERCLA. In the Chem-Dyne case, twenty-four defendants, who allegedly generated or transported hazardous substances located at Chem-Dyne's treatment facility, sought "an early determination" that they were not jointly and severally liable for the EPA's response costs. Id. at 804. After examining the statute and its legislative history, the court concluded that joint and several liability was not appropriate under CERCLA "in order to avoid its universal application to inappropriate circumstances." Id. at 810. The court used the following rationale from Section 433a of the Restatement (Second) of Torts for guidance in its decision:

(1)Damages for harm are to be apportioned among two or more causes where

(a) there are distinct harms, or

(b) there is a reasonable basis for determining the contribution of each cause to a single harm.

If the harm cannot be apportioned, pursuant to the above test from the Restatement, joint and several liability will be imposed. The nature of the harm is the key factor in determining whether apportionment is possible. Distinct harms -- e.g., where two defendants independently hurt someone at the same time, one injuring person's arm and the other injuring the person's leg -- are regarded as separate injuries. Although some of the elements of damages (such as lost wages or pain and suffering) may be difficult to apportion, "it is still possible, as a logical, reasonable, and practical matter, . . . to make a rough estimate which will fairly apportion such subsidiary elements of damages." Id., comment b on subsection (1). Following the rationale from the Restatement, the court concluded that the twenty-four defendants in the Chem-Dyne case could avoid the imposition of joint and several liability. United States v. Chem-Dyne Corp., 572 F.Supp. at 810.

The second test used by some of the federal courts, the Alcan approach, came from United States v. Alcan Aluminum Corp., 964 F.2d 252, 255 (3d Cir. 1992). The Alcan court also refused to apply joint and several liability to the defendants. The Alcan case involved millions of gallons of liquid wastes containing hazardous substances which were disposed of through a bore hole that led directly into underground mine workings. In 1985, 100,000 gallons of contaminated water were released from the site into the Susquehanna River. The government filed a cost-recovery action against twenty defendants; all but Alcan settled. The district court granted summary judgment for the government, holding that Alcan was jointly and severally liable for the response costs. The Third Circuit held that the "intensely factual nature of the 'divisibility' issue" highlighted the district court's error in granting summary judgment without conducting a hearing. Id. at 269. It remanded the case in order to give Alcan the opportunity to limit or avoid liability by attempting to prove its personal contribution to the harm to the Susquehanna River. Thus, under the Third Circuit's approach, Alcan could escape liability altogether if it could prove that its "emulsion did not or could not, when mixed with other hazardous wastes, contribute to the release and the resultant response costs." Id. at 270.

The Second Circuit essentially adopted the Third Circuit's approach to joint and several liability in another case involving Alcan, United States v. Alcan Aluminum Corp., 990 F.2d 711 (2d Cir. 1993). In that case, the Second Circuit reversed a summary judgment in favor of the government, stating that "Alcan should have the opportunity to show that the harm caused at PAS was capable of reasonable apportionment." Id. at 722. The court reasoned that Alcan was entitled to "present evidence relevant to establishing divisibility of harm, such as, proof disclosing the relative toxicity, migratory potential, degree of migration, and synergistic capacities of the hazardous substances at the site." Id. The court stated that Alcan could escape liability if it could prove that its oil emulsion, when mixed with other hazardous wastes, did not contribute to the release and resulting clean-up costs. It acknowledged that "causation is being brought back into the case -- through the backdoor, after being denied entry at the frontdoor -- at the apportionment stage." Id. However, the court pointed out that causation was "reintroduced only to permit a defendant to escape payment where its pollutants did not contribute more than background contamination and also cannot concentrate." Id.

The third test for avoiding joint and several liability is called the "moderate" approach, and was adopted by the court in United States v. A & F Materials Co., Inc., 578 F.Supp. 1249 (S.D. Ill. 1984). The A & F Materials case involved a disposal site at which over 7,000,000 gallons of waste were deposited. The court in A & F Materials thought that joint and several liability would be inconsistent with congressional intent, because Congress was "concerned about the issue of fairness, and joint and several liability is extremely harsh and unfair if it is imposed on a defendant who contributed only a small amount of waste to a site." Id. at 1256. The court concluded that six factors delineated in an unsuccessful amendment to CERCLA proposed by Representative (now Vice President) Gore could be used to "soften" the modern common law approach to joint and several liability in appropriate circumstances. Under this "moderate" approach, a court has the power to impose joint and several liability upon a defendant who cannot prove its contribution to an injury, but it also has the discretion to apportion damages in such a situation according to the "Gore factors":

(i) the ability of the parties to demonstrate that their contribution to a discharge[,] release or disposal of a hazardous waste can be distinguished;

(ii) the amount of the hazardous waste involved;

(iii) the degree of toxicity of the hazardous waste involved;

(iv) the degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of the hazardous waste;

(v) the degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste; and

(vi) the degree of cooperation by the parties with Federal, State, or local officials to prevent any harm to the public health or the environment.

Id. at 1256. The A & F Materials court stated that its moderate approach would promote fairness by allowing courts to be sensitive to the inherent unfairness of imposing joint and several liability on minor contributors, and to make rational distinctions based on such factors as the amount and toxicity of a particular defendant's contribution to a waste site. Id. at 1257.

Your attorney cautions you however to beware of those case which have held that joint and several liability is appropriate under CERCLA. In United States v. Ottati & Goss, Inc., 630 F.Supp. 1361 (D.N.H. 1988), operators of drum reconditioning businesses, property owners, and generators of wastes contained in the drums that were sent to the site for reconditioning were sued by U.S. EPA for the cost of the cleanup. The evidence in the Ottati case showed that chemical substances leaked or spilled from drums and were mixed together. The defendants proved approximately how many drums each brought to the site. However, the court nevertheless imposed joint and several liability, because "the exact amount or quantity of deleterious chemicals or other noxious matter [could not] be pinpointed for as to each defendant[, and] [t]he resulting proportionate harm to surface and groundwater [could not] be proportioned with any degree of accuracy as to each individual defendant." Id. at 1396.

A similar situation existed in O'Neil v. Picillo, 883 F.2d 176 (1st Cir. 1989). The site at issue in O'Neil was a Rhode Island pig farm that had been used as a waste disposal site. The site was described as having "massive trenches and pits 'filled with free-flowing, multi-colored, pungent liquid wastes' and thousands of 'dented and corroded drums containing a veritable potpourri of toxic fluids.'" Id. at 177. The defendants argued that it was possible to apportion the removal costs, because there was evidence of the total number of barrels excavated during each phase of the clean-up, the number of barrels in each phase attributable to them, and the cost of each phase. Id. at 181. There was testimony that, of the approximately 10,000 barrels excavated, only 300-400 could be attributable to a particular defendant. Id. at 182. The court concluded that because most of the waste could not be identified, and the defendants had the burden of accounting for the uncertainty, the imposition of joint and several liability was appropriate.

Your attorney advises you that since the silver placed into the groundwater is much less toxic than the chromium, and since the silver is a fingerprint to your business, and the chromium is a fingerprint to Chromers, Inc., there is a reasonable basis for apportioning liability. Furthermore, since the cost of the cleanup is being dictated by the chromium and not the silver, under the moderate approach or the Alcan Approach, your share of the cleanup cost would be significantly less than Chromers, Inc. Therefore, your attorney advises you to fight any attempt by U.S. EPA to impose joint and several liability for the site on your company. Accordingly, your attorney suggests that your company should only pay at most 10% of the cost of the cleanup as your fair share under the Chem-Dyne approach. Under the Alcan approach, your company should pay none of the costs of the cleanup since the chromium caused the entire harm. Under the moderate approach, your attorney explains that your fair share should also be no more than ten percent when weighing the equities of this case.

You are amazed, but you have a question. You ask your attorney who pays for the cleanup if Chromers, Inc. is out of business. Your attorney looks off into the distance, and explains that the government would have to fund Chromers, Inc.'s share. "Therefore," says your attorney, "I guess we all do."

I always advise clients not to give up hope in CERCLA cases as to joint and several liability, even when there are bankrupt defendants involved. Although the case law is not entirely uniform, certain basic principles emerge. First, joint and several liability is not mandated under CERCLA; Congress intended that the federal courts impose joint and several liability only in appropriate cases. If your company can show that you contributed little or nothing to the contamination, and the cost of cleaning up the amount you contributed will be little or nothing, you have a very good argument that you should pay exactly little or nothing.

You are the president and majority shareholder of Painters, Inc., a custom painting company. You started the company in your garage, and quickly relocated to a larger facility where you accept work from manufacturers for custom paint finishing. Because of the continued success of your company, you decided to expand again.

Working through a commercial real estate broker, you locate two buildings on a piece of property formerly owned by a dairy which went bankrupt. The building on the south side of the site was the former ice cream plant, and the building on the north side housed the former milk plant. The two buildings are very close to each other, separated only by an alley. The closing on the property goes smoothly and you are the proud owner of a new location for your paint facility.

The property is much larger than you need, but through the same real estate broker that helped you acquire the property, you arrange to sell the ice cream plant to another company which intends to use the facility for the production of frozen yogurt. Before the sale of the property, the purchaser of the ice cream plant asks if you would mind moving two drums which are partially filled with an unknown, sweet-smelling substance located on the south side of the alley. If you cannot get it done, the buyer states that he will simply have the drums disposed of properly. You do not know what the contents of the drums could be, but you cannot imagine that the contents of the drums could be hazardous given that the building housed an ice cream plant, so you agree to move the drums to your side, out of the buyer's way.

It has been three years since the drums were moved, and you are comfortably settled into your new location doing an even better business than you had anticipated. Your neighbor who owns the frozen yogurt plant seems to be doing well and you have become friends. Recently, however, he notifies you that as part of a refinancing plan for his business, he had to test the groundwater under his property for contamination, and he found extremely high levels of pesticides in the water. You explain that you will cooperate with the investigation, but you have never used pesticides on your facility, so you could not possibly be involved with the release.

A month later, representatives of your state EPA organization show up and request permission to drill groundwater wells and take soil samples on your site. The representatives inform you that the purpose of the sampling and wells is to determine from where the pesticide in the groundwater originates. You allow the EPA representatives to sample and to install the wells. About a month after the sampling and well installation, EPA representatives inform you that they want to meet with you. At the meeting, EPA representatives inform you that the source of the pesticide in the groundwater is the two corroded and leaking drums from the alley.

The EPA representative asks how the drums became located on your property. You explain to the EPA representative that the bankrupt dairy abandoned the drums on the property now owned by the frozen yogurt plant. You explain that you moved the drums onto your property when the current owner asked you to move the abandoned drums out of his way before his acquisition of the real estate. This, you explain, was your only contact with the drums, and you certainly had no idea that the dairy had abandoned pesticides on the property.

About a month later, you receive a notification from EPA that you are being held responsible for the cost of removing the drums, excavating the soils from the alley, and removing the contamination from the groundwater, all pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675. EPA claims that you are a responsible person because you disposed of hazardous substances at your property, namely pesticides. You immediately contact your attorney for environmental matters. You know that EPA must be mistaken, because you never improperly disposed of anything. Your attorney informs you that he will discuss the matter with EPA, perform the necessary research, and advise you of the accuracy of EPA's position. About a week later, your attorney provides you with the following analysis.

To hold you responsible for CERCLA liability, EPA must prove that you are a "responsible party" as defined by 42 U.S.C. § 9607(a)(1)-(4) which states:

[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section --

(1) the owner and operator of a . . . facility,

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, . . . of hazardous substances owned or possessed by such person, by any other party or entity, at any facility . . . owned or operated by another party or entity and containing such hazardous substances, . . .

(4) . . . [is a responsible party].

For purposes of CERCLA, "disposal" is defined as:

[t]he discharge, deposit, injection, dumping, spilling, leaking, or placing of any . . . hazardous waste into or on any land . . . so that such . . . hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.

42 U.S.C. § 6903(3).

In your case, you ordered your employees to move the drums, later found to contain hazardous substances, from one location to another on the site while you owned the property. Under a fact pattern almost identical to this one, the court held in New York v. Almy Brothers, 866 F. Supp. 668 (N.D. N.Y., 1994), that simply moving drums from one location to another, even when the person who moved the drums was not the person who abandoned the drums, was enough to constitute "disposal" for purposes of CERCLA liability. In this case, your attorney explains, the court is likely to hold that you disposed of hazardous substances when you relocated the drums in the alleyway, or arranged for such relocation, so that the drums would not interfere with the new owner's activities. As the court in Almy Brothers stated, "[I]t is irrelevant whether or not the movement of the drums itself resulted in a release. The [defendants] disposed of these drums when they left them in the alleyway and allowed them to deteriorate in such a way that the chemicals they contained 'might' enter the environment."

Your attorney explains that courts have struggled with CERCLA's provisions to impose liability on what would otherwise seem like innocent people. The court's justify their holdings by citing to legislative history to find that CERCLA's fundamental goal is "overwhelmingly remedial" and, on that basis, interpret its provisions liberally in favor of liability. United States v. Fleet Factors Corp., 821 F. Supp. 707, 712 (S.D. Ga. 1993).

In Fleet Factors, the defendant argued that it was not responsible for damages caused by drums containing hazardous wastes which were on the property before its ownership. The court in Fleet Factors held that "[d]isposal may occur even though the potentially liable party did not introduce the disposed of substances to the site." CERCLA's definition of "disposal" expressly encompasses the "placing of any . . . hazardous waste . . . on any land." 42 U.S.C. § 69033(3) [as incorporated into CERCLA by 42 U.S.C. § 9601(29)].

You ask your attorney if you could argue that nothing you did "caused" the release of the hazardous substances into the environment. You simply moved the drums from one side of the alley to the other. Your attorney explains that the courts have ruled that an owner may not avoid liability by ". . . standing idle while an environmental hazard festers on his property." Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 845 (4th Cir. 1992).. As the Nurad court held "[t]he trigger to liability under § 9607(a)(2) is ownership or operation of a facility at the time of disposal, not culpability or responsibility for the contamination." Thus, the Nurad court concluded that "§ 9607(a)(2) imposes liability not only for active involvement in the dumping or placing of hazardous waste at the facility, but [also] for ownership of the facility at a time that hazardous waste was spilling or leaking." Nurad, 966 F.2d at 846.

Your attorney explains that had the drums been left on the south side of the alley, where they were originally abandoned by the dairy, liability probably would not have attached to you. Because the drums were not leaking at the time of the sale of the ice cream plant, you would have neither owned the property at the time of disposal, nor would you have been the party doing the disposal. However, at least for purposes of CERCLA liability, since you owned the property onto which the pesticide leaked after you moved the drums, the courts will likely hold you liable since, according to the court, you "disposed" of the material.

My recommendation to clients is never acquire property that has drums of anything located on it, leaking or not. Insist that the prior owner remove the drums before you acquire title. Never store mystery material with the expectation that it is not hazardous. If it turns out to be a hazardous substance, and it is leaking onto your property, chances are a court will find that you are somehow liable for its cleanup if it leaks into the environment. In this case, something as simple as moving the drums from the south side of the alley to the north side of the alley constituted disposal for this unlucky owner. The courts are stretching the CERCLA definition of "responsible party" to attach liability to even a broader spectrum of people and companies. The more creative the courts, the more cautious industry must become to avoid this web of liability. 

Your grandfather started a family business almost 80 years ago called Coaters, Inc. Although much more automated and modernized, the company still manufactures the same products, using the same chemicals as when your grandfather founded the company. Forty years ago, your father inherited the business from your grandfather. In 1975, your father moved the business to a new location. Six years ago, you inherited the business from your father after working for the business all of your adult life. Before your father passed away, you had to prove yourself capable of operating the business by being responsible for each major division, including environmental compliance.

The plant is currently located on a 42 acre parcel of land owned by the corporation. However, the land where the corporation was founded by your grandfather was still in your father's name at the time of his death, and you inherited this land also. You inherited the corporation by receiving all the stock that your father owned in the company. The real estate on which the company had formerly operated was transferred directly to your name from your father's estate since it was not held by the corporation.

Recently, you learned that the company disposed of hazardous wastes at its former location before you inherited the property. From at least 1930 through 1970, the company disposed of spent solvents used in the company's coating operations in an old company owned and operated landfill on the property. You were totally unaware of the company's prior disposal methods at the time you inherited the property and the business. The municipal water company discovered the hazardous waste landfill on your property when solvents started showing up in the city's water wells located approximately one mile away from the property. After an investigation, U.S. EPA traced the plume of contamination in the groundwater back to the former company location. U.S. EPA has notified you that your company and you personally are responsible for the cost of remediating the contamination of the groundwater emanating from the old company location.

When U.S. EPA notified you of the contamination emanating from your property, you launched an investigation into the origin of the contamination. You interviewed your oldest employees and learned of the prior disposal practices. You learned through reviewing old corporate documents that the company operated the landfill on the former location until 1975, just before the Resource Conservation and Recovery Act (RCRA) made such private landfills illegal. Before RCRA's implementation, the company discontinued the landfill operation, and until U.S. EPA notified you and the company, the landfill was for the most part simply forgotten.

Now, U.S. EPA wants your company and you personally to pay for the remediation. You understand how the corporation might be liable for the release since the company placed the wastes into the landfill. The U.S. EPA's assertion that you could be personally liable for the release is confusing. All the company's solvent disposal activities on the property stopped over twenty years ago, long before you became affiliated with the company, and long before you inherited the property. You believe that you are innocent of any wrongdoing, and therefore, you intend to fight U.S. EPA's assertion that you are personally liable for the contamination.

You contact an environmental attorney who explains that you may be liable for part of the remediation. Your attorney explains that in the event of a release or threatened release of a hazardous substance, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) states that owners of property where such substances have been "deposited, stored, disposed of, or placed, or otherwise come to be located" are strictly liable for the costs of response. 42 U.S.C. § 9607. This strict liability provision caused many inequitable results to landowners who had not been involved in hazardous substance disposal activities. In response, as part of the 1986 Superfund Amendment and Reauthorization Act (SARA), Congress provided an additional statutory exemption from CERCLA liability: Congress passed the so-called "innocent landowner" exemption to give landowners a defense to the harsh liability provisions of Superfund. However, to qualify as an innocent landowner, a person must have acquired the property after the disposal of hazardous substances at the property. 42 U.S.C. § 9601(35)(A). Furthermore, the person asserting the innocent landowner defense must also establish by a "preponderance of the evidence" that at the time he acquired title to the property, whether by purchase or inheritance, he did not know, nor did he have reason to know of the disposal of any hazardous substances on the property. 42 U.S.C. § 9601(35(A)(i) and (iii).

You explain to your attorney that this is exactly what happened to you. You inherited the property with no knowledge of the prior disposal of wastes on the property. Therefore, you believe that the government should not be able to hold you personally liable for the contamination. However, your attorney explains that for the defense to be applicable, you must also establish, by a "preponderance of the evidence," that at the time you acquired title to the property, you "must have undertaken, at the time of acquisition, all appropriate inquiry into the previous ownership and uses of the property, consistent with good commercial or customary practice in an effort to minimize liability." 42 U.S.C. § 9601(35)(B). Congress further directed the court to "take into account any specialized knowledge or experience on the part of the defendant, the relationship of the purchase price to the value of the property if uncontaminated, commonly known or reasonably ascertainable information about the property, the obviousness of the presence or likely presence of contamination at the property, and the ability to detect such contamination by appropriate inspection." 42 U.S.C. § 9601(35)(B). Your attorney further explains that the "all appropriate inquiry" requirement is applicable to inherited property. When passing the law, the Congressional Conference Committee stated:

[T]hose who acquire property through inheritance or bequest without knowledge may rely on this section if they engage in a reasonable inquiry, but they need not be held to the same standard as those who acquire property as part of a commercial or private transaction, and those who acquire property by inheritance without knowing of the inheritance shall not be liable, if they satisfy the remaining requirements of section 107(b)(3). (emphasis added)

Conference Committee Report, pp. 187-188.

Your attorney explains to you that it will be difficult, if not impossible, for you to argue under 42 U.S.C. § 9601(35)(B), that you should not be liable, even though you inherited the property without knowledge of the contamination. At the time you inherited the property, you possessed specialized knowledge of the environmental laws and regulations because of your employment with the company as its environmental compliance officer. You performed absolutely no investigation of the property even though you knew of the property's prior industrial usage. Furthermore, you knew of the types of hazardous substances being used on the property, by virtue of the fact that those same hazardous substances are being used by the company today. Your attorney tells you quite frankly, you never should have taken title to the property. By doing so, under CERCLA, with the knowledge that you possessed and the lack of investigative effort done by you before acquiring title, you also acquired liability for the remediation of the property.

You ask your attorney if this means that your company will have to pay the entire amount for the remediation. Your attorney informs you that your company will not have to pay for the entire remediation -- you and your company will have to pay for the entire remediation. Since the you personally own the property, if the remediation bankrupts your company, U.S. EPA will require you to use your own personal assets to continue funding the remediation. Simply put, your family business, everything you own, and everything you ever worked for is at risk of being lost because you inherited a contaminated piece of property.

My advice to clients is to be careful with environmentally impaired property when doing estate planning. In this example, if the company had owned the contaminated property when the father died, it would have been much more difficult, if not impossible, for the U.S. EPA to reach the son's personal assets. Do not allow yourself or someone you love to become the unwilling heir of contaminated property. If you own contaminated property, have your attorney evaluate your options for limiting the risk to those you leave behind. Furthermore, just because someone leaves you something upon death, does not mean that you are required to take title. If you inherit property that could have environmental problems, at a minimum, you must have an environmental consultant perform an evaluation of the property to the extent necessary based upon the property's prior history and use. I have advised clients on multiple occasions to refuse to accept real estate with environmental problems from a loving person who has died -- or maybe the person who died was not a "loving" person, and I prevented the dead person from having the last laugh at his enemy's expense.

Your father and mother were the owners of Trusted Plating. Trusted Plating has been operating as a plating company since the 1940's. Trusted Plating has never been a major company, but it has provided your parents with a comfortable living, and it put you through business school. After graduation, you went to work for a national bank, and have been very successful at your chosen career.

Twenty-five years ago, your father died, and as the businessman of the family, you were the executor of your father's estate. Your father and mother, as part of an estate-planning program, set up trusts for the purpose of avoiding estate taxes. Upon your father's death, your father's estate was put into a trust for the befit of your mother. You were named the trustee under the trust, and you are now responsible for managing the assets that were put into the trust for your mother's benefit. The assets placed into the trust included the family business, Trusted Plating, and the real estate on which it operates. The trust that your father created provided that money from the trust was to be given to your mother as needed, but the trust assets were to be administered by you, the trustee. You turn out to be an amazing businessman. You converted six hundred thousand dollars in assets into over eight million dollars in assets. Everything is going smoothly, until yesterday.

Yesterday, you were notified that high levels of chromium and arsenic were detected in the public drinking water wells approximately one mile from your facility. U.S. EPA wanted to meet with you regarding past activities on the Trusted Plating property. You agree to a meeting with U.S. EPA, and a tour of the facility is undertaken. While touring the facility, you advise U.S. EPA that to save money on disposal costs, you authorized the burial of sludge on the property during 1974, 1975 and part of 1976. You explain to U.S. EPA representatives that as soon as this type of disposal became illegal under the Resource Conservation and Recovery Act (RCRA) 42 U.S.C. § 6901, et seq., you stopped the sludge disposal immediately. U.S. EPA then requests access to the site for purposes of determining the extent of any remediation necessary to eliminate the source of the groundwater contamination. You agree to provide the access requested, and U.S. EPA begins testing with the understanding that the cost of testing will be reimbursed from the trust assets.

Six months later, you meet with U.S. EPA again. At the meeting, U.S. EPA explains that the remediation necessary to protect human health and the environment will be extensive and costly. The total cost of the remediation required by U.S. EPA will be in the neighborhood of twelve million dollars. You explain to U.S. EPA that there is no way the assets of the business could fund such a remediation. U.S. EPA asks you to list the assets held in trust. You provide a detailed listing of the trust assets to U.S. EPA. You explain to U.S. EPA that you have administered the trust for your mother during the last ten years, and that you took a very small company and turned it into over eight million dollars in assets. However, you realize that the assets are gone now, and you thank goodness that your father separated the company from the rest of your mother's assets by putting it into a trust upon his death. U.S. EPA asks how you were able to grow the company to eight million dollars in trust assets. You proudly explain that as trustee, you personally were involved in the administration of the trust and the operation of the business. U.S. EPA then announces that you will personally have to pay for any amounts not covered by the trust for the remediation. You explain to U.S. EPA that you are not about to pay personally for the cleanup with your own money. U.S. EPA suggests otherwise, and you suggest that it is time to get the lawyers involved.

You contact an environmental attorney, explain that you are the trustee of the assets in a trust, and that U.S. EPA wants you to pay for cleaning up property where your only interest was to be the trustee. You explain to your environmental attorney that you have never taken a dime out of the company or out of the trust. You do not see how U.S. EPA could expect you to use your personal assets to remediate the trust property. You ask your environmental attorney to explain how you could possibly be held responsible for a remediation when you were only the trustee of the property.

Your environmental attorney explains that trustees face possible liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675, because, as holders of legal title to property, they may be "owners" or "operators" of CERCLA facilities, 42 U.S.C § 9607(a)(1), (2). You ask your attorney to explain how you could be considered an "owner" or "operator" when you were simply the trustee.

Your attorney explains that a trust is used for ownership of property in which the legal and beneficial interests in the property are separated: The trustee holds legal title to the property for the benefit of the beneficiary. Your mother, who is the beneficiary of the trust property, has no legal ownership of the trust property. This is why separating an estate avoids certain estate taxes, but that is not what is important to U.S. EPA. What is important to U.S. EPA is who is the "owner" or "operator" of the trust assets for CERCLA purposes. Trustees are liable for obligations incurred in the administration of a trust to the same extent as if the property were held free of trust. Restatement (Second) Of Trusts § 261 (1959). Consistent with this, trustees may be held personally responsible for liabilities committed in the administration of a trust. Id. § 264. The rationale for holding trustees liable is essentially that because the trustee is acting as the representative of the trust, the trustee is responsible for his or her conduct with respect to the administration of the trust. The trustee's liability attaches regardless of the fault or lack of fault of the trustee.

You give the environmental attorney a copy of the document that created the trust and ask him if the provision in the trust agreement regarding indemnification would protect you. Your environmental attorney explains that although ordinarily the trustee may obtain indemnification from trust assets for acts within his or her official capacity, if the assets of the trust are insufficient, the trustee's personal assets can still be attached to pay for the liability.

Your environmental attorney explains that if the trustee merely held title to the trust assets, the trust assets only would be used for purposes of paying for the remediation. However, when the trustee has power under the particular trust instrument to control the uses of the trust property, and the trustee allowed disposal of hazardous substances, he or she is more than a mere titleholder and the trustee's liability extends beyond the trust assets. Thus, your environmental attorney explains that since you were responsible for administering the trust, which included overseeing the operation of Trusted Plating during 1974, 1975, and 1976 when the disposal occurred, U.S. EPA can legally require you to pay personally to remediate the property.

You are astounded. You ask your environmental attorney if it would be possible to make U.S. EPA get the money from your eighty-six year old mother. After all, she received all the income from the trust; you were only the trustee because your father wanted you to take care of the business to provide for your mother. Your attorney explains that since your mother neither owned nor operated the trust during the time when disposal occurred, your mother will not have any liability, even though millions of dollars were given to her out of the trust.

You look at your environmental attorney, and with a tear in your eye, you tell him how your father never hurt you when he was alive. Who ever thought that twenty five years after he died, something he did would hurt you so much?

There is very little case law regarding what action U.S. EPA will take with respect to CERCLA liability of a trustee. However, most of the case law holds a trustee individually liable as an "operator" if the trustee takes an active role in administering trust assets during disposal activities. Therefore, with respect to CERCLA liability, the crucial question for trustees is: Do you have the authority to control the use of the trust property, or do you merely hold title? The difference in the answers to this question could represent a significant difference in potential liability.

As with any legal matter, you should always consult with your attorney. The above information, while deemed accurate by the author, should not be relied upon. Each set of facts and circumstances will be different and may lead to a different legal conclusion.

Mike Murphy - PLEASE NOTE: As a follow-up to last month's article, the following might be inserted as a sidebar/follow up. You decide.

The Supreme Court in Steel Company, Aka Chicago Steel And Pick- Ling Company, Petitioner V. Citizens For A Better Environment (Case No. 96-643), decided March 4, 1998 confirmed and upheld last month's article on EPCRA violations and citizen suits. The Supreme Court ruled that wholly past violations of EPCRA do not subject the violator to citizen suit liability. The opinion stated, "[W]e must conclude that respondent lacks standing to maintain this suit, and that we and the lower courts lack jurisdiction to entertain it. However desirable prompt resolution of the merits EPCRA question may be, it is not as important as observing the constitutional limits set upon courts in our system of separated powers. EPCRA will have to await another day. Justice Stevens, in a well-written concurring opinion stated "[B]ecause EPCRA, properly construed, does not confer jurisdiction over citizen suits for wholly past violations, the Court should leave the constitutional question for another day."

In 1975, your company, Wishful Platers, Inc. bought a two hundred acre parcel of industrial property on which you hoped to place a new factory someday. In 1985, Wishful Platers sold the property to Anchor Corporation. Although you had hoped to develop the property, in fact you never did anything except pay taxes on the land.

Beginning in 1989, Anchor had the property tested to determine whether hazardous chemicals contaminated the property. Those tests indicated that the property was contaminated, principally by a degreasing agent known as perchloroethylene (PCE). Under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), PCE is a listed hazardous substance. See 40 C.F.R. § 302.4. In 1992, U.S. EPA forced the current owner of the property, Anchor, to begin an extensive cleanup of the site.

Since Anchor did not contaminate the site, Anchor researched the property's prior ownership and control and determined the following: (1) prior to 1964, the property was undeveloped farm land; (2) from 1961 to April 1964, the property was developed and owned by Outta Business, Inc.; (2) from April 1964 to August 1974, the property was owned, operated and contaminated by Gonfor Good Industries, Inc.; (3) from August 1974 until July 1975, the property was held by a trustee of the Bankruptcy Court; and (4) in July 1975, your company purchased the property from the bankruptcy proceedings of Gonfor Good Industries. Gonfor Good Industries and Outta Business are no longer in existence.

Yesterday, Anchor sued your company, Wishful Platers, alleging that your company is partially liable for the costs that Anchor had incurred and would incur to assess and cleanup the site under CERCLA. You called your environmental attorney and explained to him that your company had been sued. You meet with your attorney and explain to him that your company never released, spilled, disposed or otherwise caused any hazardous substances to be released onto the property while Wishful Platers held title to the property. Your company only owned the property -- the same thing that Anchor did with the property. The only difference is that the contamination was discovered while Anchor owned the property. You tell your lawyer that since your company is in the same position as Anchor, you know that you are liable for part of the cost of the remediation and that you simply want to negotiate a quick and inexpensive settlement. You immediately tell your attorney to offer to pay for one half of the cost of the cleanup.

Your attorney advises you not to be so quick to spend your money. Your attorney advises you that you have a very viable defense to any lawsuit brought by Anchor against your company. You ask your attorney to explain how Anchor could be liable under CERCLA for the cost of the cleanup and your company would not. Neither Company disposed of the wastes on the site, both companies owned the property after it was contaminated, and U.S. EPA has already found that Anchor had to perform a cleanup.

Your attorney explains that under CERCLA 's liability section, 42 U.S.C. § 9607(a), a plaintiff makes a prima facie case by establishing that (1) the defendant is an owner or operator of the property, and thus, a responsible party under section 9607(a), (2) the site is a "facility" as defined in section 9601(9), (3) there has been a release or there is a threatened release of hazardous substances, (4) the plaintiff has incurred costs in response to the release or threatened release, and (5) the response costs conform to the national contingency plan. B.F. Goodrich v. Betkoski, 99F.3d 505, 514 (2d Cir. 1996). Your attorney explains that Anchor has proven every element of a prima facie case against your company with the exception of one. The only element at issue here is the first, whether Wishful Platers is a responsible party.

Under section 9607(a)(2) of CERCLA, a prior owner or operator is a responsible party if it controlled the site "at the time of disposal" of a hazardous substance. 42 U.S.C. § 9607(a)(2). CERCLA section 9601(29) adopts the definition of "disposal" from the Solid Waste Disposal Act, 42 U.S.C. § 6903(3), which states, in pertinent part, "[t]he term 'disposal' means the discharge, deposit, injection, dumping, spilling, leaking, or placing of any . . . hazardous waste into or on any land or water so that such . . .hazardous waste . . . may enter the environment." Accordingly, to make out a prima facie case, Anchor must establish that a spill, discharge, leak, etc., occurred at the time Wishful Platers controlled the site.

Anchor asserts that the hazardous chemicals found on the property continued to gradually spread underground (passive migration) while Wishful Platers owned and controlled the site. According to this theory of passive migration release of hazardous substances, Anchor argues that your company is liable for passive migration under CERCLA. Your attorney explains that while many companies have been found responsible under CERCLA because the company "owned" contaminated property at the time of a "release" of a "hazardous substance," recent court decisions have held that acquiring the property after the hazardous substances were released on the property, but before the hazardous substances are discovered on the property, will not impose liability under CERCLA.

The Third Circuit recently considered this same question, and after considering CERCLA's language, structure and purposes, the court held that prior owners are not liable under CERCLA for passive migration. United States v. CDMG Realty Co., 96 F.3d 706, 712-18 (3d Cir. 1996); see also Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 761-63 (5th Cir. 1994).

The third circuit reasoned that disposal is defined as "the discharge, deposit, injection, dumping, spilling, leaking, or placing" of hazardous chemicals so that they may enter the environment. 42 U.S.C. § 6903(3). The court concluded that none of these terms is commonly used to refer to the gradual spreading of hazardous chemicals already in the ground. CDMG Realty Co., 96 F.3d at 714.

Furthermore, the third circuit reasoned that current owners are liable if there has ever been a "release" of hazardous substances. 42 U.S.C. § 9607(a). Unlike the definition of disposal, release is defined to include "leaching,"(42 U.S.C. § 9601(22)), which is commonly used to describe passive migration, see CDMG Realty Co., 96 F.3d at 715 & n.4 (quoting several law journals and cases). The court held that since Congress used the term leaching in the definition of release demonstrates that Congress knew that passive migration occurred but decided that prior owners are not liable provided a release of "hazardous substances" did not occur during the ownership. Id.

In addition, the third circuit court reasoned that CERCLA provides an "innocent owner" defense. See 42 U.S.C. §§ 9607(b)(3), 9601(35); Westwood Pharmaceuticals v. National Fuel Gas Dist. Corp., 964 F.2d 85, 89-91 (2d Cir. 1992). To qualify for that defense, a defendant must establish that it acquired the site "after the disposal" of hazardous chemicals. 42 U.S.C. § 9601(35)(A). The third circuit court reasoned that if "disposal" included the gradual spreading of hazardous chemicals spilled before the defendant acquired the site, the innocent owner defense would hardly ever be available since spilled chemical rarely ever just stay in one place once released into the environment. CDMG Realty Co., 96 F.3d at 716. Congress would not intentionally create a useless defense. Thus, the third circuit interpreted the word "disposal" as limited to spilling, discharging, leaking, etc., and not to passive migration. Id.

The third circuit court in CDMG Realty Co. also relied on its conclusion that the innocent owner defense appeared to be unavailable to prior owners. See CDMG Realty Co., 96 F.3d at 716-17 (quoting 42 U.S.C. § 9601(35)(C), which provides the innocent owner defense and states: "[n]othing in this paragraph . . . shall diminish the liability of any previous owner"). The court reasoned: "if prior owners were liable because waste spread during their tenure . . . , prior owners would be in a significantly worse position than current owners: they would be liable for passive migration of waste" in circumstances where current owners could establish the innocent owner defense. Id. The court concluded that this fact indicated that disposal does not include passive migration. Id.

Finally, the CDMG Realty Co. Court reasoned that its interpretation was consistent with CERCLA policy. One of CERCLA's goals is "to force polluters to pay the cost associated with their pollution." CDMG Realty Co., 96 F.3d at 717; see also B.F. Goodrich, 99 F.3d at 514 (CERCLA's purposes include "assuring that those responsible for any damage, environmental harm, or injury from chemical poisons bear the costs of their actions"). If a person merely controlled a site on which hazardous chemicals have spread without that person's fault, that person is not a polluter and is not one upon whom CERCLA aims to impose liability.

You are amazed. You tell your attorney to defend Wishful Platers based upon the recent decisions out of the third circuit. Naturally, your attorney is pleased to comply.

Recent cases coming out of the circuit courts are more forgiving to prior owners and operators of a contaminated site for mere passive migration. I encourage past owners or past operators to be more aggressive in defending the passive migration case. The chain of title alone should not be connected to the Anchor that sinks your company.

You are the owner and founder of Clean Platers, Inc. You recently moved the company location to a twelve-acre parcel of ground that you purchased in 1993. You formerly operated the company on an eight-acre parcel of land purchased from a company called Tower Oil Company. Tower Oil Company was a local distributor of gasoline from your former location from 1951 through 1973. Tower Oil Company operated exclusively on your company's former location. Tower Oil Company would purchase refined petroleum products from other oil companies, store the refined petroleum products in above ground bulk storage tanks on site, and distribute the products to service stations in its service area.

Eventually, Tower Oil Company's share of the market declined to the point that the owner of Tower Oil Company decided to cease operations in 1973. In 1973, Tower Oil Company dismantled the tanks located on the property it owned, liquidated all of its other assets, and sold your company the real estate on which the tanks were formerly located. In 1993, your company expanded and needed a larger facility. It sold the eight-acre location where Tower Oil Company was formerly located to Stucko Industries, Inc. and purchased its current twelve-acre location two miles away.

In 1994, the local town of Clean Water detected high levels of benzene, toluene, ethyl benzene and xylene in the city water wells. The city of Clean Water performed a groundwater study and traced the contamination as coming from the former Tower Oil Company Property two miles away. Stucko Industries, Inc., the new owner of the former Tower Oil Company property, put a groundwater monitoring well on the property and found that a two-foot thick layer of gasoline is floating on top of the shallow groundwater under the property. Investigations revealed that the groundwater contamination is from your former property, but is unrelated to your former business. Investigations further reveal that your former location is heavily contaminated with gasoline from Tower Oil Company's operations and will require extensive efforts to remove the gasoline from the property and to protect the City of Clean Water's drinking water wells. Apparently, the source of the gasoline was the above ground bulk storage tanks used by Tower Oil Company during its twenty-two year ownership and operation of the property. Current estimates are that over three million gallons of gasoline are floating on the groundwater beneath your former location.

Stucko Industries, Inc. and the City of Clean Water approach you and demand that you pay for the cost of removing the gasoline contamination from the site. As the former owner and operator of the property, the City of Clean Water and the owner of Stucko Industries, Inc. demand that you pay for the cost of the removal. Since Tower Oil Company is out of business, and since you were on the property from 1973 until 1997, and since Stucko Industries, Inc. has only been on the site for a few months, the City of Clean Water and the owner of Stucko Industries, Inc. demand that you pay the entire cost of removal. However, in an attempt to be amicable, the owner of Stucko Industries, Inc. offers to pay five percent of the cost of removal and the City of Clean Water offers to pay five percent of the cost of removal. According to Stucko Industries, Inc. and the City of Clean Water, they are being generous.

Being in a cash flow crisis from your recent expansion, you decline the offer to pay for ninety percent of the cleanup, and the next thing you know, Stucko and the City of Clean Water are suing you. You were served yesterday with a complaint that names your company as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601, et seq.). Now you think that maybe you should have accepted the offer to pay only ninety percent of the cost of removing the gasoline from the property. You expect to pay more than ninety percent of the cost of removal plus legal expenses that go along with any lawsuit. Regardless, you decide to turn the defense over to an environmental attorney.

The environmental attorney that you contact asks you to bring in your documents and information on the property. You truthfully tell your attorney that you had no idea the property was contaminated with gasoline prior to selling it to Stucko, and you provide him with copies of all documentation showing what chemicals you kept on the property, and what information you had regarding the environmental condition of the property. Nothing indicates that you knew or should have known of the property's contaminated condition. You ask your attorney if there is any way to shift more of the liability to either Stucko or the City of Clean Water since you simply do not have the money to pay for such an extensive removal effort.

Your attorney asks you what percentage of the removal cost you would be willing to pay and still be happy. You explain that you would be happy if you could keep your company's share of the responsibility to less than one-third of the cost of the removal. Your attorney smiles sheepishly and says that you should be ecstatic then, because you will not have to pay for any of the cost of the removal. You are puzzled and ask for an explanation.

Your attorney explains that Stucko and the City of Clean Water are suing you under CERCLA due to releases of "hazardous substances" into the environment thereby entitling Stucko and the City of Clean Water to relief under the liability provisions of CERCLA § 107, 42 U.S.C. § 9607. However, in order for liability to exist under CERCLA, a "hazardous substance" or a "pollutant or contaminant" as defined in the statute must have been released. Section 9601(14) of 42 U.S.C. defines the term "hazardous substance." The term "hazardous substance" means:

1. any substance designated pursuant to section 311(b)(2)(A) of the Federal Water Pollution Control Act [33 USCS § 1321(b)(2)(A)],
2. any element, compound, mixture, solution, or substance designated pursuant to section 102 of this Act [42 USCS § 9602],
3. any hazardous waste having the characteristics identified under or listed pursuant to section 3001 of the Solid Waste Disposal Act [42 USCS § 6921] (but not including any waste the regulation of which under the Solid Waste Disposal Act [42 USCS §§ 6901 et seq.] has been suspended by Act of Congress),
4. any toxic pollutant listed under section 307(a) of the Federal Water Pollution Control Act [33 USCS § 1317(a)],
5. any hazardous air pollutant listed under section 112 of the Clean Air Act [42 USCS § 7412], and
6. any imminently hazardous chemical substance or mixture with respect to which the Administrator has taken action pursuant to section 7 of the Toxic Substances Control Act [15 USCS § 2606].

The term does not include petroleum, including crude oil or any fraction thereof which is not otherwise specifically listed or designated as a hazardous substance under subparagraphs (A) through (F) of this paragraph, and the term does not include natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas)

. (Emphasis added).

42 U.S.C. § 9601(14).

Section 9601(33) of 42 U.S.C. defines the term "pollutant or contaminant." The term "pollutant or contaminant" means:

. . . any element, substance, compound, or mixture, including disease-causing agents, which after release into the environment and upon exposure, ingestion, inhalation, or assimilation into any organism, either directly from the environment or indirectly by ingestion through food chains, will or may reasonably be anticipated to cause death, disease, behavioral abnormalities, cancer, genetic mutation, physiological malfunctions (including malfunctions in reproduction) or physical deformations, in such organisms or their offspring; except that the term "pollutant or contaminant" shall not include petroleum, including crude oil or any fraction thereof which is not otherwise specifically listed or designated as a hazardous substance under subparagraphs (A) through (F) of paragraph (14) and shall not include natural gas, liquefied natural gas, or synthetic gas of pipeline quality (or mixtures of natural gas and such synthetic gas). (Emphasis added).

42 U.S.C. § 9601(33).

Your attorney explains that the underlined portions of the above definitions are more commonly referred to as CERCLA's "Petroleum Exclusion." According to your attorney, the above-cited definitions unequivocally show Congress' intent to exclude petroleum products from the liability provisions of CERCLA. "What Congress means, and what the Courts hold are two different things," you tell your attorney. You ask, "How have the Court's interpreted the statute?"

Your attorney explains that in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Supreme Court of the United States proclaimed, "If the intent of Congress is clear, that is the end of the matter; for the court . . . must give effect to the unambiguously expressed intent of Congress." Id. at 842-843. On this premise the lead case on the petroleum exclusion was Wilshire Westwood Associates v. Atlantic Richfield Company, 881 F.2d 801 (9^th Cir. 1989). In Wilshire, the Ninth Circuit Court of Appeals faced the issue of whether the presence of benzene, toluene, ethyl benzene, and xylene in the groundwater, all individually listed hazardous substances under CERCLA and components of gasoline, could be considered eligible for the Petroleum Exclusion under CERCLA.

The Wilshire court noted that petroleum was a mixture of other chemicals, which if not a part of a petroleum product, would individually be considered "hazardous substances" or "pollutants or contaminants" under CERCLA. For example, the Wilshire court noted that benzene, toluene, ethyl benzene and xylene are all indigenous of crude oil. Id. At 803. The Wilshire court further recognized that if the petroleum exclusion was to have meaning, all of the "fractions" of petroleum, including these individual chemicals which would otherwise cause CERCLA liability to be imposed, must be excluded under CERCLA's petroleum exclusion.

You ask your attorney if U.S. EPA agrees with the court's interpretation of the petroleum exclusion. Your attorney explains that much of what the court in Wilshire relied upon in reaching its conclusion was based upon U.S. EPA documentation and interpretation. For example, U.S. EPA has stated that "EPA interprets the petroleum exclusion to apply to materials such as crude oil, petroleum feedstocks, and refined petroleum products, even if a specifically listed or designated hazardous substance is present in such products." 50 Fed. Reg. 13460 (April 4, 1985).

You are amazed. You ask your attorney what will happen next. Your attorney states that he will file a motion with the court to have you dismissed as a party from the lawsuit since a) you no longer own the property where the spill exists, b) there is no dispute that the gasoline was released by someone else, and c) gasoline is not a "hazardous substance" or "pollutant or contaminant" under CERCLA subjecting a former land owner to liability because of the petroleum exclusion found in the statute. You are amazed that the petroleum exclusion in CERCLA exists, and it actually prevented you from incurring liability.

Whenever a party faces CERCLA liability, it is important to understand what CERCLA covers and does not cover. The above facts were taken from a case that I personally handled several years ago. In that case, the defendant avoided CERCLA liability by proving that the chemicals released at the site were from petroleum products. Furthermore, since the releases were not attributable to my client who had already sold the property, no liability attached, except for legal fees - which were gladly paid under the circumstances.

Prior to 1986, your company, Southern Platers, Incorporated (Southern) operated a chrome plating facility in Tampa, Florida. You used tetrachloroethylene, commonly referred to as perchlorethylene or "perc" as a solvent to degrease parts at your facility before switching to unchlorinated solvents. The main perc supply at the site was held in a one thousand gallon above ground storage tank. The perc at the site would be transferred to 55-gallon drums on site, which were moved around at the site using forklifts.

In early 1988, your local environmental enforcement agency found large levels of PERC contamination in the site's groundwater. You immediately hired an environmental engineering company to test for contamination. Tests coupled with a review of records and further investigation revealed that four PERC releases had occurred at the site: in September 1978, a truck backed into and ruptured a 55-gallon drum of perc on a loading dock. This incident caused about 30 gallons of perc to be released into the soil at the plant. In August 1982, a 55-gallon drum of perc was pierced with the fork on a fork lift and approximately twenty gallons of perc spilled into the soil. In July of 1983, a transfer hose ruptured while filling a 55-gallon drum from the above ground storage tank spilling about ten gallons of perc. Then came the release that caused your company to stop using perc altogether. In May of 1985, while transfering a 55-gallon drum of perc from the storage tank, a forklift operator pierced the side of the perc storage tank just four inches from the bottom. Nearly eight hundred gallons of perc spilled into the soil. It is estimated that your company recovered less than half of the spilled perc.

After the initial determination that a large amount of perc had to be remediated from the soil and groundwater, your company entered into a consent order with the Florida Department of Environmental Regulation in August 1994 to remediate the perc contaminated soil and groundwater. However, the cost of the remediation is expected to cost millions. You would like to shift the cost over to your insurance carriers, if possible, but you are unsure of whether or not your insurance companies are required to provide coverage under these circumstances.

After weeks and months of searching through old boxes of records, your company finally locates two insurance policies that were applicable to your business at the time of the perc spills. At the time of the spills, your company held comprehensive general liability ("CGL") insurance under Old Hampshire Insurance Company, and occurrence-based umbrella liability insurance under Total Insurance Company ("Total"). You notified Old Hampshire of the environmental situation and asked that each accept responsibility for the environmental contamination. Both insurance companies refused to defend or indemnify your company. You expected that there was nothing that could be done. "If the insurance company won't pay, the insurance company won't pay," you said to your self.

However, just to be certain, you decided to ask your attorney if there exists any right to appeal an insurance company holding on this case. Your attorney reviews your old insurance policies that you fortunately found in your files and advises you that no coverage was provided for pollution unless the pollution was "sudden and accidental." However, your attorney advises you that the area of insurance coverage for environmental liability is still an unsettled area of the law. After reviewing the facts behind the four perc releases at your facility, and after reviewing your insurance policies in detail, your attorney advises you that the four identified perc releases were "sudden and accidental" under your policy. As a "sudden and accidental" occurrence, your company is entitled to collect its damages from the insurance company. You ask your attorney to explain.

Your attorney explains that your insurance companies define the term "occurrence," "sudden and accidental" and "pollution exclusion" as follows:

This "occurrence-based" policy defines the term "occurrence as:

an accident which takes place during the policy period, or that portion within the policy period of a continuous or repeated exposure to conditions, which causes personal injury, property damage ... neither expected nor intended by the insured.

The policy's pollution exclusion clause provides:

It is agreed that this policy does not apply to ... property damage arising out of the discharge, dispersal, release or escape of smoke, vapors ... toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land ...; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

Your attorney advises you that your insurance company does not deny that the four identified releases were sudden and accidental. However, the insurance company denies liability for the ongoing release of perc into the soil and groundwater that occurred for years after the sudden and accidental release. According to the insurance company's philosophy, the ongoing release, which of course caused most of the environmental harm, is not a covered event since the on going release lost its character as "sudden and accidental."

However, it is your attorney's opinion that since the four identified releases at your company were separate and distinct events which were not the result of day-to-day operations, the insurance company must provide coverage. Your attorney advises you that under Florida law, specifically Dimmitt Chevrolet, Inc. v. Southeastern Fidelity Insurance Corp., 636 So.2d 700 (Fla.1993), he believes that the discharge must be sudden and accidental, not the resulting environmental damage. Accordingly, your attorney believes that the insurance company must pay. You ask your attorney to explain his conclusion.

Your attorney explains that in Dimmitt, the Supreme Court of Florida construed a policy containing a similar pollution exclusion clause to mean that:

(1) basic coverage arises from the occurrence of unintended damages, but (2) such damages as arise from discharge of various pollutants are excluded from the basic coverage, except that (3) damages arising from the discharge of these pollutants will fall within the coverage of the policy where such discharge is sudden and accidental.

Dimmitt, 636 So.2d at 705 (emphasis added); see also St. Paul Fire and Marine Insurance v. Warwick Dyeing, 26 F.3d 1195, 1203 (1st Cir.1994) (pollution exclusion plainly refers to the discharge and not to the environmental damages themselves); Hartford Accident & Indemnity Co. v. United States Fidelity & Guaranty Co., 962 F.2d 1484, 1491 (10th Cir.1992) (the discharge must be sudden and accidental to qualify for coverage, not the pollution damage). Based on the holding in Dimmitt and the unambiguous terms in the policy issued by your insurance company, your attorney concludes that it is clear that the actual discharge, not the resulting damages or contamination, must be sudden and accidental in order to fall within the exception to the pollution exclusion clause.

You instruct your attorney to file suit against your insurance companies for breach of contract. Your attorney smiles and informs you that it would be his pleasure, especially when the laws of some states allow the attorneys to recover attorney fees from insurance companies for failing to provide legally required insurance coverage.

I always advise clients never to throw away old insurance policies. Often the most difficult part of claiming insurance coverage is showing that coverage ever existed. Occasionally, if coverage can be proven, without the policy, the exclusions cannot be determined. Insurance companies do not maintain a copy of old policies, and the burden of proving that coverage existed is on the person or company making the claim for coverage -- not with the insurance company. In the above example, only because the policies were discovered, and the exclusions were written in such a manner that "sudden and accidental" releases were covered could the company recover its remediation costs -- a savings to the company of millions of dollars. Without the policy, coverage could be impossible to prove, and the company would pay for the entire cost of the multimillion dollar remediation.

You are the Plant Manager for Coaters, Inc., an Ohio Corporation. Founded in 1963, your company prepares and coats a variety industrial equipment for its customers. Your operation uses different preparation techniques before coating depending on the particular coating application. Some equipment is sand blasted before coating, others are prepared with a solvent preparation, and still others are chemically prepared with an alkaline cleaning before coating. Your solvent preparation line requires an air permit for the discharge of volatile organic chemicals. Because your facility is in an ozone non-attainment area, your emission limits on the volatile organic chemicals are very strict. Operating at full production, your facility's air pollution control equipment is unable to keep your facility's emissions within the allowable limits issued by Ohio EPA to your company. You have decided to upgrade your facility to allow you to increase production while simultaneously reducing the total amount of volatile organic emissions from your facility. To you, this appears to be a win-win situation -- your company can increase its production by adding a new production facility while keeping EPA happy by decreasing the volatile organic emissions from the plant by upgrading the pollution control equipment.

You begin ordering equipment for your new air pollution control equipment and your new line of production. You determine where to place the equipment in your existing plant, and you have construction drawings prepared. Since you are going to be reducing the amount of volatile organic chemicals released from your facility while simultaneously increasing the production of your plant, you see no reason to bother EPA regarding the new equipment you are installing.

Soon, construction equipment begins arriving. Your old air pollution control equipment is dismantled, and sent off for scrap. Footers for the new production equipment are dug, and concrete is poured. All seems to be going smoothly when a state EPA inspector shows up unexpectedly at your facility. He asks what you are constructing, and you proudly explain the new production line and emissions control system that you are installing. You explain that the new system will allow you to increase production while simultaneously reducing air emissions. You also explain that your production will be shut down until the new system is installed since the old air pollution control system had to be dismantled before the installation of the new system.

The inspector asks to see your "Permit to Install," otherwise known as a PTI, for the new production system. With a confused look, you ask the inspector to explain his concern. You are not building a new plant, nor are you going to increase pollution. You are simply adding production capacity and updating the pollution control equipment required to operate your current production. At this point, the inspector states that he will have someone from enforcement contact you regarding the need for a PTI.

Nervous about your conversation with the inspector, you contact an environmental attorney to ask about the need for a PTI. Your attorney explains that the law in Ohio states:

"[N]o person shall cause, permit, or allow the installation of a new source or air pollutants . . . or cause, permit, or allow the modification of an air contaminant source . . . without first obtaining a permit to install from [Ohio EPA]" Ohio Admin. Code § 3745-31-02(A).

Your attorney explains that since your installation of the new production line will result in the "modification of an air contaminant source," Ohio EPA requires that you obtain a PTI prior to construction. Pursuant to a 1989 Internal Memorandum on PTI applications, for a new facility, Ohio EPA expects a company to obtain a PTI prior to "when the entity begins pouring concrete for the foundations for the structure." For an existing facility that is expanding, the entity must have a PTI from Ohio EPA prior to "when the entity starts pouring concrete for the foundation for the building expansion or for the foundation for any new equipment." To add equipment to an existing facility, an entity must have a PTI prior to "when the entity receives new equipment at the facility." Your attorney explains that your project involves the addition of equipment to an existing facility. Therefore, you would either need the PTI before receiving the equipment on site, or before pouring the footers for the foundation of the equipment, depending on whether Ohio EPA views your project as a physical addition to the plant, or a simple addition of equipment. To be safe, your attorney advises you that a PTI should be in hand before either pouring footers or bringing the equipment on site.

You ask your attorney how long it will take to push through the necessary paperwork for a PTI. Your attorney explains that the agency has 60 days to do a completeness review after Ohio EPA receives the application. Then, if Ohio EPA believes that your source is of such significance that public comments are required, you should allow at least an additional 6 to 8 months. You feel a sudden sickness in your stomach. Your plant is shut down, you have contractors on site with heavy equipment waiting to begin installing what you thought would be a benefit to the environment, and Ohio EPA may refuse to allow you to continue construction because you failed to realize that a PTI was necessary before construction began. You realize that this mistake could put you out of business, or at a minimum cost you a lot of money while your facility is shut down waiting for the necessary paperwork to be approved. To make things worse, your attorney explains that since you are requesting a PTI after construction began, the permit application fee charged by Ohio EPA is automatically doubled.

You explain to your attorney that you could easily be out of business if you cannot continue with construction. Under the circumstances, your attorney believes that you may qualify for a "Temporary Exemption" from the PTI requirements. Your attorney explains that Ohio Revised Code Section 3704.03(W) provides for exemptions from the requirements of a PTI where

"the applicant demonstrates that the source will be installed to comply with all applicable emission limits and will not adversely affect public health or safety or the environment and if [Ohio EPA] determines that such an action will avoid an unreasonable hardship on the owner or operator of the source."

You have to show Ohio EPA two things to receive a temporary exemption. First, you have to show that your new facility will comply with all the pollution control laws, and second, you have to prove that you will be "caught between a rock and a hard place" if you do not receive a temporary exemption. After some research, your attorney advises you that Ohio EPA has issued temporary exemptions from PTI requirements where people would be laid off if construction could not continue, or a company would go out of business if construction could not continue.

Your attorney explains that your situation would warrant a temporary exemption from Ohio EPA's PTI requirements to allow you to go forward with construction. Your new facility, even with its increased production capability will be in compliance with all environmental laws and will be emitting less volatile organic chemicals after the construction is complete. Your attorney places a few phone calls to Ohio EPA, and documents in writing with Ohio EPA your predicament. After assuring Ohio EPA that your new facility will comply with all environmental laws, you receive a temporary exemption from the PTI requirements. However, your attorney explains that you must still apply for a PTI while construction proceeds, and he reminds you that the application fee will be doubled.

You are forever grateful. Construction can proceed while your PTI application is pending. Your attorney then mentions that you should submit you application for a "Permit to Operate," otherwise known as a PTO, at the same time as the PTI application. You smile at your attorney and explain that you already have a PTO. Your attorney smiles nervously and says, "Not for your new system you don't." You suddenly realize, you have even more paperwork to do.

My advice to clients is not to be caught between a rock and hard place. Be aware of the PTI and PTO requirements before you begin construction. Ohio EPA has built into its regulations some leniency so that even if you forget the PTI application, you may get a temporary exemption. However, each state is different, and there is no guarantee that your construction will be allowed to proceed without the proper permits. Once your construction starts, knowingly proceeding without the proper permits puts you at risk that the project may never be allowed to operate, and puts you at risk for knowingly violating an environmental law -- a criminal offense.

You are the owner of a widget assembly plant called Nopaint Inc. Your facility exists in Ohio, but does business with manufacturers all over the United States. Your plant receives premanufactured parts from around the country and assembles the parts into a product ready for market. Your company is registered with Ohio EPA as a small quantity generator of hazardous waste, but requires no air permits or water permits for its production of assembled products.

Recently, a potential client contacts your company and asks you to be a subcontractor for him on a special government project. Your potential client wants you to assemble a special widget for him. However, the first step in the assembly of this particular widget requires that a part of the widget be painted. As a government subcontractor, your potential client explains that you must certify that your facility will be in compliance with all environmental laws. Your potential client explains that he has been looking for an assembler that can certify that its facility will comply with all applicable air pollution control laws and applicable air permit requirements during the painting and assembly. The potential client explains that three other companies have turned away the project in other states because none had an air permit that would have covered this project even though it requires the application of less than five gallons of paint per day. Provided that you can paint one small piece of the widget before it is assembled, you get the contract for assembling it.

The prospects of obtaining this contract are very exciting. Unfortunately, you do not have a coating applicator or an air permit. However, before telling the potential client that you too cannot take the job, you ask him to allow you to call him back after evaluating the capability of your facility. You call a supplier of coating applicator equipment and determine that the mechanical equipment necessary for doing the job is not that expensive, is immediately available, and can be constructed at your facility within a week. If you can get an air permit for the coating applicator, you are in business with this potential client. Your next step is to determine how difficult it will be to comply with Ohio's air pollution control laws and obtain an air permit in Ohio.

You call the Ohio Environmental Protection Agency and ask the person to whom you are transferred how difficult it will be to obtain an air permit. The person at Ohio EPA is very helpful, but not very encouraging. First, you will need a permit to install pursuant to section 3745-31-02 of the Ohio Administrative Code. According to Ohio EPA, you must obtain the permit to install before you can begin construction. The application for a permit to install can take several months for approval. You must also apply for and obtain a permit to operate pursuant to the requirements of section 3745-35-02 of the Ohio Administrative Code. The person from Ohio EPA asks if you would like to have an application for a permit to install and an application for a permit to operate sent to you so that the process can begin. You decline the offer knowing that your potential client cannot wait for months while Ohio EPA processes your requested air permits. You decide instead to call an environmental attorney to see if he has any ideas on how to speed the permit process along.

Your initial conversation with the attorney revolves around how to get an air permit from Ohio EPA on a "fast track" before you lose your potential client. Your attorney informs you of the same thing that the Ohio EPA representative stated. You will need several months to get a permit from the regulators, especially with the amount of work created for Ohio EPA by the new Title V program. Your attorney asks you if you are sure that you need an air permit. You respond that you assumed every painting operation in Ohio needed an air permit.

Surprisingly, your attorney informs you that this is not necessarily the case. Your attorney asks you to send him the Material Safety Data Sheet (MSDS) for the type of paint you will use. You immediately obtain a copy of the MSDS and fax it to your attorney. Using the MSDS, your attorney compares your proposed discharge to the air permit exemptions in the Ohio Revised Code and the Ohio Administrative Code. After checking on the status of the law, and verifying the amount of chemicals that will be released from the amount of paint you will be using every day, your attorney calls you back with good news. Ohio EPA will not require a permit to install for your new source of air pollution since it meets certain criteria found in the Ohio Administrative Code. Section 3745-15-03(kk) of the Ohio Administrative Code states that a permit to install is not needed for . . .

Coating applicators with properly designed and operated particulate control devices and venting systems that employ less than five gallons of only air-dried coating material in any one day provided that the applicators are:

(i) Not located in a nonattainment area for ozone,

(ii) Not subject to limits specified in or specifically exempted from rule 3745-21-09 of the Administrative Code,

(iii) Not subject to federal standards of performance for new stationary sources; and

(iv) Not located at a facility with actual emissions of twenty-five or more tons of volatile organic materials per year and are not subject to a standard under Title III of the Clean Air Act.

Since your facility does not exist in one of Ohio's ozone nonattainment areas, does not fall under any of the other exceptions, and will apply less than five gallons of paint per day, your attorney informs you that you need not obtain a permit to install. This is great news, but you still have the problem of obtaining a permit to operate an air contaminant source.

Your attorney explains that this also will not be a problem. The Legislature in Ohio provided an exemption for certain sources that are simply too small to require that the source obtain an air permit. Section 3704.011 of the Ohio Revised Code states that an "air contaminant source is exempt from this chapter and rules adopted under it if the emissions of particulate matter, nitrogen oxides, organic compounds, sulfur dioxide, carbon monoxide, lead, or any other air contaminant from that source do not exceed ten pounds per day . . . ." While there are exceptions to the exemption, your attorney informs you that your proposed coating applicator definitely will not need an air permit under Ohio's regulatory program. However, your attorney cautions you that because the coating applicator that you wish to install has the "potential to emit," as defined at 3745-15-05(A)(6) of the Ohio Administrative Code, more than ten pounds per day of air pollutants, you must maintain certain records for the exemption to be valid. Pursuant to Ohio Revised Code § 3704.011(C), you must "maintain records that are adequate to demonstrate that actual emissions have not exceeded ten pounds per day." Under Ohio's "De Minimis" air contaminant source exemption rule found in the Ohio Administrative Code at Section 3745-15-05(E), the owner or operator of the source must:

. . . maintain records that show that emissions of any air contaminant from the source did not exceed ten pounds per day on each day the source emitted air contaminants, and that the source in any one year did not emit more than one ton of hazardous air pollutants as defined in division (1) of section 3704.03 Of the Revised Code, and that the emissions from the source, in combination with similar air contaminant sources at the same facility, did not result in potential emissions of any air contaminant from the facility in excess of twenty-five tons during the preceding calendar year. All the following information, if applicable, shall be adequate to make that demonstration:

(1) A narrative description of how the emissions from the source were determined and maintained at or below the daily exemption level, and, for emissions of hazardous air pollutants, at or below the annual exemption level;

(2) A description of the air pollution control equipment used on the source and a statement that the source is not capable of operating without that pollution control equipment functioning;

(3) If air pollution control equipment is used, a copy of any report of the results of any emission test that was conducted following Ohio EPA approved methods, if applicable, or any other emission evaluation;

(4) A description of all production constraints required for the source to comply with the exemption levels;

(5) Records of actual operations that demonstrate that the daily and annual emissions from the source were maintained at or below the exemption level by the use of the necessary production constraints or pollution control equipment;

(6) A list of all similar sources at the same facility and a statement for each such source of the annual potential emissions. Compliance with paragraph (C)(4) of this rule shall be demonstrated; and

(7) A summation of the total emissions from each exempt or similar source, a summation of stated potential emissions from all sources identified in paragraph (E)(6) of this rule, and a certification under oath that the applicable exemption levels were complied with.

You must maintain these records for at least two years, and you must produce the records upon demand, if requested by a representative from Ohio EPA. While these requirements appear somewhat overwhelming, your attorney explains that it is quite simple to be in compliance with the record keeping requirements.

You are amazed that Ohio has made it relatively simple for you to operate a small painting operation. You immediately call the potential client and inform him that you can perform the painting as part of the assembly project. You also inform him that you will be in compliance with Ohio's air pollution control laws and permitting program.

My advice to clients with small operations is to read and to understand the laws and regulations before jumping to any conclusions about the need for a permit. In this example, the owner undertook an investigation of Ohio's air permit laws, and from that investigation was able to obtain new business because he learned that he could legally operate without an air permit. Many states have exempted small operations from the requirements of obtaining air permits under certain conditions. Understanding the regulations helps your business stay out of trouble with the regulators. Like the owner in this example learned, it can also increase your profitability by allowing you to accept projects that you might otherwise refuse.