ARTICLES

   FEDERAL HIGHLIGHTS
       David Ashton, Morgan, Lewis & Bockius, LLP.
       (September, 1997)

This column provides highlights of federal statutory, regulatory, case law, and guidance developments of relevance to Florida practitioners. If you are aware of a federal legal development which you think should be shared with your colleagues, please either email it to asht0364@mlb.com or fax it to David Ashton at 305-579-0321.

AIR

EPA Issued Final Rule Revising and Clarifying New Source Performance Standards (NSPS) for Nonmetallic Mineral Processing Plants. 40 C.F.R. Part 60, Subpart OOO, 62 Fed. Reg. 31,351 (June 9, 1997). The revisions amend the applicability definitions, test methods and procedures, and reporting and record-keeping requirements for Subpart OOO facilities. The amendments, however, did not change the affected industries or numerical emission limits.

EPA Announced the Availability of Draft Rules and Related Information That Reflect Comments it Received in Response to its Proposed Revisions to its Title V State Operating Permits Program Regulations and to the Requirements for Submission of State Implementation Plans (SIPs). 62 Fed. Reg. 30,289 (June 3, 1997). EPA is seeking comment on the provisions for minor permit revisions; permit review by EPA, affected states and the public; eligibility criteria for de minimis permit revisions; the revised definition of "potential to emit;" the absence of mandates for emissions cap permits, plant-wide applicability limits, and advance new source review as minimum elements of state Part 70 programs; and review of EPA's interpretation of collocation procedures under Part 70 for major sources and unlisted sources of fugitive emissions.

EPA Issued a Rule Clarifying and Correcting its NESHAP for Wood Furniture Manufacturing Operations. 62 Fed. Reg. 30,257 (June 3, 1997). Among other revisions, these changes clarify provisions governing the exemption for facilities using only limited amounts of coatings, glue and other process materials, and exclude aerosol spray paints used for touch up and repair from the definition of coatings. EPA also issued a direct final rule revising the definition of wood furniture component under this NESHAP to exclude foam seat cushions not made at a wood furniture manufacturing facility. 62 Fed. Reg. 31,361 (June 9, 1997). EPA stated that it is currently developing a separate NESHAP for foam fabricators that will cover facilities that manufacture these cushions for other industries, including wood furniture manufacture.

EPA Identified Acceptable Substitutes for Ozone Depleting Substances under its Significant New Alternatives Policy (SNAP) Program, Affecting Manufacturers of Ozone-depleting Substance Substitutes. 62 Fed. Reg. 30,275 (June 3, 1997). EPA listed four substances as acceptable substitutes for ozone-depleting substances in two of the major industrial use sectors -- the Refrigeration and Air Conditioning Sector and the Foam Sector. A substitute is any existing or new chemical, product substitute, or alternative manufacturing process that could replace a Class I or Class II ozone-depleting substance.

EPA Issued a Direct Final Rule Governing Commercial Aircraft Engine Exhaust. 62 Fed. Reg. 25,356 (May 8, 1997). It is intended to control NOx and CO emissions from newly manufactured or newly certified commercial aircraft engines with rated thrust greater than 26.7 kilonewtons.

LAND

The Fifth Circuit Court of Appeals Held That the Existence of a Hazardous Substance "Above Background Levels" Without Evidence That the Release Justified Response Costs Is Insufficient for CERCLA Liability. Licciardi v. Murphy Oil U.S.A., Inc., 111 F.3d 396, No. 96-30202 (5th Cir. 1997). The court further held that when the release does not violate any applicable state or federal standard, evidence that the release exceeded "background levels" established by the U.S. Geological Survey is not a sufficient basis for CERCLA liability.

The Eleventh Circuit Held That CERCLA is Fully Retroactive. United States v. Olin Corp., 107 F.3d 1506 (11th Cir. 1997). The court of appeals specifically held that CERCLA applies retroactively to impose liability for waste disposal prior to the enactment of CERCLA. The court found that CERCLA's language, purpose and legislative history demonstrate clear congressional intent that CERCLA apply retroactively. The court also concluded that the Commerce Clause permits constitutional application of CERCLA to the disposal of hazardous waste at the site of production because on-site hazardous waste disposal substantially affects interstate commerce.

The Second Circuit Court of Appeals Held That the Federal Common Law "Substantial Continuity" Test Controls the Question of Successor Liability Under CERCLA Rather Than State Law. B.F. Goodrich v. Betkoski, 112 F.3d 88 (2d Cir. 1997). In upholding the federal common law substantial continuity test as the appropriate legal test for successor liability under CERCLA, the court explained that there was a need for a national, uniform rule; the easily evaded state "identity test" would defeat the purposes of CERCLA; and no danger existed that adoption of the federal rule would unduly disrupt existing corporate relationships predicated on state law.

The Third Circuit Court of Appeals Held that a PRP May Bring Only a CERCLA § 113 Action for Contribution Against Other PRPs Rather Than a § 107 Action for Cost Recovery. New Castle County v. Halliburton NUS Corp., 111 F.3d 1116 (3d Cir. 1997). The court reasoned that the statutory language, Congressional intent and legislative history compelled the conclusion that a PRP may only assert an action for contribution under CERCLA § 113(f). The court found that the nature of an owner-operator PRP's action was one for contribution, and was therefore subject to the § 113(f) three-year statute of limitations.

The District Court For the Southern District of Florida Held That a Lease Was Not Sufficiently Clear and Unequivocal Under Florida Law to Shift A Landlord's Pollution Liability to its Tenant. Diversified Services, Inc. v. Simkins Industries, Inc., Case No. 94-217-CIV-Ferguson (Order dated March 25, 1997). The court granted the tenant summary judgment on the basis of the principle that Florida law dictates that contracts which attempt to indemnify a party against its own wrongful conduct will be enforced only if they express an intent to indemnify in clear and unequivocal terms. The court also decided to refrain from exercising supplemental jurisdiction over state law contribution claims pendent to a CERCLA claim on the grounds that such contribution claims raise novel and complex issues of state statutes and county regulations.

The District Court For the Middle District of Florida Receded From its Earlier Position That Section 376.313(3), Florida Statutes, Does Not Furnish a Private Right of Action Unless There is a Connection between the Damage Sought and the Clean Up or Removal of the Prohibited Discharge. Italiano v. Jones Chemicals, Inc., 10 Fla.L.Weekly Fed. D584, Case No. 95-1161-CIV-T-17A (Order dated February 21, 1997). The court held that its prior interpretation limiting the scope of the section 376.313(3) private right of action to damages arising out of the clean up or removal of a discharge, 908 F.Supp. 904, may have been an overly restrictive interpretation of the damages available under the statute. Therefore, the court denied Jones Chemical's motion to dismiss the plaintiff's section 376.313(3) damages claim.

The Environmental Appeals Board (EAB) Upheld EPA's Authority to Issue Corrective Action Permit Modifications to a Facility Following Closure of the Regulated Units and Expiration of the Facility's State RCRA Permit. In re GMC Delco Remy, RCRA Appeal No. 95-11 (EAB June 2, 1997). Following receipt of information regarding a GMC Delco Remy (GMC) facility in Indiana that had clean-closed its container storage units, EPA Region V unilaterally processed a permit modification imposing corrective action obligations under section 3004(u) of RCRA, for which the state was not yet authorized. EPA issued a permit modification, with a delayed effective date and a new five-year term, one day before GMC's state-issued RCRA permit expired. The Board rejected arguments of GMC that EPA lacked authority to issue the corrective action permit modification. The Board held that the modification was timely because it was issued before the state RCRA permit expired and that EPA may issue a "corrective action only" federal RCRA permit without regard to the existence of a state-issued RCRA permit.

The EPA Environmental Appeals Board (EAB) Upheld EPA's Ability to "Overfile" Enforcement Action in Matters Already Settled by Authorized States and Found the Statute of Limitations on "Continuing Violations" Runs from the Date That the Violations Cease. In re Harmon Electronics Inc., RCRA (3008) Appeal No. 94-4 (EAB March 24, 1997). EPA's Region VII brought an enforcement action against Harmon Electronics, alleging various violations of RCRA. Harmon had voluntarily disclosed its historic disposal practices to the Missouri Department of Natural Resources (MDNR), which proposed that Harmon enter into a consent decree foregoing monetary penalties. EPA filed an administrative action against Harmon before the company entered into a court-approved consent decree with MDNR. The Administrative Law Judge (ALJ) found Harmon liable and imposed penalties.

The EAB reaffirmed earlier EPA administrative decisions that RCRA does not prohibit EPA from overfiling in authorized states. The EAB held under Missouri law that EPA is not "in privity" with an authorized state and thus that principles of res judicata did not bar EPA from overfiling following approval of the consent decree in state court. The EAB also found that the five-year statute of limitations for assessing civil penalties does not run for "continuing violations" until the date that the conduct ceases. It also held that the alleged failure to obtain a permit, failure to monitor groundwater, and repeated acts of disposal were continuing violations that had not ceased five years before EPA filed its complaint. The EAB also rejected Harmon's arguments that EPA's voluntary disclosure policy should apply to adjudicated matters.

The U.S. District Court for Colorado Held That RCRA Section 3008(h) Corrective Action Orders May Not Be Challenged on Pre-enforcement Review. Amoco Oil Co. v. USEPA, 959 F.Supp. 1318 (D. Colo. 1997). The court dismissed Amoco's challenge to a final corrective action order issued by EPA following an administrative hearing and comment on the original order. The court held that although Congress did not expressly state an intent to preclude such review, an "implicit disapproval" of judicial challenges to section 3008(h) corrective action orders was discernible in the statutory scheme. The court specifically noted the delays that would accompany pre-enforcement review. The court also dismissed due process challenges to the administrative order, holding that Amoco could present a challenge to the order during administrative or judicial hearings to assess or impose penalties.

EPA Published a Final Rule Specifying Land Disposal Restriction (LDR) Treatment Standards for Hazardous Wastes from Wood Preserving Operations. 62 Fed. Reg. 25,998 (May 12, 1997). The rule amends various LDR program requirements, and excludes processed scrap metal and containerized shredded circuit boards from the definition of solid waste.

EPA Published a Supplemental Proposed Rule to Establish LDR Treatment Standards for TC Metal Wastes and for Mineral Processing Wastes. 62 Fed. Reg. 26,041 (May 12, 1997). The rule clarifies the standards for treatability variances, bans the use of prohibited wastes as fill material, excludes certain mineral processing secondary materials and wood preserving wastes from the definition of solid waste, and eliminates co-processed feedstocks from the scope of the Bevill Amendment.

WATER

The District of Columbia Court of Appeals Upheld EPA's Decision to Issue the Final Water Quality Guidance for the Great Lakes System as a Regulation. American Iron and Steel Institute v. USEPA, 115 F.3d 979 (D.C. Cir. 1997). Generally, in reviewing a number of challenges to EPA's Final Water Quality Guidance for the Great Lakes System, which was issued as a final regulation on March 23, 1995, 60 Fed. Reg. 15366, the Court deferred to EPA's expertise and interpretations of the Clean Water Act. The court upheld EPA's methodology for converting narrative water quality criteria into numerical permit limits; rejected EPA's authority to impose water-quality-based effluent limitations on internal waste streams; rejected EPA's justification for eliminating mixing zones for bioaccumulative chemicals of concern; and upheld EPA's use of outdated acceptable daily exposure values for mercury. The Court also upheld EPA's decision to adopt minimum criteria that are uniformly applicable to the "waters of the Great Lake System," while allowing for states to adopt less stringent site-specific modifications.

The Eleventh Circuit Court of Appeals Upheld Clean Water Act Criminal Convictions for Discharges to Storm Sewers Which Eventually Led to Tampa Bay. United States v. Eidson, 108 F.3d 1336 (11th Cir. 1997). The court held that a storm sewer, which was linked to a storm drainage system that ultimately led into Tampa Bay, constituted a water of the United States and, therefore, discharges to the sewer without a permit violated the CWA. Also, the court upheld a conviction for mail fraud of a company that used the mails in connection with a scheme to offer services of lawful disposal of wastewaters with the intent not to perform those services.

The Eleventh Circuit Court of Appeals Upheld Orders Requiring Restoration of Wetlands Damaged by Dredged and Fill Materials on the Grounds That the Default Statute of Limitations, 28 U.S.C. § 2462, is Inapplicable When the Government Seeks Equitable Relief in its Official Enforcement Capacity. United States v. Banks, 115 F.3d 916 (11th Cir. 1997). In 1991, the United States filed suit against an individual who had placed dredged and fill materials on several lots in Big Pine Key in the early 1980s, seeking the enjoinment of future discharges, and requiring the restoration of the damaged wetlands. Banks asserted the default limitations provisions of 28 U.S.C. § 2462 as barring the claims based on the rule that equity will withhold relief when an applicable statute of limitations would bar a legal remedy. Applying the rules that statutes of limitation will be construed in favor of the United States' claims and that absent clear congressional intent statutes of limitations do not apply to claims of the federal government in its sovereign capacity, the court of appeals found the default limitations period to be inapplicable. The lower court's restoration orders were based on a government claim for equitable relief in its official enforcement capacity.

The District Court for Oregon Held That Discharges of Pollutants into Groundwater Are Not Subject to the CWA's NPDES Permit Requirements Even If the Groundwater Is Hydrologically Connected to Surface Water. Umatilla Waterquality Protective Association, Inc. v. Smith Frozen Foods, Inc., 962 F.Supp. 1312 (D. Or. April 9, 1997). The court held that citizens could not bring a citizen's suit for violations of the Clean Water Act as a result of leachate from a lagoon that discharged into groundwater and then, via a direct hydrological connection, into a nearby creek. In certifying the decision for interlocutory appeal, the court also held that, if the discharges to groundwater constitute discharges to navigable waters, then the NPDES permit requirements would be applicable because (i) the lagoon would be a point source, and (ii) the ongoing migration of pollutants from the lagoon would be an ongoing discharge of pollutants within the meaning of the CWA.

HEALTH & SAFETY

The Fifth Circuit Court of Appeals Overturned OSHA's Enforcement Policy of Issuing Per-employee Citations for Violations of the General Duty Clause. Reich v. Arcadian Corp., 110 F.3d 1192 (5th Cir. 1997). In a decision that limits the agency's ability to impose large penalties against employers, the court of appeals ruled that, under the plain language of the General Duty clause, OSHA may issue citations only for each violative condition at a workplace, and not for each employee who is exposed to a hazardous condition. The court's ruling reduced the penalties assessed against Arcadian Corporation from nearly $4.4 million to approximately $50,000.

OSHA Issued a Final Rule Requiring Employers to Certify Abatement of Workplace Hazards. 62 Fed. Reg. 15324 (March 31, 1997). The abatement procedures mandated under the final rule, which became effective on May 30, vary depending on the nature of the violations identified and the employer's abatement actions. In general, employers will be required to certify abatement of other-than-serious and some serious violations using a one-page form, while additional documentation of abatement is required for more serious violations (willful, repeat and certain serious violations specified by OSHA). If abatement occurs during or immediately after the inspection that identified the violation(s), an employer is not required to submit an abatement certification letter to OSHA.

TRANSPORTATION

RSPA Issued a Final Rule That Harmonizes the Domestic Hazardous Materials Regulations with International Transportation Standards. 62 Fed. Reg. 24,690 (May 6, 1997). The rule significantly revises the "Explosives Table," deletes several requirements for inner and intermediate packaging, and makes several other changes. Notably, RSPA declined to adopt the international definition of "aerosol," which includes containers filled solely with gas. The amendments become effective on October 1, but RSPA has authorized immediate voluntary compliance.

RSPA Issued a Final Rule Expanding its Internet Services and Amending the Federal Hazardous Materials Regulations as Part of its Effort to Assist Small Businesses with Questions Regarding Regulated Activities. 62 Fed. Reg. 24,055 (May 2, 1997). The amendment provides that RSPA's Hazardous Materials Information Line and the staff in its Chief Counsel Office will answer questions from small businesses.

RSPA Reversed its Earlier Determination of Federal Preemption of a New York Hazardous Waste and Containment Transfer Facility Requirement. 62 Fed. Reg. 15,970 (April 3, 1997). Upon reconsideration, RSPA decided that the record does not support a finding that the state secondary containment requirement, as applied and enforced, would cause unnecessary delays in transportation of hazardous materials. The reversal leaves intact prior determinations by RSPA that federal hazardous materials transportation law preempts other New York regulations prohibiting transporters from repackaging hazardous wastes incidental to transport and requiring indications on manifests of transfers of hazardous wastes between vehicles of the same transporter.

POLLUTION CONTROL AND PREVENTION

EPA Issues Final Rule Expanding Universe of Facilities Subject to TRI Reporting Requirements Beginning in 1998. 62 Fed. Reg. 23,834 (May 1, 1997). The Toxic Release Inventory (TRI) reporting obligation applies to owners and operators of facilities that have 10 or more full-time employees and that are covered by certain Standard Industrial Classification (SIC) codes. The rule requires an additional 6,100 facilities to document toxic chemical releases to air, land and water in accordance with the reporting requirements in Section 313 of EPCRA and Section 6607 of the Pollution Prevention Act of 1990 (PPA). The seven industries affected by the rule-making are: chemical distributors, petroleum bulk plants and terminals, metal and coal mining, electric utilities, and commercial hazardous waste treatment and solvent recovery services. The rule also requires 700 chemical manufacturing facilities that are already subject to EPCRA to report additional types of activities, including waste burning and stabilization.

EPA states that it plans to develop sector-specific guidance documents for these and all other newly affected industry groups, and to make these documents available to the public no later than November 1997. These guidance documents are expected to help resolve many issues raised by the new rule and should assist owners and operators of facilities in the affected industry groups in filing required TRI reports.

ENVIRONMENTAL LAW AND BANKRUPTCY

The Third Circuit Court of Appeals Held That a Claim for Contribution under CERCLA § 113(f) by a PRP Against a Former Bankruptcy Debtor PRP Fails as a Matter of Law When the Bankruptcy Debtor's Liability to the United States under CERCLA § 107 Was Discharged in Bankruptcy. In re Reading Co., 115 F.3d 1111 (3d Cir. 1997). The court found that the claim for contribution sought by the PRP was not discharged in bankruptcy because CERCLA § 113(f) had not been enacted at the time of the discharge, and therefore the PRP could not have asserted a claim that had no recognizable legal form. The court nevertheless held that the claim for contribution under § 113(f) failed as a matter of law because CERCLA contribution is grounded in a common liability to another party. At the time of the bankrupt PRP's reorganization, the United States had, but failed to assert, a cognizable claim under § 107 against the bankrupt PRP and consequently the bankrupt's liability to the United States was discharged. Absent common liability, the § 113(f) contribution claim failed.

The First Circuit Court of Appeal Held That a Debtor-in-Possession Must Comply Post-Petition With Florida Environmental Protection Laws Governing Underground Storage Tanks And Violations Thereof May be Enforced by the Bankruptcy Court by Imposition of Penalties Having Administrative Priority. Cumberland Farms, Inc. v. FDEP, 116 F.3d 16 (1st Cir. 1997). The issue before the court of appeal was whether civil penalties sought to be imposed by FDEP on Cumberland, a debtor in possession, for post-petition violations of Florida environmental law were entitled to administrative priority in the bankruptcy. Cumberland had failed to submit proof of its financial responsibility in connection with underground storage tanks it owned and had failed to satisfy a related time-limited requirement to notify FDEP of its bankruptcy. The court held that the bankruptcy court was obligated to comply with applicable Florida environmental laws and was entitled to give administrative priority to any civil penalty it imposed. The court reasoned that payment of a fine for failing during bankruptcy to meet the requirements of Florida environmental law is a cost ordinarily incident to operation of a business in light of today's extensive environmental regulations.

GUIDANCE EPA Interim Policy and Guidance on the Use of "Credible Evidence" in Air Enforcement Activities, April 29, 1997. In February, EPA adopted a rule revising key programs implementing the Clean Air Act to allow federal and state governments and citizens to use "any credible evidence" (ACE), including continuous emissions monitoring (CEM) data, to prove or disprove CAA violations (effective April 25, 1997). Previously, the CAA had been interpreted to limit enforcement to violations determined in accordance with specified reference test methods in federal or federally enforceable state regulations and permits. EPA's newly issued guidance on ACE withdraws prior Agency policy limiting the use of CEM and other non-reference test method data in EPA's enforcement activities. The guidance also expresses EPA's belief that states have the authority to use credible evidence now, although EPA urges expedited review of SIP revisions to expressly permit the use of such evidence. While encouraging the use of non-reference test data, the new policy emphasizes that EPA enforcement activities should continue to focus on significant violations.

Policy for Use of Probabilistic Analysis in Risk Assessment, EPA Office of Research and Development (May 15, 1997); Guiding Principles for Monte Carlo Analysis, EPA Risk Assessment Forum (March 1997). EPA issued a policy and preliminary guidance on using probabilistic analyses in performing risk assessments. The policy documents EPA's recently announced position that probabilistic analysis techniques such as Monte Carlo analysis, given adequate supporting data and credible assumptions, can be viable statistical tools for analyzing variability and uncertainty in risk assessments. The policy establishes 16 good scientific practices that must be satisfied by risk assessments using probabilistic techniques. These practices concern the selection of input data and distributions for use in the risk analysis, the evaluation of variability and uncertainty, and the presentation of risk assessment results.

EPA Region IV Issued Draft Clarification Points on its Media Cleanup Standards and Conditional Remedies White Paper. Letter from Narindar Kumar to Satish Kastury dated April 29, 1997. Responding to criticism that plants owned by Motorola and Eveready Battery were getting a better cleanup deal under EPA Region IV HSWA corrective actions than otherwise available in Florida, EPA Region IV drafted clarification points explaining how the cancer risk level range discussed in the guidance is consistent with FDEP's policy on risk. The memorandum also explains how the remedies approved for Motorola and Eveready are consistent with both EPA's guidance and FDEP's policy.

If you require copies of any of these materials, please email a request to asht0364@mlb.com.

David Ashton practices in the Environmental Practice Group of Morgan, Lewis & Bockius, LLP and is located in the Miami office. He has a J.D. from the University of Miami and an LL.B. from Exeter University, England.