Controversy over Superfund has come to the fore as the statute comes up for congressional review. Critics of the law express concern about the amount of money being spent for Superfund cleanups, question whether such spending is directed toward cleanups of sites that pose serious health and ecological risks, and bristle at the apparent unfairness of Superfund liability provisions. Defenders of the law point to the increased care with which hazardous materials are now handled and to the large number of privately funded cleanups under way. Although no changes were made the last time Superfund was reauthorized, significant reforms in the law may be enacted in this or the next session of Congress. These reforms hinge on two questions central to all disagreements over Superfund: What is the appropriate extent of cleanup at Superfund sites? And how shall the costs of these cleanups be apportioned?
Over the last twenty-two years, Congress has enacted seven major laws under which the U.S. Environmental Protection Agency (EPA) has been delegated regulatory responsibility. Six of these laws—the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and the Federal Insecticide, Fungicide, and Rodenticide Act—could be called "forward looking." That is, under these statutes EPA writes regulations that proscribe the current and future generation, transportation, use, and disposal of a variety of products or pollutants that might endanger human health or the environment.
In contrast with these laws, the seventh major environmental law takes a largely retrospective view. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, better known as Superfund) was enacted to deal with the legacy of sites contaminated by hazardous materials as a result of mining, petroleum refining, manufacturing, waste disposal, and a variety of other economic activities dating back, in a few extreme cases, to the nineteenth century. Superfund has been reauthorized twice since its passage in 1980 and is up for renewal again; as is generally the case, reauthorization provides Congress the opportunity to think about what changes, if any, it wants to make in the law.
There is no shortage of suggestions. Virtually everyone affected by Superfund—from the businesses that feel its economic sting to the citizens who fear nearby contamination—has complaints about the way the waste remediation program established under Superfund has worked during the past thirteen years. This makes it very difficult for anyone—in Congress, in the Clinton administration, or in the business or environmental communities—to craft a set of reforms that would be pleasing to all. And despite criticisms, most experts would agree that Superfund has created powerful incentives to reduce the generation and improve the management of hazardous substances. The desire to preserve the most beneficial effects of the law further complicates discussions of reform.
It is our purpose here to provide a brief sketch of the Superfund program as it has evolved to this point, indicate the reforms that various groups have proposed, and offer our views as to the likely outcome of the congressional debate over reauthorization.
Overview of the program
At the risk of oversimplifying a very complicated statute, we may say the Superfund law has tried to accomplish several things. First, it has provided a mechanism through which contaminated sites that pose serious threats to human health and the environment are identified and ranked. The most troublesome sites are placed on the National Priorities List (NPL)—that group of sites for which federal moneys can be used for cleanup. There are currently 1,286 such sites on the NPL.
Second, the law has established a process for determining which possible remedies (cleanup approaches) are feasible and appropriate for each site on the NPL and for selecting the desired remedy.
Third, it has created several new federal taxes—one falling on petroleum and on chemical feedstocks used in manufacturing, the other a more general corporate income tax—that help stock a trust fund. This fund is used on an emergency basis to finance cleanups of sites posing immediate risks to health and the environment and on a nonemergency basis to finance long-term cleanups at sites where no "responsible parties" can be found and made to clean up the site(s) in question.
Last, but by no means least, the Superfund law has created a mechanism through which EPA can identify these responsible parties, apportion liability among them, and require them to pay for the remedy that has been selected.
Although controversy surrounds each of these provisions, we believe two questions lie at the heart of virtually all serious disagreements over Superfund. First, what is the appropriate extent of cleanup at each of the sites on the NPL? Second, how shall the costs of these cleanups be apportioned? Before we turn to these questions, it is useful to put Superfund in perspective with other federal environmental regulatory programs.
Superfund costs and controversies
According to EPA, individuals, government agencies, and businesses had to spend about $130 billion in 1993 to comply with all federal regulations written under the seven environmental laws listed above. Given the attention it has received lately, one would think the Superfund program was responsible for a significant share of these expenditures. In point of fact, however, this is not the case.
In 1993, total spending to meet Superfund requirements was about $6 billion. Of this, $3 billion was spent by the U.S. Departments of Energy and Defense and about $1.5 billion by EPA. Thus, under Superfund, all private firms, state and local governments, and individuals spent less than $2 billion on waste remediation.
As best we can determine, total annual spending pursuant to Superfund requirements in 1993 is likely to be on the order of $6 billion. This figure includes $3 billion in combined expenditures by the U.S. Department of Energy for cleanups at its nuclear weapons plants and by the U.S. Department of Defense for cleanups at its military bases. Of the remaining $3 billion, about $1.5 billion was spent by EPA. This implies that all private firms, state and local governments, and individuals spent less than $2 billion last year on waste remediation under Superfund. Since private parties are not required to report their annual cleanup expenditures, there is great uncertainty about this last figure.
If Superfund currently accounts for a relatively small fraction of total annual expenditures on environmental compliance, why has it become so controversial? Three explanations are likely. First, although current spending for Superfund cleanups may not yet be significant, this amount will change with time. If all 1,286 sites on the NPL are cleaned up at the current average per-site cost of $30 million, for instance, total expenditures will eventually grow to nearly $40 billion. And if EPA continues to add sites to the NPL at the current rate of 50 per year for the next decade, total expenditures will increase by $15 billion. These are sums worthy of serious attention.
Second, there is great concern—particularly among those in the business community—that the moneys being expended on site remediation are not being directed toward very serious risks. These critics allege that EPA systematically overestimates the health and ecological risks arising from site contamination, often by making unreasonable assumptions about the likely human exposures to contaminants. Many of those helping to pay for site cleanups say they are willing to pay to address serious risks, but resent squandering scarce resources on what they regard as often trivial problems. On the other hand, environmentalists contend that serious contamination at some sites is going unaddressed.
Third, controversy surrounds the allocation of cleanup costs. When Superfund was passed in 1980, Congress, having no appetite for increasing federal spending to pay for site cleanups, created a liability system to make it relatively easy for the government to link private parties to sites and make them pay for remediation.
Under Superfund, liability is referred to as retroactive, strict, and joint-and-several. It is retroactive in the sense that it applies to activities that took place before—occasionally long before—Superfund was enacted. Strict liability is that which is unrelated to the care or the negligence responsible parties may have exhibited in the past. Joint-and-several liability implies that any one party at a site can be required by the government to pay for the entire cleanup, regardless of the share of wastes it contributed. (That party can then in turn sue other contributors, but it must incur the legal costs associated with bringing these suits.)
Each of these liability provisions has been exceptionally controversial. For instance, it is galling for one responsible party at a site to be told that it must shoulder a disproportionately large share of cleanup costs because none of the other contributors can be found, or because they are insolvent or otherwise incapable of paying for cleanup. Similarly, firms that took pains to manage hazardous substances in a responsible way in the past bristle at the fact that their efforts are no defense against Superfund liability.
These controversies lead back to the two questions raised above: What is the appropriate extent of cleanup at Superfund sites? How shall cleanup costs be apportioned? We turn now to these two fundamental issues.
How clean is clean?
Section 121 of Superfund spells out the criteria governing site cleanups. Importantly, the law calls for a cleanup that "utilizes permanent solutions and alternative treatment technologies . . . to the maximum extent practicable" at each site. This seemingly innocuous wording is the source of much of the controversy over the Superfund statute.
Consider a site located in or near a residential area. There are houses nearby, but the site—once an industrial dump, say—is fenced off and currently vacant. The soil at the site is contaminated but is not contributing to the contamination of an underground aquifer. Some might find it appropriate in these circumstances to cap the site in order to contain the contamination and to build a more secure fence around it, but then to do little more than continue to monitor it carefully. In view of the risk posed by the site, some might deem this a reasonable response. In fact, they would argue, it would be wrong to go much beyond the measures described here, as doing so would eat up scarce resources that might better be deployed elsewhere.
Some argue that scarce resources necessitate the ranking of cleanup priorities; others argue that a precise balancing of risks against cleanup costs is a practical impossibility.
But would this be a "permanent" remedy? To many in the environmental community and in Congress, the answer is no. Critics of such a risk-based approach—in which the extent of the remedial action depends upon the seriousness of the current health risks a site poses—believe that a permanent remedy is one that goes well beyond containment, extending perhaps to the excavation and incineration of contaminated soils or the pumping and treatment of contaminated groundwater. They would balk at a remedy that would reduce exposure to contamination without removing the contamination itself.
This very brief discussion suggests the basic nature of the debate. On the one side are those who argue that scarce resources necessitate the ranking of cleanup priorities, an activity that implies some sites should receive much less extensive remedies than others. To these individuals, chain-link fences and "Keep Out" signs will constitute appropriate remedies for at least some low-risk sites.
On the other side are those who argue that while a precise balancing of risks against cleanup costs may be a nice conceptual approach to remedy selection, it is a practical impossibility in light of the almost total lack of reliable data on the actual health and environmental risks at sites, as well as the great uncertainties about the costs of various possible remedies. In the view of these people, site-by-site balancing of risks and cleanup costs would drag the cleanup program into the next millennium. In addition, they point to the congressional preference for permanence in remedy selection.
Are there hybrid approaches that might placate both camps? Perhaps. One change that has been suggested would be the establishment by EPA of maximum permissible concentrations of contaminants in soils and groundwater at Superfund sites. Any remedy would be required to meet these standards, but with one important twist: different standards would be established for different sites, depending upon the intended future use of a site. Thus, for instance, a Superfund site that would be redeveloped as an industrial park would have to meet less stringent cleanup standards than a Superfund site on which a housing development or a school would be built. In this way, a crude form of balancing would take place; this hierarchical approach would reflect the fact that humans' exposure to remaining contaminants would be much less likely at the industrial park than at the school playground.
Whether or not such a change is politically feasible remains to be seen. Perhaps surprisingly, tailoring cleanup to intended land use may make less difference than one might suspect from a strict reading of the law. We say this because if one looks closely at the cleanup remedies EPA has selected at Superfund sites all around the United States, it is hard to see any uniform pattern suggesting strict adherence to the concept of permanence. Rather, remedy selection seems to depend at least in part upon which EPA regional office is in charge of a given site, the amount of press attention devoted to the site, and the extent of public involvement there. Interestingly, remedy selection also seems to depend upon the seriousness of the health and environmental risk the site poses. Thus, although the Superfund statute seems to discourage risk-based cleanups, these considerations do seem to be part of the decision making calculus. (See "Cleanup Decisions Under Superfund: Do Benefit and Costs Matter?" by Shreekant Gupta, George Van Houtven, and Maureen L. Cropper in the Spring 1993 issue of Resources, as well as "When Is a Life To Costly to Save? The Evidence from Environmental Regulations" by Cropper and Van Houtven in this issue.)
Who pays for cleanups?
As noted above, Superfund contains expansive liability standards. Not surprisingly, these standards have been the source of tremendous controversy. Equally unsurprising, a number of groups have sought changes in Superfund that would relax these standards in one way or another.
Banks and other lending institutions fear being held liable for cleanup cost under Superfund because they lent money to, and sometimes foreclose upon, firms that were found to be responsible parties at Superfund sites. Claiming that Congress never intended for "nonpolluters" such as themselves to be caught up in the liability net, these institutions have pressed for elimination of what has come to be known as lender liability.
Also unhappy are municipal officials. A fair number of Superfund sites are landfills that municipalities either operated or contributed wastes to at one time. Like industrial contributors to these sites, they have been named as responsible parties by EPA or have been sued in "contribution actions" by one or more firms that have been stuck by EPA with the cleanup bill. They, too, are claiming that the Superfund law was never meant to impose significant economic costs on them; they generally argue that municipal waste (or garbage, as it used to be called) is much less likely to be among the risky contaminants at municipal landfills. (We should point out, though, that the paint thinners, used motor oils, car batteries, and other liquid and solid wastes that households once casually discarded with their trash can be every bit as toxic as some industrial wastes.)
Private firms, both large and small, are also unhappy with Superfund. They have argued forcefully that they should be neither held liable retroactively nor held liable for contamination caused by others. While there is now no doubt about their legality, retroactive and joint-and-several liability provisions do strike many observers (including some with no financial stake in the matter) as being somewhat unfair. Several recent proposals put forward by coalitions of responsible parties would change the liability provisions of Superfund to address these perceived inequities. For instance, one proposed change would require EPA to pay for any "orphan" shares at Superfund sites; these are the cleanup costs that would be assigned to firms or other responsible parties that either cannot be located or are financially insolvent.
By far the most unhappy bearers of Superfund liability are insurance companies. Although they are never held to be responsible parties by EPA, they, too, have been ensnarled in the recovery of cleanup costs. This is because many of the industrial and other private firms that are responsible parties have sued their insurance companies under the comprehensive general liability policies they have taken out for many years. The responsible parties have contended that these policies do cover the costs they incur to clean up Superfund sites.
For their part, the insurance companies point to the standard language in these policies, language to the effect that coverage pertains to "sudden and accidental" damages. The insurers then argue that the gradual leakage of contaminants at a site is not at all sudden and maintain for this reason that they are not liable. Because insurance is regulated almost exclusively at the state level in the United States, suits brought against insurance companies by responsible parties have been played out in many different state courts; these courts have sided in about equal measure with each of the parties—a confusing situation, to say the least.
Two types of relief for insurers have been suggested. Under one proposal, retroactive liability would be eliminated—that is, no one would be liable for cleaning up wastes disposed of before 1981. This would benefit both responsible parties and their insurers. Under another proposal, Congress would absolve insurers from having to reimburse the cleanup costs of the firms they insured. In either case, the "quid" for this "quo" would be the creation of a separate fund—financed in part or in toto by a tax on insurance companies—to help pay for cleanup costs at those sites where liability is removed.
Responsible parties often recover cleanup costs by suing their insurance companies; under one proposal, Congress would absolve insurers from reimbursing the cleanup costs of the firms they insured.
Nearly two years ago we completed a report (Assigning Liability for Superfund Cleanups: An Analysis of Policy Options, Resources for the Future, 1992) that looked carefully at several ways in which the liability standards in Superfund could be changed, including some possible approaches that resemble proposals currently being put forward. At that time we concluded that, while the current liability standards in Superfund are unfair in several respects and result in a lot of litigation, any changes in them will create some new inequities even as they ameliorate others and thus will provide new incentives to sue. We also concluded that EPA has the power under the current Superfund statute to address many of the criticisms being raised, though doing so would not be easy.
Guessing on changes
It is very difficult to predict what will happen to the Superfund law. The Clinton administration appears to be inching its way steadily toward a set of changes that it will propose to Congress. Although the administration's proposed changes will start the debate in earnest, Congress may well elect to reauthorize the law in its present form for another five years or so, thus putting off—as it did in the prior reauthorization—debate over significant changes. One never goes broke betting on the status quo.
Nevertheless, we hazard the guess that Superfund will be changed in several important ways in this or the next session of Congress. First, it seems likely that Congress will modify Section 121 of Superfund—wherein the standards for cleanups are spelled out—to allow for different degrees of cleanup of Superfund sites depending upon their intended future use. In addition, Congress may restrict "treatment" at NPL sites to highly contaminated hot spots. It also appears likely that Congress will require EPA to pay for orphan shares at NPL sites using an enhanced Superfund trust fund. If so, responsible parties who have complained about joint-and-several liability should be appeased.
Regardless of what happens to Superfund in this or coming years, the United States will be dealing with contaminated sites for decades to come. We will be surprised if the controversy does not outlive the cleanup program.
Paul R. Portney is vice president of and a senior fellow at Resources for the Future. Katherine N. Probst is a fellow in the Center for Risk Management at RFF.
A version of this article appeared in print in the January 1994 issue of Resources magazine.
A version of this article appeared in print in the January 1994 issue of Resources magazine.
