Motion — Exxon Corp. v. Hunt

—

Office - Supreme

"et ED -

O/ FEB y 1985

No. 84-978 ALEXANDER L STEVag

In The

Supreme Court of the United States

October Term, 1984

Ly

EXXON CORPORATION; THE B. F. GOODRICH COM-

PANY; UNION CARBIDE CORPORATION; MONSAN-

TO COMPANY and TENNECO CHEMICALS, INC.,

Appellants,

V.

ROBERT HUNT, Administrator of the New Jersey Spill

Compensation Fund; CLIFFORD GOLDMAN, Treasurer

of the State of New Jersey; SIDNEY GLASER, Director

of the Division of Taxation; JERRY F. ENGLISH, Com-

missioner of the Department of Environmental Protection;

and THE STATE OF NEW JERSEY,

Appellees.

ry

Vv

On Appeal from the Supreme Court of New Jersey

MOTION OF APPELLEES TO DISMISS OR AFFIRM

“

Irwin I. KimmMeELMAn

Attorney General of New Jersey

Attorney for Appellees

Richard J. Hughes Justice Complex

CN 112

Trenton, New Jersey 08625

(609) 292-1568

Micnaet R. Coie

First Assistant Attorney General

Of Counsel

Mary C. Jacopson

Deputy Attorney General

Counsel of Record and

On the Brief

COCKLE LAW BRIEF PRINTING CO., (800) 835-7427 Ext. 333

Qh

QUESTION PRESENTED

Whether the Comprehensive Environmental Response,

Compensation and Liability Act of 1980 (also known as

“Superfund”), 42 U.S.C. 4 9601 et seq., preempts the tax-

ing provisions of the New Jersey Spill Compensation and

Control Act, N.J.S.A. 58:10-23.11 et seg., which the New

Jersey Legislature enacted in 1977 to finance the State’s

petroleum spill and hazardous waste site cleanup pro-

gram?

ll

TABLE OF CONTENTS

Pages

COUNTER-STATEMENT OF THE CASE W000. = 2

ARGUMENT:

Plenary Review Of This Appeal Is Not Warrant-

ed Because The Supreme Court Of New Jersey

Correctly And Convincingly Rejected The Pre-

emption Argument Raised By Exxon After Ap-

plying Well-Established Principles Of Statutory

Construction And Preemption Analysis To The

Particular Circumstances Of This Case. 000000. =11

A. The Approach Used by the Supreme Court Of

New Jersey to Analyze the Preemption Issue

in this Case is Completely Consistent With

the Precedents of this Court. 12

B. The Supreme Court Of New Jersey Correctly

Concluded That The Preemption Clause Of

The Superfund Act Is Narrow In Scope And

Permits New Jersey To Continue Its Spill

Fund Tax As Long As The Revenues Collect-

ed Are Dedicated To Financing Spill Fund

Program Costs Not Covered Or Actually

Compensated by Superfund. 15

CONCLUSION 24

TABLE OF AUTHORITIES

CasEs :

Aloha Airlines v. Div. of Taxation of Hawau, 104

S.Ct. 291 (1983) .. 13, 14

Arizona Public Serv. Co. v. Snead, 441 U.S. 141

(eee .

Bell v. New Jersey and Pennsylvania, 461 U.S.

193 (RGEE) ccs ; —

lil

TABLE OF AUTHORITIES—Continued

Pages

Chicago € N.W. Transp. Co. v. Kalo Brick & Tile

a ny)

Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) ....... . bb

Exxon Corp. v. Hunt, 4 N.J. Tax 294 (1982) 2... 8

Exxon Corp. v. Hunt, 190 N.J. Super. 151, 462 A.

2d 1983 (App. Div. 1983) oe

Exxon Corp. v. Hunt, 683 F.2d 69 (3rd Cir. 1962),

cert. denied 439 U. s. 1104 (1963) ‘on oe

Exxon Corp. v. Hunt, 97 N.J. 526, 481 A.2d 271

(1984) Stace me ro wane Sy

F.E.A. v. Algonquin SNG, Inc., 426 U.S. 548 (1976) ..... 22

Fidelity Federal Sav. &€ Loan Ass'n v. De La

Cuesta, 458 U.S. 141 (1982) ~ LSS a

Florida Lime & Avocado Growers v. Paul, 373 U.S.

132 (1963). a = iim ©

Goldstein v. California, 412 U.S, 564 (1973) 2. .

Hines v. Davidowttz, 312 U.S. 52 (1941) ee

Jones v. Rath Packing Co., 430 U.S. 519 (1977) ........... 12,18

Kelly v. State of Washington, 302 U.S. 1 (19387) ............ 16

Kraft v. Board of Educ. for D.C., 247 F. Supp. 21

(D.D.C. 1965), cert. denied 386 U.S. 958 (1967) ... 14

Perez v. Campbell, 402 U.S. GBT (1971) nescence ncseeneseneevnnene 9

Rice v. Norman Williams Co., 458 U.S. 654 (1982) 23

Seatrain Shipuuilding Corp. v. Shell Oil Co., 444

U.S. 572 (1980) ........ ‘nae ca

Shaw v. Delta Air Lines, Inc., 103 S.Ct. 2890 (1983)....12, 16

Youakim v. Miller, 425 U.S. 231 (1976) nee 15

iv

TABLE OF AUTHORITIES—Continued

Pages

STATUTES:

BUS... $41 ¢ we 3

ae ee ee Oe oi easier 3

42 U.S.C. § 9601 et seq. 2, 37

42 U.S.C. § 9601(14) 3

42 U.S.C. § 9604(a) 19

Fe FD cecerctsceiensiienienviriiccarrtiadsicssinpiilitaniiiiniialigiall eae 4,17

42 U.S.C. §9604(d) (1) +

GU. QTD Wiititnsniniienele 7, 10, 19

42 U.S.C. § 9614(a) +

42 U.S.C. § 9614(e) ...... 8, 12, 13,18

GB AEE. 4 FI eeriesienicrectnmmisins 3

N.J.S.A, 58 :10-23.11 et seq. 2

PPE FSS, FL TT NE

N.J.S.A. 58 :10-23.11b (1) 2

N.JS.A. 58 :10-23.11g¢ 2

N.JS.A. 58 :10-23.110 2,17

N.JWS.A, 58 :10-23.11f 7

ReEGULATIONS:

40 C.F.R. Part 300 ..... lee eee — >

Cs SD Kncksinitwnbcmnisicnsndiccnietnamaall 8, 10, 20

TABLE OF AUTHORITIES—Continued

Pages

LuGisLativeE History:

136 Ceng. Rec. G2 (1960) —_ _$__ _ _____E- 3

126 Cong. Rec. 30935 (1980) lk... 3

126 Cong. Rec. 30940 (1980) 0. a ee WP cd Pet 19

136 Cong. Bec. TOS (1960) —__ 18, 21

126 Cong. Rec. 31965 (1980) 18

1980 U.S. Code Cong. & Ad. News 6119, 6123 oo. 5

1980 U.S. Code Cong. & Ad. News at 6139 200. 19

S. Rep. No. 848, 96th Cong. 2d Sess., at 17 2000. 4,19

T.R. Rep. No. 890, Part I, 98th Cong., 2d Sess.

| eee 22

H.R. Rep. No. 96-1016, 96th Cong., 2d Sess. (1980) =e

MISCELLANEOUS:

Office of Emergency and Remedial Response, U.S.

Environmental Prolection Agency, Guidance:

Cooperative Agreements and Contracts with

States Under the Comprehensive Environment-

al Response, Compensation and Liability Act of

1980, at p. x (Mareh 1982) . B

Black’s Law Dictionary at 883 (rev. Sth ed. 1979) ........... 14

Webster’s New Collegiate Dictionary at 711 (1976) ~.. 14

Webster’s Third New International Dictionary at

ERS emenesroe rcereerie 14

No. 84-978

rae

_—T

In The

Supreme Court of the United States

October Term, 1984

fy.

EXXON CORPORATION; THE B. F. GOODRICH COM-

PANY; UNION CARBIDE CORPORATION; MONSAN-

TO COMPANY and TENNECO CHEMICALS, INC.,

Appellants,

Vv.

ROBERT HUNT, Administrator of the New Jersey Spill

Compensation Fund; CLIFFORD GOLDMAN, Treasurer

of the State of New Jersey; SIDNEY GLASER, Director

of the Division of Taxation; JERRY F. ENGLISH, Com-

missioner of the Department of Environmental Protection;

and THE STATE OF NEW JERSEY,

Appellees.

ny

Vv

On Appeal from the Supreme Court of New Jersey

ny

MOTION OF APPELLEES TO DISMISS OR AFFIRM

4

Appellees Robert Hunt, Administrator of the New Jer-

sey Spill Compensation Fund, ef al., respectfully move

pursuant to Rule 16(1)(b) and (d) to dismiss this appeal

or aifirm the judgment of the Supreme Court of New Jer-

sey because the issues presented do not raise substantial

federal questions meriting plenary review by this Court,

and because this case was correcily decided below in keep-

ing with well-established preemption doctrine and the pre-

cedents of this Court.

°

COUNTER-STATEMENT OF THE CASE

In 1977 the New Jersey Legislature adopted the Spill

Compensation and Control Act (‘‘Spill Act”), N.J.S.A.

58 :10-23.11 et seq., to protect the citizens and environment

of the State from damage resulting from discharges of

petroleum and other bazardous substances. To finance the

spill prevention and cleanup program created by the Spill

Act, the Legislature imposed a tax upon major petroleum

and chemical facilities. N.J.S.A. 58:10-23.11h; see also

N.J.S.A. 58 :10-23.11b(1) for the definition of ‘‘major facil-

ity.” The tax was levied on a per barrel basis for petro-

leum, and on either a per barrel or percentage of fair mar-

ket value basis for hazardous substances. N.J.S.A. 58:10-

23.11h. The Spill Act provides for the revenues generated

by the tax to be credited to the Spill Compensation Fund

(‘*Spill Fund’’) which is authorized to finance, among

other things, spill response costs incurred by the Depart-

ment of Environmental Protection; property damage and

loss of earnings claims resulting from hazardous dis-

charges; the personnel and equipment costs of the Depart-

ment of Environmental Protection associated with the en-

{forcement of the Spill Act; and the administrative costs of

the Spill Fund. NW.J.S.A. 58:10-23.11g¢; NwWJ.S.4. 58:10-

23.1lo. From 1977 through 1980, the Spill Fund provided

the primary source of revenue for New Jersey’s petroleum

spill and hazardous waste cleanup program.

At the end of 1980, however, Congress recognized that

states acting alone could not adequately address the stag.

gering problems associated with the release of hazardous

substances into the environment. Consequently, Congress

adopted the Comprehensive Environmental Response,

Compensation and Liability Act (‘‘Superfund”), 42 U.S.C.

3

§ 9601 et seq., to assist the states in financing cleanups at

the most severely damaged and highest priority sites

throughout the nation. Funding for this federal effort

was provided by a 1.6 billion dollar trust fund to be raised

over a five-year period by placing a tax on crude oil, pe-

troleum, and certain chemicals, and by transferring to the

Fund appropriations from general federal revenues. 26

U.S.C. § 4611 et seq.; 26 U.S.C. § 4661 et seq.; 42 U.S.C.

§ 9631. The tax was structured to provide 87.5% of the

fund, while general revenues were to make up the balauce.

Enacted as a compromise measure in the waning days

of the 96th Congress, the Superfund Act as finally adopted

drastically reduced the funding levels and coverage pro-

posed in predecessor bills. Its direet precursors which

forined the basis for the compromise were S. 1480, which

provided $4.1 billion over six years for oil spill and haz-

ardous substance release cleanups and third party damage

claims including victim compensation; H.R. 85, which fo-

cused primarily on petroleum spill cleanups and also pro-

vided for the payment of claims resulting from property

damage or economic loss; and H.R. 7020, which was di-

rected at remedying abandoned hazardous waste dump-

sites. Although the Superfund Act grew out of these

earlier bills, it did not authorize compensation for third

party damage claims, excluded petroleum spills from cov-

erage altogether (42 U.S.C. § 9601(14)), and reduced the

size of the fund from over $4 billion to $1.6 billion. 126

Cong. Rec. 30932 (1980) (remarks of Senator Randolph).

The compromise thus eliminated approximately ‘75 per-

cent”’ of what initially had been proposeé@. 126 Cong. Rec.

30935 (1980) (remarks of Senator Stafford).

In recognition of the reduced federal program brought

about by the legislative compromise, and certainly in rec-

ognition of the enormous remedial capability that must be

developed to address the nation’s staggering hazardous

substance pollution problem, Congress designed the Super-

fund Act to encourage a joint federal and state response

to toxic contamination. The statutory scheme thus pro-

vided a cooperative federalism approach through which

states were encouraged to work together with the federal

government. The importance of state participation in im-

plementing the Superfund law is evident throughout the

Act. See 42 U.S.C. § 9604(c) which provided that the fed-

eral government must consult with an affected state before

determining appropriate remedial action, and required

states to guarantee as a prerequisite to receiving federal

funds: (1) all future maintenance at sites where removal

and remedial actions were undertaken; (2) the availability

of a hazardous waste disposal facility for the off-site

storage or treatment of hazardous substances: and (3)

payment of 10% or more of the total costs of remedial

operations. See also 42 U.S.C. § 9604(d)(i) and 42 U.S.C.

§ 9614(a). It is abundantly clear, therefore, that Congress

envisioned active state financial, technical, and administra-

tive support as an integral part of the nationwide effort to

eradicate hazardous substance pollution from the United

States.

State participation is essential for the program to

work. It is well-recognized that the money provided in tlie

Superfund Act to launch the Federal program falls far

short of the amount needed to remedy the hazardous waste

problem in this country. In S. Rep. No. 848, 96th Cong.,

2d Sess. at 17, for example, it was noted in reference to

the then-proposed six-year, $4.1 billion Superfund that

such ap allotment ‘‘.. . will permit government response

only to the most significant releases. At this level of fund-

ing, response will not be possible at a large number of

releases posing imminent or substantial threats to public

health or the environment.” These comments are even

more striking when viewed in light of the level of funding

actually supplied by Superfund which, as noted earlier,

provided for only about 30% of the amount of money once

deemed minimally necessary. A similar conclusion as to

the insufficiency of federal funding under the Act can be

drawn from H.R. Rep. No. 96-1016, 96th Cong., 2d Sess.,

reprinted in [1980] U.S. Code Cong. & Ad. News 6119,

6123, which noted that in 1979 EPA estimated that it

would cost between $13.1 and $22.1 billion to clean »p all

the known inactive and uncontrolled hazardous waste sites

in the nation. Given this limited federal funding—lim-

ited to the extent that it fell far short of covering pro-

jected needs—the role of each individual state became crit-

ical to the achievement of the ameliorative goals of the

Superfund Act.

Although Congress recognized the importance of the

state role, it was concerned that states would levy taxes

on the chemical and petroleum industries to finance state

programs that merely duplicated federal efforts. Con-

gress consequently included the following provision in

§ 114(c) of the Superfund Act:

Except as provided in this chapter, no person may

be required to contribute to any fund, the purpose of

which is to pay compensation for claims for any costs

of response or damages or claims which may be com-

pensated under this subchapter. Nothing in this sec

tion shall preclude any State from using general reve-

nues for such a fund, or from imposing a tax or fee

upon any person or upon any substance in order to

finance the purchase or prepositioning of hazardous

substance response equipinent or other preparations

for the response to a release of hazardous substances

which affects such State. [42 U.S.C. 4 9614(c) }

Before enactment of the above provision, Senator Bill

Bradley of New Jersey became concerned about its impact

on the continued operation of the State’s hazardous waste

cleanup program. In the course of debate on the Super-

fund measure, he questioned Senator Jennings Randolph

of West Virginia, a sponsor of the Superfund effort and

Chairman of the Committee on Environment and Public

Works which had reported the bill to the Senate, as to the

future of state taxes on industry to fund hazardous waste

cleanup programs if the foregoing provision were

adopted. Included in the colloquy between the two senators

were the following remarks:

MR. RANDOLPH. * * * What this bill does is prohibit

a State from requiring any person to contribute to any

fund if the purpose of that fund is to compensate for a

claim paid for under the provisions of this bill.

Putting it simply, this is a prohibition against

double taxation for the same purposes. It is not a

prohibition on the uses that a State may make of its

money, nor does it prohibit a State from imposing

fees or taxes for other purposes connected with clean-

up or restoration activities such as the purchase of

pollution abatement equipment or the hiring or train-

ing of personnel for pollution prevention programs.

In summary, Mr. President, this preemption pro-

vision is narrow in scope and limited to the particular

purpose of preventing double taxation.

MR. BRADLEY. Am I correct in assuming that

moneys expended by State funds can be used to pro-

vide the required 10 percent State match?

MR. RANDOLPH. That is correct.

MR. BRADLEY. Am I also correct in noting that

State funds are preempted only for efforts which are

in fact paid for by the Federal fund and that there

would be no preemption for efforts which are eligible

for Federal funds but for which there is no reimburse-

ment?

MR. RANDOLPH. That is correct.

MR. BRADLEY. Finally, if the Federal Government

determines that the needs at other sites require that

Federal efforts be terminated at the first site before

that site is completed, may a State fund complete the

effort?

MR. RANDOLPH. This legislation would permit that

to happen. [126 Cong. Ree. 30949 (1980) }.

Given the narrow scope of the language used in

) 114(c) and the guidance of the foregoing colloquy, once

the Superfund Act was adopted New Jersey began to ad-

minister the Spill Act to supplement rather than to dupli-

cate federal cleanup efforts. The State had the flexibility

to adapt its program in this way because the New Jersey

Legislature had vested broad discretion in the Department

of Environmental Protection to select the type and extent

of cieanup and related activities to be financed by the Spill

Act tax. N.J/.S.A. 58:10-23.11f. In the post-Superfund

era, therefore, New Jersey has sought to maximize the in-

fusion of federal dollars into the State for cleanup activi-

ties. As a consequence, 85 New Jersey sites have been

nominated to the priority list of approximately 535 sites

maintained by the United States Environmental Protection

Agency (‘‘EPA”) pursuant to 42 U.S.C. 4 9605, and used

as a prerequisite to establishing eligibility for Superfund-

financed remedial activity. 40 C.F.R. § 300.68; see also

Appendix B to 40 C.F.R. Part 300.

Following the adoption of the Superfund Act, how-

ever, New Jersey’s right to continue the collection of the

Spill Fund tax was challenged by the Exxon Corporation

and four other owners of “major facilities” responsible

for paying the tax (referred to collectively as ‘*Exxon’’)

on the sole ground that N.J.S.A. 58:10-23.11h was pre-

empted by the language contained in § 114(c) of the Sup-

erfund Act, codified at 42 U.S.C. § 9614(c). Following an

unsuccessful attempt to raise this challenge in federal

court (see Exxon Corp. v. Hunt, 683 .2d 69 (3d Cir. 1982),

cert. denied 439 U.S. 1104 (1983) ), Exxon pursued the mat-

ter through the New Jersey court system. Upon review-

ing cross motions for summary judgment on the merits, the

‘Tax Court of New Jersey upheld the validity of the Spill

Fund tax. Exxon Corp. v. Hunt, 4 NJ. Tax 294 (1982)

(reprinted in the appendix attached to Appellant Exxon’s

Jurisdictional Statement (‘‘Aa”) at Aad47 to Aa78). This

determination was subsequently affirmed by both the Ap-

pellate Division of the Superior Court, Exxon Corp. v.

Hunt, 190 N.J. Super. 131, 462 A.2d 1983 (App. Div. 1983)

(reprinted at Aa37 to Aa46), and by the Supreme Court of

New Jersey, Exxon Corp. v. Hunt, 97 N.J. 526, 481 A.2d

271 (1984) (reprinted at Aal5d to Aa36).

In upholding the Spill Fund tax against Exxon’s chal-

lenge, the Supreme Court of New Jersey followed the

traditional approach established by this Court in preemp-

tion eases which requires asw«rtaining the meaning of the

federal and state enactments in question, and then deter-

mining whether they are in conflict. Exxon v. Hunt,

supra, 97 N.J. at 533 (Aa23), citing Chicago & N.W.

Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317

(1981); Perez v. Campbell, 402 U.S. 637, 644 (1971); and

Florida Lime & Avocado Growers v. Paul, 373 U.S. 132,

142 (1963). Pursuant to this well-established approach,

the court below carefully examined the language of

§ 114(e), legislative history directly pertinent to that pro-

vision, and the purpose and spirit of the Superfund Act as

a whole. This painstaking analysis persuaded the court

that §114(c) did not preempt New Jersey’s right to tax

industry to support Spill Fund activities, as long as the

State tax was used to supplement and not to duplicate

federal cleanup efforts.

While the Supreme Court of New Jersey did consider

the plain meaning argument advanced by Exxon, it re-

jected the argument because the language of § 114(c) was

not sufficiently clear on its face to support the extremely

broad preemption interpretation urged by Exxon. The

court consequently looked to contemporaneous legislative

history concerning the preemption provision, and found

ample support there for a much narrower construction of

§ 114(c)—a construction that would allow the New Jersey

and federal taxes to coexist. See the Bradley/Randolph

colloquy quoted above and cited in Exxon v. Hunt, supra,

97 N.J. at 538-540 (Aa28 to Aa30). Recent legislative his-

tory confirming this interpretation was also cited by the

court below (Aa3l to Aa32), as was an agency construc-

tion to the same effect issued by EPA in a guidance docu-

10

ment provided to the states as part of Superfund program

implementation (Aa32 to Aa33). This cumulative and

compelling support for a narrow interpretation of § 114(c)

convinced the court that Congress had not intended to

vitiate New Jersey’s hazardous waste cleanup program by

cutting off its source of financing.

Also found persuasive by the court below, however,

was the federal statutory scheme itself which focused on

priority sites to the exclusion of other problem areas. See

42 U.S.C. § 9605; 40 C.F.R. 4 300.68. In light of this lim-

ited federal coverage, the Supreme Court of New Jersey

echoed the conclusion of the Tax Court which had found

that “[{i]t simply strains credulity to say that hazardous

waste sites and spills not meeting the [priority list] eri-

teria are claims which ‘may be compensated’ under [Sup-

erfund].’’ 97 N.J. at 543 (Aa34). Based on this realistic

analysis of Superfund coverage, the court below rejected

Exxon’s broad preemption claim and endorsed ‘‘The more

logical conclusion .. . that Congress contemplated that the

federal government would attempt to deal with the prob-

lems of the most seriously affected sites . . . and to allow

states to maintain a compensation fund .. . to conduct their

own cleanup efforts on those sites not receiving Superfund

compensation and to provide for their cooperative pro-

gram components including their 10% share of cleanup

costs, related administrative costs for equipment and per-

sonnel, and other program features not covered by Super-

fund... .” 97 N.J. 543-544 (Aa35).°

* Since the adoption of the Superfund Act, New Jerse has

administered its Spill Fund in a manner consistent with the

ruling of the Supreme Court of New Jersey. Thus, the proceeds

(Continued on next page)

11

Dissatisfied with this result, Exxon filed a Notice of

Appeal from the judgment of the Supreme Court of New

Jersey on November 19, 1984. Exxon’s Jurisdictional

Statement was submitted thereafter. Appellees Hunt and

the State of New Jersey, et al. urge this Court to dismiss

the appeal for want of a substantial federal question mer-

iting plenary review, or to affirm the judgment issued in

this matter by the Supreme Court of New Jersey. In sup-

port of this motion, appellees rely upon this brief and the

opinions rendered by the courts below.

ARGUMENT

Plenary Review Of This Appeal Is Not Warrant-

ed Because The Supreme Court Of New Jersey

Correctly And Convincingly Rejected The Pre-

emption Argument Raised By Exxon After Ap-

plying Well-Established Principles Of Statutory

Construction And Preemption Analysis To The

Particular Circumstances Of This Case.

This appeal should be dismissed, or the opinion below

affirmed, because the Supreme Court of New Jersey care-

fully followed the methods established by this Court for

(Continued from previous page)

of the Spill Fund have accordingly been used to finance the

State’s 10% or greater share of remedial costs at priority sites

selected for cleanup work by EPA, to finance site cleanups

where no federal funding has been made available, to finance

personnel and equipment costs incurred by the Department

of Environmental Protection in enforcing the Spill Act, and to

finance the administrative expenses of the Spill Fund. To the

extent that appellants assert otherwise (Jurisdictional Statement

at p. 4), they are plainly wrong; in any event, there is nothing

in the record of this case to support their assertions.

12

analyzing preemption cases and correctly determined,

upon a detailed examination of the statutory language,

legislative history, and statutory scheme as a whole, that

§ 114(c) of the Superfund Act, 42 U.S.C. § 9614(c), did not

invalidate the tax levied by New Jersey to support the

State’s hazardous discharge prevention and cleanup pro-

gram. Plenary review is also unnecessary here because

the conflicts alleged by Exxon between the decision below

and the precedents of this Court, and between the federal

and state statutes in question, are imagined rather than

real, as demonstrated below.

A. The Approach Used by the Supreme Court of

New Jersey to Analyze the Preemption Issue

in this Case is Completely Consistent With the

Precedents of this Court.

The primary thrust of preemption analysis is to deter-

mine the intent of Congress in enacting the federal statute

in issue. Shaw v. Delta Air Lines, Inc., 103 S.Ct. 2890,

9899 (1983); Fidelity Federal Sav. € Loan Ass’n v. De La

Cuesta, 458 U.S. 141, 152 (1982). For until that intent is

ascertained, it is impossible to decide whether the state en-

actment ‘‘stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress,”’

and thus must be invalidated under the Supremacy Clause.

Jones v. Rath Packing Co., 430 U.S. 519, 526 (1977), quot-

ing Hines v. Davidowttz, 312 U.S. 52, 67 (1941). The Su-

preme Court of New Jersey recognized and gave effect to

this key element of preemption doctrine in its opinion be-

low which liberally cited and carefully followed the prece-

dents of this Court. In an effort to support the granting

of plenary review here, however, Exxon has alleged that

the Supreme Court of New Jersey ‘‘disregarded” settled

13

preemption principles in upholding the Spill Fund tax.

This allegation—based on an illusory conflict between the

decision below and this Court’s opinion in Aloha Airlines

v. Div. of Taxation of Hawaii, 104 S.Ct. 291 (1983)—is a

sheer makeweight, however, and thus cannot sustain Ex-

xon’s request for plenary review.

The Aloha Airlines opinion noted that courts need not

look beyond the plain meaning of a statutory provision

where preemption is alleged if the federal enactment in

question clearly and unambiguously forbids a particular

type of state action, and precisely that kind of action is

under attack. 104 S.Ct. at 294. The key to this holding—

and to the plain meaning rule in general—is that the fed-

eral statutory provision must be completely free from am-

biguity on its face, and must operate independently of the

rest of the statute. Even Exxon recognizes that these es-

sential prerequisites must be met before the plain meaning

rule can properly be invoked. (Jurisdictional Statement

at 8).

After acknowledging these requirements, however,

Exxon proceeds to ignore them. For §114(¢) automati-

cally falls beyond the scope of the plain meaning rule be-

cause it is ambiguous on its face. First, the provision is

not self-defining like the statutory section in issue in Aloha

Awlines, but rather explicitly refers to the balance of the

Superfund Act for a complete understanding of its terms.

Moreover, $114(¢) does not categorically prevent the

states from taxing industry to support all hazardous waste

cleanup programs, as Exxon would have this Court. be-

lieve, but only from taxing persons ‘“‘to pay compensation

for claims .. . which may be compensated under this sub-

chapter.” 42 I7.S.C. §9614(c). Resort to the rest of the

14

Superfund Act at the very least is consequently neces-

sary to determine the extent of federal coverage and—

derivatively—to determine the extent of federal preemp-

tion. Yet, Exxon has persistently refused to recognize

this fact. Finally, application of the plain meaning rule

would be inappropriate here in any event because the word

‘‘may” is used in § 114(¢)—a word that has had many dif-

ferent meanings ascribed to it and thus is inherently am-

biguous. See generally Kraft v. Board of Educ. for D.C.,

247 F. Supp. 21, 24-25 (D.D.C. 1965), cert. denied 386 U.S.

958 (1967); Webster’s Third New International Dictionary

at 1396 (1971); Webster’s New Collegiate Dictionary at

711 (1976); Black’s Law Dictionary at 883 (rev. 5th ed.

1979). Given these facial ambiguities in §114(¢), Aloha

Airlines does not support the position advanced by Exxon.

The alleged “conflict” between that decision and the opin-

ion below must consequently be seen for what it really is:

an attempt to create a conf!ict where none exists.

As is painfully obvious from an examination of the

instant matter, Exxon argues so strenuously for applica-

tion of the plain meaning rule because it wants to prevent

the Court from considering the Bradley/Randolph col-

loquy that undermines Exxon’s position in this litigation

and supports the narrow reading of § 114(c) endorsed be-

low. While Exxon’s effort in this regard is understand-

able, it is not valid. For none of the cases cited by Exxon

authorize courts to exclude pertinent legislative history

from consideration. Indeed, even in Aloha Airlines the

Court discussed the legislative history of the federal en-

actment and relied upon it to support a determination of

congressional intent. 104 S.Ct. at 294-295. Similar re-

liance on relevant legislative history can be found in two

15

additional cases cited by Exxon as purported support for

its misguided “plain meaning” argument: Ernst & Ernst

v. Hochfelder, 425 U.S. 185 (1976); and Arizona Public

Serv. Co. v. Snead, 441 U.S. 141 (1979).

When the Supreme Court of New Jersey relied upon

contemporaneous legislative history that was directly per-

tinent to the preemption issue in question here, therefore,

it adhered to the precedents established by this Court.

Moreover, contrary to Exxon’s assertions, use of the views

of a subsequent Congress by the court below to confirm

legislative intent was also appropriate. See Bell v. New

Jersey and Pennsylvania, 461 U.S. 773 (1983); Seatrain

Shipbuilding Corp. v. She'l Ow Co., 444 U.S. 572, 596

(1980). So, too, was reliance on a Superfund program

guidance document addressing the preemption question is-

sued by the United States Environmental Protection Agen-

ey. See Youakim v. Miller, 425 U.S. 231, 235-236 (1976).

Since all of Exxon’s objections to the approach utilized by

the Supreme Court of New Jersey to analyze the preemp-

tion issue are without merit, plenary review to address

these objections is completely unwarranted.

B. The Supreme Court Of New Jersey Correctly

Concluded That The Preemption Clause Of

The Superfund Act Is Narrow In Scope And

Permits New Jersey To Continue Its Spill

Fund Tax As Long As The Revenues Collect-

ed Are Dedicated To Financing Spill Fund

Program Costs Not Covered Or Actually Com-

pensated by Superfund.

Before sustaining the validity of the Spill Fund tax

against Exxon’s preemption challenge, the Supreme Court

of New Jersey carefully analyzed the State and federal

16

enactments and determined that no irreconcilable conflict

existed between the two regulatory schemes. It found

ample support for the conclusion that the statutes could

be harmonized in the language of § 114(c), in the Super-

fund Act as a whole, in the legislative history of the Act,

and in the operation of the federal program by the United

States Environmental Protection Agency. A review of

each of these elements of the decision below will demon-

strate that the Supreme Court of New Jersey properly

upheld the Spill Fund tax, and that plenary review by

this Court is consequently unneces.ary.

Section 114(c), by its own terms, restricts state taxa-

tion only insofar as revenues are used for costs that ‘‘may

be compensated under this subchapter.” It is completely

consonant with this language, therefore, for states to tax

industry for activities excluded from coverage by Super-

fund. As a consequence, there is no preemption whatso-

ever of state taxation to finance state program costs that

are not eligible for Superfund financing. For what Con-

gress did in § 114(c) was to relate the restriction on state

taxation to the areas it chose to cover on the federal level,

leaving large untouched areas to be proper objects of

state taxation and spending. When Congress circum-

scribes its coverage in this way, “state regulation outside

that limited field ... is not forbidden or displaced.” Kelly

rv. State of Washington, 302 U.S. 1, 10 (1937). See also

Shaw v. Delta Air Lines, Inc., supra, 103 S.Ct. at 2900

(state anti-discrimination employment law preempted only

insofar as it related to pension plans covered by ERISA

and thus continued to apply to other aspects of the em-

ployment relationship such as hiring, promotions, and sal-

aries).

17

The New Jersey Spill Act provides financing for many

categorics of costs that are not eligible for federal Super-

fund compensation. These categories include the cost of

remedying petroleum spills, the payment of third party

property damage claims, the personnel and equipment ex-

penses incurred by the Department of Environmental Pro-

tection in operating the State spill program, and the ad-

ministrative costs of the Spill Fund. N.J.S.A. 58:10-

23.110; compare 42 U.S.C. § 9601 et seq. The State legis-

lation also provides financing, as the courts below held,

for cleanup costs at discharge sites of local but not na-

tional significance and thus beyond the scope of Super-

fund, and for the ten percent or greater state match at

priority sites—a contribution that specifically cannot be

paid by federal funds. 42 U.S.C. § 9604(c). In regard to

the State match, the New Jersey Legislature explicitly

recognized that the Spill Fund should be used for this pur-

pose when it enacted the Hazardous Discharge Bond Act.

P.L. 1981, c. 275, which provided that bond moneys could

be used for the match if resources in the Spill Fund were

insufficient. Jbid. at section 15. Since none of the above

categorics are covered by Superfund, it is clear that New

Jersey may continue to tax industry for these purposes.

Exxon maintains to the contrary, however, that the

only permissible state tax would be one dedicated solely

to the exemptions authorized in the second sentence of

$114(c) (Jurisdictional Statement at 8). Such a reading

would severely restrict a state’s right to tax industry by

requiring that all revenues derived from the tax be used

“to finance the purchase or prepositioning of hazardous

substance response equipment or other preparations for

the response to a release of hazardous substances which

18

aff cts such State.” 42 U.S.C. §9614(c). Exxen’s argu-

ment fails because it simply refuses to recognize the ex-

press language of §114(c) which limits the preemptive

scope of the provision to areas covered by the federal

Act and leaves other areas open to regulation by the states.

It also fails because the argument is contrary to the legis-

lative intent. See 126 Cong. Rec. 30949 (1980) (remarks

of Senators Randolph and Bradley); 126 Cong. Rec. 31965

(1980) (remarks of Representative Florio). The court

below thus correctly concluded that § 114(¢) did not pre-

empt the Spill Fund tax as long as the revenues derived

therefrom were used to compensate hazardous waste clean-

up costs and claims not covered by Superfund.

While the areas of Spill Fund spending that fall be-

yond the scope of federal! coverage would alone sustain

the validity of the New Jersey tax, the Supreme Court of

New Jersey alse held that the State tax could be used to

finance costs “not in fact compensated by Superfund

moneys.” 97 N.J. at 543 (Aa35). This conclusion was

based on a pragmatic analysis of the federal and state

programs that followed the directive of Jones v. Rath

Packing Co., supra, 430 U.S. at 526, which required courts

addressing preemption problems ‘‘to consider the relation-

ship between state and federal laws as they are interpreted

and applied, not merely as they are written.”

The key to determining the impact of § 114(c) on New

Jersey’s financing scheme for the Spill Fund program is

to ascertain what activities may be paid for on the federal

level under the provisions of the Superfund Act. Al-

though this question is at the crux of the instant case,

Exxon never addresses it, but rather assumes that the

19

Superfund Act makes compensation available for any and

all hazardous waste cleanup actions and related expenses.

Such an assumption ignores the limited coverage provided

by the federal act and substitutes superficial, conclusory

allegations for a close examination of the statutory and

regulatory aspects of Superfund. When the Superfund

program is analyzed carefully, however, it supports the

holding reached by the court below and not the simplistic

argument advanced by Exxon.

The Superfund Act provided that all response actions

to releases of hazardous substances be consistent with the

National Contingency Plan for the removal of oil and haz

ardous substances (‘‘NCP”). 42 U.S.C. §9604(a). The

Act also directed that the existing NCP be revised to in-

clude criteria for determining priorities among problem

sites throughout the United States. 42 U.S.C. § 9605

(8)(A). Based upon these criteria, the federal govern-

ment must select—with input from the states—the worst

sites in the country for inclusion on the National Priority

List (‘““NPL’’). 42 U.S.C. §9605(8)(B). In order to

qualify for federally financed remedial action, a release

must be on the NPL. This requirement drastically re-

stricts the number of sites where federal funding will even

be considered. Superfund’s focus upon the worst sites

nationwide is consistent with the legislative history of the

Act which recognized that the funding limitations of the

federal program would make responses possible only at the

most severely damaged sites. See, e.g., S. Rep. No. 848,

96th Cong., 2d Sess. at 17; [1980] U.S. Code Cong. & Ad.

News at 6139 (comments of Representative Gore); 126

Cong. Rec. 30940 (1980) (remarks of Senator Tsongas).

20

EPA, the federal agency charged with implementing

the Superfund program, has elaborated on the Act’s re-

stricted coverage in the NCP. See 40 C.F.R. Part 300.

That document specifically provides that remedial actions

will be authorized only for releases on the NPL. 40C.F.2.

5 300.68(a). It is important to note, however, that inc‘u-

sion on the NPL does not guarantee that compensation

will be provided, but merely constitutes the first step to-

ward qualifying for Superfund financed remedial action.

As to the question of eligibility for funding, EPA has an-

alyzed the NCP in the following manner:

Subpart F establishes criteria upon which deci-

sions as to eligibility for Federal funding will be

based. The eligibility of particular actions will be de-

cided on a case-by-case basis using these factors. The

Plan cannot ensure funding approval for specific ac-

tions since current demands for response and expected

future demands exceed available funds. [47 Fed. Reg.

at 31195 to 31196 (July 16, 1982) }

See also Ibid. at 31187 where EPA noted that inclusion on

the NPL did not guarantee eventual federal funding.

Since eligibility for Superfund financing is determined

on a case by case basis, the only way to ascertain whether

a particular site may receive compensation under the fed-

eral act is to make an application to EPA. If that site is

not included on the NPL, or if ineluded is rejected for

financing, states should be permitted to use industry taxes

to fund remedial action there because such work may not

realistically be compensated by Superfund. Given !PA’s

case by case approach to eligibility, the ‘‘actual compensa-

tion” test endorsed by the Supreme Court of New Jersey

is the only practicable way to interpret § 114(c).

eee

ws yee

21

Although Exxon argues that this narrow construction

of §114(c) renders the provision meaningless, this is not

so. For what the actual cou:pensation test requires o/

states that want to collect industry taxes is that they maxi-

mize their participation in the federal program by apply

ing for compensation whenever a site has a reasonable

chance to meet the criteria established in the NCP. A

state could not ignore the federal program and then tax

industry for any and all cleanup work in order to avoid

federal entanglements and regulatory requirements, there.

fore, because such action would in essence lead to state

taxation for work that could have been financed under

Superfund—just the kind of double taxation and dupliea

tion of program goals proscribed by 4114(c). Should a

state wish to pursue such a course, it would be required to

fund an independent cleanup program through general

revenues, as allowed by the second sentence of § 114(e).

If a state chooses to use an industry tax to supplement

federal cleanup efforts within its borders by financing

remedial action where no Superfund compensation has

been provided, however, this type of program is permis

sible under § 114(ce).

While Exxon argues that the Supreme Court of New

Jersey substituted its will for that of Congress when ii

endorsed the ‘‘actual compensation’

test, this is not the

case. For the test comes directly from the Bradley /Ran-

dolph colloquy quoted extensively above at pp. 6-7. There

Senator Randolph stated unequivocally that 4 114(c)

would not preempt state taxation for activities eligible

for federal financing, but where no Superfund reimburse-

ment was actually provided. 126 Cong. Rec. 30949 (1980).

Since Senator Randolph was a co-sponsor of the Super-

fund Act and Chairman of the Committee on Environment

and Public Works which referred the measure to the Sen-

ate, his remarks are entitled to great weight, as the Court

below held. Exxon v. Hunt, 97 N.J. at 537 (Aa27), citing

F.E.A. v. Algonquin SNG, Inc., 426 U.S. 548, 564 (1976).

Substantial deference should also be accorded to the Ran-

dolph comments because they were prompted by the situa-

tion in New Jersey and thus have a direct bearing on the

issue raised in this case. Further congressional support

for the “actual compensation” test can be found in a recent

report of the House of Representatives Committee on En-

ergy and Commerce which stated in regard to the Super-

fund Act that, ‘‘The Committee believes that the proper

interpretation of current law is that its preemption provi-

sion was intended only to preclude states from imposing

taxes or otherwise requiring contributions to funds which

would pay costs or damages that would be actually com-

pensated by Superfund.’ H.R. Rep. No. 890, Part 1, 98th

Cong., 2d Sess. 58-59 (1984). While the views of a subse-

quent Congress are not always determinative of earlier

legislative intent, they are persuasive here because they

confirm the interpretation of §114(c) contained in the

Bradley/Randolph colloquy. Also of note is that the Com-

mittee explicitly rejected the broad preemption interpre-

tation of § 114(c) advocated by Exxon. Ibid.

The ‘‘actual compensation’’ test has also been en-

dorsed by EPA, the federal agency charged with imple-

menting the Superfund Act. In a guidance document con-

cerning the state role in the Superfund implementation

process, KPA addressed the preemption issue and con-

cluded that 4 114(c) did not apply to state funds used ‘‘to

conuipensate damage claims and to remove or remedy re-

leases of hazardous substances eligible to be financed by

the Fund but for which no federal reimbursement is pro

vided.” Office of Emergency and Remedial Response,

U.S. Environmental Protection Agency, Guidance: Cooper-

ative Ayreements and Contracts with States Under the

Comprehensive Environmental Response, Compensation

and Liability Act of 1980, at p. x (March 1982). By fol-

lowing the interpretation of § 114(¢) endorsed by both Con-

cress and EPA, the Supreme Court of New Jersey did

not engratft its own policy judgments upon the Superfund

statute as Exxon contends, but rather gave full effect to

the will of Congress and the views of EPA. Exxon’s criti-

cism of the opinion below is thus lacking in substance and

does not merit plenary review by this Court.

As is abundantly clear from the decision of the Su-

preme Court of New Jersey and from the above analysis

supporting the conclusions reached below, the State Spill

Fund tax and the federal Superfund law can coexist with-

out offending congressional objectives. Where such har-

mony is possible, the state statute must be upheld. Flori-

da Lime € Avocado Growers v. Paul, supra, 373 U.S. at

141-143. Hypothetical or illusory conflicts such as those

posited by Exxon simply are not sufficient to support a

‘inding of preemption; actual conflict between the state

and federal legislation must be demonstrated. Rice v.

Norman Williams Co., 458 U.S. 654 (1982): Goldstein vr.

Cal fornia, 412 U.S. 546 (1973). Given the absence of any

real conflict in this case, the decision upholding the State

enactinent should be affirmed, or the appeal filed by Exxon

dismissed for lack of a substantial federal question.

24

CONCLUSION

It is respectfully submitted that for the foregoing rea-

sons the appeal should be dismissed or the judgment ot the

Supreme Court of New Jersey affirmed.

Respectfully submitted,

Irwin I. KtMMELMAN

Attorney General of New Jersey

Attorney for Appellees

Richard J. Hughes Justice Complex

CN 112

Trenton, New Jersey 08625

(609) 292-1568

By: Mary C. Jacosson

Deputy Attorney General

Counsel of Record

MicHae. R. Coie

First Assistant Attorney General

Of Counsel

DATED: January 30, 1985