Appellants Brief — Exxon Corp. v. Hunt

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QUESTION PRESENTED

Whether the Supreme Court of New Jersey correctly

determined that the Comprehensive Environmental Re-

sponse, Compensation and Liability Act of 1980 (also

known as ‘‘Superfund”), which prohibited special State

taxes only for the purpose of financing ‘‘claims which may

be compensated” by Superfund, 42 U.S.C. § 9614(c), does

not preempt the taxing provisions of the New Jersey Spill

Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.,

insofar as the State Spill Fund supported by the tax is

used to finance claims either not covered or not actually

compensated by Superfund?

STATEMENT OF THE CASE

SUMMARY OF ARGUMENT

TABLE OF CONTENTS

Page

ARGUMENT

IT.

CONCLUSION

THE LANGUAGE OF 42 U.S.C. § 9614(c)

AND THE STRUCTURE OF THE SUPER-

FUND ACT CONTEMPLATE CONTIN-

UED STATE TAXATION TO FINANCE

STATE HAZARDOUS WASTE PRO-

GRAM COSTS EITHER NOT COVERED

OR NOT ACTUALLY COMPENSATED

BY SUPERFUND

THE LEGISLATIVE HISTORY OF THE

SUPERFUND ACT SUPPORTS NEW

JERSEY’S INTERPRETATION OF 42

U.S.C. § 9614/c)

TABLE OF AUTHORITIES

CASES

Aloha Airlines, Inc. v. Director of Taxation, 464

U.S. 7 (1983)

Andrus v. Shell Oil Co., 446 U.S. 657 (1980)

Askew v. American Waterways Operators, Inc.,

411 U.S. 325 (1973)

Bell v. New Jersey, 461 U.S. 773 (1983)

Cabell v. Markham, 148 F.2d 737 (2d Cir. 1945),

aff'd 326 U.S. 404 (1945)

Chemical Mfrs. Ass’n v. Natural Res. Defense

Coun., 105 S.Ct. 1102 (1985)

iil

TABLE OF AUTHORITIES—Continued

Page

Chevron, U.S.A., Inc. v. Natural Resources De-

fense Council, 104 S.Ct. 2778 (1984) 47

Chicago & North Western Transportation Co. v.

Kalo Brick & Tile Co., 450 U.S. 311 (1981) 18

C.ILR. v. Engle, 464 U.S. 206 (1984) 47

Exxon Corp. v. Hunt, 683 F.2d 69 (3rd. Cir. 1982),

cert. denied 459 U.S. 1104 (1983) 12

Fidelity Federal Sav. é Loan Ass’n v. De La

Cuesta, 458 U.S. 141 (1982) 17

Himes v. Davidowitz, 312 U.S. 52 (1941) 17

Jones v. Rath Packing Co., 430 U.S. 519 (1977) 17, 18, 24

Kelly v. State of Washington, 302 U.S. 1 (1937) 18, 20

Maryland v. Louisiana, 451 U.S. 725 (1981) 17

Metropolitan Life Ins. Co. v. Massachusetts, 105

S.Ct. 2380 (1985) 14, 18, 19, 20

NLRB v. Lion Oil Co., 352 U.S. 282 (1957) 47

New Jersey v. Ruckelshaus, Civil Action No. 84-

1668 ‘D.N.J. 1984) 5

North Haven Board of Ed. v. Bell, 456 U.S. 512

(1982) .. 45

Russello v. United States, 464 U.S. 16 (1983) 00.) 29

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

U.S. 572 (1980) 44

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) 17, 20

Stafford v. Briggs, 444 U.S. 527 (1980) 28

United States v. Fisher, 2 Cranch 358, 2 L.Ed. 304

(1805) 28

Watt v. Alaska, 451 U.S. 259 (1981) 28, 44, 47

TABLE OF AUTHORITIES—Continued

STATUTES

Page

Comprehensive Environmental Response, Com-

pensation and Liability Act of 1980, 42 U.S.C.

§ 9601 et seq.

42 U.9.C. § 9601(4)

42 U.S.C. § 9601(6)

42 U.98.C. § 9601(14)

42 U.S.C. § 9601(23)

42 U.S.C. § 9601(24)

42 U.S.C. § 9604(c)

3, 15, 21

42 U.S.C. § 9604/e) (1)

42 U.S.C. § 9604(c) (3)

42 U.S.C. § 9605

3, 10, 20

3, 15, 46

4,13

42 U.S.C. § 9605(8) .

42 U.S.C. § 9605(8) (A)

42 U.S.C. § 9605(8) (B)

42 U.S.C. § 9607(f)

3, 20, 47

42 U.S.C. § 9611

42 U.S.C. § 9611(a)

42 U.S.C. § 9611(e) (2)

42 U.S.C. § 9612

42 U.S.C. § 9614(a)

42 U.S.C. § 9614(b)

42 U.S.C. § 9614(c)

passim

42 U.S.C. § 9614(a)

TABLE OF AUTHORITIES—Continued

Page

42 U.S.C. § 9631 2

26 U.S.C. § 4611 et seq. bike

26 U.S.C. § 4661 et seq. 2

Clean Water Act, 33 U.S.C. § 1321 3

Airport Development Acceleration Act of 1973, 49

U.S.C. § 1513 (a) 19

New Jersey Spill Compensation and Control Act,

N.J.S.A. 58 :10-23.11 et seq. 1

N.J.S.A. 58:10-23.11a 21

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

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

N.J.S.A. 58 :10-23.11f 11, 22

N.J.S.A. 58 :10-23.11g 2,15

N.J.S.A. 58 :10-23.11g(a) 1, 21

N.J.S.A. 58:10-23.11h 1, 2,12

N.J.S.A. 58 :10-23.11k to N.J.S.A. 58:10-23.11q —.. 45

N.J.S.A. 58 :10-23.110 1, 2, 15

New Jersey Hazardous Discharge Bond Act, P.L.

1981, ¢. 275 22

REGULATORY MATERIAL

National Contingency Plan,

40 C.F.R. Part 300 (1984) 5

40 C.F.R. § 300.65 20, 24

40 C.F.R. § 300.65(a) 5

40 C.F.R. § 300.67

40 C.F.R. § 300.68

40 C.F.R. § 300.68(a)

40 C.F.R. § 300.68(d)

47 Fed.

48 Fed.

50 Fed.

H.R. 85, 96th Cong., 2d Sess. (1980)

§ 104

§ 104(f) (1)

§ 105

§ 110

§ 110(a)

§ 110(a) (1)

§ 110(a) (2)

§ 110(b)

§ 302(a)

§ 531

TABLE OF AUTHORITIES—Continued

Reg.

Req.

Reg.

5, 14, 20, 24

31187 (1982)

31195 (1982)

31196 (1982)

31199 (1982)

40658 (1983)

40659 (1983) ....

9593 (1985)

9595 (1985)

LEGISLATIVE HISTORY

passim

30, 40

7,16

7, 32

vii

TABLE OF AUTHORITIES—Continued

Page

H.R. 85, 96th Cong., Ist Sess. (1979) 29

§ 103(a) 31

H.R. 7020, 96th Cong., 2d Sess. (1980) 6, 8, 29, 36, 39

S. 1341, 96th Cong., Ist Sess. (1979) 6, 7, 8, 35, 38

§ 607 35

§ 612 35

Ne i te 7

§612(b) ......... 8, 36

S. 1480, 96th Cong., 2d Sess. (1980) ........ passim

PO (GS OF 37

I TE italien sienvitinsiinaitbiaat 37

Amend. No. 2387 —___. 25, 39

H.R. Rep. 96-172, Part I, 96th Cong., 1st Sess.

(1979) .30, 34

H.R. Rep. 98-890, 98th Cong., 2d Sess. (1984) 00. 16, 44

S. Rep. 96-848, 96th Cong., 2d Sess. (1980) 4

S. Rep. 98-631, 98th Cong., 2nd Sess. (1984) 16, 43

Library of Congress, Senate Comm. on Environ-

ment and Public Works, 97th Cong., 2d Sess., A

Legislative History of the Comprehensive En-

vironmental Response, Compensation and Lia-

bility Act of 1980 (Superfund), Public Law

96-510 (Comm. Print 1983) :

Vol. 1 4,6, passim

Vol. 2 3,4, passim

Vol. 3 6,7, passim

viii

TABLE OF AUTHORITIES—Continued

Page

The Environmental Energy Response Act:

Hearings on S. 1480 Before the Senate Commit-

tee on Finance, 96th Cong., 2d Sess. (Comm.

Print 1980) 22

Hearings on S. 1480 Before the Senate Committee

on Commerce, Science and Transportation, 96th

Cong., 2nd Sess (Comm. Print 1980) 2, 37

MISCELLANEOUS

Black’s Law Dictionary (5th Ed. 1979) 0. .23, 26

Eckhardt, ‘‘The Unfinished Business of Hazard-

ous Waste Control,” 33 Baylor Law Rev. 253

i RA Pea Se ney enna ane 3

Executive Order No. 12316, 46 Fed. Reg. 4223

(1981) 4

Frankfurter, ‘‘Some Reflections on the Reading

of Statutes,” 47 Col. Law Rev. 527 (1947) 28

Webster’s Third New International Dictionary

(1976) 23, 26

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 hazardous 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 gener-

ated by the tax to be credited to the Spill Compensation

Fund (‘‘Spill Fund”) which is authorized to finance spill

response and waste site cleanup costs incurred by the De-

partment of Environmental Protection; certain damage

claims resulting from hazardous discharges;' the person-

nel and equipment costs of the Department of Environ-

mental Protection associated with the enforcement of the

Spill Act; the administrative costs of the Spill Fund; and

research concerning pollution and cieanup techniques, in-

cluding ocean pollution. N.J.S.A. 58:10-23.1lo. From 1977

through 1980, the Spill Fund provided the primary source

of revenue for New Jersey’s petroleum spill! and hazard-

ous waste cleanup program.

1 The types of damage claims covered by the Spill Act are set

forth in N.J.S.A. 58:10-23.11g(a) and include: 1) damage to

pee or real property; 2) damage to natural resources; 3)

oss of income or earning capacity due to damage to property

or natural resources; 4) loss of tax revenue by a State or local

government resulting from property damage for a period not

to exceed one year; and 5) interest costs on debts incurred to

remedy a discharge.

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, Com-

pensation and Liability Act (known as the ‘‘Superfund

Act’’ or ‘*‘CERCLA”’), 42 U.S.C. § 9601 et seq., to assist

the states in financing cleanups at the most severely dam

aged and highest priority sites throughout the nation.

Funding for this federal effort was provided by a $1.6 bil-

lion trust fund to be raised by placing a tax on crude oil

petroleum, and certain chemicals,’ and by transferring to

the fund appropriations from general federal revenues.

The tax was structured to provide 87.5% of the fund,

while general revenues were to make up the balance. The

federal tax took effect on April 1, 1981 and is scheduled to

expire, if not reauthorized by Congress, on September 30,

1985. 26 U.S.C. § 4611 et seq.; 26 U.S.C. § 4661 et seq.; 42

U.S.C. § 9631.

Unlike the Spill Act, the Superfund Act did not cover

cleanup expenses for oil spills or property damage claims

of any sort. Compare N.J.S.A. 58:10-23.11b(k) and 42

U.S.C. § 9601(14) ; N.J.S.A. 58:10-23.11(g) and (0) with 42

U.S.C. § 9611. Nor did the federal Act provide funding

2 26 U.S.C. § 4661 imposes a tax on 42 chemicals at specified

rates. Compare the New Jersey tax on “hazardous substances”

which saan substances designated as “hazardous” by the

Department of Environmental Protection and includes over 300

substances. N.J.S.A. 58:10-23.11b(k); N.J.S.A. 58:10-23.11h; see

also the Environmental Emergency Response Act: Hearings

on §$.1480, before the Senate Committee on Finance, 96th

Cong. 2d Sess., Comm. Print at 587 (1980) (testimony of Jerry

F. English, Commissioner of the New Jersey Department of

Environmental Protection).

for State personnel, equipment, or administrative costs.

Rather, the federal fund was designed to provide financ-

ing for: 1) emergency removal actions limited to $1 million

or six months unless specific findings justifying continued

action are made (42 U.S.C. § 9604(c)(1)); 2) up to 90%

of the cost of remedial actions at priority sites contam-

inated by hazardous substances (42 U.S.C. § 9604(c); see

also 42 U.S.C. § 9605(8)); and 3) claims by the state or

federal governments for damage to natural resources (42

U.S.C. § 9607(f)). See generally 42 U.S.C. § 9611.4 The

federal Act specifically obligated states to pay at least 10%

of all remedial actions, with the state share expanding to

50% or more for sites owned at the time of disposal by a

state or one of its political subdivisions. 42 U.S.C. § 9604

(c)(3). Moreover, the Act directed the States to assure

all future maintenance of the removal and remedial actions

finaneed by Superfund, including some—and perhaps all—

of the costs for this work. Jbid.’ In light of CERCLA’s

limitations, former Representative Eckhardt has observed

that the use of the term ‘‘comprehensive’’ in the Act’s

title is a misnomer. Eckhardt, ‘‘The Unfinished Business

3 In fact, a proposal by Representative Stockman to create a

grant program to support state hazardous waste site investiga-

tion and mitigation efforts was rejected. See 2 Library of Con-

gress, Sen. Comm. on Environment and Public Works, 97th

Cong., 2d Sess., “A Legislative History of the Comprehensive

Environmental Response, Compensation and Liability Act of

1980 (Superfund), P.L. 96-510” (hereinafter “Legis. Hist.’”’) at

295-336.

4 The Superfund may also be used for certain other matters,

such as the compensation of claims asserted prior to CERCLA’s

adoption under the Clean Water Act, 33 U.S.C. § 1321, and the

financing of epidemiologic studies. 42 U.S.C. § 9611.

5 Although the State of New Jersey has argued to the United

States Environmental Protection Agency (“EPA’’) that CERCLA

requires states to contribute only 10% of operation and main-

tenance costs, this argument has been rejected by EPA which

expects the States to finance the bulk of these costs.

of Hazardous Waste Control’’, 33 Baylor Law Rev. 253

(1981). The same could be said for the Act’s sobriquet:

‘‘Superfund.’’

Perhaps the clearest example of the non-comprehen-

sive nature of CERCLA can be found in 42 U.S.C. 4 96085.

There Congress directed the President (who in turn dele-

gated this responsibility to EPA in Executive Order No.

12316, August 14, 1981, 46 Fed. Reg. 42237) to revise the

National Contingency Plan (‘‘NCP’’) for the removal of

oil and hazardous substances to reflect and effectuate the

new powers and responsibilities created by CERCLA. The

NCP was to contain ‘‘criteria for determinixg priorities

among releases or threatened releases throughout the

United States for the purpose of taking remedial action

and, to the extent practicable taking into account the po-

tential urgency of such action, for the purpose of taking

removal action.” 42 U.S.C. §9605(8)(A).° See also 42

U.S.C. § 9605(8)(B) which mandated the compilation of a

National Priority List (‘‘NPL’’) containing at least 400

of the country ’s worst hazardous waste sites. This focus

on priority releases grew directiy out of the congressional

recognition that the amount of money made available to

Superfund would, in the words of Representative Volkmer,

‘*cover only the tip of the iceberg as far as complete clean-

up of all waste sites is concerned.” 2 Legis. Hist. 265.

See also S. Rep. No. 848, 96th Cong., 2d Sess. (1980) at 17,

reprinted in 1 Legis. Hist. 324, where it was noted in ref-

erence to the then proposed six-year, $4.1 billion Super-

fund that such an allotment ‘‘.. . will permit government

response only to the most significant releases. At this

6 “Removal” actions are immediate, emergency cleanup ac-

tions taken on a short-term basis to prevent or mitigate damage

to the public and the environment, while “remedial” actions

are long-term actions “consistent with permanent remedy.”

42 U.S.C. § 9601(23) and (24).

level of funding, response will not be possible at a large

number of releases posing imminent or substantial threats

to public health or the environment.”

EPA has further clarified the priority system and the

limited availability of Superfund money in the NCP. 40

C.F.R. Part 300 (1984). Removal actions will be funded

only where the release or threat of a release is sufficiently

acute to demand immediate response. Examples of such

acute situations provided by EPA are those instances

where the release or threatened release will expose the food

chain to acutely toxic substances, contaminate drinking

water supplies, or result in a fire or explosion. 40 C.F.R.

§ 300.65(a). See also 40 C.F.R. § 300.67 and 47 Fed. Reg.

31199 (1982). As to remedial actions, funding is limited

to releases on the N.P.L. 40 C.F'.R. 4 300.68(a). The list-

ing of a site does not guarantee financing, however, be-

cause ‘‘eligibility of particular actions will be decided on a

case-by-case basis’’ since ‘‘current demands for response

and expected future demands exceed available funds.’’ 47

Fed. Reg. 31196 (1982). Moreover, in regard to claims

for damage to natural resources, Congress itself limited

the amount of money available to pay such claims to no

more than 15% of the Superfund (42 U.S.C. § 9611(e) (2) )

—an amount EPA has indicated it will not allocate for

such purposes. 50 Fed. Reg. 9595 (1985). Indeed, the

Agency did not even prepare proposed rules governing the

natural resource claims process despite congressional di-

rection to do so until New Jersey obtained an injunction

mandating this relief. New Jersey v. Ruckelshaus, Civil

Action No. 84-1668 (D.N.J. December 12, 1984) ; see 50 Fed.

Reg. 9593 (1985). Both the structure of CERCLA and

EPA’s administration and implementation of the Act thus

highlight the restricted nature of its coverage.

Many of the limitations contained in CERCLA were

the product of a last-minute compromise forged by a

group of senators during ibe lame duck session of the 96th

Congress which convened in late November 1980. 1 Legis.

Hist. VII; 1 Legis. Hist. 681 (remarks of Senator Ran-

caolph during floor debate on the compromise measure).

The compromise grew primarily out of four different bills

which had been considered by both houses of Congress

throughout the preceding two years. On the House side,

the two major proposals were H.R. 85 and H.R. 7020. As

passed by the House, H.R. 85 operated prospectively to

address spills of oil and hazardous substances into navi-

gable waters, and created a fund supported by fees and

general revenues to finance all government response costs

and certain specific damage claims resulting from the de-

struction of property and natural resources. 2 Legis. Hist.

1016-1114. H.R. 7020 was limited to abandoned hazardous

waste sites and proposed addressing the sites on a pri-

ority basis in cooperation with the states. 2 Legis. Hist.

391-463. The major Senate proposal was 8.1480 which

excluded coverage for oil spills, but otherwise addressed

all kinds of releases of other hazardous substances, includ-

ing spills and abandoned hazardous waste sites. 1 Legis.

Hist. 462-552. §.1480 also provided compensation for cer-

tain specific property damage, natural resource damage,

and medical claims incurred by victims of hazardous sub-

stance releases. The bill proposed by the Carter Admin-

istration, introduced in the Senate as 8.1341, addressed

spills into navigable waters of petroleum and other haz-

ardous substances as well as abandoned hazardous waste

sites. 3 Legis. Hist. 27-60.

It was in the context of the spill-oriented legislative

proposals that the suggestion of preempting state taxes

levied to support state response and damage funds first

arose. The genesis of the preemption provision is sig-

nificant because the spill bills anticipated that the funding

provided would cover all necessary costs involved in re-

sponding to future spills and in compensating the limited

kinds of property damage and natural resource claims pro-

posed for coverage. Under the major spill proposal, H.R.

85, states were preempted from levying taxes to pay for

‘‘losses’’ (including response costs) covered by the bill,

although states were permitted to impose special taxes to

finance the purchase and prepositioning of pollution clean-

up and removal equipment as well as claims and damages

not covered in the bill. §110(a) and (b) of H.R. 85, re-

printed at 2 Legis. Hist. 1051; 4 302(a) of H.R. 585, re-

printed at 2 Legis. Hist. 1074-1075; see also 2 Legis.

Hist. 903-907 (remarks of Representatives Biaggi, Florio

and Snyder). Insofar as 8.1341 dealt with spills, that

proposal also provided for the preemption of state taxes

to finance a fund to pay compensation for losses and costs

covered by the spill provisions of the bill. §¢612(a) of

S.1341, reprinted at 3 Legis. Hist. 57.

Preemption of state taxation to finance state spill

funds covering response costs and certain damage claims

was thought to be appropriate in the spill context because

the federal spill program was designed to cover future

spills ‘‘on an as-needed and comprehensive basis.” State-

ment of Thomas C. Jorling, Assistant. Administrator for

Water and Waste Management of EPA, before the Senate

Committee on Environment and Public Works, June 20,

1979, reprinted at 1 Legis. Hist. 124. Since all spills re-

quiring response would receive it under the legislative

proposals, no state funding was needed in that area. Ibid.

Nor would state financing be necessary for the property

and natural resource claims comprehensively covered by

the spill bills.

Although the proposed spill legislation affected state

taxation, the preemption was admittedly narrow in scope

and prevented states from imposing special taxes only to

the extent that those taxes would be dedicated to duplicat-

ing elements already provided for in the federal legisla-

tion. As Representative Biaggi, the sponsor and floor

manager of H.R. 85 stated, ‘‘. . . it is not the intent of H.R.

85 to preempt the States from financing by whatever means

they choose those activities which are not compensable

under H.R. 85.’’ 2 Legis. Hist. 907. And, as Representa-

tive Livingston added, ‘‘This bill does not totally preempt

the field: it o ly preempts State and local enactments which

would duplicate the purpose of the funds established in

H.R. 85.’’ 2 Legis. Hist. 920. Under the proposed spill

legislation, therefore, states could impose taxes to finance

special funds for spill-related costs and claims not covered

by the federal program.

Where abandoned sites were concerned, however, none

of the major legislative proposals that pre-dated the com-

promise measure that became CERCLA contained tax ex-

emption provisions. See H.R. 7020 as passed (2 Legis.

Hist. 391-463) ; 8.1480 as passed (1 Legis. Hist. 462-552) ;

and 8.1341 as introduced at §612(b) (3 Legis. Hist. 57).

The rationale for not preempting state taxation in this

area was that the abandoned site proposals—S.1480 and

part of §.1341 in particular—required state cost-sharing

and provided a level of funding that, ‘‘fell far short of

what would be needed to cleanup all the sites that will need

some kind of remedial action in the next few years.” State-

ment. of Swep T. Davis, Associate Assistant Administrator

for Water and Waste Management of EPA, recorded in

Hearings on 8.1480 before the Senate Committee on Com-

merce, Science and Transportation, 96th Cong., 2nd Sess.

(September 11-12, 1980), Comm. Print at 175. Since a

comprehensive program covering all response costs was

not achievable given budget constraints in the abandoned

site area, preemption of state taxation was at first thought

to be completely inappropriate. Jbid. See also Jorling

Statement, 1 Legis. Hist. 124.

In the course of preparing the compromise measure,

however, a provision affecting state taxation was inserted

in CERCLA even though the legislation addressed aban-

doned sites as well as non-petroleum hazardous spills.

Modeled after the preemption provisions contained in the

spill proposals, the language utilized in the compromise

similarly limited the preemption of state taxation to only

those areas covered by the federal program:

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 of prepositioning of hazardous

substance response equipment or other preparations

for the response to a release of hazardous substances

which affects such State. [42 U.S.C. § 9614(e); em-

phasis added].

Given the restricted nature of CERCLA coverage—

particularly as restricted in terms of response costs where

coverage was not intended to be comprehensive, but to ad-

dress only the worst releases of hazardous substances na-

tionwide—the language of 42 U.S.C. 4 9614(c) had even a

narrower impact in the context of CERCLA than similar

language had had in the more comprehensive oil spill leg-

islation. The language of 42 U.S.C. § 9614(c) thus allows

New Jersey to continue collecting the Spill Fund tax to fi-

nance items not covered by Superfund such as oil spill re-

sponse costs, property damage and loss of earnings or tax

revenue claims, State administrative costs, State cost-shar-

ing and maintenance costs under CERCLA, and remedial

actions at New Jersey sites not included on the NPL.

Moreover, the ‘‘may be compensated” language used in 42 .

U.S.C. §9614(c) would also allow the State to use Spill

Fund moneys to pay costs where Superfund financing

proves inadequate or is not made available—.e., where

State requests for removal actions are denied or limited by

cost or duration under 42 U.S.C. § 9604(c) (1), or where fed-

eral funding for remedial actions is either not provided to

a site on the NPL or is cut off prior to completion of

necessary cleanup work.

The legislative history discussing the compromise lan-

guage supports this interpretation. Obviously concerned

about the impact of the provision on the State’s Spill Fund,

Senator Bill Bradley of New Jersey questioned Senator

Jennings Randolph of West Virginia, a sponsor of the

Superfund effort and Chairman of the Committee on En-

vironment and Public Works which had primary responsi-

bility for the measure in the Senate, as to the future of

state taxes on industry to finance State response funds if

the foregoing provision were adopted. Included in the

colloquy between the two senators were the following re-

marks:

MR. RANDOLPH. * * * What this bill does is pro-

hibit a State from requiring any person to contribute

to any fund if the purpose of that fund is to compen-

sate for a claim paid for under the provisions of this

bill.

MR. BRADLEY. Am I correct in assuming that mon-

eys expended by State funds can be used to provide

the required 10 percent State match?

MR. RANDOLPH. That is correct.

MR. BRADLEY. And am [ 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. Rec. 30949 (1980), reprinted

at 1 Legis. Hist. 732-733].

Given the narrow scope of the language used in 42

U.S.C. § 9614(c) and the guidance of the foregoing collo-

quy, once the Superfund Act was adopted New Jersey be-

gan to administer the Spill Act to supplement rather than

to duplicate 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 cleanup and related activities to be fi-

nanced 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 infusion of federal dollars into the State

for cleanup activities, and has devoted its Spill Fund to

items not covered by the federal Act or to items where

federal financing is unavailable.’

7 Appellants’ suggestion to the contrary (Exxon brief at 25,

fn.26), is both incorrect and unsupported by the record in this

(Continued on following page)

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 Super-

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

unsuecessful attempt to raise this challenge in federal court

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

cert. denied, 459 U.S. 1104 (1983)), Exxon pursued the

matter through the New Jersey court system. Upon re-

viewing cross-motions for summary judgment on a limited

record, the Tax Court of New Jersey upheld the validity

of the Spill Fund tax. Exxon Corp. v. Hunt, 4 N.J. Tax

294 (1982) (reprinted in the appendix attached to Appel-

(Continued from previous page}

case. Moreover, Exxon’s reliance on reports prepared by the

New Jersey State Auditor for fiscal years 1981 and 1982 and

lodged by appellants with the Court is misplaced; those re-

ports simply do not demonstrete, as Exxon asserts, that New

Jersey has improperly used Spill Fund moneys subsequent to the

adoption of 42 U.S.C. § 9614(c). First, the reports include fiscal

year 1981 which extended from July 1, 1980 to June 30, 1981.

The Superfund Act was not even in existence for almost half of

this period, and the federal tax designed to support the program

was not imposed until April 1981. The Superfund program was

thus a nullity for most—if not all—of this period. Furthermore,

the Auditor’s reports do not indicate when the tax moneys ex-

pended for cleanup purposes were collected. If collected prior

to the effective date of CERCLA, there would be no preemp-

tion whatsoever in regard to their use. In addition, Exxon failed

to mention that the NPL was not promulgated until September

8, 1983 (48 Fed. Reg. 40658)—well after the alleged misspend-

ing of funds occurred. These and other items not addressed by

Exxon or by the Auditor’s reports (such as the accounting pro-

cedures used by the Spill Fund and the source of the federal

funds obtained for cleanup purposes) demonstrate that Exxon’s

assertions about Spill Fund expenditures are unsupported and

must be rejected as lacking in foundation.

lant Exxon’s Jurisdictional Statement (‘‘JSa”) at JSa47

to JSa78). This determination was subsequently affirmed

by both the Appellate Division of the Superior Court,

Exxon Corp. v. Hunt, 190 N.J. Super. 131, 462 A.2d 1983

(App. Div. 1983) (reprinted at JSa37 to JSa46) and by

the Supreme Court of New Jersey, Exxon Corp. v. Hunt,

97 N.J. 526, 481 A.2d 271 (1984) (reprinted as JSal5 to

JSa36).

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

lenge, the Supreme Court of New Jersey focused on the

“may be compensated” language of 4 114(c) and the Su-

perfund statutory scheme which addressed priority sites to

the exclusion of other problem areas. See 42 U.S.C. 4 9605;

40 C.F.R. § 300.68. In light of the limited coverage of

CERCLA, 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] criteria are

claims which ‘may be compensated’ under [Superfund].”

97 N.J. at 543 (JSa34). 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 problems 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 program

components including their 10% share of cleanup costs,

related administrative costs for equipment and personnel,

and other program features not covered by Superfund.

...? OT N.J. 543-544 (JSa35).

Dissatisfied with this result, Exxon filed a Notice of

Appeal from the judgment of the Supreme Court of New

Jersey on November 19, 1984. After requesting and re-

ceiving the views of the Solicitor General as to the issues

involved in this appeal, the Court noted probable jurisdic-

tion on June 17, 1985. This brief is submitted on behalf

of appellees who urge affirmance of the judgment below.

fy.

SUMMARY OF ARGUMENT

In construing explicit preemption provisions, the

Court must give effect to the will of Congress and not

enlarge the preemptive scope of a federal statute beyond

that intended by Congress. Metropolitan Life Ins. Co. v.

Massachusetts, 105 S.Ct. 2380, 2390 (1985). Even in ex-

plicit preemption cases, therefore, there is a presumption

against the complete displacement of state regulation,

particularly where Congress has used statutory language

effecting only limited preemption and leaving room for

state action. Ibid.

In adopting the Superfund Act, Congress placed an

extremely narrow limitation on the power of the states

to impose special taxes. 42 U.S.C. 4 9614(c). States were

prohibited only from levying taxes for the purpose of

compensating “claims for any costs of response or dam-

ages or claims which may be compensated under this sub-

chapter.” Jbid. This provision limits the preemption of

state taxation to the areas covered by Congress on the

federal level. Correspondingly, all areas not covered by

Superfund may properly be financed by state funds sup-

ported by special taxes.

A eareful analysis of CERCLA reveals that the avail-

ability of Superfund financing is restricted to priority

sites or releases of national significance. 42 U.S.C. § 9605

(8); 40 C.F.R. § 300.68(a). Moreover, no federal com-

pensation whatsoever is provided for petroleum spills or

nongovernmental third party damage claims. 42 U.S.C.

§ 9601(14); 42 U.S.C. 49611. This narrow federal cover-

age thus leaves many areas open for financing on the state

level through special taxes.

The tax levied under the New Jersey Spill Act may

consequently be used to fund all authorized state costs

excluded from federal coverage. Compare N.J.SA. 58:10-

23.11(g) and (o) with 42 U.S.C. § 9611. Authorized state

costs ineligible for federal financing include expenditures

incurred in responding to petroleum spills, the administra-

tive expenses incurred in implementing the Spill Act by

the Spill Fund and the Department of Environmental

Protection, and equipment and personnel costs. In addi-

tion, the Spill Fund may be used for the payment of dam-

age claims, including claims for damage to property, loss

of earnings, and loss of tax revenues. Compare N.J.S.A.

58 :10-23.11(g) and (0) with 42 U.S.C. § 9611. Moreover,

the State tax may also be used to finance the 10% or

greater state share required for federal action under

CERCLA, 42 U.S.C. §9604(c), because such an expense

is statutorily ineligible for federal compensation. Like-

wise, special state taxes may be used to provide mainte-

nance costs incurred by the states at Superfund sites. See

42 U.S.C. §9604(c)(3). These areas alone support the

validity of the Spill Fund tax.

State taxes may also be used to supplement federal

response efforts, however, because the “may be compen-

sated” formulation limits federal preemption to instances

where there is some likelihood or probability of Super-

fund financing. Where federal regulations establish cri-

teria that must be met to qualify for Superfund compen-

sation, sites failing to meet these standards are not eli-

gible for federal funding and thus fall outside of the pre-

emptive seope of 42 U.S.C. §9614(c). Moreover, where

EPA rejects State requests for Superfund financing, such

rejections are tantamount to declarations of ineligibility.

Special state taxes may thus be used to support all such

work not actually compensated by Superfund. State taxa-

tion is limited, therefore, only for the purpose of financ-

ing costs that are realistically eligible for federal funding.

This construction is amply supported by the legisla-

tive history. All of the precursors to 42 U.S.C. § 9614(c)

similarly limited the preemption of state taxation only

to those areas covered on the federal level. See, e.g.,

§110(a) of H.R. 85, reprinted at 2 Legis. Hist. 1051; re-

marks of Representatives Biaggi, Florio, and Snyder, re-

printed at 2 Legis. Hist. 903-907. States were thus free

to use special state taxes to supplement—albeit not to

duplicate—federal coverage. This narrow scope of pre-

emption was carried over into 42 U.S.C. 4 9614(c), as dem-

onstrated conclusively by the remarks cf Senators Ran-

dolph and Bradley. According to the colloquy between

these two senators, states may levy. special taxes “to cover

expenses and economic loss not covered under the provi-

sions of this bill...” 1 Legis. Hist. 732. This interpre-

tation has recently been confirmed in both the Senate and

the House where committees dealing with proposed Super-

fund reauthorization legislation have attempted to dispe!

“any cloud of uncertainty over the legitimacy” of continued

state taxation under 42 U.S.C. §9614(c). See Superfund

Amendments of 1984, Sen. Rep. No. 98-631, 98th Cong.,

2nd Sess. (September 21, 1984), Comm. Print at 35-36;

Superfund Expansion and Protection Act of 1984, H. Rep.

No. 98-890, Part 1, 98th Cong., 2ud Sess. (July 15, 1984),

Comm, Print at 58-59. Both of these reports reaffirm the

construction of 42 U.S.C. §9614(c) provided in the Brad-

ley/Randolph colloquy.

The intent of Congress was thus fulfilled by the Su-

preme Court of New Jersey when it upheld the Spill Fund

tax. As a result, this Court should affirm the judgment

helow.

ARGUMENT

POINT I

THE LANGUAGE OF 42 U.S.C. §9614(c) AND

THE STRUCTURE OF THE SUPERFUND ACT

CONTEMPLATE CONTINUED STATE TAXA-

TION TO FINANCE STATE HAZARDOUS

WASTE PROGRAM COSTS EITHER NOT COV-

ERED OR NOT ACTUALLY COMPENSATED

BY SUPERFUND.

The primary thrust of preemption analysis is to de-

termine the intent of Congress in enacting the federal

statute in issue. Shaw v. Delta Air Lines, Inc., 463 U.S.

85, 95 (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 enactment “stands as an obstacle to the accom-

plishment and execution of the full purposes and object-

ives of Congress,” and thus must be invalidated under the

Supremacy Clause. Jones v. Rath Packing Co., 430 U.S.

519, 526 (1977), quoting Himes v. Davidowitz, 312 U.S. 52,

67 (1941).

In reviewing a preemption challenge, however, state

legislation is presumed valid and preemption is disfavored,

to be found only in the clearest cases of conflict. Mary-

land v. Louistana, 451 U.S. (25, 746-747 (1981). This rule

applies even in “explicit” preemption cases such as the

instant matter where the scope of preemption contained

in a particular congressional enactment is in question.

The Court recently affirmed this principle in Metropolt-

tan Life Ins. Co. v. Massachusetts, 105 S.Ct. 2380, 2390

(1985), when it upheld a Massachusetts statute because

the state legislation fell outside of the explicit preemp-

tion language contained in the federal Employee Retire-

ment Income Security Act of 1974 (“ERISA”). Even in

eases involving express preemption clauses, therefore,

“ft]he presumption is against pre-emption,” and the Court

is ‘‘not inclined to read limitations into federal statutes

in order to enlarge their preemptive scope.” Jbtd.

Preemption analysis generally follows a two-tiered

format. First, a court will ascertain the scope and mean-

ing of the two statutes in question; secondly, a court will

determine whether the State enactment necessarily con-

flicts with its federal counterpart, or can coexist with it

without impeding the federal objective. Chicago & North

Western Transportation Co. v. Kalo Brick & Tile Co., 450

U.S. 311, 317 (1981). Such an inquiry is not restricted

to analyzing the statutory language alone, but requires

a court “to consider the relationship between state and

federal laws as they are interpreted and applied, not

merely as they are written.” Jones v. Rath Packing Co.,

supra, 430 U.S. at 526. In comparing the operation and

effect of state and federal enactments, particularly where

federal preemption is explicitly narrow and partial in

scope, it is important to keep in mind that, “Congress may

circumscribe its regulation and occupy only a limited field.

When it does so, state regulation outside that limited field

... is not forbidden or displaced.” Kelly v. State of Wash-

ington, 302 U.S. 1, 10 (1937). See also Askew v. American

Waterways Operators, Inc., 411 U.S. 325, 332 (1973).

Nothing in Aloha Airlines, Inc. v. Director of Paxa-

tion, 464 U.S. 7 (1983), requires deviation in this case from

either the presumption against preemption or the two-

tiered method of analysis previously followed by this Court

and used below by the Supreme Court of New Jersey. For

in Aloha Airlines the Court indicated that where an ex-

press preemption provision clearly and unambiguously

forbids precisely the kind of state action under attack,

the state statute can be invalidated without further re-

course to legislative history or rules developed in cases

where the scope of federal preemption is much less clear.

Ibid. at 12. Since the explicit preemption language in

issue here differs from that involved in Aloha Airlines

in that 42 U.S.C. §9614(c) does not categorically prevent

all state taxation of a particular category, but rather is

much more circumscribed in nature, the truncated review

that proved sufficient in Aloha Airlines is inappropriate

in this context.’

As in all cases involving explicit preemption clauses

where the task before the Court is one of statutory con-

8 Compare 49 U.S.C. § 1513(a) which provides that, “No State

. . . Shall levy or collect a tax, fee, head charge, or other charge,

directly or indirectly, on persons traveling in air commerce or

on the carriage of persons traveling in air commerce or on the

sale of air transportation or on the gross receipts derived there-

from . . .”” with the language of 42 U.S.C. § 9614(c) which pro-

vides that, ‘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 compensated under this sub-

chapter.” (Emphasis added). The italicized language of 42

U.S.C. § 9614(c) limits the preemptive scope of the provision

and compels resort to the rest of the Superfund Act to deter-

nine the extent of federal coverage and—derivatively—the ex-

tent of federal preemption. In such circumstances where Con-

gress has consciously chosen co se language to limit the

scope of preemption, and a traditional function of state gov-

ernment (i.e., taxation) is at stake, the presumption against

preemption is particularly strong. See Metropolitan Life Ins.

Co. v. Massachusetts, supra, 105 S.Ct. at 2389-2390.

struction, the starting point for analysis is the language

of the federal statute. See Metropolitan Life Ins. Co. v.

Massachusetts, supra, 105 S.Ct. at 2386-2389; Shaw v.

Delta Air Lines, Inc., supra, 463 U.S. at 95. At issue here

is the following language contained in 42 U.S.C. § 9614(c) :

Except as provided in this Act, no person may be re-

quired to contribute to any Fund, the purpose of which

is to pay compensation for claims for any costs of re-

sponse or damages or claims which may be compen-

sated under this subchapter.

This provision, by its own terms, restricts state taxa-

tion if the purpose of the tax is to finance a fund used to

pay claims ‘‘which may be compensated under this sub-

chapter.’’ Although not a paragon of legislative drafting,

this language limits the preemption of state taxation to

the areas Congress decided to cover on the federa! level.

A corollary of this limitation is that Congress thus left to

the states the power to tax industry for claims excluded

from coverage by Superfund. For, when Congress cireum-

scribes its coverage in this manner, ‘‘state regulation out-

side that limited field ... is not forbidden or displaced.’’

Kelly v. State of Washington, supra, 302 U.S. at 10; see

also Shaw v. Delta Air Lines, Inc., supra, 463 U.S. at 97fn.

17. (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

employment relationship such as hiring, promotions and

salaries).

As noted above, Superfund provides limited financing

for certain removal actions involving acute toxicity (42

U.S.C. § 9604(¢) (1) ; 40 C.F.R. 300.65), for remedial actions

at sites on the NPL (40 C.F.R § 300.68(a)), and for claims

brought by the state or federal governments for damage

to natural resources (42 U.S.C. §9607(f)). 42 U.S.C.

§ 9611. No federal financing in any of these areas is pro-

——_- —-

—— or

vided for petroleum releases, however. 42 U.S.C. 4 9601

(14). CERCLA thus leaves completely untouched many

categories of expenditures covered by Spill Fund. These

categories include the cost of remedying petroleum spills;

the payment of damage claims, including claims for dam-

age to property, loss of earnings, and loss of tax revenues;

and nongovernmental claims for damage to natural re-

sources. Compare 42 U.S.C. § 9611 with N.J.S.A. 58:10-

23.11g(a). Moreover, the Spill Fund also finances other

costs excluded from federal coverage such as personnel

and equipment costs incurred by the Department of En-

vironmental Protection in operating the State response

program, and the administrative costs of the Spill Fund.

Although Exxon has referred to these purposer of the Spill

Fund as “‘incidental’’ (Exxon brief at 22-23, fn. 24), New

Jersey rejects this characterization as inconsistent with

the State statutory scheme. Petroleum spills in particular

are an integral part of the coverage provided by Spill

I'und,’? as are administrative expenses which support the

operation of both the Spill Fund and the Department of

Environmental Protection’s hazardous site cleanup pro-

gram.

CERCLA also specifically requires states to provide

at least 10% of the cost of remedial actions. 42 U.S.C.

5 9604(c). Since these costs are not eligible for Super-

9 The Spill Act placed special emphasis on providing a fund

to address petroleum spills because of the fear that such a spill

would serio’ !y damage the waters and beaches of the New

Jersey shore, thus interfering with the State’s lucrative tourist

industry. N.J.S.A. 58:10-23.11a. That New Jersey has not suf-

fered a catastrophic oil spill since the Spill Act was adopted

neither renders this purpose of the Act “incidental,” nor re-

moves the need to collect taxes to provide a contingency fund

for use in the event of a serious petroleum spill. The tax court

noted this important fact in its opinion upholding the Spill

Fund tax (JSa75).

fund financing, a state may levy its own tax to fund these

expenditures." Furthermore, since the Spill Act in

N.J.S.A. 58:10-23.11f vests the Department of Environ-

mental Protection with discretion in financing cleanup ac-

tions, this flexible grant of authority allows the Depart-

ment to use Spill Fund moneys to provide New Jersey’s

cost share under CERCLA. Any doubt that may have

existed concerning this use of the Spill Fund was removed

by the New Jersey Legislature when it adopted the Haz-

ardous Discharge Bond Act, P.L., 1981, c. 275. This Act pro-

vided for the sale of bonds to finance a fund supplemen-

tary to Spill Fund, and authorized the use of money ob-

tained under the Act to pay the non-federal share of any

federal cleanup program ‘‘if moneys available pursuant

to P.L. 1976, c. 141 [Spill Act] are currently insufficient

to cover the share.’’ Ibid. at § 15. Since New Jersey cur-

rently has 85 sites on the NPL and 12 more have been pro-

posed for addition to the list, the State share of the cost

of remedial actions has been a significant expense of the

Spill Fund, and is expected to constitute a significant ex-

penditure in the future if Superfund is reauthorized. More-

over, as remedial and removal actions are concluded at

New Jersey sites, it is anticipated that the costs of main-

taining these sites will become a significant non-federal

cost of the State’s hazardous waste cleanup program.

10 Interestingly, Dr. Louis Fernandez, Vice Chairman of Mon-

santo Company, a party to this litigation, submitted a state-

ment on behalf of the Chemical Manufacturers Association to

the Senate Committee on Finance during the Committee’s

hearings on S.1480—a statement that supported preemption

“except to the extent used to raise money for matching pur-

poses under this legislation.” Hearings on S.1480 before the

Committee on Finance, United States Senate, 96th Cong., 2d

Sess; September 11-12, 1980, Comm. Print at 209. Appellants’

position in this case, however, does not recognize the state

share of the cost of remedial actions as a legitimate object of

state taxation.

The plain language of 42 U.S.C. §9614(c) thus per-

mits states to impose taxes to finance all of the elements

of state hazardous waste programs not covered by Super-

fund. Under the New Jersey Spill Act, therefore, the

State may continue to levy its tax on petroleum and haz-

ardous substances to finance a whole host of items, includ-

ing State response to petroleum spills; administrative, per-

sonnel, and equipment costs incurred by the Spill Fund

and the Department of Environmental Protection; prop-

erty damage claims; the New Jersey share of the cost of

Superfund remedial actions; and State maintenance costs

at Superfund sites.

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 language used by

Congress in 42 U.S.C. § 9614(¢c)—when analyzed against

limitations in Superfund coverage imposed by EPA—

allows the states to supplement federal cleanup efforts by

financing costs not actually compensated by Superfund.

This is so because the “may be compensated” formulation

limits federal preemption to instances where there is some

likelihood or probability of Superfund financing. See

Webster's Third New International Dictionary (1976) at

1396, which defines ‘‘may” as “in some degree likely to”;

see also Black’s Law Dictionary (5th ed. 1979) at 883,

which defines “may” as “an auxiliary verb qualifying the

meaning of another verb by expressing . . . possibility [er]

probability . . .” Where federal regulations establish cri-

teria that must be met to qualify for Superfund financing,

therefore, sites that fail to meet these standards are not

eligible for federal funding and thus fall outside of the

preemptive scope of 42 U.S.C. § 9614(c).

Perhaps the clearest example of this point involves

federal funding for remedial actions where the NCP pro-

vides that Superfund financing will be made available only

to sites on the NPL. 40 C.F.R. 4 300.68(a). Remedial ac-

tions at New Jersey sites not included on the NPL could

thus be financed by the Spill Fund since there is no reason-

able likelihood under the federal program that such sites

would receive Superfund financing. State funding of re-

medial actions at non-NPL sites would be used to clean up

problem areas of local—but not national—significance. A

similar analysis applies to removal actions that fail to

qualify under the “acute toxicity” test established by EPA

in the NCP as a prerequisite to federal funding. 40 C.F.R.

§ 300.65. As noted above, EPA’s implementation of the

Superfund program is relevant to the issue of preemption

because courts must ‘‘consider the relationship between

state and federal laws as they are interpreted and applied,

not merely as they are written.” Jones v. Rath Packing

Co., supra, 430 U.S. at 526.

In addition, where EPA rejects state requests for

Superfund financing for emergency removal actions, for

remedial actions at NPL sites,"' or for damage to natural

resources, such rejections effectively foreclose the pos-

sibility of federal financing for the requested action. Since

a rejection is tantamount to a declaration of ineligibility

for federal financing, State funds should be permitted to

finance all work for which a rejection is received. See

the introduction to the NCP, 47 Fed. Reg. 31195 to 31196,

11 EPA has indicated that inclusion on the NPL is merely the

first step in qualifying for Superfund-financed remedial action;

it is not a guarantee that compensation will be provided. For,

as EPA has stated, “If a release is included on the NPL but a

later remedial investigation discloses the hazard to be less

significant than —— thought to be, a decision may be

made not to provide Fund financed remedial response.” 47

Fed. Reg. 31187 (1982). See also 48 Fed. Reg. 40659 (1983)

(“Inclusion of a site on the NPL does not establish that EPA

necessarily will undertake response actions.”).

where EPA noted that ‘‘eligibility” for Superfund finane-

ing will be decided on a case-by-case basis since insuffi-

cient funding was available to support all sites in need of

cleanup.

The use by Congress of the ‘‘may be compensated”

language is particularly telling in this regard. Congress

selected this formulation over ‘‘may be asserted” which

would have prevented the use of state taxes to finance any

claim which could conceivably have been brought under

Superfund, regardless of its chances for eventual financ-

ing.’ By utilizing “may be compensated” instead, how-

ever, Congress limited preemption to those areas where

there was a realistic chance of federal financing. Once that

opportunity is foreclosed and ineligibility established for

any specific action, though, the “may be compensated”

formulation allows state funds to pick up the slack. It

was precisely this situation that the Supreme Court of

New Jersey addressed when it found that the Spill Fund

could be used to finance hazardous waste cleanup costs

and related claims “not actually paid under Superfund.”

(JSa36).

This “actual compensation” test, however, presup-

poses that states will request Superfund financing when-

ever a site or release falls reasonably within the criteria

used to establish NPL ranking for remedial actions, or

within the acute toxicity criteria used to determine federal

funding for removal actions. To the extent that New

Jersey sites remain realistically eligible for federal financ-

ing, therefore, Spill Fund revenues could not be used to

support independent, state-sponsored cleanup efforts at

12 The “may be asserted” formulation was proposed by Senator

Cannon in Amend. No. 2387 to 5.1480, reprinted at 3 Legis.

ty 185-186. See also § 110 of H.R. 85, reprinted at 2 Legis.

ist. 1051.

those sites. This, then, is the real thrust of 42 U.S.C.

§ 9614(c)—to channel the states into the Superfund pro-

gram for acutely hazardous and national priority sites.

Congress thus used 42 U.S.C. §9614(c) to promote na-

tional uniformity in responding to priority sites—at least

to the extent that federal financing would be made avail-

able to support such a program. States that want to main-

tain their own funds supported by special taxes must thus

maximize their participation in the Superfund program

and cannot use their funds to cireumvent federal regula-

tory requirements or other entanglements regarding sites

realistically eligible for federal financing.” Should a state

want to embark upon such an independent program, how-

ever, it would be required to finance it through general

revenues, as allowed by the second sentence of 42 U.S.C.

§ 9614(c) (“Nothing in this section shall preclude any State

from using general revenues for such a fund... .”).

The actual compensation test thus encompasses the

concept of compensability because it restricts the use of

state taxes to finance costs realistically eligible for Super-

fund financing unless and until a determination of in-

eligibility is made. Although the “may” in “may be com-

pensated” could conceivably be interpreted as “shall” (see

Webster's Third New International Dictionary (1976) at

1396 which notes that ‘‘may” often means ‘‘shall” when

used in statutes; see also Black’s Law Dictionary (5th ed.

13° Just such a situation occurred in New Jersey when the State

wanted to deviate from EPA’s policy of allowing potentially

responsible parties to conduct the remedial investigation/

feasibility study (“RI/FS”; see 40 C.F.R. § 300.68(d)) at an NPL

site. In order to ensure prem con gee as opposed to private

party control of the RI/FS process, New Jersey withdrew its

request for Superfund financing. Because it appeared that the

cost of the study realistically could have been financed under

the federal program, the Attorney General’s Office advised the

Spill Fund not to pay for the RI/FS. General revenues were

used instead.

1979) at 883 which notes that “may” and “shall” are fre-

quently used interchangeably, and advises that the mean-

ing of “may” should be sought in its context rather than

through resort to grammar), it need not be given anything

other than its common meaning of “likely to” to support

the validity of the Spill Fund tax and the judgment to

this effect rendered below.

Although Exxon argues that the “actual compensa-

tion” test makes 42 U.S.C. § 9614(b) and (c) impermissibly

redundant, this is not the case.“ For 42 U.S.C. §9614(b)

prevents double recoveries for the same claims no matter

what the source of compensation, and does not refer solely

to governmental funds. If a person—including a state

government—were to obtain complete compensation for

response costs from a responsible party through a state

court common law nuisance action, for example, this sec-

tion would prevent a duplicate recovery under Superfund.

By prohibiting double recoveries categorically regardless

of source, 42 U.S.C. §9614(b) fosters the conservation

of livaited financial resources available for compensating

clains, protects the subrogation rights of the Superfund,

anc promotes the early election of remedies by claimants.

In no way can it be deemed to be redundant of 42 U.S.C.

§ 9614(c) which addresses entirely different concerns re-

lated to state taxation, as noted above.

44 642 U.S.C. § 9614(b) provides in full that:

Any jones who receives compensation for removal

costs or damages or claims pursuant to this chapter shall

be precluded from recovering compensation for the same

removal costs or damages or claims pursuant to any other

State or Federal law. Any person who receives compensa-

tion for removal costs or damages or claims pursuant to

pw other Federal or State law shall be precluded from re-

ceiving compensation for the same removal costs or dam-

ages or claims as provided in this chapter.

In conclusion, the preemptive scope of 42 U.S.C.

§ 9614(c) is limited by its own terms and the structure

of the Act and its implementing regulations to those costs

covered or actually compensated by the Superfund. Con-

sequently, the decision of the Supreme Court of New Jer-

sey should be affirmed.

POINT II

THE LEGISLATIVE HISTORY OF THE SU-

PERFUND ACT SUPPORTS NEW JERSEY’S

INTERPRETATION OF 42 U.S.C. § 9614(c).

In interpreting statutes, the duty of the Court is to

enforce the will of Congress. Chemical Mfrs. Ass’n v.

Natural Res. Defense Council, 105 S.Ct. 1102, 1108 (1985).

Although the Court starts the process of statutory con-

struction with the language of the statute, its analysis

does not necessarily end there. Rather, the Court also

considers the object and policy of the statute as well as

its legislative history. Stafford v. Briggs, 444 U.S. 527,

536-537 (1980). Indeed, all materials relevant to deter-

mining legislative intent should be reviewed. Watt v.

Alaska, 451 U.S. 259, 265-266 (1981); Andrus v. Shell Oil

Co., 446 U.S. 657, 666 fn.8 (1980). For, as Chief Justice

Marshall declared in the early days of this Court, “[wJhere

the mind labours to discover the design of the legislature,

it seizes every thing from which aid can be derived.” Jbid.,

citing United States v. Fisher, 2 Cranch 358, 386, 2 L.Ed.

304 (1805). See also Frankfurter, ‘‘Some Reflections on

the Reading of Statutes,” 47 Col. Law Rev. 527, 541 (1947).

To understand the scope and meaning of 42 U.S.C. § 9614

(ec), therefore, resort to the legislative history of the pro-

vision is necessary. Indeed, the evolution of the provision

may be the best available guide to legislative intent. See

generaliy Chemical Mfrs. Ass’n v. Natural Res. Defense

Ceuncil, supra, 105 S.Ct. at 1108; Russello v. United States,

464 1S. 16, 23 (1983).

The Superfund Act was adopted in the waning hours

of the 96th Congress to provide a “first step to respond

to the severe threats posed by spills, leaks and releases

of hazardous substances, as well as toxic dumpsites.”

1 Legis. Hist. 711 (remarks of Senator Mitchell). The

road to passage, however, “was neither easy nor direct.”

1 Legis. Hist. V (preface to legislative history of Super-

fund prepared by the Congressional Research Service).

Indeed, the Act was an eleventh hour compromise forged

primarily in the Senate on the basis of four predecessor

bills: H.R. 85 which addressed spills into navigable wa-

ters of oil and hazardous substances; H.R. 7020 which was

confined to abandoned hazardous waste sites; 8S. 1480 which

addressed all releases of nonpetroleum hazardous sub-

stances (including spills and abandoned sites) and pro-

vided for vietim compensation; and S. 1341 which was

proposed by the Carter Administration and combined cov-

erage in one bill for oil and hazardous substance spills as

well as abandoned sites. See generally, 1 Legis. Hist. V-

VII; 1 Legis. Hist. 681-773 (Senate debate) ; 1 Legis. Hist.

774-775 (letter transmitting the compromise measure from

the Senate to the House).

Despite the rushed and somewhat confusing cireum-

stances surrounding the enactment of CERCLA, the evo-

lution of the provision concerning state taxation can be

charted through the 96th Congress. The preemption of

state taxation and states response programs became a

central issue during consideration by the House of H.R.

85, the oilspill bill that eventually was broadened to in-

elnde spills of hazardous substances. Compare H.R. 85

as introduced on January 15, 1979 (2 Legis. Hist. 474-524)

with H.R. 85 as passed by the House on September 19,

1980 (2 Legis. Hist. 1016-1114). In H.R. 85, the House

proposed a national, comprehensive scheme of liability

and compensation to address pollution caused by spills

of oil and hazardous substances into navigable waters. ‘The

bill was intended te provide a uniform federal program

to replace the existing “patchwork quilt” of federal and

state laws in the area. 2 Legis. Hist. 527 (H. Rep. No.

96-172, part 1). The bill imposed strict liability on the

persons responsible for spills (4 104, reprinted at 2 Legis.

Hist. 1028-1033),'5 and also required vessels and other en-

tities involved in the transportation and handling of oil

and hazardous substances to obtain insurance to cover

damages and response costs resulting from spills (§ 105,

reprinted at 2 Legis. Hist. 1034-1037). To provide com-

pensation in those situations where a party responsible

for a spill was either unknown or incapable of financing

the costs of response and damages, however, H.R. 85 p.o-

posed the creation of a fund supported in large part by

fees on oil and certain chemicals (Title V, reprinted at

2 Legis. Hist. 1093-1104). Although some concern was

expressed about the impact of the fees on industry, no

adverse effect was anticipated. Indeed, the anticipated

impact of the fees was described as ‘‘minimal.” 2 Legis.

Hist. 567 (H. Rep. No. 96-172, part 1).

H.R. 85 made the fund “liable, without any limitation,

for all damages which are compensable damages under

title V of this Act, to the extent that the loss is not other-

wise compensated.” §104(f)(1), reprinted at 2 Legis.

Hist. 1031. “Compensable damages,” in turn, were de-

fined as “damages asserted for”:

1S Citations are to the oilspill portion of H.R. 85; parallel P

visions can be found relating to hazardous substance spills in

Title Ill, reprinted at 2 Legis. Hist. 1061-1090.

(A) removal costs,

(B) injury to, or destruction of, real or personal prop-

erty,

and

(D) loss of profits or impairment of earning capacity

due to injury or destruction of real or personal

property or natural resources [subject to certain

conditions]. [§531, reprinted at 2 Legis. Hist.

1104].

This definition excluded damages which had been covered

in earlier versions of the bill, including the loss of use of

property or natural resources, and the loss of tax revenue

for a period of one year due to property damage. Com-

pare H.R. 85 as passed with § 103(a) of H.R. 85 as intro-

duced, reprinted at 2 Legis. Hist. 487.

Against the backdrop of the coverage provided in the

final version of H.R. 85, the House proposed the follow-

ing preemption language :

See. 110.(a) Exeept as provided in this title—

(1) no action may be brought in any court of the

United States, or of any State or political subdivision

thereof, for damages for an economic loss described

in section 103(a), a claim for which may be asserte«!

under this title, and

(2) no person may be required to contribute to

any fund, the purpose of which is to compensate for

a loss which is a compensable damage under title V,

nor to establish or maintain evidence of financial re-

sponsibility relating to the satisfaction of a claim for

such a loss [reprinted at 2 Legis. Hist. 1051; emphasis

added }.

H.R. 85 went on to provide, however, that “Nothing in

subsection (a) shall preclude any State from imposing

a tax or fee upon any person or upon oil in order to finance

the purchase and prepositioning of oil pollution cleanup

and removal equipment.” §110(b), reprinted at 2 Legis.

Hist. 1051. See also §302(a) of H.R. 85 which imposes

substantially similar requirements in regard to hazardous

substance spills (2 Legis. Hist. 1074-1075).

The preemption provisions of H.R. 85 sparked a con-

siderable amount of concern and comment in the House.

During the course of debate on the measure, Representa-

tive Biaggi—the floor manager of the bill—noted the grow-

ing concern about the continuing existence of State funds

and stated that, ‘‘ What H.R. 85 does is to prohibit a State

from requiring any person to contribute to any fund if the

purpose of that fund is to compensate for an oil spill dam-

age claim as defined in title V of the bill.” 2 Legis. Hist.

903. This statement led to a colloquy between Representa-

tive Biaggi and Representative Florio from New Jersey

who was concerned about the impact of the provision on

New Jersey’s Spill Fund:

Mr. Florio ... Am I correct in understanding

that it is the purpose of section 110 to prohibit States

from requiring any person to contribute to a fund for

the purpose of reimbursing claims as described in

title V?

Mr. Biaggi. Yes, that is the clear intent. The

purpose is to prohibit States from creating duplicate

funds to pay damage compensable under H.R. 85.

Mr. Florio. However, there is no such preemption

of a State’s ability to collect such taxes or fees for

other costs associated with spills and discharges of

oils and hazardous substances that are not compens-

able damages as defined in this legislation or that do

not occur in or threaten the navigable waters of the

United States.

Mr. Biaggi. The gentleman is correct. [2 Legis.

Hist. 904].

The colloquy went on to establish that H.R. 85 would not

prevent states from levying taxes ‘‘to finance a State fund

designed to cover expenses and economic loss not covered

under the provisions of H.R. 85,” or from using such taxes

‘*to provide intermediate, up front capital to pay for [re-

sponse] activities and seek reimbursement from the Fund

established under H.R. 85.” Ibid. Moreover, the colloquy

stated that there would be no preemption whatsoever in

regard to the use of state taxes collected prior to the ef-

fective date of H.R. 85. 2 Legis. Hist. 905.

The meaning of the preemption provisions was further

clarified in the following colloquy between Representa-

tives Biaggi and Snyder:

Mr. Snyder. Further with respect to the existing

State fund, will it be permissible for the State of New

Hampshire to maintain that fund and continue raising

revenues for that fund and any purposes other than

those covered by H.R. 85? Specifically, I refer to

maintenance of a State staff as well as the purpose of

prepositioning of equipment and materials for clean-

up.

Mr. Biaggi. The preemption provision in H.R, 85

would not prohibit the maintenance and operation of

such a fund as the gentleman mentions for the purpos-

es he cites.

Mr. Snyder. In fact, cannot the State fund and

the revenue system supporting it be maintained and

used for any purpose, including compensation of

damages, and cleanup for which the fund created by

H.R. 85 is not available?

Mr. Biaggi. Again, I would say to the gentleman

that it is not the intent of H.R. 85 to preempt the

States from financing by whatever means they choose

those activities which are not compensable under H.R.

85. [2 Legis. Hist. 906-907].

See also the remarks of Representative Livingston to the

same effect at 2 Legis. Hist. 919-920.

Both colloquies echo the analysis of the preemption

provision contained in an earlier House report on H.R. 85

which noted that, ‘‘The States would be prohibited only

from duplicating the basic purposes of the Federal fund

.. 7 2 Legis. Hist. 532 (H. Rep. No. 96-172, part 1). More-

over, in regard to the language assuring states that they

could tax to finance the purchase and installation of pollu-

tion abatement equipment, the report stated that, ** by

singling out this particular State activity as not covered

under the preemption subsection, neither the Subcommittee

nor the Committee implies or intends to imply that other

State actions, not specifically enumerated, are prohibited.”

2 Legis. Hist. 533. See also 2 Legis. Hist. 562-563 (H. Rep.

No. 96-172, part 1).

From all of the above comments, it is clear that the

preemption provisions in H.R. 85 were intended merely

to prevent the states from duplicating what was envisioned

to be a comprehensive federal spill fund—comprehensive,

that is, within the scope of its coverage. The House ree-

ognized, however, that even the program it envisioned in

FLR. 85 would not address all of the kinds of damage re-

sulting from spills, and thus contemplated that States

would levy taxes to cover areas excluded from the pro-

posed federal scheme. Moreover, although the House spe-

cifically included a disclaimer in the preemption sections

of TLR. 85 allowing states to impose taxes for the purchase

and positioning of pollution abatement equipment, this

provision was intended to be illustrative of the acceptable

uses of a state tax, and was not the only purpose for which

a State tax was authorized.

Since a combination of the liability, insurance, and

funding provisions of H.R. 85 was expected to accommo-

date all future spills in terms of response costs and the

specified damages, there appeared to be no need for co-

extensive state programs. This point was emphasized

during consideration of S. 1341, the bill proposed by the

Carter Administration, which also contained a spill pro-

gram analogous to the coverage provided in H.R. 85. (3

Legis. Hist. 27-60). Under the spill provisions of S. 1341,

according to Thomas C. Jorling, Assistant Administrator,

Water and Waste Management, EPA, “all spills requiring

response would receive it, each spill would be completely

cleaned up, and any property damages and limited econom-

ic damages ... would be compensated. For these activ-

ities, then, no State authority or funds would be needed.’

1 Legis. Hist. 124 (written statement of Mr. Jorling sub-

mitted to the Subcommittee on I’nvironmental [Pollution

and Resource Protection, Committee on Environment and

Public Works). Mr. Jorling also noted, however, that

the spill portions of 8S. 1341 would preempt a state from

establishing a fund ‘‘which would duplicate the purposes

of the legislation but it does not preempt States for other

purposes.” 1 Legis. Hist. 112. His views are thus con-

sistent with those of Kepresentatives Biaggi, Florio, and

Snyder noted above. See also Statement of Swep T. Davis,

Associate Assistant Administrator for Water and Waste

Management of EPA, recorded in Hearings on S. 1480 be-

fore the Senate Committee on Commerce, Science and

Transportation, 96th Cong. 2nd Sess. (September 11-12,

1980), Comm. Print at 175.

In contrast to the spill-related preemption provision

of S. 1341, another section of that bill expressly narrowed

the scope of the spill provision and also disavowed any

16 The preemption provision of S. 1341 was contained in

§ 612 and used language similar to that included in H.R. 85.

S. 1341 provided in pertinent part that, “no person may be re-

quired to contribute to any fund, the purpose of which is to

pay compensation for such a loss or cost [described in sub-

section (a) of section 607 of this title] . . . 3 Legis. Hist. 57.

preemptive intent in regard to abandoned hazardous waste

sites:

Nothing in subsection (a) of this section shall pre-

clude or be interpreted to preempt any State from es-

tablishing liability funds, establishing limits of lia-

bility, setting financial responsibility requirements,

or imposing any taxes or fees upon any person, or upon

oil or hazardous substances for the purpose of estab-

lishing liability and compensation schemes for losses

or costs not compensated under this title which are

associated with pollution, or for any losses or costs

associated with releases of hazardous substances as

defined in section 601(0) 3) at uncontrolled hazard-

ous waste disposal sites. [§612(b), reprinted at 3

Legis. Hist. 57].

No preemption was proposed for abandoned sites because

‘‘The legislation focuses Federal assistance on those sites

presenting the most serious public health, safety or en-

vironmental problems: the States would have the re-

sponsiiblity for remedying the problems caused by the

vast majority of the remaining inactive and abandoned

sites.” Jorling Statement, supra, 1 Legis. Hist. 109-110.

Due to the limitations of the federal program for aban-

doned sites, therefore, ‘‘the Administration felt that pre-

emption would neither be equitable nor in the best interests

of public health and environmental protection.” Ibid. at

124. See also Davis comments, supra, Comm. Print at

175 (no preemption in regard to state taxation to remedy

abandoned sites because ‘‘we need that State program as

a complement to this program.”)

Congress at first agreed with the Administration that

there should be no preemption of state taxation in the

abandoned site area. Neither H.R. 7020 nor S. 1480 which

both addressed the abandoned site problem contained any

restriction on state taxation. See H.R. 7020 as passed by

the House, 2 Legis. Hist. 391-463; S. 1480 as reported, 1

Legis. Hist. 462-552. In August 1980, however, two amend-

ments containing preemption provisions were proposed

for addition to S. 1480—one by Senator Magnuson and the

other by Senator Gravel. Both of these amendments pro-

posed adding an oilspill title to S. 1480 and limitea pre-

emption to the oilspill context. They thus were consistent

in concept with the approach taken earlier by Congress and

the Administration which preempted state taxation to the

extent of federal coverage in the oilspill area, but rejected

preemption in regard to abandoned sites."’

On September 24, 1980, however, Senator Cannon pro-

posed a number of amendments to S. 1480 reflecting con-

cerns raised in hearings before the Commerce Committee.

3 Legis. Hist. 178-179. See also Hearings on S. 1480 be-

fore the Senate Committee on Commerce, Science and

Transportation, 96th Cong., 2nd Sess. (September 11-12,

1980), Comm. Print. Due to the extremely tight time-

frame, the amendments had not been considered in com-

mittee session. 3 Legis. Hist. 178. Senator Cannon, on

behalf of the Commerce Committee, thus invited comments

on the amendments. Jbid. Included in the group of 15

amendments was No. 2387 which proposed some limitations

on state taxation:

17 The Magnuson Amendment (No. 1958) is reprinted at 3

Legis. Hist. 70-113. In regard to preemption, § 15(a) of the

amendment provided in pertinent part that, ‘No person may

be required to contribute to any fund, by any Federal, State,

or other law, the purpose of which is to pay compensation for

any loss which may be compensated under this title.” Ibid

at 107. The Gravel Amendment (No. 1965) is reprinted at 3

Legis. Hist. 114-150. Its preemption provision was sweeping in

scope, stating that ‘States are hereby precluded from: 1) the

imposition of excise taxes or fees upon oil for purposes of fi-

nancing activities related to the cleanup of discharges and the

payment of damages caused by discharges.” Ibid. at 142 (em-

phasis added).

Sec. 8(a) Except as provided in this Act and subject

to the provisions of subsection (b) of this section—

(1) No action may be brought in any court of the

United States, or of any State or political subdivision

thereof, for costs or damages for which a claim may

be asserted under this Act, and

(2) No person may be required to contribute to

any fund, the purpose of which is to pay compensa-

tion for claims for such costs or damages, nor to es-

tablish or maintain financial responsibility relating to

the satisfaction of a claim for such costs or damages:

provided, however, that nothing in this subsection shall

preclude any State from imposing a tax or fee upon

any person or upon any hazardous substance in order

to finance the purchase or pre-positioning of hazard-

ous substance release cleanup equipment or other prep-

arations for the cleanup of a release of hazardous sub-

stances which affects such State.

(b) Nothing in subsection (a) shall preclude or

be interpreted to preempt any State from establish-

ing liability funds establishing limits of liability, set-

ting financial responsibility requirements, or imposing

any taxes upon any person, or upon oil or hazardous

substances for the purpose of establishing liability and

compensation schemes for losses and costs associated

with releases of hazardous substances at any closed

hazardous waste disposal facility. [3 Legis. Hist. 185-

186].

Although the precise impact of this language when

viewed against the federal coverage proposed in 8. 1480 is

far from clear, Senator Cannon intended it to be consistent

with both S. 1341 and H.R. 85. Explanation to Amendment

No. 2387, reprinted at 3 Legis. Hist. 186. In keeping with

this intent, the explanation accompanying the amendment

stated that, ‘‘The amendment would expressly not prevent

the states from providing remedies for damages not cov-

ered by S. 1480. In addition, states would specifically re-

tain their authority to impose taxes or fees for the pur-

chase of cleanup equipment.” Jbid. The thrust of the

Cannon Amendments was thus to prevent overlapping,

duplicative, and unnecessary state programs. [bid.

Following the presidential election in November 1980,

the Senate stepped up its efforts to adopt some form of

Superfund bill before the end of the lame duck session. 1

Legis. Hist. VII. A group of senators led by Senators

Randolph and Stafford, the ranking members of the Sen-

ate Committee on Environment and Public Works, intro-

duced their first compromise measure on November 18,

1980. 3 Legis. Hist. 199-287. This proposal contained a

substitute to S. 1480 that combined those parts of H.R. 85,

H.R. 7020, and S. 1480 where the senators believed that

consensus existed. Of particular note is that the first sub-

stitute was silent in regard to state taxation. The only

mention of preemption was contained in ¢114(a) of the

substitute which assured states that they would not be pre-

empted from ‘‘imposing any additional liability or require-

ments with respect to the release of hazardous substances

within such State.” 3 Legis. Hist. 275.

When this substitute measure failed to yield the ex-

pected consensus, however, Senators Stafford and Ran-

dolph introduced a second proposal. 1 Legis. Hist. 560-

680. It was this second substitute to S. 1480, introduced on

November 24, 1980, and passed by the Senate on that same

day, which eventually became CERCLA. 1 Legis. Hist. VIL.

In regard to preemption, the conipromise retained § 114(a)

from the first Stafford/Randolph substitute, thus allowing

states to impose additional liability and other require-

ments regarding releases of hazardous substances. 42

U.S.C. §9614(a). This provision represented a rejection

of the Cannon proposal which had restricted a state’s op-

tions in this area. See Amend. No. 2387, reprinted at

3 Legis. Hist. 185-186. The Act did prevent states from

imposing financial responsibility requirements, however,

thus accepting the Cannon proposal in this regard. Ibid.

Compare 42 U.S.C. § 9614(d). Finally, the compromise did

contain the language in issue here—42 U.S.C. § 9614(¢)—

which obviously represented an accommodation between

those legislators who opposed the preemption of state tax-

ation altogether, and those like Senator Cannon and the

supporters of H.R. 85 who supported some limitations on

state taxation.

In preempting state taxation only to the extent that

such taxes would be used to finance ‘‘claims which may be

compensated under this subchapter,” however, Congress

linked preemption to the coverage provided by CERCLA,

paralleling the thrust of the preemption provisions pro-

posed eariier in H.R. 85. Despite this parallel, though, the

preemption effected by 42 U.S.C. § 9614(c) was even less

onerous than what had been proposed earlier in the oil-

spill context because—unlike H.R. 85—CERCLA was noi

intended to cover all ‘‘compensable damages” including re-

moval costs associated with future spills, but was designed

to address only those releases (including abandoned waste

sites) that qualified for national priority status. Compare

the priority focus of CERCLA, 42 U.S.C. § 9605(8), with

§ 104(f) (1) of H.R. 85 which made the fund liable for

all removal costs and specified damage claims resulting

from a spill (2 Legis. Hist. at 1031 and 1104). Since

CERCLA left far more to the states to cover on their own

than H.R. 85 had left, therefore, the preemption accom-

plished by 42 U.S.C. §9614(c) was correspondingly nar-

rower. Moreover, by choosing “may be compensated” over

other proposed formulations such as “may be asserted,”

Congress prevented the use of state funds only for those

claims that had a realistic chance for Superfund compen-

sation and not from financing all claims that conceivably

could be raised under CERCLA.

As incorporated in the Superfund Act, then, 42 U.S.C.

§ 9614(c) became an incentive to states to participate fully

in the federal cleanup program for priority sites. If states

maximized their use of Superfund, they could maintain

their own funds supported by state taxes to supplement

the federal program. Should states wish to start a com-

peting and duplicative program for priority sites, how-

ever, 42 U.S.C. § 9614(¢) would require such programs to

be financed by general revenues.

The legislative history recounted above demonstrates

that Congress fully intended to allow states to impose

special taxes to supplement federal cleanup efforts. For

it simply made no sense in the context of H.R. 85, and

makes no sense in the context of CERCLA, to preempt

state taxation for needed cleanup efforts and damage com-

pensation that would not be addressed by the federal pro-

gram.

The limited nature of the preemption accomplished by

42 U.S.C. § 9614(c) was confirmed in the Bradley/Ran-

dolph colloquy quoted above at pp. 10-11, reprinted at 1

Legis. Hist. 731-733. A close examination of the colloquy

reveals substantial similarities to the exchange of remarks

that took place earlier between Representatives Biaggi and

Florio in regard to the preemption provisions of H.R. 85.

Compare 1 Legis. Hist. 731-733 with 2 Legis. Hist. 903-905.

Both colloquies demonstrate that continued state taxation

was contemplated, and that preemption was intended to

reach only to the extent of federal coverage of the problem

areas sought to be remedied by the legislation. In Senator

Randolph’s words, ‘‘Any damage not reimbursed by this

bill fund may similarly be the proper subject of a State

fund if a State so chooses to construct its fund.” 1 Legis.

Hist. 732.

The Bradley/Randolph colloquy did establish that

there would be no preemption whatsoever of state fund

moneys collected prior to the effective date of the legisla-

tion. 1 Legis. Hist. 732. Contrary to Exxon’s assertions,

however, the colloquy also addressed the permissible scope

of state taxation after the adoption of CERCLA. That

this is so is clear from Senator Bradley’s question con-

cerning the propriety of using state funds to finance re-

sponse activities vp front in the absence of federal action,

and then seeking reimbursement from the federal fund:

Mr. BRADLEY. In the event I have described,

where a State or a contractor of the State is the re-

spondent to the release and incurs economic loss nor-

mally compensable under the provisions of this bill,

does this legislation intend that a State that has con-

tinued to collect taxes or fees to finance a State fund

designed to cover expenses and economic loss not cov-

ered under the provisions of this bill have the right to

use those State fund moneys to provide intermediate,

up front capital to pay for these activities and seek

reimbursement from the fund established under this

bill?

Mr. RANDOLPH. Nothing in the language or

intent of this bill would prohibit a State from using

its fund for the purposes you have inquired about... .

[1 Legis. Hist. 732, emphasis added).

Moreover, since the colloquy had already established that

there was no preemption at all for state taxes collected

prior to the adoption of CERCLA, the following statement

obviously refers to the collection of state taxes after the

enactment of CERCLA:

Mr. BRADLEY. And 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. [1 Legis. Hist.

733).

Similarly, the remarks confirming the use of state funds

to provide the state share of remedial costs and to com-

plete cleanup efforts terminated by the federal govern-

ment also referred to funds supported by state taxes levied

subsequent to the adoption of CERCLA. Ibid. lxxon’s

interpretation of the colloquy which limits it to the use of

state taxes collected before the enactment of CERCLA is

just plain wrong. As the above excerpts indicate, the col-

loquy supports New Jersey’s interpretation of 42 U.S.C.

§ 9614(c). See aiso the comments of Representative Florio

concerning the preemption provision during House debate

on CERCLA, 1 Legis. Hist. 780 (‘‘while States may not

create duplicate funds to pay damages compensable under

this bill, there is no preemption of the State’s ability to

collect taxes on fees for other costs associated with re-

leases that are not compensable damages as defined in this

legislation. It is also intended that state funds can be

used to provide the required 10-percent State match.”)

Both Houses of Congress have recently reconfirmed

the construction of 42 U.S.C. §9614(c) coutained in the

Bradley/Randolph colloquy and endorsed by the courts

below. In considering legislation to reauthorize Super-

fund, the Senate Committee on Environment and Public

Works has proposed aii amendment to 42 U.S.C. § 9614(c)

to clarify the ‘‘original intent of the provision.” Super-

fund Amendments of 1984, Sen. Rep. No. 98-631, 98th

Cong., 2nd Sess. (September 21, 1984), Comm. Print at 35-

36 and 245. As noted in the Committee Report:

The addition makes clear that in no way are States

prohibited from using special taxes to raise their own

funds if the funds are expended for costs at Superfund

sites under section 104/c)(3).... It also includes the

costs of responses supplemental in number or degree

to those taken under the Fund. State management

activities for hazardous substance programs would

also be appropriate. [Jbid. at 36].

This clarification was deemed necessary by the Committee

to clear up “[a]ny cloud of uncertainty over the legitimacy

of” state taxes that had been prompted by the instant liti-

gation. Jbid. A similar need to clarify existing law was

perceived in the House where the Committee on Energy

and Commerce has noted that, ‘‘The Committee believes

that the proper interpretation of current law is that its

preemption provision 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 compensated by Superfund.” Superfund Expan-

sion and Protection Act of 1984, H. Rep. No. 98-890, Part 1,

9th Cong. 2nd Sess. (July 15, 1984), Comm. Print at 58-59.

Although post-enactment legislative history such as

these recent committee reports may not be as persuasive

as contemporaneous legislative history, post-enactment his-

tory is nonetheless entitled to ‘‘significant weight.” Sea-

train Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572,

596 (1980). See also Bell v. New Jersey, 461 U.S. 773, 784-

785 (1983). Certainly, the consideration of these reports is

in keeping with this Court’s desire to review all material

relevant to the task of ascertaining legislative intent. See

Watt v. Alaska, supra, 451 U.S. at 265-266; Andrus v. Shell

Oil Co., supra, 446 U.S. at 666. The fact that the post en-

actment history refers to the instant controversy contrib-

utes rather than detracts from the weight that should be

accorded to the reports because the reference makes clear

that Congress knew about the dispute and sought to clarify

any misinterpretation of its original intent in adopting 42

U.S.C. §9614(c). See generally North Haven Bd. of Ed.

v. Bell, 456 U.S. 512, 535 (1982) ‘congressional awareness

of dispute as reflected in post-enactment developments

lends weight to interpretation of statute endorsed by

Court).

Both the contemporaneous and subsequent legislative

history thus support the conclusion reached below that New

Jersey may continue the Spill Fund tax to finance costs

not covered or actually compensated by Superfund. To

fulfill the will of Congress, therefore, this Court should

affirm the judgment of the New Jersey Supreme Court.

Before concluding, however, some mention must be

made of the interpretation of 42 U.S.C. § 9614(¢) urged by

the Solicitor General. The Solicitor General focuses on

the definition of “claim” contained in CERCLA which

means “a demand in writing for a sum certain.” 42 U.S.C.

§ 9601(4). Since governmental response costs are distinct

from claims on both the federal and State level because

they are paid directly from the trust funds established

for this purpose without resort to the claims process estab-

lished in both pieces of legislation, the Solicitor General

concludes that governmental response costs are completely

beyond the preemptive scope of 42 U.S.C. 4 9614(c). See

42 U.S.C. § 9611(a) in which the payment of governmental

response costs is explicitly distinguished from the payment

of claims; compare the claims processes in 42 U.S.C. 4 9612

and N.J.S.A. 58:10-23.11k through N.J.S.A. 58 :10-23.11q

which were not intended to be used for governmental re-

sponse costs.'"* Although this use of the “claims” language

differs from New Jersey’s reading of 42 U.S.C. § 9614(c),

it certainly is feasible and is consistent with New Jersey’s

interpretation to the extent that both are in keeping with

the narrow scope of preemption envisioned by Congress

and discussed above.

Insofar as third-party damage claims are concerned,

however, the Solicitor General finds this area totally pre-

empted by 42 U.S.C. §9614(c). For example, under the

Solicitor General’s reading, a nongovernmental party who

cleans up a site could not be compensated by a state fund

even if the cleanup was either not eligible for federal com-

pensation (e.g., site not on NPL), or if the request for re-

imbursement had been rejected by EPA. Similarly, states

would be precluded from financing third-party claims for

damage to natural resources, even though CERCLA spe-

cifically limits such claims to governmental entities. 42

18 The structure of both the federal and New Jersey acts dem-

onstrates that governmental response costs were not meant

to go through the claims process. In regard to CERCLA, Con-

gress has noted that governmental response costs were not

subject to the procedures for claimants seeking third party dam-

ages and response costs since such a process would preclude

timely governmental response. 1 Legis. Hist. 371 (Sen. Rep. No.

96-848). Similar reasoning applies to the Spill Act. Moreover,

the Superfund program in regard to response costs operates

in conjunction with the states through cooperative agreements

and contracts, not through claims. 42 U.S.C. § 9604(c) (3).

States thus agree to pay their percentage of remedial costs up

front and do not as a matter of course file claims for response

costs against Superfund. Finally, the federal program utilizes

these up front funding guarantees from the states and does

not operate on a reimbursement basis so that states typically

do not file claims for the reimbursement of moneys already

expended.

U.S.C. § 9607(f)."° Such a construction is at odds with

the language of 42 U.S.C. § 9614(c) and the legislative his-

tory recounted above which demonstrates that Congress

clearly contemplated that states would use their own tax-

supported funds to fill in those areas either not covered

or not actually compensated by Superfund. In keeping

with this legislative history and the language of the stat-

ute, New Jersey reads “which may be compensated under

this subchapter” to modify the entire phrase, “claims for

any costs of response or damages or claims.” While this

reading may not reflect the best grammatical usage, those

engaged in statutory construction should avoid both scho-

lastic strictness and making ‘‘a fortress of the dictionary.”

See Watt v. Alaska, supra, 451 U.S. at 266, citing Cabell

v. Markham, 148 F.2d 737, 739 (2d Cir. 1945) (L. Hand, J.),

aff'd 326 U.S. 404 (1945). As this Court recently observed

in Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, 104 S.Ct. 2778, 2791 (1984), “We are not per-

suaded that parsing of general terms in the text of the

statute will reveal an actual intent of Congress.” When

the Court looks for “that interpretation which can most

fairly be said to be imbedded in the statute, in the sense

of being most harmonious with its scheme and with the

general purposes that Congress manifested,” C.J.R. v.

Engle, 464 U.S. 206, 217 (1984), quoting NLRB v. Lion Oil

19 In the course of developing the compromise that became

CERCLA, coverage for damages was severely restricted. As

enacted, CERCLA provides no compensation for property dam-

age or medical injuries, only damage to natural resources in-

curred by governmental entities. Consequently, the definition

of “damages” was restricted to mean “damages for injury or

loss of natural resources. . . .”” 42 U.S.C. § 9601(6).

Co., 352 U.S. 282, 297 (1957) (Frankfurter, J., concurring

in part and dissenting in part), New Jersey submits that

its interpretation of 42 U.S.C. 4 9614(c) is the only prof-

fered construction to meet this criteria. The State thus

urges the Court to affirm the judgment below.

)

CONCLUSION

For the foregoing reasons, the Court should affirm

the judgment of the Supreme Court of New Jersey.

Respectfully submitted,

Irwin lL. KIMMELMAN

Attorney General of New Jersey

Attorney for Appellees

Richard J. Hughes Justice Complex

CN 112

Trenton, New Jersey

(609) 292-1568

MicHazL R. Coz

First Assistant Attorney General

Of Counsel

Mary C. JacoBson

Deputy Attorney General

Counsel of Record and

On the Brief

Dated: September 24, 1985

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.