Amicus Curiae Brief — Exxon Corp. v. Hunt

No. 84-978 f

In the Supreme Cou

OF THE

United States

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OCTOBER TERM, 1984

ExXON CORPORATION, et al.,

Appellants,

VS.

ROBERT HUNT, ADMINISTRATOR. OF

New JERSEY SPILL COMPENSATION FUND, et al.,

Appellees.

ae

On Appeal from the Supreme Court

of the State of New Jersey

AMICI CURIAE BRIEF

OF STATE OF CALIFORNIA EX REL.

JOHN K. VAN DE KAMP, ATTORNEY GENERAL

THE STATES OF CONNECTICUT, OHIO, MAINE,

NEW HAMPSHIRE, NEW YORK, TEXAS AND

VERMONT

JOHN K. VAN DE KAmpP

Attorney General of the

State of California

THEODORA BERGER

Assistant Attorney General

REED SATO

(Counsel of Record)

Deputy Attorney General

1515 K Street, Suite 511

Sacramento, California 95814

Telephone: (916) 324-5493

Attorneys for Amici Curiae

State of California ex rel.

John K. Van de Kamp

Attorney General

Continued on Inside Front Cover.

BOWNE OF SAN FRANCISCO. INC. + 190 NINTH ST. + S.F.. CA 94103 + (415) 864-2300

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JOSEPH I. LIEBERMAN

Attorney General

State of Connecticut

ANTHONY J. CELEBREZZE, J

Attorney General

State of Chio

JAMES E. TIERNEY

Attorney General

State of Maine

STEPHEN E. MERRILL

Attorney General

State of New Hampshire

ROBERT ABRAMS

Attorney General

State of New York

Jim MATTOX

Attorney General

State of Texas

JEFFREY L. AMESTOY

Attorney General

State of Vermont

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TABLE OF CONTENTS

INTEREST OF AMICI CURIAE....................

SUMMARY OF ARGUMENT ......................

eee e ee Cee e EERE OCC eCececceesceeess

THE FORMATION OF STATE CLEANUP FUNDS

WAS AN ESSENTIAL ELEMENT OF THE

COMPREHENSIVE FEDERAL-STATE SCHEME

SEU GET GUNES oc ccc ccc ccc ccccccccccess

A. Congress Recognized That States Would Need Their

Own Funds To Abate Hazardous Substance Sites . .

1. State Response Funds Are Required For

Remedial Actions Under Section 104 Of

eect Pay eke eeeneeeceenese6ses

2. State Response Funds Are Permitted For

Response Actions At Sites For Which Federal

Funds Cannot Or Have Not Been Used ......

B. Exxon Fundamentally Misunderstands The Federal-

State Relationship Contemplated By CERCLA....

II

CERCLA DOES NOT PREEMPT STATE FUNDS

WHICH ARE USED FOR RESPONSE ACTIONS ..

A. Only Those State Funds Which Pay “Claims For

Compensation” Are Subject To The Section 1!14(c)

TID vnc cctcvccccccccescacceses

1. The Plain Language of Section 114(c) Prohibits

Only A Limited Class of State Activities .....

2. The Legislative History is Consistent With The

Plain Language of the Statute ..............

State Funds Which Pay “Compensation For Claims”

Are Preempted Only If Federal Superfund Has

Actually Paid Compensation For The Same Claim

1]

15

15

15

17

20

TABLE OF CONTENTS

C. State Funds Used For Any Purpose Not Specified In

Section 114(c) Including State Response Costs, Are

Not Preempted.......... Ra eee A a

III

STATE CLEANUP PROGRAMS WHICH ARE

FUNDED BY TAXES WHICH ARE NOT

DUPLICATIVE OF THE CERCLA TAX ARE NOT

PE 6 8 ko $-oscuwekeaweieccaessncetsnees

TTT TCURLT TE CTT TCU TT TOT TTT ere

23

ill

TABLE OF AUTHORITIES CITED

Cases

Page

Aloha Airlines v. Director of Taxation, 464 U.S. 7 (1983) 26

Chemical Manufacturer’s Association v. National Resources

Defense Council, __. U.S. ___., 105 S.Ct. 1102 (1985)

ckbeeae beShaeee hh bacn cons cus eusdwottbensnsteces 10, 11

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

Council, __. U.S. ___., 104 S.Ct. 2778 (1984) ...... 10

Consumer Products Safety Commission v. GTE Sylvania,

a ea a gis as Bie al 15

Federal Energy Administration v. Algonquin SNG, Inc., 426

ED fon ete rg i or nL ean ie oe a 18

Mastro Plastics Corp. v. National Labor Relations Board,

is we dacs pbveuese 0 ¢eeuectes 18

Matter of Quanta Resources Corp., 739 F.2d 912 (3d Cir.

1984), cert. granted, 53 U.S.L. Week 3584 (Feb. 19,

IG ey AR ce aha ee a de 21

National Woodwork Manufacturers Assoc. v. National

Labor Relations Board 386 U.S. 612 (1957) .......... 18

New York v. General Electric, 592 F.Supp. 291 (N.D.N.Y.

Sedu akeneel iid kee aus ou eee etl aaa 9,11

New York v. Shore Realty, 759 F.2d 1032 (2d. Cir. 1985)

PE OCP ETE CC TT ETE TOC eC TOT oT eT ET errr 9,11, 13

Penn Terra Ltd. v. Department of Environmental Resources,

Fae ee I, IS 6 bid ced cecsacucvceacses 21

Perez v. Campbell, 402 U.S. 637 (1971) ............... 20

Ray v. Atlantic Richfield Co., 435 U.S. 151 (1978) ...... 26

United States v. Bass, 404 U.S. 336 (1971) ............. 26

United States v. Northeastern Pharmaceutical & Chemical

Company, 579 F.Supp. 823 (W.D. Mo. 1984) ......... 11

United States v. Reilly Tar & Chemical Company, 546

- Gi fi o & -) eer ree 11

iv

TABLE OF AUTHORITIES CITED

Statutes

Page

Comprehensive Environmental Response, Compensation

and Liability Act of 1980, 42 U.S.C. 9601 et seq.

ARON Tee ae re Seen eee ee passim

42 U.S.C

SN ik A a tS at Baal ica on ee a 16

Se cceiekGketsik tkeueekuunedcsaekvendhneut 16

nS cc ins saw ahaa eeu ab ee She eee meek aes 2,7

RS a ok gle har Sed tae ee Die ene Sir ine Sn 2,7

er ae rhe eee ey ei aren 7

REE en iy ee RE a DR Ms oe Fe 3, 8, 12

Ns Sel ee ieee carer e ey cuudee S oreesae 2

Pn ds Svat ne do cabs din warned dena 7

ERE SPE rer ee re re rr ey om ee 7,8

AGREES, OAPI SS DGD PAREN oA dharani De Sle AID 8

RY tte eke. sae Soe ee ee eee ae 7

Ph cc eer oL Es 6B ee PK Ca oe ake REESE TERE TORS 17

a et anes ane 17

I a Ne oe er aie 17

aoa i oe ie Giclee was eg ene a aac 17

A rr ere ry rr ern a rer F passim

Hazardous Substance Account Act, California Health and

Safety Code sections 25300-25382 (West 1984 & Supp.

1985):

Section 25330 ......... eckubueenasduas Guneenbek as 2

<a oo tec uwesedue led eueks ons 2

ET son's bs abe neesdece axe i caeeubereeeuees 2

i cci<s deen bucueu hades dad eibeeseneted 2

eee eee ee eee a 2

EE oan do 640500450 b06 cece eae eh ceekan 2

EA eh Sere uh ee Cod ewe es oe ea oan 3

Vv

TABLE OF AUTHORITIES CITED

STATUTES

Page

ss cece acy Veet shee) due eR 3

i coc ebeuckeu ss veneneaeeee 3

Ee re rr grrr. 3

I so oS indies Wks ckessbavesaeeaeneees 27

N.H. Rev. Stat. Ann:

Ds cc caecabeacndhueneseeesss 4

SY SE ED 6 kis vdace usd evevscustneoes’ 4

New Jersey Spill Compensation and Control Act. N.J. Stat.

Ann. Section 58:10-23.11 et seq. (West 1982)......... l

N.J. Stat. Ann. section 58:10-23.11i (West 1982) ........ |

Vorment, 32 Veet. Ame. CRO. 257... 2 ces ccccsenes 4

ts Or OMI, on ck ede rd ouececunaeseuseaces 11

42 U.S.C.

RAN Rtkeh RAG KASRS ACRE SR SORE ET ORAE ATES 26

IEE Ea pe sro rer ney ener ere 26

Legislative Material

126 Cong. Rec.:

S 14941-15008 (daily ed. Nov. 24, 1980) ............. 8

S 14981 (daily ed. Nov. 24, 1980).......... 9, 19, 22, 24, 26

S 15607 (G@ally o6. Nov. 24, 19GB)... 2. ccc ccc cncens 8

H.R. 85, 96th Cong., Ist Sess. (1979), 126 Cong. Rec. H9,

186-201 (daily ed. Sept. 19, 1980)................0.4. 17

H.R. Rep. No. 1016, 96th Cong., 2d Sess. 18 (1980),

reprinted in 1980 U.S. Cong. Ad. News 6120)......... 7,8

H.R. 7020, 96th Cong., 2d Sess. (1980), 126 Cong. Rec. H9,

437-48 (daily ed. Sept. 23, 1980).................... 17

H.R. 7020, 96th Cong., Ist Sess. (1979)................ 19

v1

TABLE OF AUTHORITIES CITED

LEGISLATIVE MATERIAL

Page

| Library of Congress, Senate 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),

Public Law 96-510, at 780 (Comm. Print. 1983)....... 19

S. Rep. 99-11, 99th Cong., Ist Sess. 69-60 (1985) ....... 23

S. Rep. No. 848; 96th Cong., 2d Sess. 17 (1980) ........ 7,8

S. 1480, 96th Cong., Ist Sess. (1979), 126 Cong. Rec. S14,

938-48 (daily ed. Nov. 24, 1980) ..................0.. 17

Other Authorities

Black’s Law Dictionary 256 (Sth Ed. 1979) ............. 16

er ee eI 6 50k 6k oS het cdeetaseseasnaes core «8

cae ius hes hades ewe KEN ae 10

0 EA ee Pree ere ee 10

ee ieee a aban kee ce aun hoe 10

OF Fe. Be 0600s 8 kieran nsvervesces. 9

rE crys laser as 6a eke 10

EERE oy PO come moe 10

ee I, ohio ac keine eins tab eGueeen'ee 14

United States General Accounting Office, Status of EPA's

Remedial Cleanup Efforts March 20, 1985............ 16

Webster's Third New International Dictionary 463 (1976) 16

No. 84-978

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1984

ExXON CORPORATION, et al.,

Appellants,

VS.

ROBERT HUNT, ADMINISTRATOR OF

New JERSEY SPILL COMPENSATION FUND, et al.,

Appellees.

On Appeal from the Supreme Court

of the State of New Jersey

AMICI CURIAE BRIEF

OF STATE OF CALIFORNIA EX REL.

JOHN K. VAN DE KAMP, ATTORNEY GENERAL

THE STATES OF CONNECTICUT, OHIO, MAINE,

NEW HAMPSHIRE, NEW YORK, TEXAS AND

VERMONT

Amici file this brief pursuant to Rule 36.4 of the Rules of the

Supreme Court of the United States.

INTEREST OF AMICI CURIAE

Over the last decade, the nation has had its attention forcibly

drawn to the risks associated with hazardous substances and

wastes. Environmental contamination at Love Canal in New

York, Times Beach in Missouri, and Stringfellow Acid Pits in

California raised many concerns about the extent of toxic con-

tamination in our country. Those concerns have been elevated

into fears that the nation is aware of only the tip of the toxics

iceberg, and that hazardous waste dangers, like the cancer they

can cause, are multiplying at a seemingly uncontrollable rate.

In response, Congress passed the Comprehensive Environmen-

tal Response Compensation and Liability Act of 1980 (CER-

CLA).' CERCLA created the federal Superfund to control

releases of hazardous substances nationwide. Even as CERCLA

was enacted, Congress realized that the federal Superfund would

be adequate to address only a portion of the most seriously

contaminated sites. Congress, therefore, relied upon the states to

assume a substantial role in the mitigation of the nation’s hazard-

ous substance sites.

As of this writing, the United States’ ability to collect taxes to

support the federal Superfund will expire on September 30, 1985.

Even assuming that Congress reauthorizes a new authority to tax

after that date thereby maintaining the viability of Superfund, the

states undoubtedly will be required to assume financial responsi-

bility for hazardous substance cleanups. It is critical for this Court

'“CERCLA” means the Comprehensive Environmental Response,

Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.,

enacted by Congress on December 11, 1980. “Superfund” is the Haz-

ardous Substance Response Fund established by section 221 of CER-

CLA, 42 U.S.C. § 9631. “Spill Fund” means the New Jersey Spill

Compensation Fund established pursuant to N.J. Stat. Ann. section

58:10-23.11i (West 1982) as part of the New Jersey Spill Compensation

and Control Act. N.J. Stat. Ann. Section 58:10-23.11 et. seq. (West

1982) enacted on January 6, 1977 and thereafter amended.

2

to affirm the ability of the states to raise funds to support those

cleanup efforts.

In 1981 the State of California created a state fund to comple-

ment and supplement the federal Superfund.” This state fund,

known as the Hazardous Substance Account (HSA)? is gener-

ated primarily by a tax on persons who dispose of hazardous waste

within the State of California.‘

As will be explained below, the tax to support the California

program is different from the tax used to support both the New

Jersey Spill Fund and the federal Superfund, however, the au-

thorized uses of the HSA are similar.* HSA, upon appropriation

by the State Legislature, may fund administrative costs, hazard-

ous substance response equipment costs, costs of preparation for

response to a hazardous substance release, removal and remedial

action costs incurred by the State,° costs of certain specified

studies, and the state share of remedial action costs mandated

pursuant to section 104(c)(3) of CERCLA, 42 US.C.

§ 9604(c) (3). Money in HSA may also be appropriated by the

?The Hazardous Substance Account Act, California Health and

Safety Code sections 25300-25382 (West 1984 & Supp. 1985).

* California Health and Safety Code section 25330. This account is

administered by the director of the California Department of Health

Services.

*See generally California Health and Safety Code section 25340-

25348. The HSA is funded by a tax imposed annually upon persons who

dispose of hazardous and extremely hazardous waste over a specified

amount in the state. The tax rate is based upon the total amount in tons

of waste disposed of during a one-year period. See California Health and

Safety Code section 25347.

* See California Health and Safety Code section 25351, which re-

quires that the expenditures from HSA be consistent with section

114(c) of CERCLA, 42 U.S.C. § 9614(c).

* The State of California generally adopts the definitions in CERCLA

for “remedy or remedial action” (42 U.S.C. § 9601(24)) and “remove

or removal” (42 U.S.C. § 9601(23)). See California Health and Safety

Code sections 25322, 25323.

3

state legislature on a site specific basis for the costs of restoring,

rehabilitating, or replacing natural resources, and of assessing

short-term and long-term injuries to natural resources to the

extent such costs are not reimbursed pursuant to CERCLA.’

Finally, HSA may be used to compensate victims for uninsured

out-of-pocket medical expenses and uninsured actual lost wages,

business income, or injury to a person’s property,” compensation

provisions which have no equivalent under CERCLA.

On November 6, 1984, the electorate of the State of California

passed the Hazardous Substance Cleanup Bond Aci of 1984.’ As

a consequence, the state hazardous substance account was in-

creased to fifteen million dollars ($15,000,000) annually with five

million dollars ($5,000,000) from the account dedicated to repay

in part the principal of, and interest on, the bonds sold under the

Hazardous Substance Cleanup Bond Act.

7 See California Health and Safety Code section 25352.

* See generally California Health and Safety Code sections 25370-

25382.

* That act empowered the sale of general obligation bonds to create a

Hazardous Substance Cleanup Fund of up to one hundred million

dollars ($100,000,000) to pay (1) the state share of costs of removal and

remedial action pursuant to section 104(c) (3) of CERCLA, and (2) all

costs of removal or remedial action on sites on the State Priority

Ranking List (SPRL). (See California Health and Safety Code Sec-

tions 25385-25386.6)

In order to spend HSA funds and/or bond funds for removal or

remedial actions at a site, the state must first place this site on the

SPRL. (See California Health and Safety Code section 25385.6.) There

are currently 222 sites on the SPRL. Of those sites, 53 are also listed or

proposed to be listed on the National Priority List. The State of

California has executed three cooperative agreements and three con-

tracts with the United States Environmental Protection Agency pursu-

ant to Section 104 of the CERCLA, 42 U.S.C. § 9604 for work on the

NPL sites in California.

4

committed to expeditiously cleaning up sites contaminated by

hazardous substances to protect the public health and safety of

their citizens. A broad ruling in favor of appellants’ position could

eliminate or deeply erode a state’s ability to tax hazardous waste

to support its cleanup funds and thereby jeopardize its ability to

respond to hazardous substance contamination problems.

'° The State of New York also maintains a hazardous waste remedial

fund created pursuant to New York State Finance Law, Section 97-b.

The Fund is made up of monies collected pursuant to special assess-

ments on generators of hazardous waste and monies collected from

penalties against violators of certain sections of the New York State

Environmental Conservation Law. To date, New York has identified

approximately 1400 hazardous waste sites within the state, only a

fraction of which are being addressed by the federal government with

Superfund money. The existence of the hazardous waste remedial fund

has enabled New York to begin a major program of site investigation

and remediation. Without the State fund, New York would not be able

to adequately address its hazardous waste problem.

The State of New Hampshire manages the New Hampshire Hazard-

ous Waste Cleanup Fund which was established in 1981. The fund is

supported by a fee imposed on industry based upon the amount of

hazardous waste generated in the state. (N.H. Rev. Stat. Ann.

147B:8(1) (Supp. 1983).) The fund was established for the broad

purpose of providing for the adequate and safe containment of and

cleanup of hazardous waste sites in the State of New Hampshire. In

1985, the New Hampshire Legislature restricted the use of the fund to

sites which do not qualify for CERCLA funds. (N.H. Rev. Stat. Ann.

147B:6(I) (Supp. 1983) as amended by Chap. 346 of the 1985 N.H.

Laws). State matching funds for CERCLA are derived from the sale of

a special bond (Chap. 346:4 of the 1985 N.H. laws). No claims payable

to third parties out of the Hazardous Waste Cleanup Fund are autho-

rized. (N.H. Rev. Stat. Ann. 147-B:6(II) (Supp. 1983).)

The State of Vermont manages a response fund pursuant to 32 V.Stat.

Ann. Chap. 237 “Tax on Hazardous Waste Generation.”

5

SUMMARY OF ARGUMENT

When Congress adopted CERCLA, it set forth a comprehen-

sive scheme designed to guide federal and state responses against

the uncontrolled releases of hazardous substances to protect

public health and welfare and the environment.

CERCLA established a two-pronged approach for the acceler-

ated cleanup of hazardous substances throughout the nation.

First, CERCLA established a federal fund to be used directly

by the United States Environmental Protection Agency (EPA) to

take cleanup actions at the most seriously contaminated hazard-

ous substance sites in the nation, and to make other specified

payments for claims to the Superfund. The large majority of

Superfund expenditures require a specified contribution by a state

in order to commence cleanup of a particular site.

Second, CERCLA created liability standards for certain cate-

gories of parties responsible for hazardous substance contamina-

tion and established a cause of action for recovery of abatement

costs from those parties. In so doing, Congress created a powerful

mechanism for states and the federal government to rapidly

expend public funds to protect the public health and welfare and

the environment with the expectation of eventually recovering

those costs from responsible parties.

In creating this approach, Congress clearly looked to the states

to provide substantial funds to undertake appropriate response

actions. State funding is necessary to provide the state share

required for federal Superfund expenditures at a specified site.

The states also are relied upon to fund response action at sites

which may not be addressed with Superfund money. Congress

recognized state response funds would be essential to the abate-

ment of hazardous substances because federal Superfund would

be inadequate to pay for cleanup at all sites requiring abatement.

There is no evidence that Congress desired in any way to limit the

ability of states to raise funds for such purposes.

Congress did place a restriction on the use of state funds for

other than state response costs. Section 114(c) of CERCLA, 42

U.S.C. § 9614(c) expressly prohibits states from requiring per-

6

sons to contribute to funds to pay claims for damages or costs of

response by third parties or for other compensable items under

CERCLA. In creating those categories of limitations, however,

Congress intended to preempt state taxation only where the funds

raised are to be used to compensate claims already paid for by

Superfund. In any event, Congress did not intend to preempt state

taxation systems which were not duplicative of the CERCLA

system.

We adopt the general reasoning employed by the New Jersey

Supreme Court as it enunciated an “actual compensation” test to

determine the validity of a state compensation fund. We have

recast the court’s reasoning, however, in a moderately revised

framework.

ARGUMENT

I

THE FORMATION OF STATE CLEANUP FUNDS WAS AN

ESSENTIAL ELEMENT OF THE COMPREHENSIVE

FEDERAL-STATE SCHEME EMBODIED IN CERCLA

Amici submit that a comprehensive review of CERCLA and

its legislative history compels the conclusion that state cleanup

funds are permitted and, in fact, are encouraged by the federal

legislation.

A. Congress Recognized That States Would Need Their Own

Funds To Abate Hazardous Substance Sites

In considering the need for federal legislation to address the

problems of improperly managed hazardous waste, Congress

observed that:

“Since enactment of [the Resource Conservation and

Recovery Act of 1976], a major new source of environmental

concern has surfaced: the tragic consequences of improperly,

negligently, and recklessly hazardous waste disposal prac-

tices known as ‘the inactive hazardous waste site problem.’

The unfortunate human health and environmental conse-

quence of these practices has received national attention

amidst growing public and Congressional concern over the

7

magnitude of the problem and the appropriate course of

response that should be pursued. Existing law is clearly

inadequate to deal with this massive problem.” (H.R. Rep.

No. 1016, 96th Cong., 2d Sess. 18 (1980), reprinted in 1980

U.S. Cong. Ad. News 6120.)

In an effort to address concerns such as those, Congress

enacted CERCLA. The legislation established a $1.6 billion

Superfund, which is financed primarily by a federal tax on

petroleum and specified chemicals. The principal use of the fund

is to provide the federal share of public monies for removal'' or

remedial'? actions directed against releases or threatened releases

of hazardous substances to the environment. The remainder of

the public monies for remedial measures at a site must be

provided by the states in proportions specified by CERCLA.

Additionally, Superfund can be used for certain governmental

costs and for the payment of two types of claims. (See 42 U.S.C.

§ 9611.)

As part of the CERCLA legislation, Congress required the

amendment of the National Contingency Plan (NCP) created by

section 311 of the Federal Water Pollution Control Act, 33

U.S.C. § 1321 to set forth procedures for responding'’ to hazard-

ous substance releases. (See 42 U.S.C. § 9605.) A component of

the NCP is the National Priorities List (NPL). (See 42 U.S.C.

'! Removal action refers to emergency or crisis measures including

“spill containment measures; measures required to warn the public of,

and protect it from acute damages; temporary evacuation and housing;

[and] activities necessary to close an existing public water supply

system.” (S.Rep. No. 848, 96th Cong., 2d Sess. 53-54 (1980). See 42

U.S.C. § 9601 (23).)

'2 Remedial action deals with “those actions consistent with perma-

nent remedy... to prevent or minimize the release of hazardous sub-

stances so that they do not migrate 10 cause substantial danger to present

or future public health or welfare or the environment.” (42 U.S.C.

§ 9601 (24).)

13 S<- 42 U.S.C. § 9601(25). “Respond” or “response” are generic

terms referring to a broad range of actions which mitigate or abate

hazardous substance contamination.

8

§ 9605(8)(B).) The NPL is a list of sites contaminated by

hazardous substances which appear to present the most significant

threat of harm to human health in the nation. (See 40 C.F.R.

§ 300.68(a).) Once a site has been placed on the NPL, the

federal government may arrange for remedial activities at the site

with financing from Superfund. (See 42 U.S.C. § 9604.)

Despite the size of Superfund, Congress was aware that it was

inadequate to address every site in the nation requiring cleanup.

At the time of CERCLA’s passage the EPA, manager of the

Superfund, estimated that as many as 30,000 to 50,000 inactive

and uncontrolled hazardous waste sites existed in the United

States, and estimated that cleanup of the most dangerous sites

alone would cost between $13.1 and $22 billion (H.R. Rep. No.

1016, 96th Cong., 2d Sess. 18, 20, (1980), reprinted in 1980 U.S.

Cong. Ad. News 6120, 6123). Congress recognized that

Superfund would not provide for a sufficient level of funding to

handle the cleanup and removal of hazardous waste sites that

existed at the time. (See Exxon v. Hunt, 481 A.2d 271, 279 (N.J.

1984); see generally 126 Cong. Rec. S/15007 (daily ed. Nov. 24,

1980) remarks of Sen. Stafford; S.Rep. No. 848; 96th Cong., 2d

Sess. 17, 71 (1980).) As a consequence, Congress looked to

maximize the use of Superfund by requiring supplemental funds

from the states for specified actions. In addition, Congress in-

tended to provide enhanced legal authority to the states pursuant

to Section 107 of CERCLA, 42 U.S.C. § 9607 to enable them to

respond independently to sites which would not be addressed by

the limited federal funds. Clearly, in both cases Congress envi-

sioned the creation of state cleanup funds.

1. State Response Funds Are Required For Redmedial

Actions Under Section 104 Of CERCLA

State involvement is critical in the initiation of remedial actions

under section 104 of CERCLA, 42 U.S.C. § 9604. Section

104(c) of CERCLA prohibits actions unless the state in which

the release occurs first enters into a contract or cooperative

agreement providing assurances that (1) the state will assure all

future maintenance of the removal and remedial action; (2) the

state will assure availability of an acceptable hazardous waste

9

disposal facility, if necessary; and (3) the state will pay either 10

percent of the cost of the remedial action (including all future

maintenance) or, in the case of a facility that the state or political

subdivision owned at the time of the disposal, at least 50 percent

of any sums expended in response to a release at such a facility.

(See 47 Fed. Reg. 31186 (1982).) In recognition of the necessity

of state contributions for cleanup actions, the states’ ability to

raise funds for those purposes was intended to be unaffected by

the passage of CERCLA. (See 126 Cong. Rec. S$14981 (daily ed.

Nov. 24, 1980) (remarks of Sen. Randolph.) )

2. State Response Funds Are Permitted For Response

Actions At Sites For Which Federal Funds Cannot Or

Have Not Been Used

As encouragement for states to undertake remedial actions

with their own funds, CERCLA specifically entitled states to

initiate cost recovery actions against specified parties for those

expenditures. By authorizing state action for cost recovery and

natural resources damages, section 107 of CERCLA provides the

states with an essential tool to respond to sites which have not

been or may never be addressed with Superfund money. (See

New York v. General Electric Company, 592 F.Supp. 291

(N.D.N.Y. 1984)

In order to recover response costs under Section 107 of CER-

CLA, the federal or state response action must not be inconsistent

with the NCP. The NCP provides a comprehensive guidance for

the identification, investigation and remedy of hazardous sub-

stance releases. The NCP is the national blueprint detailing on a

flexible basis the methods for achieving the goal of CERCLA

which is protection of public health and welfare and the environ-

ment. It was through the creation of the NCP, not the creation of

Superfund, that Congress intended to impose the comprehensive

federal-state scheme alleged by appellants. (New York v. Shore

Realty Corp., 759 F.2d 1032 (2d Cir. 1985.) If the states followed

the NCP then cleanup actions would follow a consistent, nation-

wide pattern. By providing the cost recovery component in CER-

CLA, Congress set forth a strong incentive—a carrot rather than

10

a stick—for the states to implement the cleanup guidelines of the

NCP.

The NCP not onl provides an overall methodology on how

best to clean up sites; it embodies the Congressional reliance on

state cleanup actions. Through the NCP, EPA has interpreted

CERCLA to provide states with a substantial and oftentimes

independent role for undertaking hazardous substance response

actions.

As an example of this federal reliance, a major new section of

the NCP was added in subpart F (40 C.F.R. §§ 300.61-300.71).

This subpart established seven phases of response, from discovery

of the release of hazardous substances through various levels of

response to documentation of response for cost recovery purposes.

The phases are designed to give response personnel a decision-

making framework for undertaking response action. (See 47 Fed.

Reg. 31198 (1982).) As part of this action, EPA added a new 40

C.F.R. § 300.62 to describe the State role under CERCLA. EPA

stated that it “decided to add this section to emphasize the ability

of the States to undertake responsibility for much of the response

detailed in Subpart F.” (47 Fed. Reg. 31199 (1982).)

Furthermore, the NCP specifically provides that:

“States are encouraged to use State authorities to com-

pel potentially responsible parties to undertake response

actions, or to themselves undertake response actions which

are not eligible for Federal funding.” (Emphasis added.) (40

C.F.R. section 300.24(c).)

The court should afford great weight to an agency’s interpreta-

tion of its governing statute. Within the past year, this Court twice

has applied this fundamental maxim of statutory construction in

upholding interpretations by EPA of federal environmental stat-

utes. See Chemical Manufacturer's Association v. National Re-

sources Defense Council, __. U.S. —_-—, 105 S.Ct. 1102

(1985), Chevron, U.S.A. Inc. v. Natural Resources Defense

Council, ____ U.S. ___., 104 S.Ct. 2778 (1984)."*

'* While reviewing a challenge to EPA’s position regarding the grant-

ing of variances from pollution discharge requirement established under

1]

The ability of the states to pursue a cost recovery action under

107(a)(4)(A) of CERCLA is separate and independent of the

requirements of any other CERCLA sections, including section

104. (See United States v. Northeastern Pharmaceutical & Chem-

ical Company, 579 F.Supp. 823 (W.D. Mo. 1984); United States

v. Reilly Tar & Chemical Company, 546 F.Supp. 1100, 1118 (D.

Minn. 1982).) CERCLA, therefore, authorizes state actions to

recover costs even where such costs were not incurred as part of a

contract or cooperative agreement pursuant to section 104 of

CERCLA.

By requiring national guidelines for response actions and pro-

viding clear legal authority to the states to recover the costs of

their response actions, Congress envisioned the broad use of

State-created response funds. The use of such funds may be

independent of federal funds, without EPA supervision and at

sites not on the National Priorities List and still be consistent with

the aims of Congress. (See New York v. Shore Realty, 759 F.2d

1032, 1046-1047 (2d. Cir. 1985); New York v. General Electric,

592 F.Supp. 291, 303-304 (N.D.N.Y. 1984).)

B. Exxon Fundamentally Misunderstands The Federal-State

Relationship Contemplated by CERCLA

While appellants recognize that CERCLA envisions a coordi-

nated federal-state scheme to address hazardous substance

problems, they misapprehend the full nature of the response

scheme. They unduly restrict their focus to the creation of the

Superfund and the means by which it is spent in conjunction with

matching state contributions. In doing so, appellants erroneously

inaply that states can only spend response funds on National

the federal Clean Water Act (33 U.S.C. § 1251 et seq.) this Court in

Chemical Manufacturers Assoc. stated:

“This view of the agency charged with administering the statute

is entitled to considerable deference; and to sustain it, we need not

find that it is the only permissible construction that EPA might

have adopted but only that EPA’s understanding of this ‘very

complex statute’ is a sufficiently rational one to preclude a court

from substituting its judgment for that of EPA.” [105 S.Ct. at

1108. }

12

Priority List sites and even then only in the context of section 104

of CERCLA. This is patently incorrect.'*

Nothing in CERCLA supports appellants’ contention that

states cannot clean up sites on the NPL entirely with state funds

if they so desire. States can certainly refuse to enter into coopera-

tive agreements or contracts with EPA as called for by section

104 of CERCLA. In such a situation, EPA would be unable to

proceed with a remedial action. Whether a site on the NPL

'S Appellants’ confusion over the purposes of CERCLA is evident in

their discussion of the role of state funds to pursue cleanup (App. Br. at

20, 21). On the one hand they state that:

“[i]f states were permitted to create their own special funds for the

purpose of financing cleanup at Superfund-eligible sites within the

State, they would circumvent the coordinated State-federal proce-

dure and priorities of CERCLA—for example, by relying upon

their own funds to pursue cleanup through their own unsupervised

and refusing to enter into the cooperative agreements

with EPA required by Sections 104(c) and (d) as a precondition to

governmental action under Section 104.”

On the other hand they state that “Congress did not prohibit the States

from using general revenues . . . to create such funds for cleanup.” Thus,

according to appellants, Congress intended to preclude independent

state actions—to require coordinated federal-state procedure—but only

in instances involving “special” state funds, not in cases involving

“general” funds. The alleged problems described in their first statement

regarding State-controlled funds are cured by their second statement. If

their first statement were correct, the source of the funds would be

irrelevant since it is States’ ability to have their own cleanup funds

which is the perceived problem.

Furthermore, appellants’ contend that if states were limited to general

revenues to finance their own cleanup efforts they would have a greater

incentive to “participate in CERCLA” and to coordinate their actions

with the federal government. While it is unclear what appellants mean

by “participate in CERCLA” it makes no sense that the source of state

cleanup funds should affect the State’s desire to enter into cooperative

agreements or contracts pursuant to section 104 of CERCLA. The fact

that section 104 provides for federal funding of up to 90% of specified

remedial costs on NPL sites acts as a powerful incentive for states to

work with EPA at sites eligible for federal funding irrespective of the

source of state funds for the state share.

13

becomes the subject of a publicly-financed remedial action is

largely dependent on whether the state, not EPA, can contribute

the necessary remedial share and provide other specified assur-

ances. The New Jersey Supreme Court correctly noted that the

underlying scheme of Superfund is one that “allows, but does not

require, cooperation of the federal and state regimes.” (Exxon v.

Hunt, 481 A.2d at 280, citing the Tax Court, 4 N.J. Tax at 315.)

The United States Court of Appeals, Second Circuit also has

observed that:

“Congress did not intend listing on the NPI to be a prereq-

uisite to all response actions. Neither the earlier House nor

Senate version included the NPL [National Prioritics List]

in the NCP [National Contingency Plan] [citations omit-

ted]; although the Senate version limited joint federal-state

responses to sites on the NPL [citations omitted]. It is also

instructive to note that the Senate Report described the NPL

as serving ‘primarily informational purposes, identifying for

the States and the public those facilities and sites or other

releases which appear to warrant remedial actions.’ (empha-

sis added). In reviewing the changes made by the compro-

mise, no one mentioned that NPL listing would be a

requirement for removal action or even a general require-

ment under the NCP.” (New York v. Shore Realty Corp.,

759 F.2d 1032, 1047 (2d Cir. 1985.)

Appellants further contend that any site on the NPL can be

cleaned up with public funds only if federal Superfund money is

spent on the site and that to the extent that state funds are

required to initiate a remedial action at the site, those funds can

only be from general revenue sources. This position ignores

Congress’ recognition that a federal Superfund would not be able

to address all sites that require remedial action nor even address

the limited number of sites designated on the National Priorities

List.

Appellants argue that the states are barred by CERCLA from

having any special state funds whose purpose is to clean up

“Superfund-eligible” sites. Nowhere in its brief, however, has

appellant attempted to articulate what a Superfund-eligible site is.

14

Appellant has avoided definition because to do so would mene

the fallacies of its argument.

Assuming arguendo that such a definition is possible, a

“Superfund-eligible” site could refer to any site which is, or may

be on the NPL. The first NPL was proposed by EPA on

December 30, 1982 (see 47 Fed. Reg. 58476 (1982)), over two

years after the passage of CERCLA. The first final NPL was

issued as a rule in September 1983 and included 406 sites (see 48

Fed. Reg. 40658 (1983)). The NPL is required to be revised at

least once annually. At present 538 sites are on the list and 248

additional sites are proposed for inclusion. It is estimated that, on

the basis of its current criteria, between 1,400 and 2,200 sites will

ultimately be added to the NPL."* Any site in the United States

which has suffered a release of hazardous substances to the

environment has the potential to be added to the NPL. If all such

sites are “Superfund-eligible,” then no state could create funds to

respond to those releases.

Even if actual listing on the NPL is the criteria for “superfund-

eligibility,” there are problems in application that Congress could

not have intended. First, che delay in promulgating the NPL

would have prevented any site action for almost three years.

Second, the NPL is a dynamic document and will undoubtedly

include new sites. How will a state know whether a site which is

currently not on the NPL eventually be included? Under the

theory advanced by appellants the jeopardy to a state-financed

cleanup is obvious. A state could be using its funds to address a

site not on the NPL at the time and, therefore, not eligible for

federal funding. As soon as the site was included on the list, the

state would be required to cease using its own funds on the site

until it entered into a cooperative agreement or contract with

EPA pursuant to section 104 of CERCLA. EPA, however, while

listing the site on the NPL, may not have any federal funds

currently available to devote to the site. Thus, ironically, where

some work could have taken place on the site, it would now be

'® Letter to James Florio from United States General Accounting

Office, Status of EPA's Remedial Cleanup Efforts, March 20, 1985.

15

barred. In short, the goal of CERCLA—that the health and

welfare be protected—would be stymied.

Because the logical outcome of appellant’s theory contravenes

the primary goal of CERCLA it should be rejected in total. State

cleanup funds were not barred by CERCLA; they were, in fact,

counted upon to address hazardous substance problems that could

not or would not be remedied with federal r:onies.

CERCLA DOES NOT PREEMPT STATE FUNDS WHICH

ARE USED FOR RESPONSE ACTIONS

Appellants erroneously argue that section 114(c) of CERCLA,

42 U.S.C. § 9614(c) preempts special State funds which finance

any cleanup costs or damages which are eligible for, though never

actually compensated by, federal Superfund. Appellants err be-

cause they ignore the plain language of section 114(c) and its

legislative history which provides for State funding of a broad

range of activities including response actions at sites both on and

off the NPL.

A. Only Those State Funds Which Pay “Claims For Compen-

sation” Are Subject to the Section 114(c) Test For

Preemption

1. The Plain Language of Section 114(c) Prohibits Only

A Limited Class Of Stace Activities

As required by the general principles of statutory construction

and federal preemption, the starting point for interpreting a

statute is with the words of the statute itself. (See Consumer

Products Safety Commission v. GTE Sylvania, Inc., 447 U.S. 107,

108, (1980).) Section 114(c) states in pertinent part:

“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

subchapter.”

16

On its face, section 114(c) expressly prohibits two categories of

uses for which state funds could not be used.'’ The first is “to pay

compensation for claims of any costs of response or damages.”

The second is to pay compensation for “. . . claims which may be

compensated under this subchapter.”

There is a definite limitation on the reach of this prohibition.

The term “compensation for claims” has a narrowing effect so

that many state uses of its own funds are not affected. The

preemption set forth in section 114(c) is for a very limited

category of state activities.

The term “claim” is defined in Superfund as a “demand in

writing for a sum certain” (42 U.S.C. § 9601 (4)). The term

“compensation” is not defined by the statute but is customarily

used to mean “indemnification; ... making whole; giving an

equivalent or substitute of equal value[;] [t]hat which is neces-

sary to restore an injured party to his former position.” Black's

Law Dictionary 256 (Sth Ed. 1979); see also Webster's Third

New International Dictionary 463 (1976). The terms “claim” and

“compensation” as used in Superfund are related; Superfund

defines a “claimant” as any person who presents a claim for

compensation under this chapter. (42 U.S.C. § 9601(5) (empha-

sis added).)

Elsewhere in CERCLA, Congress drew a distinction between

“compensation for claims” and other types of government ex-

penditures for removal or remedial action. In section 111(a) of

'7 The Solicitor General of the United States submitted an amicus

curiae brief which addressed whether this Court should note probable

jurisdiction. In that brief, the Solicitor General took a different position

from either of the parties or the New Jersey Supreme Court. He argued

that there was a preemptive purpose to section 114(c) but that it was

limited to “claims for compensation” only. Under his analysis the

payment by a State fund of cleanup expenses incurred by the state is

permissible under section 114(c) since it is not “compensation” for a

“claim” as those terms are used in CERCLA. The Solicitor General

declined to adopt the “actual compensation test” articulated by the New

Jersey Supreme Court. Our initial argument borrows heavily from the

Solicitor General’s brief.

17

CERCLA, 42 U.S.C. § 9611(a), there are four specified uses of

Superfund. Two of the permitted uses of Superfund money are

described as the “payment” of “claim[s].” (Sections 111 (a) (2)

and (3), 42 U.S.C. §§ 9611 (a) (2) and (3).) Both involve written

demands either for damages or reimbursement for monies spent

in response (Sections l1l(a)(2) and (3), 42 U.S.C.

§§ 9611(a)(2) and (3)). The other two permitted uses of

Superfund money involve expenditures made without such a

written demand for damages or reimbursement. (Sections

L11(a)(1), (4), 42 U.S.C. §§ 9611(a)(1) and (4).) These

are “payment of governmental response costs” (Section

111(a)(1), 42 U.S.C. § 9611(a) (1)—i.e., payments made for the

cleanup or removal of hazardous substances or for remedial

action—and payments for necessary studies, investigations, equip-

ment, and employee health (Section 111(a)(4), 42 U.S.C.

§§ 9611 (a) (4).)

“Claims,” therefore, has an express and definite meaning

within CERCLA. The term does not have a general, imprecise

use nor is it synonymous with costs incurred for a cleanup or

response actions undertaken by a federal or state entity.

2. The Legislative History is Consistent With The Plain

Language of the Statute

Section 114(c) was inserted as a floor amendment during the

waning hours of the Congressional session. As a consequence,

there are no committee reports or other legislative documents to

demonstrate conclusively the intended use of the provision. The

chronological development of the legislative proposals that even-

tually became CERCLA have been exhaustively detailed by the

appellants and appellees.'* All parties, including the New Jersey

Supreme court, have identified as particularly significant the

‘CERCLA was the product of last-minute compromise between

competing House (H.R. 85, 96th Cong., Ist Sess. (1979), 126 Cong.

Rec. H9, 186-201 (daily ed. Sept. 19, 1980) and H.R. 7020, 96th Cong.,

2d Sess. (1980), 126 Cong. Rec. H9, 437-48 daily ed. Sept. 23, 1980)

and Senate (S. /480, 96th Cong., Ist Sess. (1979), 126 Cong. Rec. S14,

938-48 (daily ed. Nov. 24, 1980)) bills, and carried virtually no direct

legislative history.

18

colloquy between Senator Bradley of New Jersey and Senator

Randolph, Chairman of the Environment and Public Works

Committee, which preceded the enactment of the bill that be-

came Superfund. (See 126 Cong. Rec. S 14941-15008 (daily ed.

Nov. 24, 1980).) The parties recognize that because Senator

Randolph was chairman of the committee which reported the

Superfund bill to the Senate, as well as floor manager and co-

sponsor of the measure, his explanations and commentws with

respect to the interpretation of Superfund provisions deserve

particular deference. (Exxon v. Hunt, 481 A.2d 271, 277 (N_J.

1984); see also Mastro Plastics Corp. v. National Labor Relations

Board, 350 U.S. 290 (1956); National Woodwork Manufacturers

Assoc. v. National Labor Relations Board 386 U.S. 612, 740

(1957); Federal Energy Administration v. Algonquin SNG, Inc.

426 U.S. 548, 564-567 (1976).)

The discussion between Senator Bradley of New Jersey, who

was concerned about the survival of the very state fund addressed

in this case, and Senator Randolph provides a strong demonstra-

tion that the reach of the preemption clause was intended to be

limited to “compensation for claims” as is in the phrase’s custom-

ary, literal sense. The Senators’ discussion was as follows:

“MR. BRADLEY: * * * Am I correct in understanding

that it is the purpose of this legislation to prohibit States

from requiring any person to contribute to a fund for the

purpose of reimbursing claims already provided for in this

legislation?

“MR. RANDOLPH: Yes, that is the clear intent. The

purpose is to prohibit States from creating duplicate funds to

pay damage compensable under this bill.

“MR. BRADLEY: However, there is no such preemption

of a State's ability to collect such taxes or fees for other costs

associated with releases that are not compensable damages

as defined in this legislation.

“MR. RANDOLPH: The Senator is correct.

“MR. BRADLEY: There is nothing in the language or

intent of this bill which would prohibit a State from respond-

19

ing to a release either under agreement with the Secretary, at

the direction of the Federal on-scene coordinator or in the

absence of timely response by any other party. In fact, the

Federal Government’s cleanup and containment capability is

viewed as something of an appeal of last resort in the absence

of any other adequate and timely response, if my understand-

ing is correct.

“MR. RANDOLPH: Yes, the Senator understands the

intent of the bill correctly. * * *” (Emphasis added; 126

Cong. Rec. S 14981 (daily ed. Nov. 24, 1980)

After S. 1480 was passed by the Senate and its language was

substituted for that in the House bill (H.R. 7020, 96th Cong., Ist

Sess. (1979), Representative Florio, the sponsor of the House

bill, observed:

“Regarding the preemption language contained in these

amendments, I would point out that some States, including

my own State of New Jersey, have successful spill funds and

that while States may not create duplicate funds to pay

damages compensable under this bill, there is no preemption

of the States’s ability to collect taxes or fees for other costs

associated with releases 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.” (1 Library of Congress, Senate Comm. on Environ-

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

History of the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 (Superfund), Pub-

lic Law 96-510, at 780 (Comm. Print 1983).)

Given this history as well as the plain meaning of the terms we

must concur with the Solicitor General that section 114(c)

preempts, as a general matter, only a category of payments made

in response to formal demands in writing upon a state fund by

parties seeking to be made whole for damages or costs or other

actions compensable under CERCLA for the release of a hazard-

ous substance.

20

B. State Funds Which Pay “Compensation For Claims” Are

Preempted Only If Federal Superfund Has Actually Paid

Compensation For The Same Claim

Thus far, amici have generally adopted the argument of the

Solicitor General as to the scope of 114(c) preemption provision.

The Solicitor General takes the position that funds used by the

states to pay “compensation for claims” which are damages or

costs attributable to the release of a hazardous substance or other

use which may be compensated, are preempted. The Solicitor

General requires no further inquiry into the type of damage or

cost which a state fund seeks to reimburse as a claim. The

Solicitor General finds that one of the two uses of the New Jersey

Spill Fund—the payment of other parties’ damages and cleanup

costs—constitutes the payment of “compensation for claims”

within the meaning of section 114(c) of Superfund."

At this point, amici must depart from the Solicitor General's

position. While we believe that section 114(c) clearly preempts,

as a category, “compensation for claims” the language is less

clear as to the extent of the preemption. The legislative history

indicates that Congress intended to prohibit use of funds to pay

claims for compensation only to the extent that such claims were

already paid for by Superfund. Therefore, we agree with the

reasoning of the New Jersey Supreme Court that state funds are

not preempted by section 114(c) insofar as the state funds

compensate claims that are either not covered or not actually paid

under Superfund. Review of the applicable law and relevant

legislative history of CERCLA supports this view.

In addressing the question of whether federal law confers a

power that is not exercisable by states—the payment of compen-

sation for specified claims—the Supremacy Clause (U.S. Const.,

art. VI, cl. 2) requires a judicial determination of whether

application of state legislation frustrates the full effectiveness of

federal law. (See Perez v. Campbell, 402 U.S. 637, 657 (1971).)

As recently stated in pending hazardous waste litigation:

'7We agree with the Solicitor General’s observation that the only

“damages” which may be affected by section 114(c) are “natural

resource damages.”

21

“Thus, analysis must proceed in two stages: first, an exami-

nation of the primary purposes of each of the laws at issue;

second, a determination whether state law is an obstacle to

the effectuation of federal objectives.” (Matter of Quanta

Resources Corp., 739 F.2d 912, 915 (3d Cir. 1984), cert.

granted, 53 U.S.L. Week 3584 (Feb. 19, 1985).)

Furthermore, as noted by the New Jersey Supreme Court, “it is

not a question of ‘whether purposes of the two laws are parallel or

divergent,’ but ‘whether both regulations can be enforced without

impairing the federal superintendence of the field...’ [citation

omitted]” (Exxon v. Hunt, 481 A.2d 271, 275 (N.J. 1984).

Where it argued, as it is in this case, that Congress intended to

withdraw a power from a state by enacting a federal scheme, that

intention must be explicit. (Penn Terra Ltd. v. Department of

Environmental Resources, 733 F.2d 267, 272 (3d Cir. 1984).)

In this case, the Congressional intention to prevent the states

from using their own funds to pay any compensation for certain

specified claims is not explicit.

As described earlier in this brief, the colloquy between Senators

Bradley anc Randolph demonstrated that section 114(c) was

intended to have very limited preemptive effect on existing and

future state funds. Furthermore, the discussion also demonstrated

that state funds could be used for purposes including the payment

of “compensation for claims” that were either not covered or not

actually paid under Superfund.

“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 compensate for a claim

paid under the provisions of this bill.

“Putting it simply, this is a prohibition against double

taxation for the same purposes. It is not a prohibition on the

uses that a State may make of its money, nor does it prohibit

a State from imposing fees or taxes for other purposes

connected with cleanup or restoration activities such as the

22

purchase of pollution abatement equipment or the hiring or

training of personnel for pollution prevention programs.

“In summary, Mr. President, this preemption provision is

narrow in scope and limited to the particular purpose of

preventing double taxation.

“e * a * *

“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 reimbursement?

“MR. RANDOLPH: That is correct.”

(Emphasis added; 126 Cong. Rec. S 14981 (daily ed. Nov. 24,

1980).)

Senator Randolph’s statements, which addressed funds created

subsequent to the passage of CERCLA” and would enable states

to tax to compensate claims not actually compensated under

Superfund, comports with a prohibition against double taxation in

that states are still prevented from taxing to pay for claims

actually financed by the federal government.”'

” Appellants’ suggestion that the reference point for this critical

dialogue between Senators Randolph and Bradley were state funds in

existence prior to CERCLA is unsupportable. They had finished their

discussion of existing funds and were focused on newly financed funds.

Furthermore, Senator Bradley would not have noted that “State funds

are preempted only for efforts which are in fact paid for by the Federal

fund” if he were referring to an existing fund. Such funds would have

already received their contributions prior to CERCLA and no tax

conflict could have arisen.

2! Recent comments of the House of Representatives Committee on

Energy and Commerce confirm the above conclusion. Its report dated

July 16, 1984, addressed the CERCLA’s relationship to other law and

the then pending bill’s (H.R. 5640) repeal of the preemption provision:

“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

23

If Congress had intended section 114(c) to perform the broad

preemptive purpose alleged by appellants it would have explicitly

drafted that section to do so. For example, Congress could have

made section 114(c) read as follows:

“Except as provided in this chapter, no person may be

required to contribute to any fund the purpose of which is to

pay for any costs of response or damages or costs which may

be compensated under this subchapter.”

The insertion of the “compensation for claims” language in

section 114(c) was a conscious choice by Congress to ensure that

preemption be narrow in scope and not unduly restrict the states’

capability to fund response actions.

C. State Funds Used For Any Purpose Not Specified in Section

114(c) Including State Response Costs, Are Not Preempted

Expenditures by states for any purposes other than those

expressly restricted by section 114(c) are not preempted.” There-

funds which would pay costs or damages that would be actually

compensated by Superfund. To avoid any possible misinterpretation

of the law which could further restrict the states’ efforts to raise the

funds necessary to meet their matching share obligation under the

program, the legislation repeals the current law’s preemption provi-

sion in its entirety. [H.R. Rep. No. 890, Part 1, 98th Cong., 2d

Sess. 58-59 (1984) (emphasis added).]” See also S. Rep. 99-11,

99th Cong., Ist Sess. 59-60 (1985).

Congress is clearly attempting to clarify its intent in enacting this

statute and such attempts should be accorded due consideration.

” Appellants arguments against the suggestion that section 114(c)

preempts only state funds used to pay third party claims for costs or

damages or any other compensable items is unsupported by legislative

history or a plain reading of section 114(c).

The first argument apparently assumes that if states can be claimants

under CERCLA, they cannot maintain their own special funds. On its

face, this argument is unworkable. It is unimportant whether the state

can assert a claim against Superfund for specified costs of response

taken by the state or damages suffered by the state, and still maintain its

own fund to pay thiré party claims against the state fund. There is no

nexus between the payment of the state claim by Superfund and the

payment of the third party claim by the state. Senator Randolph

24

fore, states may establish funds to be used for a broad range of

response actions whether undertaken in cooperation with the

federal government pursuant to section 104 or alone.

The legislative history reveals a number of additional purposes

for which a state can collect taxes for funds to be used when the

costs are not compensable under Superfund. (See 126 Cong. Rec.

S 14981 (daily ed. Nov. 24, 1980) (remarks of Sen. Bradley and

Sen. Randolph).) States can use their funds to provide an initial

response to a hazardous waste release and thereafter seek reim-

recognized that and characterized it as “a question of bookkeeping

rather than a subject or preemption.”

The second argument relies upon section 114(b)’s prohibition against

double recovery. Nothing however in the Solicitor General’s position

supports the possibility of a double recovery,

The third argument is that under the New Jersey system, the New

Jersey Department of Environmental Protection is compelled by state

law to present claims for compensation to an independent state official

who is the administrator of the New Jersey spill fund. Appellants

suggest that the Solicitor General’s argument is tenuous because Con-

gress could not have intended the preemptive effect of Section 114(c) to

rely upon the administrative mechanisms adopted by the states for the

purposes of paying response costs—i.e. whether the state agency has to

file a claim in writing or whether it can make direct withdrawals without

so filing. As amici have demonstrated the question of whether there is a

claim for compensation is only an initial inquiry. The claims must also

not have been actually paid by Superfund. The internal state mechanism

for payment of state costs is of little significance.

Finally, the appellants complain that the Solicitor General’s approach

“would leave the States free to create special funds of unlimited size and

allow them to pursue cleanup wholly outside of the framework of

CERCLA.” (App. Br., p. 32.) The ability of states to create special

funds for response costs is not unique to the Solicitor General’s argu-

ment but is an integral part of CERCLA. Futhermore, cleanups are not

likely to occur outside of the framework of CERCLA since the cost

recovery provisions under section 107 are a powerful incentive to ensure

that response activities by the states are in conformance with the NCP

and therefore in furtherance of CERCLA’s goals.

For the above reasons, appellants have failed to rebut the general

reasoning of the argument initially advanced by the Solicitor General

and expanded by amici.

25

bursement from Superfund. States may also set up funds to cover

all costs of a cleanup in the event that the state, in fact, is not

reimbursed by the federal fund. If the federal government does

not reimburse the state for its claim—reimbursement is neither

guaranteed or automatic—no claim has been paid under CER-

CLA and the state is free to cover such costs from whatever

source. There is also the possibility that the federal government

will not complete federal cleanup at a site before moving to

another site. The Senators expressly noted that state funds could

be used to complete the clearup efforts at the first site. The state

fund could also be used for the ten percent cost share required by

CERCLA. Clearly, section 114(c) was drafted to protect a

narrow concern and was not designed to impede accomplishment

of a principal goal of CERCLA—rapid cleanup of hazardous

waste sites.

STATE CLEANUP PROGRAMS WHICH ARE FUNDED

BY TAXES WHICH ARE NOT DUPLICATIVE OF THE

CERCLA TAX ARE NOT PREEMPTED

Assuming, arguendo, that this Court finds that some preemp-

tion may be warranted, such a finding should not broadly extend

to state programs which are funded by special taxes which are

different than the CERCLA tax.

Congress historically has recognized the high degree of speci-

ficity it must employ in preempting state taxing programs, con-

forming the scope of preemption with the specific problem which

gave rise to its need. While appellants seek a broad preemption

finding, their concern is only with state funds which are supported

by taxes on the same products which financed Superfund. They

contend that Congress recognized that every cleanup cost or

damage claim could be or should be compensated by funds drawn

from special taxes on oil and chemicals during the first five years

of CERCLA that it imposed limitations upon States embodied in

Section 114(c). Any preemptive effect of CERCLA should be in

keeping, therefore, with the federal purpose sought to be pro-

tected.

26

The principal case asserted by appellants in support of their

preemption argument cautions against the overbroad preemption

of state taxing schemes. In Aloha Airlines v. Director of Taxation,

464 U.S. 7 (1983), this Court permitted preemption only of a

particular kind of tax on an industry affecting interstate

commerce.

As a general principle, where it is argued that Congress

intended to withdraw police power or taxing power from a state by

enacting a federal regulatory or taxing scheme, that intention

must be exzticit. (See Ray v. Atlantic Richfield Co., 435 U.S. 151

(1978).) This is particularly true where federal preemption would

upset historic federal-state relationships such as the protection of

public health and safety. (See United States v. Bass, 404 U.S. 336

(1971).)

As argued by appellants, section 114(c) of CERCLA preserves

the Congressional desire to limit the tax that could be imposed on

the oil and chemical manufacturing industries so that they would

suffer no competitive disadvantage in the international market-

place or cause domestic consumers to pay sharply higher prices.

Assuming that to be the case, there is absolutely no indication,

explicit or othe,-wise, that Congress intended to preempt a state

tax on the generation of hazardous wastes or any other tax that is

not identical in scope to federal Superfund tax. The legislative

history is consistent with this position. As noted earlier, Senator

Randolph stated that the preemption provision of CERCLA is “a

prohibition against double taxation for the same purposes...”

and that “this preemption provison is narrow in scope and limited

to the particular purpose of preventing double taxation” (126

Cong. Rec S 14981 (daily ed. Nov. 24, 1980).) There can be no

double taxation in situations where taxing schemes are entirely

different and the categories of parties obligated to pay taxes are

not the same.

Under CERCLA, the federa! Superfund is supported by a tax

on petroleum products (see 42 U.S.C. § 4611) and a tax on

certain listed chemicals. (See 42 U.S.C. § 4661.) In essence, it is

a feed stock tax imposed on manufacturers or producers of these

hazardous substances. Many states, in creating their response

funds, have devised entirely different tzxing mechanisms to sup-

27

port their funds. For example, in the State of California, the

Hazardous Substance Account is funded by a tax based upon the

disposal of hazardous and extremely hazardous wastes. The tax

rate is based upon the total amount in tons of hazardous waste

disposed of in a given one-year period. The persons liable for the

tax are every person who submitted for disposal offsite, or who

disposed of onsite, more than 500 pounds of hazardous waste

during the preceding calendar year.” Such a taxing system does

not reach, as a category of taxpayers, the same persons or the

same products covered by CERCLA. Therefore, the State of

California system and others like it are not duplicative of the

federal Superfund nor can they be characterized as creating

“double taxation.” The mere fact that some persons, as a result of

two wholly different activities, can be subject to both tax systems

does not create the double tax problem which Senator Randolph

sought to avoid.

Therefore to the extent that this Court finds that any preemp-

tion is authorized by CERCLA, it is only those state response

funds which impose a taxing mechanism on the same category of

persons as CERCLA that should be affected by the Court’s

decision.

3 The following persons are liable for the tax pursuant to California

Health and Safety Code Section 25342:

a. persons who dispose of hazardous waste generally,

b. persons who dispose of extremely hazardous waste

¢. persons who dispose of hazardous waste into in injection

well or landfill;

d. persons who place hazardous or extremely hazardous wastes

into surface impoundments;

¢. persons who dispose of hazardous or extremely hazardous

waste from extraction, beneficiation, and processing of ores and

minerals.

28

CONCLUSION

The decision of the Supreme Court of New Jersey should be

affirmed for reasons set forth above.

DATED: September 25, 1985

Respectfully submitted,

JOHN K. VAN DE Kamp,

Attorney General of the

State of California

THEODORA BERGER

Assistant Attorney General

REED SATO

(Counsel of Record)

Deputy Attorney General

29

JOSEPH I. LIEBERMAN

Attorney General

State of Connecticut

ANTHONY J. CELEBREZZE, JR.

Attorney General

State of Ohio

JAMES E. TIERNEY

Attorney General

State of Maine

STEPHEN E. MERRILL

Attorney General

State of New Hampshire

ROBERT ABRAMS

Attorney General

State of New York

Jim MATTOXx

Attorney General

State of Texas

JEFFREY L. AMESTOY

Attorney General

State of Vermont