New York Seeks to Recover Landfill Closure Costs Through Inventive Use of Superfund
July 31, 2002
This article is reprinted with permission from the July 1, 2002 issue of The New York Law Journal. ? 2002 NLP IP Company.
New York’s Environmental Quality Bond Act was enacted in 1986, in part, to “assist financially strapped towns meet their obligations under the New York State Environmental Conservation Law (“ECL”) in responding to the threats posed by inactive hazardous waste sites owned and/or operated by towns.” This financial assistance comes in the form of reimbursement from New York for seventy-five (75%) percent of the town’s cost to properly close its landfill. Recently the New York Department of Environmental Conservation and the New York Attorney General have been attempting to recoup EQBA funds disbursed to municipalities through cost recovery actions under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). New York has also resorted to blurring the distinction between inactive hazardous waste sites and traditional municipal landfills that were never used for disposal of hazardous wastes. New York’s attempt to shift the routine costs of closing local landfills in accordance with State standards from the municipal owners and operators to private parties presents both legal issues and policy considerations, which are explored below.
The Closure Dilemma For Municipal Landfills
New York has been able to blur the distinction between inactive hazardous wastes sites and municipal landfills because of a dichotomy between the Resource Conservation and Recovery Act (“RCRA”) and CERCLA. Under RCRA and its implementing regulations, household wastes, as well as solid wastes from many commercial activities containing low levels of hazardous substances, are not regulated as hazardous wastes. Nevertheless, it is well-established that municipal solid waste contains CERCLA hazardous substances and that disposal of municipal solid waste can give rise to CERCLA liability.
RCRA allows parties to legitimately dispose of wastes containing hazardous substances at municipal landfills. Thus, any municipal landfill could – and usually does – contain hazardous substances which could become the source of soil or groundwater contamination. However, New York law does not leave municipal landfills unregulated. Rather, municipal landfills are “solid waste facilities” subject to extensive permitting and operating requirements pursuant to the ECL. When a municipal landfill reaches the end of its operating life it must be closed in accordance with the ECL and a final cover system or cap must be installed. The regulations governing landfills are intended to address the well known and fully anticipated risk that municipal landfills contain wastes which include hazardous substances. Importantly, the minimum landfill closure requirements of the ECL must be followed whenever a municipal landfill is closed regardless of whether or not hazardous substances are present.
How The EQBA Operates
When the EQBA was enacted in l986 its scope was limited to inactive hazardous waste sites. The EQBA was amended in 1990 to extend coverage to include any landfills owned or operated by a municipality rather than solid waste disposal landfills only. As a result, when a landfill reaches the end of its useful life and the town complies with the ECL by developing a plan for the closure of its landfill, the town may apply to the State to obtain funds for implementing the closure. The town engages the contractors and pays for the closure. The town is then reimbursed for 75% of its cost to design and construct the mandatory cap. To be eligible for EQBA reimbursement, the town must enter an Order on Consent which, inter alia, requires the town to complete the remediation without regard to the availability of State financial assistance.
Recovery Of EQBA Funds
In Bedford Affiliates v. Sills the Second Circuit joined a number of other circuits in holding that potentially responsible parties (“PRPs”) – such as landfill owners – may not pursue CERCLA Section 107(a) cost recovery claims against other PRPs. Rather, landfill owners and operators are limited to actions for contribution under CERCLA Section 113(f). The distinction between Section 107(a) and Section 113(f) is critical. While courts have read Section 107(a) as permitting the imposition of joint and several liability, in a Section 113(f) contribution action the court allocates response costs among liable parties using such equitable factors as the court determines are appropriate. As a practical matter the contribution plaintiff faces a much more difficult task than a Section 107 plaintiff, who can recover all of its cleanup costs from a few PRPs – or even one. There is nothing in the EQBA, its enabling regulations, or the statute’s legislative history, to support the view that the 25% of landfill closure costs borne by the town under the EQBA limits or otherwise dictates the town’s CERCLA liability. Quite the contrary: CERCLA imposes liability on the landfill owner “[n]otwithstanding any other provision or rule of law.” As a result, the towns – having received reimbursement for 75% of their landfill closure costs – are not highly motivated to invest time or resources in difficult and uncertain CERCLA contribution actions against local industry.
In a number of recent cases, New York State has either joined with the municipality in these cost recovery actions as a Section 107 plaintiff or brought an action solely in its own name. (Unlike the municipality, the State can use Section 107 because it neither owned nor operated the landfill and thus is not a PRP.) Under either scenario New York is seeking to recover funds reimbursed to towns pursuant to the EQBA. The State enjoys several advantages compared with a municipality. First, as mentioned above, as a Section 107 plaintiff the State wields the substantial hammer of joint and several liability. CERCLA also establishes a strong presumption that response costs incurred by a State are reasonable and consistent with the National Contingency Plan. In essence, this approach allows the State to assume the rights of the municipality, which actually expended the closure costs and can bring only a contribution action, and expand those rights by transforming the municipality’s contribution claim into a much more powerful cost recovery claim under Section 107 — in effect a regulatory overruling of Bedford Affiliates.
What the Courts Have Said So Far
CERCLA permits municipalities to recover only the “necessary costs of response incurred” by them. The phrase “necessary costs of response” is not defined in CERCLA, a fact noted with some regularity by the courts. Nevertheless, the term “response” is broadly defined. The far reaching scope of this definition led the Supreme Court to observe that the phrase “costs of response” covers “essentially the entire spectrum of cleanup expenses.”
The lack of an express statutory definition has not preventing courts from deciding that certain cleanup expenditures do not constitute “necessary costs of response.” For example, costs of investigating and monitoring contamination which are primarily intended to support litigation are generally not recoverable. Likewise, costs incurred prior to the enactment of CERCLA are not recoverable as response costs. Thus, not all sums incurred responding to hazardous substances are recoverable as CERCLA response costs.
Of particular interest on the issue of what costs may constitute CERCLA response costs is the 1994 decision by the District Court for the Western District of Washington in City of Seattle v. Amalgamated Services, Inc. The facts in City of Seattle are simple and strikingly similar to the general pattern in New York’s EQBA cases. Plaintiff, the City of Seattle, had operated a landfill from 1966 until 1983. Eventually, Seattle entered into a consent decree with the state Department of Ecology to properly close its landfill. After completing this closure, the City sought to use CERCLA to recover its costs from companies that had used the landfill. The defendants argued that the City would have had to meet the state and local minimum landfill closure standards, whether or not there was a release or threat of release of hazardous substances. Because the costs of complying with these minimum closure standards were not caused by the presence of hazardous substances, the City’s routine closure cots could not constitute “necessary costs of response.” The District Court cited several CERCLA opinions that have allowed defendants to assert defenses based upon causation issues and held that, as a matter of law, routine landfill closure costs arising from state and local requirements are not CERCLA response costs. The Seattle court stated:
Any actions the City was already obligated to take to meet the [minimum standards] were not caused by the escape of hazardous substances. Only costs incurred to meet additional requirements caused by the escape of hazardous substances, or listing as a Superfund site, qualify as necessary response costs.
The earliest New York decision to consider whether routine landfill closure costs were “necessary costs of response” was Barnes Landfill, Inc. v. Town of Highland. The facts in Barnes differ slightly from those in Seattle – and the typical EQBA claim – because Barnes involved a landfill owned by a private party rather than a public entity. Nevertheless, the question presented was whether the owner and operator of a landfill could resort to CERCLA to recover its routine closure costs. The Southern District also considered the causation issue and ruled that “[o]rdinary closing or clean-up costs [for a landfill] not pertaining to hazardous substances, incurred under state law or otherwise, would not be a basis for holding defendants responsible under CERCLA.” 
Less then two years later, the Southern District was presented with an opportunity to revisit this issue in Town of New Windsor v. Tesa Tuck, Inc. New Windsor spent money closing a landfill that it had operated from 1962 until 1976. The town entered into an administrative order with New York which, in turn, agreed to reimburse New Windsor for seventy-five (75%) percent of the clean-up costs from the EQBA. The defendants, once again landfill customers, did not direct their arguments to the causation issues issued relied upon by City of Seattle. Rather, the defendants argued that because New York had merely reimbursed New Windsor, the State had not “incurred” any response costs. The District Court acknowledged that only a liable party can “incur” response costs. Therefore, if New York were a mere volunteer when it reimbursed New Windsor, the State had not incurred response costs. However, without mentioning either Seattle or Barnes, the court reasoned that because the State has a constitutional mandate to protect the public health and the environment, by using the EQBA funding mechanism to channel response costs through New Windsor, the State had indeed “incurred” response costs.
Finally, on January 31, 2002, the Northern District issued its opinion in New York v. Moulds Holding Corporation. Faced with facts that were nearly identical to those of New Windsor, the Northern District reasoned that “there is no question that the State could have remediated the landfill on its own and then brought a claim…” Therefore, the court did not hesitate to impose liability on the private customers of the landfill for the State’s seventy-five (75%) reimbursement of the town.
Open Legal Questions
The Second Circuit has not yet been called upon to review New York’s use of CERCLA to recoup funds paid to towns pursuant to the EQBA. Notwithstanding the District Court decisions in New Windsor and Moulds, there is at least some reason to suspect that the Second Circuit might be troubled by New York’s approach. In United States v. Alcan Aluminum Corp., the Second Circuit left open the “back door” to arguments for “a special exception to the usual absence of a causation requirement [under CERCLA.]” It remains to be seen whether the Second Circuit would recognize such an exception in circumstances when all response costs are “caused” by New York’s own regulatory requirements governing landfills and not the presence of hazardous substances.
New York’s efforts to press the outer limits of what constitutes CERCLA response costs also raises a number of important policy considerations. When CERCLA was reauthorized in 1986, Congress was concerned about whether “one state or a small group of states were able to dominate the overall national agenda for cleaning up Superfund sites by spending state monies on relatively low priority sites.” By resorting to CERCLA to close municipal landfills which do not present any imminent threat, and are virtually indistinguishable from any other landfill which must be closed, New York might be doing just that.
Moreover, New York’s present strategy could backfire on the towns. Towns receiving EQBA funds expected finality when they agreed to fund 25% of the landfill closure costs. If New York proceeds against private PRPs, these parties will assert CERCLA contribution claims against the towns. In these third party actions the PRPs will attempt to increase the towns’ equitable share of the total closure costs. Several decisions support allocations to landfill owners and operators of greater than 50%, and at least one district court has assigned 95% of the total landfill closure costs to the owner operator. Because the towns often profited from tipping fees received during the life of the landfill and sometimes had questionable operating practices, they may not be anxious to defend the 25% EQBA allocation.
One further consideration is whether the EQBA was meant to clean up all municipal landfills in this fashion. It would appear that the Legislature thought not because the EQBA does not to include any cost recovery provision. Where the presumptive remedy is simply the customary cap, strong policy arguments can be made that the landfill should not be managed as if it were an inactive hazardous waste site. Only when additional remediation beyond the minimum ECL standards is necessary to prevent or eliminate problems related to the presence of hazardous substances should the State be allowed to recover costs from landfill users.
N.Y. Envtl. Conserv. Law, Article 52.
Town of New Windsor v. Tesa Tuck, Inc., 935 F. Supp. 317, 319 (S.D.N.Y. 1996)
42 U.S.C. Sections 9601 et seq.
42 U.S.C. Sections 6901 et seq. 
See 42 U.S.C. Sections 6903(5),(27), 6921; 40 C.F.R. Section 261.4(a)(19)(b)(1).
See “Interim Policy on CERCLA Settlements Involving Municipalities or Municipal Wastes,” USEPA, dated December 6, 1989 (OSWER DIRECTIVE #9834.13). see also B.F. Goodrich Co. v. Murtha, 958 F.2d 1192 (2d Cir. 1992).
6 N.Y.C.R.R. Sections360-1.1 et seq.
6 N.Y.C.R.R. Section 360-2.15(d).
L.1990, c. 146, Section 5.
See N.Y. Envtl. Conserv. Law Section 52-0101(11).
N.Y. Env. Conserv. Law, Section 52-1313(5)(g). Certain municipalities may also be eligible for a non-interest bearing loan for the closure costs. See 6 N.Y.C.R.R. Section 360-9.8.
See 6 N.Y.C.R.R. Section 375-3.2(b).
156 F.3d 416, 423-24 (2d Cir. 1998)
See 42 U.S.C. Section 9607(a).
42 U.S.C. Section 9613(f).
42 U.S.C. Section 9607(a)
B.F. Goodrich Co. v. Murtha, 958 F.2d 1192, 1198 (2d Cir. 1992)
42 U.S.C. Section 9607(a)(4)(B).
See, e.g., Avnet, Inc. v. Allied-Signal, Inc., 825 F. Supp. 1132, 1136 n.27 (D.R.I. 1992); Artesian Water Co. v. Gov’t of New Castle County, 659 F. Supp. 1269, 1286 n.28 (D.Del. 1987) (decrying CERCLA’s “predictable failure” to define “response costs”).
42 U.S.C. Section 9601(25). The definition covers both “removal” and “remedial” actions, both of which are, in turn, broadly defined. See 42 U.S.C. Section 9601(23, (24). States can recover “all costs of removal or remedial action.” 42 U.S.C. Section 9607(a)(4)(A). 
Exxon Corp. v. Hunt, 475 U.S. 355, 364 (1986).
See, e.g., Dedham Water Co. v. Cumberland Farms Dairy, Inc., 770 F. Supp. 41, 42 (D. Mass. 1991), aff’d, 972 F.2d 453 (1st Cir. 1992).
See United States v. Northeastern Pharm. & Chem. Co., 579 F. Supp. 823, 843 (W.D.Mo. 1984); but see City of Philadelphia v. Stepan Chemical Co., 748 F.Supp. 283, 288 (E.D. Pa. 1990) (upholding recoverability of city’s pre-enactment costs).
1994 WL 869839 (W.D. Wash. Mar. 4, 1994).
1994 WL 869839, at *2.
802 F. Supp. 1087 (S.D.N.Y. 1992)
802 F. Supp. at 1088.
935 F. Supp. 317 (S.D.N.Y. 1996)
935 F. Supp. at 320-22.
196 F. Supp. 2d 210 (N.D.N.Y. 2002).
196 F. Supp. 2d at 215.196 F. Supp. 2d at 215.
990 F.2d 711, 722 (2d Cir. 1993).
H.R. Rep. No. 99-253, pt. 1, at 69 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 2851.
See, e.g., Amoco Oil Co. v. Dingwell, 690 F. Supp. 78 (D. Me. 1988).
Waste Management of Alameda County v. East Bay Regional Park District, 135 F. Supp. 2d 1071 (N.D. Cal. 2001).