Wetlands, Waste Sites, and Oil Spills: To Federalize or Not to Federalize

Benjamin H. Grumbles

Benjamin H. Grumbles is Assistant Minority Counsel for the Water Resources Subcommittee of the Public Works and Transportation Committee, U.S. House of Representatives, a position he has held since 1985. Opinions in this Dialogue are the author's and do not necessarily reflect any opinions of the Public Works and Transportation Committee or its members.

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On August 18, 1990, President Bush signed into law the Oil Pollution Act of 1990 (OPA),¹ the most comprehensive federal legislation ever dealing with oil spill liability, compensation, prevention, response, and research. Nowhere in the statute will you find the word "federalize";² read between the lines and into the legislative history, however, and you will discover federalization is a major theme throughout the law.

The same holds true for the nation's primary laws for wetlands regulation and hazardous waste site cleanup. Neither § 404 of the Federal Water Pollution Control Act,³ addressing wetlands, nor the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA, also known as Superfund)⁴ addressing cleanup of hazardous substances, includes the term "federalize." But, each statute does just that: federalize the nation's response to wetlands protection and waste site contamination.

Federalization can be a "hostile takeover." It can lead to the establishment of bureaucracies. It can also thwart more cost-efficient and effective responses by the private sector. Most importantly, by rejecting a free-market approach, it can often result in fewer — not more — environmental benefits.

This Dialogue describes problems posed by federalizing our nation's efforts to protect wetlands and clean up waste sites and oiled waters. In each instance, many of our problems stem from relying too much on the federal government, neglecting private property rights, and underestimating the value of free-market, private-sector responses. The Dialogue then discusses solutions. For each area, it suggests a middle-ground approach that falls short of full federalization, except in very limited situations, and recognizes externalities and other shortcomings ofprivate-sector, free-market approaches.

Problems

Generally

When the environment is at issue, members of Congress, other elected officials, and decisionmakers are well-intentioned. Sometimes, however, they choose the wrong means to achieve their goal of environmental protection.

One bad experience with a potentially responsible party (PRP) or a state-led cleanup under Superfund⁵ can generate decades of mistrust of nonfederal entities. It then becomes very easy to rely on federal bureaucracies, even when nonfederal or public-private partnerships present comparable, if not better, solutions.

Not giving proper deference to economic factors involving private property, the "free market," and human nature creates problems. As long as the property is definable, defendable, and divestible (i.e., transferable) property owners have built-in incentives to protect their investments and to be good stewards of the land.⁶ While self-interest rather than social good may motivate property owners' actions, many environmental benefits can result.

Wetlands

Section 404 of the Clean Water Act provides the most comprehensive regulatory program for wetlands protection.⁷ [20 ELR 10514] The Army Corps of Engineers and the Environmental Protection Agency (EPA) jointly administer a program for permitting the "discharge of dredged or fill material" into the "waters of the United States," including wetlands.

One of the most controversial environmental regulatory programs, § 404 has several problems: (1) the expansive definition of "wetlands" and the jurisdictional reach of the Corps and EPA; (2) the lack of coordination among regulatory and resource management agencies; (3) the inflexibility toward innovative mitigation and restoration practices; and (4) the insensitivity toward private property rights and social values other than preservation of wetlands.⁸

The regulated community has one chief complaint: § 404 has become a federal land-use planning statute where federalization is the norm and privatization or local response the exception.

Waste Sites

CERCLA provides a comprehensive federal program for responding to hazardous substance spills and emergencies and cleaning up abandoned waste sites. It establishes a four-prong approach for the federal government (usually EPA), containing (1) broad authority to take short-term removal actions or long-term remedial actions; (2) authority to order private parties to abate imminent and substantial dangers; (3) liability on a broad array of parties for response costs and natural resource damages; and (4) establishment of an $ 8.5 billion Superfund based largely on industry taxes to pay for government response costs and certain other costs.⁹

Despite this impressive array of tools, most critics agree that Superfund has been a failure to date. EPA has cleaned up fewer than 60 sites on, and removed fewer than 30 from, the National Priority List (NPL).¹⁰ Instead, millions of dollars are spent on allegedly "gold-plated" cleanups and studies, negotiations, and litigation. Claims of mismanagement, sweetheart deals, and conflicts of interest continue to hamper the Agency and discredit the program — much like they did during Superfund's infancy.

Excess federalization and mistrust of private and nonfederal governmental cleanups underlie the problem. The massive Superfund budget, between $ 1.6 and $ 1.7 billion for fiscal year 1991 alone, proliferates an even larger federal bureaucracy. EPA, pushed by statutory deadlines for cleanup, may also be taking ill-advised shortcuts or pursuing easy cleanups for "bean counting" purposes.¹¹

Costly litigation also squanders valuable resources for actual cleanup. Chemical companies, property owners, and others caught in the complicated web of Superfund liability can be left in limbo for years, unable to transact business or to transfer property.

Oil Spills

New and existing oil spill laws also incorporate the federalization theme. Congress' instinctive response to a catastrophe — especially something as devastating or emotional as the Exxon Valdez incident — is to call out the National Guard, or in this instance, the Coast Guard. OPA, in particular, unleashes an expanded federal bureaucracy to address the problem.

This is not always a bad thing. Despite legislators' good intentions, what begins as oil spill prevention, response, and liability legislation can become a huge public works, trust fund program that may not succeed given its size and complexity. If not adequately funded, the legislation threatens to collapse from its own weight.¹²

Not surprisingly, a major theme in OPA is to increase the role of the federal government (but not at the expense of the states) in regulating oil and shipping industries and directing oil spill cleanups.The Exxon Valdez and other spills convinced Congress, the administration, and the public that a dangerous complacency had developed. Many found that regulators and the regulated industries had become too comfortable with their contingency plans and when spills occurred; the government relied too heavily on spillers to conduct cleanups.

Congress reacted to this criticism by strengthening governmental regulation and giving the President a broader, "take charge" role in cleanup operations. Critics of OPA state the pendulum has swung too far in the opposite direction, claiming that OPA's armada of government regulators, planners, and responders will create a costly and inefficient "overreliance" on the public rather than private sector.

Congress responded in part by encouraging coordination of efforts with the newly proposed Marine Spill Response Corporation (formerly the Petroleum Industry Response Organization), and $ 800 million initiative establishing regional centers and a research and development program to respond to catastrophic spills.

Nevertheless, OPA expands the governmental role. The final version of H.R. 1465 establishes a new layer of contingency planning requirements for ports, vessels, and facilities. The Coast Guard must review and approve most contingency and response plans and conduct periodic drills. OPA sets up a bureaucracy of Coast Guard strike teams and district response groups, which may not be able to coordinate with private-sector efforts such as those of the Marine Oil Spill Corporation.

In probably the most publicized "federalization" provision, the new legislation significantly limits the President's discretion to rely solely on private spillers' cleanup efforts and broadens the President's authority to direct cleanups without actually "federalizing" them (i.e., having the federal government or its contractors perform the cleanup). The bill gives the President, acting through the Coast Guard or EPA, various options — although most address how to respond rather than whether to respond.

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Only if the discharge is minor can the federal government decline to take action and rely solely on private response efforts. Otherwise, the President must choose between "federalizing" or directing cleanups. In the event of a spill that creates a substantial threat to public health or welfare, the President has even less discretion. Federalization, to many congressional members, is the appropriate response, although the legislation requires only that the President direct — rather than actually federalize — cleanups for such spills.

Solutions

Wetlands

Congress and the regulatory agencies can reform the § 404 program without weakening it. They can even expand the scope of regulated activities to include drainage,¹³ and do so in a manner consistent with protection of private property rights and principles of public-private partnership. As recommended by the National Wetlands Policy Forum,¹⁴ the key is to clarify the jurisdictional reach of the agencies, allow for broader program delegation to the states, accord different levels of protection based on wetlands values, increase opportunities for mitigation banking and wetlands restoration and creation, and provide incentives for private stewardship.

Defining a wetland is no simple matter. What one person sees as a periodic wet area may be a flourishing "water meadow" to another or a glorified swamp/wasteland to someone else.¹⁵ But to reform the program, policymakers and regulators must first provide a clear definition. Otherwise, the regulated community has little guidance in protecting sensitive lands. Confusion breeds disrespect for the law and ultimately may lead to even greater federalization.

The federal program should be more flexible. Admittedly, the Corps, EPA and other federal agencies have a role to play. They can offer much expertise in the science (or art) of wetlands creation and restoration and enforcement power to multi-jurisdictional (such as interstate) problems. Yet, the current rules for delegation of § 404 programs to states are too rigid and regulations on permit-specific mitigation and compensation requirements are inflexible. Regulators need to explore a "sliding-scale" approach, recognizing that some wetlands deserve more protection than others.

Perhaps the best proposal is to foster greater private stewardship through public education and tax credits and other financial incentives. Some economists might argue that left undisturbed by governmental regulations, private property owners would have enough incentives to protect their assets. In either case, the proposal has merit because it would decrease the federal regulatory role when private efforts can pick up the slack.

Waste Sites

Proponents of change need not call for the total dismantling of the Superfund program to reform our nation's response and cleanup system. Instead, they should promote greater use of PRPs and state-delegated "mini-Superfunds."¹⁶ This will help keep EPA from becoming a more entrenched bureaucracy and minimize federal response efforts.

EPA and Congress should consider an approach that the Federal Emergency Management Agency (FEMA)¹⁷ uses in providing disaster assistance. The Stafford Disaster Relief and Emergency Assistance Act lays out basic authorities of FEMA and rights, duties, and requirements of aid recipients.

Generally, FEMA is prohibited from declaring a federal disaster or emergency until the governor of an impacted state finds that an effective response is beyond state and local capability and that federal assistance is necessary. Furthermore, the governor, before requesting assistance, must take appropriate actions under state law and certify that the state and affected local governments will comply with all cost-sharing requirements.¹⁸

If applied to Superfund, such state certification and cost-sharing requirements could limit the tendency to "over-federalize" the hazardous waste cleanup process. Greater deference to state "mini-Superfund" programs makes sense on both federal budgetary and policy grounds. Local problems generally demand localized cleanups. Increased state and local cost-sharing also makes sense and would be more consistent with other assistance programs.¹⁹

Most importantly, these changes could allow EPA to focus on what it does best: short-term emergency removals. In a crisis, EPA employees or contractors could mobilize quickly — much like the Coast Guard's oil spill strike teams or FEMA's disaster officials — to handle immediate threats. Such reforms would also mean less federal presence on sites or in courtrooms battling over long-term cleanups.

A major insurance group's recent proposal provides another solution: a surtax on industrial and commercial insurance policies to fund an estimated $ 40 billion account that EPA would use to clean up "old" hazardous waste sites.²⁰ The proposal would provide EPA with an alternative to suing PRPs for cleanup of certain abandoned sites. Rather than apply strict joint and several liability, EPA [20 ELR 10516] would use the industry-sponsored fund. This, proponents argue, would get EPA out of the business of suing PRPs, creating "litigation gridlock," and wasting resources, and instead, into the business of cleanup of old sites.

In some respects, this cost-spreading approach is attractive. Superfund has failed to clean up sites efficiently and timely. Retroactive liability, in particular, continues to create uncertainty in business decisionmaking and obstacles to obtaining insurance.

But, according to some, the proposal may run counter to private-sector, free-market approaches that could be the salvation of Superfund. The proposal would rely heavily on the trust fund solution but only for older sites; newer ones (after the 1980 date) would still trigger the combination of a broad-based tax and a sue-the-polluter remedy. Advocates of a purely private-sector approach would prefer to dismantle the public works, trust fund scheme. This private-works fund may be the wave of the future and also holds promise for degraded wetlands and other environmental problems.

Oil Spills

Like waste sites and wetlands, oil spills demand a federal presence. The key to success, however, is to limit that presence to large emergency and interstate response situations. Long-term programs, whether for wetlands monitoring, Superfund remedial actions, or oil spill restorations, should remain largely with private parties or at least nonfederal governmental entities.

Although OPA attempts to limit the federal role, federalization prevails. One noted exception to the federalization scheme, however, is OPA's § 4201(a), which exempts public and private cleanup personnel from liability. The response action contractor and Good Samaritan provision shield cleanup workers from liability under federal law except in cases of gross negligence or willful misconduct.²¹

By providing limited immunity, Congress intended to create incentives for greater public and private response efforts and to avoid insurability and liability problems. It supplements other provisions intended to coordinate planning and response actions between public and private sectors. Perhaps Congress will use this approach more frequently.

Conclusion

Complete reliance on a private-sector response will not solve problems with wetlands, waste sites, and oil spills. But neither will overreliance on a federal response. Between the two extremes is a workable approach. Rather than ignoring the problem entirely or setting up, in effect, a fourth branch of federal government (complete with trust funds, strike teams, and permit brigades), the federal government should focus more on responding to national emergencies, ensuring consistency among state programs, and providing nationwide research and technology.

Federalized public works programs have benefits, but costs as well. Federalize when the free market fails to cope with screaming emergencies and enduring externalities — not every time a problem arises in a pristine or politically sensitive area. Wetlands and waste site and oil spill cleanups will benefit if we use the public works approach to supplement — not supplant — local and private efforts.

1. Pub. L. No. 101-380; see H.R. CONF. REP. NO. 101-653 on H.R. 1465.

2. "Federalization" is the establishment of or takeover by the federal government of virtually all protection, emergency response, and cleanup measures. The term came into vogue particularly after the March 24, 1989, Exxon Valdez oil spill and subsequent congressional debate on oil spill legislation. In fact, the first major issue the nation focused on after the Exxon Valdez spill was whether President Bush should have "federalized" the cleanup rather than continue to rely on Exxon's efforts. See Senator Michell Seeks to Force Federal Action in Cleanup of Future Oil Spills, Wash. Post, Apr. 5, 1989, at A3.

3. 33 U.S.C. § 1344, ELR STAT. FWPCA 054. The Water Quality Act of 1987 (Pub. L. No. 100-4) made the most recent and comprehensive amendments and extensions of authorizations to the 1972 Act.

4. 42 U.S.C. § 9601 et seq., ELR STAT. CERCLA 007 et. seq. The Superfund Amendments and Reauthorization Act of 1986 is the only comprehensive legislation to date to revise the 1980 law.

5. The terms "potentially responsible party" and "state-led cleanup" are generally referred to in the national contingency plan (NCP) 40 C.F.R. pt. 300, promulgated pursuant to both CERCLA and the Clean Water Act, and EPA policy guidance.

6. See, e.g., Stroup, Hazardous Waste Policy: A Property Rights Perspective, 20 ENV'T REP. 868-73 (1989); The Free Market and the Environment, Public Interest, Fall 1989, at 30 [National Affairs Inc., Washington, D.C.].

7. In addition to the statute, see regulations of the Corps, 33 C.F.R. pt. 323, and EPA, 40 C.F.R. pt. 230. The U.S. Fish and Wildlife Service, the Soil Conservation Service, and other agencies within the Departments of the Interior and Agriculture also have extensive wetlands programs and responsibilities. Interestingly, the term "wetland" appears only once in the statute. Section 404(g) mentions the term in describing various water bodies over which state-delegated wetlands programs would be able to assert jurisdiction.

8. See, e.g., Hearings of the Water Resources Subcommittee, Public Works and Transportation Committee, held on February 28 and March 13, 1990 (not yet printed).

9. See Atkeson, Goldberg, Ellrod & Connors, An Annotated Legislative History of Superfund Amendments & Reauthorization Act of 1986, 16 ELR 10363 (Dec. 1986).

10. Superfund: A National Perspective (U.S. EPA, June 1990).

11. See, e.g., H.R. Doc. No. 69, 100th Cong., 2d Sess. (1988).

12. Tauzin, Oil Pollution Liability Trust Funds Are Being Used to Offset Deficit, ROLL CALL, Apr. 2, 1990, at 26.

13. Currently, § 404 covers a relatively narrow set of activities — only the discharge of dredged or fill material. In contrast, its geographic scope (involving the identification and delineation of jurisdictional wetlands) is quite broad. Many have proposed expanding § 404's coverage to include other activities, such as drainage.

14. EPA and the Conservation Foundation convened the Forum in 1987. The Forum's November 1988 final report, Protecting America's Wetlands: An Action Agenda, contains several recommendations, including the interim goal of "no net loss" of wetlands.

15. The ongoing controversy over the Federal Manual for Identifying and Delineating Jurisdiction Wetlands is one of many examples of how science, environmental and social policy, agency turf battles, and politics coalesce to make a tough job even tougher. Published in 1989, the manual embodies a commitment among the Corps, EPA, FWS, and Soil Conservation Service to use the same definitions and procedures for identifying and delineating wetlands.

16. Many states have established their own programs to address hazardous waste spills and sites. Minnesota, for example, has established a program pursuant to the Minnesota Environmental Response and Liability Act, 9 MINN. STAT. ANN. §§ 115B.01-.24.

17. 42 U.S.C. § 5121.

18. Sections 401, 501(a) (codified at 42 U.S.C. §§ 5170, 5191).

19. Superfund currently requires only 10 percent for most long-term cleanups.

20. See Greenberg, Fees on Commercial and Industrial Insurance to Finance Hazardous Waste Cleanup, 19 ELR 10251 (June 1989). In March 1989, the American International Group (AIG) suggested to Congress, EPA, and the general public a new approach to abandoned waste sites involving the establishment of a "National Environmental Trust Fund." AIG is a U.S.-based international insurance organization.

21. This provision is similar to §§ 107 and 119 of Superfund.