C. Coase Theorem (Real Question Is Who Should Be Allowed to Harm Who? Avoid More Serious Harm)

Env. w/ Hsu -- Fall 2002

I. Intro.

C. Coase Theorem (real question is who should be allowed to harm who? avoid more serious harm)

1. externality

a. an effect of a decision on a party other than the decision maker that the

decision maker doesn’t take into acct.

--e.g. factory owner produces X which pollutes neighbor

b. 2x

i. negative—neg. effect from decision

ii. positive – pos. effect from decision

2. from econ. efficiency standpoint, doesn’t matter if give injunction – same result will occur

--if bargaining is costless and cooperative then any choice of an entitlement or remedy 

efficient outcome

3. prob. w/ theorem

i. only takes into acct. econ. efficiency

ii. another prob. is it ignores transaction costs

(a) what if have factory polluting whole neighborhood?

bargaining process will be expensive for neighbors

(b) free riding—when have group venture, try to shirk duty b/c know others will pick

up share

D. Approaches to Env. Reg.

1. Boomer v. Atlantic Concrete

a. even though cust. to grant injunction, NY doesn’t b/c factory worth toooo much

--grants “cond. injunction” --- factory must pay permanent damages to comp. for present

and future harm/damages

b. Problem

i. remedy doesn’t really create incentive to apply better tech.

ii. bargaining process can lead to extortion ; OR may underpay

plaintiffs—sometimes people value it higher (subjectively)

2. How regulate? (LOOK AT P. 166)

a. health (controls on basis of what req. to achieve health goal (only health))

i. ambient/harm based

--est. level of env. qual. to be achieved or maintained in some env.

ii. marketable allowance

iii. liability rules

b. technology or feasibility (tie std. to capabilities of tech.)

i. design style/ tech. specs

ii. challenge reg.--govt. est. clear env. perf. target, while the reg. community designs

and implements a program for achieving it

--spec. reg. effects take effect if target not met

iii. perf. std. --set an objective or perf. level, for the reg. target to meet w/o spec. how

iv. planning/ analysis req.s--req. certain info. be gathered and analyzed or that certain

plans be prep. prior to undertaking env. sig. decisions

v. info. disclosure/ labeling req.s

c. balancing (compare gains of proposed std. w/ its costs)

i. pol’n taxes / emissions charges

ii. subsidies

iii. deposit refund

iv. product tax

II. Sources of Env. Law

A. CL Roots

1. trespass -- req. actual phys. invasion

2. nuisance

a. doesn’t req. actual invasion like trespass

b. private-- non-tresp. invasion of another’s interest in the private use and enjoyment of land

i. req. that invasion is unR and intentional —look at harms to pl. v. utility of activity

(a) gravity of harm outweighs utility OR

(b) harm cx is serious and the fin. burden of comp. for this and sim. harm to

others would make the continuation of theconduct not feasible

ii. balance interests (Boomer, Madison)

(a) Madison (plants near town—smoke  town much harm)

(1) timber and crop interests badly injured

(2) but def. operating lawfully, only method avail., no else to go

injunction stopping operations  destroying industry

(3) ct. says plant worth much more and town couldn’t survive w/o

so denies injunction and grants damages

iii. only those who have prop. rights and priv. w/ respect to the use and enjoyment of land

may recover, and only if harm suffered is sig.

c Public – an unR interference w/ a right common to the general public

i. only certain people allowed to bring this action

—public officials/agencies

--people who suffer a different harm (dif. than harm suffered by public as whole)

--private citizen in class action suit

ii.. unR if:

(a) involves sig. interference w/ the public health, safety, comfort or convenience

(b) is illegal OR

that the actor has reason to know will be sig.

d. Mo. v. Ill. (Chicago’s sewage)

i. if could est. a cx link, then would’ve been a public nuisance BUT no cx link

--can’t prove sewage  + typhoid – need prox. cx

ii. no private nuisance b/c transaction cost problem

iii. case shows need govt. reg.—ct. sys. not set up to solve these cases

--lacks educ.

e. CL WORKS BETTER WHEN: (when can rely on CL liability and Coasian bargaining)

i. small number parties

ii. think parties can overcome transaction costs

iii. env. offense unique and traceable to an offender

iv. hard to make gen. rules

B. Leg.

1. Reason to legislate

a. we get too little pos. externalities so we subsidize or mandate them

b. we get too many neg. ext. so we tax/reg./crim. them

c. move from CL  fed. reg. gives us the power to do the above (encourage pos., discourage

neg. ext.)

2. WHEN BETTER:

a. many def. or pl.

b. generalized harms

c. causation prob.

d. complex issues

--doesn’t work as well in heterogeneous situations (e.g. land use in west)

3. Models of env. fed.

a. fed. financial asst. (“sugar daddy approach”)

i. don’t tell states what to do; just give them $$

ii. principal fed. approach to issues such as land use mgmt.

b. preemption of state law (“stern parent” approach)

i. fed. govt sets rules---states have no say (e.g. TSCA, FIFRA)

ii. for when need consistent std. (for reg. prod. distrib. nat’ly)

iii. comp. reg. scheme—may indicate intent to preempt inconsistent laws

c. cooperative fed. (in most stat.)

i. fed. agencies est. std. and states decide how to meet std.

-states can decide to implement on own or leave implementation to fed. authorities

(if states don’t enforce, fed. authorities will)

4. Reasons to centralize env. reg.

a. transboundary pol’n prob.

b. scientific research

c. fairness and EP (residents of one state shouldn’t be subject to more pol’n than people of

another state)

d. “race to the bottom” –one state could relax env. std. to get more bus.  all states relax std.

7. 1995—leg.  more diff. to impose fed. mandates on state and local govt.

a. req. that more detailed cost est. be provided for fed. mandates and if est. of future cost

$50m/yr, can strike leg. unless funding provided or mandate approved by maj. vote

b. fed. agencies can’t issue reg. that don’t employ least costly method

C. Reg. (“tell you what to do”)

1. Rulemaking Procedure

a. most done under “informal rulemaking”

i. process

(a) notice in Fed. Reg. of proposed rulemaking

(b) provide opportunity for public to submit written comments

(also publishes statement and comments and responds to all comments)

2. Rulemaking Reforms

a. negotiated rule making

i. major groups interested in a prospective rulemaking action attempt to resolve their dif. through neg. prior to issuance of a proposed rule

ii. if neg. successful, parties agree on substance,  issued for public comment

iii. works well only in certain narrowly defined circ.

(a) parties have power to affect decision and incentive to bargain

(b) small # of parties

(d) neg. has potential to benefit all parties

(e) +1 issue so can trade-off

(f) agency committed to proposing product

b. interim std. –based on substantially reduced info. thresholds while gather nec. data to det.

final level

--prob.: once issue, have way of staying “interim” for long time

c. reinvention –Project XL

i. gives greater flex. to bus. and state and local govt. in deciding how to meet env. std.

ii. participants enter into comprehensive K w/ EPA

EPA waives app. of some std. if make greater, overall reductions than req.

3. Pres. and Cong. Oversight

a. process highly politicized and pres. and Congress often meddle in process

b. Exec. Order –Clinton – ea. fed. agency must consider env. justice when making decisions

4. Judicial Review (authorized by APA)

**dif. than citizen suit prov.—authorizes cts to review agency actions, such as issuance of reg.

a. BUT can only sue

i. over final agency action (and can’t be “committed to agency discretion by law”)

ii. once have exhausted admin. remedies

iii. issue must be ripe (impact is concrete/clear)

b. *also, must overcome jud. reference—Ct. tend to defer to agency decisions

i. --betw. 70-78, ct. were tough on regulatory agencies—carefully scrutinized agency

decisions (e.g. Overton) (“Hard look” doctrine)

ii. then Vt. Yankee in 1978—ct. reinstated high deference

(a) beg. of “judicial deference doctrine”

--“agencies free to grant add’l procedural rights in the exercise of their discretion,

but reviewing ct. are not free to impose them if agencies haven’t granted them”

--agencies free to experiment procedurally w/o strict jud. oversight

iii. *Chevron **2 part-test

1. is congressional intent clear?

2. if not, is agency’s interpretation reasonable? if so, defer

III. RCRA (Resource Conservation & Recovery Act) (amendment to SWDA)

A. how know if governed by RCRA?

1. look at §1604 (27) and see if “solid waste” def. applies

2. RCRA regulates gen., transp. and final disposition of solid waste

B. 3 goals

1. life-cycle waste mgmt. (cradle-to-grave)

2. tech.-forcing

3. waste reduction

a. encompasses any techniques that adjust basic manuf. process so waste not gen.

b. encourages recycling by offering exemptions for products in the process of recycling

4. also wanted to maintain subs. state resp. for solid waste prob.

a. “collection of solid wastes should cont. to be primarily the f(x) of state, reg. and local govt.

5. 1984 Amendments—wanted to elim. use of landfills to dispose of hazmats

C. What are “solid wastes”? Stat. Def.

1. 1003(27) – includes any garbage, refuse, sludge from a waste treatment plant, water supply

treatment plant, or air poll’n control facility and other discarded material, including solid,

liquid, semisolid or containing gaseous material, resulting from industrial, commercial, mining

and agri. oper. and from community activities

2. exemptions listed, and EPA has also exempted household wastes, fertilizer, and certain cat. of

high-volume wastes

3. see below for AMC v. EPA

C. 3 programs

1. reg. of haz. wastes (Subtitle C)

a. Def. of haz. waste --

i. stat. —1004(5) (p. 692)

--solid waste, which b/c of concentration/quantity/or char. increase in mortality or

serious illness OR pose subs. present or potential hazard to human health or env. when

improperly treated, stored, transp. or disposed of

ii. reg. def. of which materials are hazmat (3001(a) authorizes EPA to further define)

(a) waste listed OR

(b) exhibits one of 4 characteristics (“characteristic waste”)

-ignitability-reactivity

-corrosivity-toxicity

also persistence and degradability in nature, and potential for accum. in tissue

only considered haz. so long as exhibit haz. char.

(1) mixture rule: listed waste still haz. even if mixed w/ nonhaz. waste

(2)derived from rule: any waste derived from a listed waste is still haz.

--any solid waste gen. from treatment, storage or disposal of haz.

--includes sludge, spill residue, ash, emission control dust, or leachate

b. cradle to grave regulation and tracking system

manifest follows waste wherever it goes

c. Std. for hazmat gen., transp., and oper. of TSD (Treatment, storage and disposal) facilities

i. gen. and transp.

-gen. are resp. for det. if wastes are haz.

-both gen. and transp. must use the manifest sys.

ii. special req. for TSD facilities –need permit

--must clean up any prior contam. regardless of when occurred

(must take corrective action for all releases)

--must conduct reg. groundwater monitoring

iii. Exclusions

a. Household waste – 3004(i)

--resource recovery facility recovering energy from mass burning not TSD for hazmat

if only household waste (or if unlisted commercial/industrial waste)

b. small quantity gen. (less than ~ 1000 kg/mo.)

iv. land disposal “ban”

--theoretically banned—strong presumption that some wastes can’t be put in landfills

BUT can get around ban in 3 ways:

a. treat

b. demonstrate to EPA that no migration will result from burial

c. get a temp. variance showing insuff. capacity to handle/treat this part. waste

*must use BDAT (Best Demonstrated Avail. Tech.) before disposing on land

2. Reg. of Non.-Haz. waste (Subtitle D)

a. substantially a state program under fed. financial asst. model

--EPA sets min. req., including ban on new open dumps, . . .

b. 1984, amended and EPA req. to impose reg. for sites that receive nonhaz. and might

receive haz. waste

i. req. groundwater monitoring

ii. corrective action must be taken if leaking occurs

iii. est. some criteria for landfills (siting, building, closing)

iv. states req. to est. permit programs to incorp. std.

--many states have adopted more stringent std.

3. Reg. of Underground Storage Tanks

--underground storage tanks tend to leak

D. Enforcement

1. Civil Liability

a. EPA enforcement actions

i can sue

ii. can enjoin if imminent and subs. harm to env.

iii. can fine

b. citizen suit –7002 (p. 764)

i. ag. any person (inc. fed. govt and govt. agencies.) who is alleged to be in violation

ii. ag. any person, including govt. or govt. instrumentality and including any present or

past gen., transp .or oper. of TSD facility who

has contrib. to past or present handling , storage, treatment, transp. or disp. of any

solid or haz waste

which may present an imminent and subs. endangerment to health or env.

iii. ag. Admin. if didn’t perform mandatory duty

c. whistleblower provision (7001)

--can’t disc. ag. empl’ee for telling about violation

2. Crim. liability (6928)

a. need to have acted knowingly

E. Common RCRA issues

1. defining “solid waste”

a. American Mining Congress v. EPA (1988)

i. Ct. says RCRA enacted to help states deal w/ disposal

-so don’t reg. spent materials recycled and reused in an ongoing man. or ind. process

-not part of disposal prob. yet b/c destined for beneficial reuse in a continuous process

ii. *in light of lang. and structure and purpose of RCRA, Congress clearly and

unambiguously expressed its intent that “solid waste” be lim. to materials

“discarded” by virtue of being disposed of, abandoned, or thrown away

-Congress wants to encourage recycling

b. 1988—EPA proposed new def. of “solid waste”

i. excluded “closed loop” (AMC) but if recycling  discarding then can reg.

ii. consider several f(x) to det. whether materials recycled, w/o passing through cont.

ongoing manuf. process,is solid waste

(a) whether material is typically discarded on industry-wide basis

(b) whether material replaces a raw material when recycled and degree to which its

comp. is sim. to that of the raw material

(d) whether material handled prior to reclamation in secure manner that min. loss and

prevents release to env.

(e) **other f(x), such as length of time material accum.

c. AMC II—limits AMC I to materials for immediate use (only these materials exempted)

2. Household waste exclusion

a. 3000(i)—can burn household waste (or nonhaz com. waste)

b. BUT Chicago v. EDF –ash that results from that burning is reg. as solid waste

3. Avoiding TSD status

a. have 90 days to store hazmat

if store w/o first recycling  avoid TSD status

if spent material reclaimed and returned to orig. process-closed loop  not RCRA “waste

-have 90 days to recycle

can “treat” in containers or tanks for up to 90 days at gen .facility

--just empty tanks every 90 days

IV. CERCLA (Comprehensive Env. Response, Comp., and Liability Act)

A. jurisdiction

1. “Haz. substance” --def. 101(14 p. 1109

a. defined by how other stat. define “haz. substance”

b. lists some exceptions (e.g. nat. gas and petroleum, fed. permitted releases)

2. 104—have jur. over unlisted substance if is “pollutant or contaminant which may present

an imminent or subs. danger to public health or welfare”

3. *req. release or a threatened release which causes the incurrence of response costs, of a haz. substance,

B. Liability under CERCLA

1. Req:

a. site is a “facility” (has haz. mat)

b. release of “Haz. substance” or unR dangerous pollutant

--release” 101(22) -- broadly defined

c.  govt. to incur response costs

d. def. fall w/in at least one of 4 classes of resp. people

2. liability applies retroactively (Olin)

3. Resp. parties (parties who could be liable)

a. Owners – 107(a)(1) and (2)

i. any person who owns now or owned at time or disposal

ii. Exceptions

(a) 3rd Party Exception

if release cx solely by 3rd party, *other than agent/empl’ee OR one in K rel. w/ def.

IF def. est. b/y prep. of evid. that

-exercised due care w/ respect to haz. substance concerned

-took precautions ag. FOS acts/omissions of any such 3rd party and FOS cons.

*act needs to be done by unrelated 3rd party and must take precautions

(b) Innocent Purchaser --101(35)(B)

Innocent purchasers can assert 3rd party exception IF est. that

(1) did not have actual or constructive knowledge of presence of hazmat when

bought land

(2) govt. entity acq. prop. through invol. transfer

(3) acq. land by inheritance or bequest

**must undertake, at time of acq., all approp. inquiry into previous ownership

and uses of prop. consistent w/ good commercial or customary practice in an

effort to min. liability

(B)(iii)—factors to consider to assess if lack knowledge R

includes rel. betw. purchase price and value of prop. (VIII)

specialized knowledge or experience by def. (VII) (e.g. developer)

iii. Shore Reality

(a) Stat. applies regardless of fault  Strict Liability

--could conduct env. test before purchase and then decide on if to buy

(b) not under 3rd party exception

(1) was aware of tenant’s conduct before and after closing and FOS that would

continue to dump

(2) had contractual rel. (real estate K)

iv. 120(h)—notice req.—fed. govt. must tell if stored, released, or disposed of haz. waste

on prop. when owned it at sale (but disclosure lim. to what’s in agency’s files)

v. sev. states have sta. req. sellers to disclose info. about known or suspected contam. on

prop. being sold (Ill., Ca, Ind., NJ)

b. Operators

--person who “directs workings of, manages, or conducts affairs of facility dir. rel. to pol’n

i. degree of control req.

(a) must control day-to-day operations at facility

(b) construed broadly—could be person or firm

--cir. cts varied so  SC in Bestfoods

(1) 2 ways could be liable

(a) derivative liability -- must pierce corp. veil

(b) also may be liable as operator