However, the existing §107(a) has at its beginning the important statement that "Notwithstanding any other provision or rule of law..." which applies to the entire subsection (a), and modifies the clause addressing what costs are recoverable. The amended version includes this "Notwithstanding..." clause only in subsection (a)(1), “PERSONS LIABLE," and might be read as not applying to costs. There is case law which preserves the governments' entitlement to their costs, even if certain procurement or other federal or state laws are not followed, based on the "Notwithstanding..." provision. See, e.g., United States v. Rohm & Haas Co., 2 F.3d 1265, 1274 (3d Cir. 1993); Town of New Windsor v. Tesa Tuck, Inc., 935 F.Supp. 317, 323 (S.D.N.Y. 1996). We strongly oppose this amendment and suggest that the clause be moved to immediately after the phrase "GENERAL RULE," and before “(1) PERSONS LIABLE."

Subsection (a)(2) covers “Costs and Damages" and makes substantial changes to the liability provisions that will delay governmental responses to releases and shift costs from the polluters to the taxpayers. Instead of the current entitlement to all costs of removal and remedial action not inconsistent with the NCP, the amended subsection allows only recovery of any costs of response which are not unnecessary and not inconsistent with the NCP. Such a change would constitute a serious weakening of the governments' recovery efforts and reduce the likelihood that governments will respond quickly to emergencies and rapidly evolving incidents because any costs associated with an error when quickly assessing a situation would not be recoverable. In addition, the transaction costs of both the governments and the defendants will increase significantly to address this major new litigation issue. Under this amendment, the governments would have to defend every item of cost incurred in investigating and cleaning up the hazardous waste sites, giving responsible parties a field day in taking discovery and litigating why the government spent $10 on a sampling container instead of $8.50. We strongly oppose this amendment.

B. EXEMPTIONS AND LIMITATIONS TO LIABILITY

1. Owners/Operators

In §303, "Innocent Parties," further amendments to §107 of CERCLA are made. The current "innocent purchaser" protections, created through the definition of “contractual relationship" in §101(35) of CERCLA, apply only to owners, while H.R. 1300 extends these protections to owners and operators.

Under current law, the definition of "contractual relationship" implicates current owners if they are related to a PRP through the chain of title. Current owners can escape liability only by proving they are "innocent" purchasers, i.e., they did not know or have reason to know that the property was contaminated before they bought it and complied with the "due diligence" requirements. In H.R. 1300, there is no definition for "contractual relationship," and, under new §107(b)(5), a current owner who is linked only by a chain of title is not liable. Thus, under these changes, a current owner which knows the property is contaminated will be able to purchase it and escape all liability, even if the owner paid a reduced price for the land because of the

contamination. This shifts to the taxpayers the costs and burdens of cleanup, thereby improving properties owned by knowing purchasers at governmental expense.

Even if the current owner were somehow still potentially liable, the owner could escape liability through the "Innocent Owners or Operators" provisions of the new §107(b)(1) because the requirements for owners/operators to qualify as “innocent" are extremely lax. For instance, as long as the government is conducting any “response action," such as a Preliminary Site Assessment, the owner/operator can avoid any liability by simply letting the government onto the property and getting out of the way.

The effect of all these protections for current owners/operators is to obliterate the current owner/operator category from CERCLA liability. This is contrary to one of the important tenets of the CERCLA liability scheme.

In addressing an owner's liability, CERCLA was intended not only to hold responsible those whose activities created the contamination, but "to provide incentives for private parties to investigate potential sources of contamination and to initiate remediation efforts." Foster v United States, 922 F.Supp. 642, 656, 26 EAR 21327 (D.D.C. 1996). Moreover, CERCLA's provision for current owners is "modeled after common law tort liability rules that seek to control the social cost of hazardous waste contamination by controlling the behavior of landowners and other relevant actors." See, e.g., RESTATEMENT (SECOND) OF TORTS §§351 et seq. and §§822 et seq.; State of New York v. Shore Realty, 759 F.2d 1032, 1050-52 (2d Cir. 1985).

For the reasons stated, we oppose these amendments.

2. Governmental Entities, Contiguous Property Owners and Others

We support the changes to the long-standing "Innocent Governmental Entities" exception to liability under new §107(b)(2)(D), although it is drafted too narrowly to address current abuses where, for example, states are subject to counterclaims based on sovereign interests in groundwater, stream and river beds and banks. We also support the relief for "Contiguous Property Owners" amending §101(20) of CERCLA.

3. Livestock Treatment

Under §305 of H.R. 1300, §107(I) of CERCLA is amended to expand the exemption for pesticide application to cover any release of a hazardous substance "resulting from" the application of a pesticide for the treatment of livestock.

We believe this provision is overly broad. Pesticides are typically applied to livestock in large "dipping" vats; the vats are filled with water, pesticides, and solvents, and livestock are herded into the vats, one at a time, for treatment. Eventually the dipping solution becomes dirty or "spent," and is replaced with fresh solution. The spent solution, which often contains highly

toxic pesticides, must be disposed of, usually off-site. Under the bill's exemption, past disposal of such pesticide solution, unless shown to be contrary to law, would be exempted from CERCLA liability.

Our concern is not a theoretical one. For example, the Oklahoma National Stock Yards Company arranged for the disposal of some 211,900 gallons of cattle dipping waste at the Royal Hardage site in Criner, Oklahoma. Included in that waste was approximately 2,000 gallons of toxaphene, a highly toxic pesticide which is listed as an acutely hazardous waste under RCRA, 40 C.F.R. §261.33(e). Pursuant to a court order, the Stock Yards Company is currently helping pay for the clean up of the Hardage site. If this "livestock treatment" exemption were to be enacted in its current form, the Stock Yards Company's liability would be eliminated.

4. Small Businesses Exemption

Section 107 of CERCLA is amended by §306 of H.R. 1300 to include a new subsection (0), limiting liability at NPL sites for small businesses which are generators or transporters. "Small" is a business that had no more than 75 full-time employees, or equivalent, on the average over the previous three years, and had $3 million or less in "gross revenues" in the taxable year preceding the date of notification by the President that the entity is a PRP. If the company qualifies, it escapes liability for costs or damages, unless it engages in gross negligence (defined as "reckless, wilful or wanton misconduct," the punitive damages standard) or wilful misconduct.

NAAG supports an exemption from liability for de micromis parties that sent truly minuscule quantities of waste to a site. However, NAAG supports only early settlements for de minimis parties that sent minimal quantities of waste to a site.

We oppose the proposed exemption in H.R. 1300 since the exemption is based on the status of the PRP and applies no matter how toxic, or even lethal, the waste disposed by such companies and no matter what volume of waste was disposed. The exemption would eliminate many PRPs, especially at municipal-owned, co-disposal facilities, and the Superfund and the States would have to make up for this share of liability. The States do not have the resources to absorb these shares. Also, experience shows us that it is often smaller companies that pay less attention to their environmental responsibilities than larger companies. The exemption would encourage less careful handling of wastes because small companies no longer would face CERCLA liability even when negligent.

Moreover, H.R. 1300 provides that the exemption applies unless the small business engaged in "gross negligence" or "willful misconduct." Introducing this fault-based standard into CERCLA litigation would undermine the critically important strict liability provisions of existing law, and undermine recovery of the public funds at CERCLA sites.

5. MSW Exemption

Section 107 of CERCLA is amended by §306 to include a new subsection (p), providing a liability exemption for municipal solid waste (“MSW") and municipal sewage sludge ("sludge”) at NPL sites. Under H.R. 1300, MSW includes all waste generated by households, hotels and motels, and by commercial, institutional and industrial sources to the extent (I) such materials are substantially similar to household waste, or (ii) the material is waste that is collected with MSW and, regardless of when generated, is considered conditionally exempt small quantity generator waste under the Solid Waste Disposal Act. The term includes food, yard waste, paper, clothing, appliances, consumer product packaging, disposal diapers, office supplies, cosmetics, glass and metal food containers, wooden pallets, cardboard, grade and high school lab waste, household hazardous waste (“HHW”) and “wastes that are substantially similar."

NAAG supports reasonable limitations on liability for disposal of municipal solid waste. Unfortunately, the limitations provided under §107(p) of H.R. 1300 are much too broad. A substantial portion of PRPs would be relieved of liability if these changes were adopted because the exemption applies to not just households, but a wide, almost all-inclusive group of business, commercial, institutional and industrial sources. For instance, at a number of hazardous waste sites, cosmetic manufacturers have disposed of sometimes substantial quantities of their waste containing a variety of hazardous substances, e.g., acetone. Under H.R. 1300, such PRPs would escape liability because their wastes, at least arguably, are “substantially similar to waste materials normally generated by households," i.e., cosmetics thrown away by households. Or, for another example, at municipal-owned, co-disposal facilities, it is common to have a large volume of MSW and then a small volume of waste from commercial and industrial sources which is highly toxic. Many commercial, institutional and industrial facilities have used solvents in large quantities, and those wastes were often disposed in landfills over the years. PRPs could argue that their solvents are “substantially similar” to solvents used in households and, therefore, exempt.

Moreover, the exemption applies regardless of the volume of the MSW waste. While NAAG historically has supported liability reforms for small MSW generators, such broad-based exemptions, which would apply to major waste handling companies, go too far.

Finally, the States do not have the resources to cover the 10% of the exempt shares for these parties at NPL sites.

6. Municipal Owners/Operators

Section 107 of CERCLA is amended by §306 to include a new subsection (q), limiting liability for municipal owners/operators at NPL sites. With respect to facilities that are not subject to RCRA subtitle D criteria and proposed for listing before March 25, 1999, small municipalities (less than 100,000 in 1990 census) have an aggregate liability for response costs incurred after March 25, 1999, of the lesser of (I) 10% of total response costs at the facility, or

(ii) the costs of compliance with subtitle D, if facility continued to accept MSW through January 1, 1997. Large municipalities (100,000 or more), under the same conditions, are limited to 20% or costs of subtitle D, whichever is less.

NAAG supports provisions that recognize the burden on local governments. However, it must be noted that to the extent that the other exemptions are applicable, and the exempt and limited liability parties avoid sharing in the costs of cleaning up these toxic waste sites, that burden will fall disproportionately on the municipalities, even with the proposed limitations. And the burden also will fall on the States which will be responsible for some portion of the orphan, exempt and limited liability shares.

7. Recyclers

Under the new §130, there is no liability as a generator or transporter for the recycling of recyclable material. "Recyclable material" is defined to include (1) plastic, glass, textiles, rubber (not including whole tires) and metal, as well as minor amounts of material incident to or adhering to such scrap; (2) spent batteries; and, (3) used oil. Special rules are then provided for transactions involving these different kinds of recyclable materials. Section 130 of the bill is encaptioned a "clarification of liability." It is not a clarification, but is rather a substantive change in the law.

The special rules provide protection to recyclers so long as they comply with various federal regulations or standards. However, only state regulations and standards are applicable in most states and there are no federal requirements in existence. Therefore, the recyclers will always be in compliance regardless of how irresponsible they are. Therefore, we oppose this provision.

While we agree that recycling activities should be encouraged, we are nevertheless troubled by this exemption because it is too broad. For instance, the exemption is particularly inappropriate as it applies to spent lead-acid batteries. Such batteries contain large quantities of lead, an especially toxic substance. Much of the lead in these batteries is in the form of lead oxide and lead sulfate, compounds that are relatively mobile and bioavailable in the environment. Moreover, the sulfuric acid in these batteries (which has a pH approaching 0) greatly enhances the solubility and mobility of these metals.

The secondary lead smelter industry has repeatedly argued that the RCRA regulations under either federal or state authority -- do not apply to spent batteries. These batteries, the industry argues, are raw material; they are not discarded, and thus not solid wastes and not subject to regulation under RCRA. See United States v. ILCO, Inc., 996 F.2d 1126 (11th Cir. 1993). The lead components of spent lead-acid batteries would also fall within the definition of "scrap metal." The limitations on the exemption for scrap metal are significantly less stringent than the limitations on the exemption for spent batteries. As the exemptions are currently drafted, a person recycling the lead from spent lead-acid batteries could take advantage of the