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Dumping Ground

Toxic waste on your property could cost you-even if you didn't put it there.

Suppose you purchase a cozy old storefront on Main Street, remodel it and proudly open your new flower shop. Your business is just getting on its feet when patrons of the cafe next door start complaining that the water tastes funny. After poking around a bit, investigators discover the cause: contaminated soil radiating from your property. Further examination reveals that a dry cleaner who owned the property for 10 years routinely disposed of excess solvents by pouring them down the drain, which led to an underground leaching field. Restoring the land will be very expensive. But that isn't your problem, right?

Wrong. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, better known as CERCLA (or the Superfund Law), property owners can be held responsible for the cost of cleaning up environmental contamination on their property-even if they had nothing to do with the pollution. Often state or federal agencies extract the cost of cleanup from the property owner who's easiest to find. Likely as not, that's the current owner, who then has to locate whoever's responsible and sue for compensation.

The legal concept involved here is called "joint and several liability." It means that any one of a number of parties can be held legally responsible for the entire cost: the property owner at the time the contamination occurred, the party who actually did the contaminating, the current owner, or even the lender that helped finance the business found responsible. The concept is convenient for government agencies looking for someone to pick up the tab, but it can be a headache for business owners. More and more cases involving cleanup costs are piling up in the courts.

One reason is that environmental cleanup is so expensive. Coping with a contaminated well, for instance, might involve removing all the contaminated soil and paying to dispose of it, which could cost hundreds of thousands of dollars. Dealing with major industrial dump sites is even more costly.

The primary problem is deciding who should pay for it: Property owners? Insurance companies? Petrochemical businesses? Insurance companies? Taxpayers? Congress has attempted to address the question through a bill that would reauthorize the Superfund, the huge fund used to study toxic waste sites and begin cleanup while the Environmental Protection Agency (EPA) uses the courts to pursue those deemed responsible. In 1994, the Clinton administration tried to hammer out a solution acceptable to industry, insurers and environmental groups alike, but Congress failed to come to an agreement before the session ran out. Prospects look equally dim this session. Superfund's taxing authority was scheduled to expire at the end of 1995, but at press time, Congress was still haggling over the details of the re-authorization bill.

The reasons are largely political, but the process of reform is difficult because of the complexity of the issues and the sheer magnitude of the problem. Among the issues: Should companies be required to pay millions of dollars to clean up old sites that were contaminated through actions that were legal at the time? Should the liability of each party be proportional to its involvement in the problem? Should sites be prioritized according to danger to human health or treated equally as potential problems in the future? Don't expect easy answers.

Steven C. Bahls is dean of Capital University Law and Graduate Center in Columbus, Ohio, where he teaches courses in entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

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This article was originally published in the January 1996 print edition of Entrepreneur with the headline: Dumping Ground.

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