Exxon Corporation v. Hunt

PETITIONER:Exxon Corporation
LOCATION:Dow Chemical

DOCKET NO.: 84-978
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: New Jersey Supreme Court

CITATION: 475 US 355 (1986)
ARGUED: Dec 09, 1985
DECIDED: Mar 10, 1986

Daniel M. Gribbon – on behalf of the Appellants
Mary Carol Jacobson – on behalf of the Appellees

Facts of the case


Audio Transcription for Oral Argument – December 09, 1985 in Exxon Corporation v. Hunt

Warren E. Burger:

Mr. Gribbon, I think you may proceed whenever you are ready.

Daniel M. Gribbon:

Mr. Chief Justice, and may it please the Court:

The issue in this appeal is whether a tax on oil and chemicals imposed by New Jersey in order to finance a spill fund to be used for the cleanup of hazardous wastes is pre-empted by an Act of Congress.

As part of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, Congress imposed a tax on oil and chemicals to finance a superfund to start cleaning up hazardous wastes nationwide.

Section 114-C of the federal Act pre-empts other funds whose purpose is to pay for response costs, damages and claims which may be compensated under CERCLA, the key words being “may be compensated”.

This, then, is an express pre-emption case similar to the Aloha Airlines case that the Court decided two years ago, and unlike implied pre-emption cases such as that submitted to you just now, there is no need to inquire whether Congress intended pre-emption of state action.

Here it is undisputed that Congress has pre-empted some state taxation for cleanup purposes, and the question is whether the New Jersey spill fund escapes that pre-emption.

It is clear on the face of a New Jersey statute which was passed in 1977 that the purpose of the spill fund was to clean up hazardous wastes in accordance with the National Contingency Plan.

Three years later, Congress came along and passed CERCLA to accomplish the same cleanup purpose on a nationwide basis.

There can be no question, therefore, that a purpose of the spill fund was really to do the same thing as CERCLA, to pay claims that after 1980 might be compensated under CERCLA, in the sense that they are eligible for payment under CERCLA.

It is appellant’s contention that spill fund is thus pre-empted because its purpose is to pay costs of response, damages and claims that qualify for compensation under CERCLA.

In holding that the spill fund is not pre-empted, the New Jersey Supreme Court read the statutory language, CERCLA> [“] to mean actually paid under CERCLA, rather than eligible or qualified for payment.

This interpretation as we understand it would serve only to pre-empt state funds that are established for the purpose of paying response cost damage claims actually paid by the federal government.

No state, we submit, would ever have any reason to impose taxes or to create a fund for the purpose of paying claims that are actually paid by the federal government.

On the other hand, the interpretation of [= 114-C], we urge, gives the pre-emption real meaning.

Certainly Congress intended that it was to have some real meaning.

Sandra Day O’Connor:

Mr. Gribbon, I think the Solicitor General in a brief filed with us takes the position that is neither yours nor the appellee’s.

I’m not sure I understand the SG’s position.

Do you, and would you… do you plan to comment on it?

Daniel M. Gribbon:

I will comment on it right now, Justice O’Connor.

The Solicitor General rejects New Jersey’s view that the pre-emption is limited to claims actually paid.

He goes on to say that the New Jersey statute is partially pre-empted by the federal statute.

He arrives that way by distinguishing between claims that New Jersey would pay that are submitted by third parties as against payments made directly by the state, even for the same purpose, and therefore he says that the pre-emption is only to the extent that New Jersey honors claims that are submitted to it and it does not cover direct payments made by the state to accomplish exactly the same purpose.

And, it is that second part where we disagree with him and feel there is no basis in the statute or in its legislative history for making this arbitrary distinction between claims submitted to New Jersey and work done directly by New Jersey that accomplishes the same purpose.

Actually, the New Jersey statute is very clear that everything that it pays is put in terms of claims and compensation, and similarly CERCLA recognizes that a state–

Sandra Day O’Connor:

I don’t understand that last statement.

Are you saying that under the New Jersey scheme all payments would be made to the state itself, in effect?

Daniel M. Gribbon:

–All payments made by the state itself are regarded as payment of claims, because there is a New Jersey Environmental Department that submits claims to the Treasurer’s Department and the Treasurer then pays them, so that New Jersey does not recognize this distinction that the Solicitor General purports to see between paying claims for third parties and doing the work yourself.

That really doesn’t make any sense.

Sandra Day O’Connor:

Well, I suppose it’s also possible to argue that what the statute means is pre-empted.

Sandra Day O’Connor:

Is it, not only things that could actually be paid by the federal government because it’s part of the national priority list, but sites or damage that are not included in any national priority list would never be paid by the federal government and therefore are not pre-empted?

Now, what about that?

Daniel M. Gribbon:

Your Honor, we would agree with that interpretation.

That’s precisely what we say, that to the extent a claim… to the extent a response or damage claim does qualify under CERCLA and can be paid, then the state is pre-empted from resorting to a tax on oil and chemicals to pay it.

Sandra Day O’Connor:

But if there is a site in New Jersey that isn’t on the priority list of the federal government and of EPA, then you would think the state could make its–

Daniel M. Gribbon:

Could tax chemical and oil and make a payment, except for sites that are on the National Contingency Plan, an earlier list where removal without any kind of approval from EPA can be compensated under EPA, and a lot of the expenses of the State of New Jersey are removal expenses.

CERCLA distinguishes between remedial and removal, and there is a broader right to the states in removal.

Essentially, I think I’m in agreement with your statement that the State could create a fund by taxing oil and chemicals as long as it was for the purpose of dealing with non-CERCLA qualified matters.

New Hampshire has precisely that kind of a statute, and we’ve referred to it in our brief.

Lewis F. Powell, Jr.:

–Mr. Gribbon, along the line of your answers, what if the federal government pays claims to the state, perhaps would pay.

What does the state do with the money derived from its taxes where the federal government had paid the claim already?

The state raises taxes, and I understood you to say the taxes are raised to pay claims that the federal government under the Superfund Act already will pay.

Is that correct?

Daniel M. Gribbon:

Yes, that is correct.

If they qualify, if they will go to the federal government and say, we’ve spent this money, or this needs to be done and we qualify for payment, yes.

Lewis F. Powell, Jr.:

Well, assume that the claims do qualify for federal payment.

Does the state have a windfall with the taxes it has raised?

Daniel M. Gribbon:

Well, to some extent it does.

It has presently in this spill fund an accumulation of $25 million that it hasn’t spent, and it has spent very heavily… pardon?

Lewis F. Powell, Jr.:

Because the federal government has paid the claims?

Daniel M. Gribbon:

It may be because the federal government has paid 90 percent of the cost of cleaning up sites in New Jersey.

It has spent more money in New Jersey than it has in any other state, and New Jersey has benefited from that and it still keeps in its fund this $25 million that it’s collected from the tax on oil and chemicals.

Lewis F. Powell, Jr.:

You said “maybe”.

I suppose the record just doesn’t show?

Daniel M. Gribbon:

It shows the $25 million accumulation.


Daniel M. Gribbon:

But to say exactly why that’s there, that’s impossible.

It shows these two things, New Jersey participating heavily.

Indeed, it says in its official report, it’s among the leaders in competition for the national superfund dollars.

John Paul Stevens:

Mr. Gribbon, while you are interrupted, I’d like to pursue a little further Justice O’Connor’s question about the Solicitor General’s interpretation of the statute in which he says, the word “claims” refers to third party claims against the state.

John Paul Stevens:

As I understand your response, you are saying, well, New Jersey treats a claim by its own agency against the state treasury as a claim.

But, does that necessarily answer the question, what the word “claim” means in the federal statute?

Daniel M. Gribbon:

In the federal statute, a state is recognized as an appropriate claimant, something that the Solicitor General overlooked or didn’t pay any attention to.

But there isn’t any reason why the state can’t be a claimant for Superfund monies in accordance with the words of the statute.

John Paul Stevens:

It is sort of a strange way to write a statute, though, to talk about claims, compensation for claims, to mean a state compensating itself.

Daniel M. Gribbon:

Well, the New Jersey statute is written that way, and I think the reason for it is that there are these two different departments of the state, the Environmental Department on the one hand which does the work or that contracts it out and the Treasury which holds the money.

Indeed, in the whole area of environmental work, claims and compensation have been used fairly interchangeably with no distinction as to whether the state does the work directly or the federal government does the work directly, or pays for having it done.

I would just like to say–

Sandra Day O’Connor:

Mr. Gribbon, if we agreed with your interpretation of the statute, would all the money ever collected by New Jersey to put in its Superfund have to be refunded?

Daniel M. Gribbon:

–We believe it would, Your Honor, the reason being twofold: in the first place the pre-emption goes to the purpose of the statute.

New Jersey never took any steps to change the purpose of its statute after CERCLA was passed.

It could have done that.

Indeed, the New Jersey statute in ’77 recognized that there could come along a federal statute that would be pre-emption and it directed that at that time there be a review and re-examination.

That never took place.

Moreover, the non-CERCLA funds that expenditures have been made by New Jersey are quite insignificant, about six percent of the total fund, the record appears to show at least in the earlier years.

So, we believe that since… initially, let me concede, New Jersey could have split the fund.

It could have decided, we’re going to collect so much for all spills which are not governed by CERCLA and we’re going to collect so much for chemicals which are not covered.

It did not do that, and indeed the tax rate was originally set to cover all kinds of hazardous waste, not just oil spills, and that tax rate has never been changed even though in 1980 the tax would have gone off through a capping provision in the statute if it were not for the hazardous waste claims.

New Jersey’s experience with oil spills was so favorable that they would have had enough money, were it not for these hazardous wastes.

Sandra Day O’Connor:

May I just ask you one more question while I have you interrupted, please.

I understand Congress is presently considering legislation affecting the Superfund.

Is there anything in the present proposals before Congress addressing itself to this question of pre-emption?

Daniel M. Gribbon:

I think the answer to that is no.

Congress is considering it, indeed they’re going to debate it again tomorrow, and they have three bills up there.

All of the bills they are talking about would significantly increase the amount of money and would go to a broad-based tax of some sort and would take the whole burden as it now rests off oil and chemicals.

If that were to happen under all these bills, the pre-emption would disappear.

The oil and chemicals would no longer be bearing what was recognized as a disproportionate burden of the tax, and the pre-emption would disappear.

It’s entirely possible, though, that they are not going to arrive at any kind of agreement and the present bill would simply be extended and the pre-emption presumably would continue, although that remains to be seen, if oil and chemicals continue to bear the disproportionate burden.

On the words of the statute, and it isn’t a big, comprehensive sort of a statute, I will emphasize only this, that the “may be compensated”, particularly the “may be”, reflects the potential and not the certainty of payment that actually paid.

which was not used, which would reflect… and by examining CERCLA a state legislature can determine what kinds of claims qualify for payment and which don’t, and if they think the need is there, create another fund even by a tax on oil and chemicals and that, as I say, is exactly what New Hampshire has done.

Daniel M. Gribbon:

There are other aspects of section 114, for example, the exemption from pre-emption and a provision against double taxation in 114-B, which we submit fully support our view that looking solely at the statute itself, New Jersey’s view strips it of meaning and doesn’t give proper significance to the words that are used in there.

Let me turn briefly to the objectives and purposes of CERCLA, which we submit fully support the interpretation of the pre-emption that we urge.

This was compromise legislation jammed through in the 1980 lame duck session with very little in the way of explanation as to just exactly what Congress meant.

There were, for example, no reports.

Accordingly, one has to look at what was said and discussed during about two years of legislative gestation that this bill was going through.

Two strains in that discussion, I submit, give real content to the pre-emption.

The first one is about money, where it was going to come from and how much they were going to need.

They finally decided that a fund of $1.6 billion would be enough to make a start on this massive job.

Now, this money could have come from general revenues because all of us in some measure bear some responsibility for hazardous wastes.

It could have come from a tax on generators.

These are manufacturers, miners, milling people, some 260,000, who directly contribute to this.

Nonetheless, it was decided not to do that, to impose this tax only on oil and chemicals, some 30 chemicals, with the result that about 400… about 900 taxpayers bore the entire burden of the federal waste program.

Thereafter, there was considerable discussion and concern that those people should not be taxes again for this purpose, at least for the five-year experimental period during which CERCLA was to be in effect.

So that, the basic consideration there was a recognition that oil and chemicals were bearing a disproportionate burden of the cost of federal waste cleanup, and that at least for this period when the federal program was getting itself going and finding what needed to be done, they shouldn’t be subject to multiple state taxation.

They could have been taxed in all 50 states.

The other theme that runs through the discussions is the need to provide for federal-state cooperation in order to achieve effectively this nationwide program of dealing with the waste, and this involved the states nominating sites and working with the federal government, and indeed paying ten percent of the total cost.

So, it was necessary, and many legislators suggested that this was going to be difficult enough with one federal program without having up to 50 other state programs competing in this prioritization, competing for human resources and financial resources.

So, those two strains, I submit, fully support our contention that what was intended was that the states would not put additional taxes on oil and chemicals for these same purposes, and it didn’t have to do with actual payment but rather with the purpose of the tax.

Now, the New Jersey Supreme Court, in accepting the actually paid argument, relied almost entirely on a single incident in the legislative history of CERCLA, and in a colloquy on the Senate floor, Senator Randolph, the Floor Leader, did agree in response to two complicated leading questions from Senator Bradley that pre-emption extends only to funds whose purpose is to pay claims actually paid by Superfund.

I submit that in the first place, any court should be extremely cautious in according very much weight to such an isolated exchange, particularly when it strays so far from the words of the statute.

Moreover, it is at least as likely as not, if you look at the context of that statement, that Senator Bradley in his curt agreement to Senator Randolph, in his agreement to Senator Bradley, had in mind pre-existing state funds.

These were funds that had collected money before the effective date of CERCLA, and Senator Randolph at great length explained that there was no pre-emption involved there.

That money could be spent however they wanted to spend it.

And, New Jersey had a deep interest in that because it did have such a fund.

It should be noted in this connection that earlier in this colloquy both Senator Bradley and Senator Randolph referred to pre-emption as extending to claims and damages compensable under CERCLA, and “compensable” and “may be asserted” were the terms that were used most frequently throughout the legislative discussion, along with this concern to prevent federal taxation.

I think, in answer to Justice O’Connor’s question, I have dealt with an argument New Jersey makes which appears to be that even if our view of the pre-emption is accepted, this spill fund should nonetheless survive.

One reason is that it says it has other purposes, these being the oil spill, particularly, and as I indicated the purpose is what is important and they haven’t changed the tax rate, and the oil spill expenditures are very, very small.

The other argument that it seems to make is that in fact it has refrained from spending money on certain sites.

Now, even if that were factually correct, and I’ll show in just a moment that it is not, we submit that spill funds should still be stricken because it is not the manner in which the money is spent that determines pre-emption, it is the purpose, and the purpose remains to clean up hazardous wastes, the same purpose as CERCLA.

However, the records that are before the Court here show that New Jersey did not refrain from spending on CERCLA sites.

Daniel M. Gribbon:

$32 million out of about $36 million that was spent have gone to CERCLA sites, CERCLA qualified sites.

Some of that, a small amount of it, about $2 million, may be New Jersey’s portion of the Superfund expenditures, but that could not be in excess of about two and a half million dollars.

This is all shown, as I say, in papers that are with the Court.

They were brought in, really, in response to New Jersey’s effort to avoid pre-emption by forgetting about the purpose and looking to the manner in which the expenditures were made.

I submit that that will not work, because it is purpose that is the key figure here, and even if you look to expenditures, substantial amounts of money have been spent on the CERCLA sites.

I would like to refer only briefly to the brief filed by California and seven other states as amici.

I would further look, because I believe it highlights the narrow issue that is presented for decision here.

As that brief puts it, a number of states did create funds to supplement and complement federal Superfund, and that is perfectly permissible.

New Jersey made no such effort.

It failed even to abide by the provision in its own statute which said, if there’s federal legislation, take a look at this.

Indeed, during the course of that legislation, one of the legislators recognized that there was apt to be, before too long, federal legislation which would pre-empt dual taxes by the state and the federal government.

But they didn’t do that.

They continued right along with their statute, and it appears, and this is borne out by our description of the 40 other state funds, in the appendix to our reply brief, that alone among the states New Jersey has imposed a very duplicative tax on oil and chemicals that was in the mind of the framers of the pre-emption provision in 114-C.

As far as these other funds are concerned, they all appear to be financed through general revenues, which is not pre-empted, or in some other way that does not impose on oil and chemicals the disproportionate burden which was the essential reason for the pre-emption written in 114-C.

Accordingly, it is our contention that New Jersey spill fund alone transgresses the pre-emption and should be accordingly set aside.

Warren E. Burger:

Ms. Jacobson.

Mary Carol Jacobson:

Thank you, Mr. Chief Justice, and may it please the Court:

New Jersey has one of the worst, if not the worst hazardous waste problem in the country.

We have 97 sites, either currently on the national priority list, or nominated to the national priority list, maintained by the United States Environmental Protection Agency.

This is a list of the worst sites nationwide.

New Jersey not only has more sites than any other state but has more than ten percent of all the sites in the country, on the list.

Given the extent of this problem, which actually reaches far beyond the priority sites, those that actually make the list, because of this problem massive amount of resources are needed to clean up these sites in order to protect the public and the environment.

The New Jersey Legislature responded to the hazardous substance pollution problem and the threat of oil spills to the state’s coast and tourist industry in 1977 when it adopted the Spill Compensation and Control Act.

The Spill Act provided strong liability provisions in order to have responsible parties pay for as much of the cleanup as possible, but it also provided a funding source for those cleanups where responsible parties were not available to finance the work.

New Jersey relied almost exclusively on the Spill Act for funding of hazardous substance cleanup from 1977 until Congress adopted the federal Superfund Act in December of 1980.

The federal Act provided funding for the cleanup of top priority sites nationwide.

Its focus was limited to priority sites because of the restricted amount of financing that was made available on the federal level.

Given this limited federal financing, Congress itself recognized that active state participation and financing were critical to achieve the cleanup goals envisioned by Congress.

Several members of the New Jersey Congressional delegation were actively involved in the legislative process that led up to the adoption of the Superfund Act, most notably Senator Bill Bradley and Congressman James Florio.

They were well aware of the state’s funding mechanism and were very concerned about the impact that the new law would have on New Jersey’s ability to continue its spill fund taxing scheme.

Mary Carol Jacobson:

Senator Bradley was especially concerned about the impact that Section 114-C would have on the New Jersey Spill Act.

I’d like to read that language of Section [= 114-C]:

“Except as provided in this Act, no person may be required to contribute to any fund, the purpose of which is to pay compensation for claims for any cost of response or damages or claims which may be compensated under this Subchapter. “

Senator Bradley then questioned Senator Jennings Randolph who was Chairman of the Committee on Environment and Public Works which had reported the bill to the Senate as to the effect of this language on the New Jersey fund.

The New Jersey fund was thus the particular context for the colloquy that occurred.

The gist of the Bradley-Randolph colloquy which is quoted extensively in the briefs, is that states may levy special taxes on industry to support hazardous substance cleanups and related costs not compensated on the federal level, and among the categories of expenditures from state funds that were explicitly found appropriate in the colloquy were that state funds could be used to pay for the ten percent state share that Superfund requires as a prerequisite for financing remedial actions on the federal level.

They also specifically said that state funds could be made available for sites that were eligible for compensation on the federal level but where no federal financing was actually provided.

And thirdly, they said that state funds were available for cleanup costs at sites that were initially undertaken by the federal fund but where the work had to be stopped prior to actual completion of the work.

Although Mr. Gribbon stated that there was an argument that they were talking about state funds collected prior to the effective date of the Act, that simply is not borne out on the face of the colloquy.

They did mention in their discussion of the statute that there would be absolutely no pre-emption whatsoever for funds collected prior to the effective date of the federal Act.

When they got to the end of the colloquy, however, they talked about particular exemptions from pre-emption that were available under the language of Section 114-C.

They would have had no reason to talk about exemptions for funds collected prior to the effective date of the Act because they weren’t pre-empted at all.

In essence, then, the language of Section 114-C was drafted to enable the states to supplement but not to duplicate the federal cleanup program.

Since the adoption of the Superfund Act, New Jersey has administered its state program to supplement federal cleanup efforts.

As interpreted and applied, therefore, New Jersey is using its special tax to finance cleanups either not covered on the federal level or not actually compensated by Superfund.

Those are the two kinds of test endorsed by the New Jersey Supreme Court, the New Jersey fund could be used for items not covered or not actually compensated.

Exxon’s assertion that the state has misspent Spill Fund monies, under our own interpretation of Section 114-C, is first of all irrelevant and second of all, it’s flatly wrong.

The assertion is irrelevant because it’s not part of the record in this case.

The documents that they rely upon were lodged with the Court by Exxon in recent days, but they were not relied on by the court below.

Secondly, this assertion is not necessary to the decision in this case, and in any event is one that demands a full factual development in another proceeding.

The Court here is asked to define the permissible uses of a special state tax in the hazardous waste cleanup area in light of Section 114-C.

This is a legal issue, not a factual issue, and it had always been treated as such by both of the parties until Exxon reached this Court.

Once that legal determination is made as to what uses are permissible under the federal Act, Exxon may then decide to challenge the state’s compliance with that legal determination.

Such a proceeding is not his case, which was decided on cross motions for summary judgment on the extremely limited record.

Exxon recognized as early as the state Tax Court that this was a matter for legal determination and not a factual issue.

Beyond that, Exxon had distorted the annual reports that it has submitted to this Court.

Those reports simply do not support Exxon’s contention that the Spill Fund money has been misspent.

They focus on two different sites, the Chemical Control and the Goose Farm site.

The reports they rely upon were compiled in fiscal years, and the year they point to as being most… or the worst violation by New Jersey was 1981.

Fiscal year 1981 runs from June of 1980… or July 1st of 1980 to June 30th of 1981, and a good almost six months of that period was before the federal Act was ever adopted.

Mary Carol Jacobson:

Also, the Chemical Control facility that they focus on actually blew up in April of 1981.

It was a toxic time bomb that did explode.

The State of New Jersey couldn’t wait for the federal government to make its decision to pass a federal statute.

They had to move in right away in April of 1980 and committed massive amounts of funds.

In fact, they actually wiped out the existing balance of the fund in 1980, responding to this particular site.

Exxon also doesn’t recognize that there was a start-up period that EPA went through with the Superfund Act, that there was no rational contingence plan, no list and so forth, until July of ’82.

Beyond that, New Jersey did apply for federal funds for both the Chemical Control and the Goose Farm sites from the only then available source, which was Section 311-K under the Federal Clean Water Act.

A schedule attached to the last page of the audit report for fiscal years 1983 and 1984, which Exxon has lodged with the Court, reflects the federal reimbursement under this program.

New Jersey certainly tried to get the federal government involved in the Chemical Control and Goose Farm sites and succeeded on a limited basis.

Finally, as the May 1985 report, recently lodged with the Court by Exxon, notes, a major settlement occurred in 1984 between the Spill Fund and the company that had been under contract to the state to provide cleanup costs for those two sites.

Disputes over the amounts due and owing from that 1980 explosion have thus led to expenditures in years subsequent to 1980.

Exxon’s factual argument must thus be rejected as unsupportable as well as irrelevant to this case.

Returning to the real issue at hand, which is the meaning of Section 114-C, it’s important to remember that Congress did not say that states could not tax… or could not have special taxes to fund hazardous waste cleanups.

Rather, Congress linked the restriction on special state taxation to cleanup and damage coverage on the federal level.

They specifically said, to claims which may be compensated under Superfund.

At this point I would like to address what Exxon claims, there were two major strains of this legislation.

I think they’re wrong on both counts of the themes that were important to Congress.

Exxon claims that Congress had some interest in protecting the petrochemical industry from a double tax.

As the Solicitor General points out, Section 114-C is not limited in any way to petrochemical companies.

The language reads:

“No person may be required to contribute to any tax. “

Even though there had been some discussion of avoiding a double tax on the petrochemical industry, particularly in the context of the Oil Spill legislation which predated the Superfund Act, in the waning days of the Congressional session Congress came up with another formulation.

They endorsed, “no person”, which would limit a state’s tax, a special tax to support a state fund, not simply a tax on the petrochemical industry.

So, Exxon is wrong on that count.

It simply is not supported by the language.

The second thrust of their argument was a national uniformity argument which we can agree with only up to a point.

There was some concern by Congress to have a national program.

They created the National Contingency Plan and the National Priority List, and clearly wanted to have the resources available on the federal level to set the tone, set the pace for the rest of the nation.

However, they did allow states quite a bit of leeway.

If you look at Section 114-A of the Act, it explicitly states that the states may add whatever requirements they want in regard to hazardous substance response actions.

Mary Carol Jacobson:

In addition, Section 104 of the Act requires extensive state participation throughout the cleanup process.

John Paul Stevens:

May I just interrupt a moment.

Don’t those provisions just generally apply to state action that might well be financed from general revenues?

Mary Carol Jacobson:


John Paul Stevens:

Section 114-A, for example, doesn’t that just apply to state action that could well be financed by general tax revenues instead of from the special fund?

Mary Carol Jacobson:

–I don’t believe it’s limited to just–

John Paul Stevens:

Maybe it’s not limited, but at least it would be effective.

Mary Carol Jacobson:

–It would be effective as to those, yes.

John Paul Stevens:

Because, I have to confess, this language, does the New Jersey Spill Fund provide money to clean up damages that could be compensated under the federal Act?

Mary Carol Jacobson:

Not as interpreted and applied subsequent to the adoption of Section 114-C.

Since Congress adopted that statute, the State has administered the Act in accord with our interpretation, which allows for the supplementation of the federal program but not the duplication of the federal program.

The way that this is applied on a practical basis is that the State has maximized its use of the federal program and we feel that the actual compensation test enunciated by the New Jersey Supreme Court, when given a practical application, forces us into the federal program to take advantage of whatever opportunities are available to us on the federal level.

It does place a restriction on us because the site, for example, is on the national priority list.

New Jersey has to pursue federal funding for that site, and if it is still realistically eligible for such compensation the State could not fund that site.

John Paul Stevens:

What do you mean by “realistically eligible”?

I guess there are priorities, and a lot of sites are eligible that may not actually get any money.

You say they are not realistically eligible unless they get the money, is that it?

Mary Carol Jacobson:

While there is a possibility, a reasonable possibility that the money will be forthcoming… for example, if EPA says to New Jersey in regard to a particular site, it’s on the national priority list but we don’t have enough money to go around, therefore we cannot fund this site, at that point the state could step in and use its state fund.

Before that, if New Jersey wanted to upset federal priorities, for example, or if they wanted to fund a cleanup that was not consistent with the National Contingency Plan, or assuming one that… where they disagreed, suppose there were two alternatives under the Plan and EPA endorsed one and New Jersey endorsed a different cleanup, under those circumstances we would have to use general revenues because there was a source of federal funding that was available to us if we had gone along with the federal plan, with the federal program.

John Paul Stevens:

Would you explain to me once, I know you have got it in your brief but I have a little trouble following it, why isn’t 114-C duplicative of 114-B under your present argument?

Mary Carol Jacobson:

Well, it comes right out of the argument I’ve just made.

Section 114-C limits New Jersey from spending its special tax for sites that are realistically eligible, where there is some good chance that we are going to get financing.

John Paul Stevens:

Well, if the chance is good enough so that you actually get the money, then 114-B would prohibit the–

Mary Carol Jacobson:

114-B and also 114-C.

There is some overlap.

114-B goes directly to whether… prevents double compensation, and that has a greater applicability than 114-C because it prevents double compensation from any source.

If a claimant had gotten a tort remedy, for example, or an insurance recovery, it would prevent recover–

Byron R. White:

–Are you defending the decision below and all of its ramifications?

Mary Carol Jacobson:

–We have taken the actual compensation part of the decision below and have given it what we feel to be a practical application, and so we start at the same thing.

Byron R. White:

Didn’t the court below say that New Jersey is pre-empted only in those instances where Superfund actually pays something?

Mary Carol Jacobson:

They use the terms “actual compensation”.

Byron R. White:

Do you defend that?

Mary Carol Jacobson:

We defend the actual compensation test as given in a practical way.

Byron R. White:

Any other claim, New Jersey may go right ahead as long as Superfund hasn’t actually paid even though there is a realistic chance that it might?

Mary Carol Jacobson:

We would differ at the point.

The New Jersey Supreme Court didn’t put any flesh on the bones of the actual compensation test, and when we looked at the test and were faced with the problem of implementing it, we felt that the court had not recognized the important state role.

Byron R. White:

So, you do request us to put quite a gloss on… if we agree with you, we must put quite a gloss on the New Jersey Supreme Court’s opinion?

Mary Carol Jacobson:

A gloss in terms of how you practically apply it, yes.

You take it beyond what they have said.

Byron R. White:

Do you think we are in a position really to do that?

Did you make this kind of an argument in the New Jersey court?

Mary Carol Jacobson:

Yes, we have made this argument from–

Byron R. White:

I would have thought you would have made the argument that they bought.

Mary Carol Jacobson:

–We think this is just an extension of their argument and one, frankly, that gives it a practical application.

We don’t see it as being–

Byron R. White:

It’s a narrowing or their argument, isn’t it?

Mary Carol Jacobson:

–It goes beyond their argument.

Byron R. White:

It sounds to me like… the New Jersey court, it seems to me, gave the State of New Jersey much more freedom than you say, that you now ask for.

Mary Carol Jacobson:

Except, the New Jersey court did not address how the test was to be applied, although they did suggest at page 35 in the Appendix to the Jurisdictional Statement, that Congress contemplated that the federal government would attempt to deal with the problems of the most seriously affected sites and to allow states to maintain a compensation fund or to use general revenues should they choose, to conduct their own cleanup efforts on those sites not receiving Superfund compensation.

So, they did recognize the national priority scheme by the federal government, and–

Byron R. White:

Do you agree, may not a state be a claimant under the Superfund program?

Mary Carol Jacobson:

–The state is the claimant under the Superfund program for natural resource damages only.

We agree with the Solicitor General that when you use “claims” in a technical sense as a term of art under the Superfund Act, that a state’s own response costs are not claims.

You don’t have to go through the claims process set forth in Section 112, for example.

Byron R. White:

Suppose a state goes ahead and cleans up a site.

May it make a claim on Superfund?

Mary Carol Jacobson:

The federal fund had not been operated that way by EPA.

They do not operate on a reimbursement basis.

They operate on a contractual or cooperative agreement basis in which the state must agree up front to provide ten percent of the costs of any remedial action.

So, it’s not a reimbursement program.

Byron R. White:

I see.

May I ask while you’re interrupted, too, do you agree with your opponent that really only New Jersey statute is at issue in this, that he contends that your statute is unique in having this special fund.

Is that correct?

Mary Carol Jacobson:

Relying upon the review of state statutes that Exxon has included in its brief, our statute does seem to be different from other statutes.

That may be a timing… there may be a timing issue in there, in that ours was adopted in 1977.

In fact, in many ways it was the model for the federal Superfund Act.

And, this litigation was brought almost on the very heels of the adoption of the statute, so other states were put on notice, beware, you may run into some litigation if you adopt the same kind of statute New Jersey has.

Interestingly, though, if you look at their review the majority of the statutes are financed by some sort of special tax or fee, either on waste generation or licensing or so forth, so that states have relied upon special funds, some sort of dedicated fund, as the way to provide their share of federal… of the federal cleanup program, and also whatever falls outside of the federal cleanup program.

If you look at the two schemes, the federal and the state schemes, it’s helpful in finding out what the State of New Jersey is able to do under the statute.

Under the Superfund Act and the National Contingency Plan, the Superfund may be used to finance up to 90 percent of the cost of cleanup at sites on the national priority list.

States must pay ten percent of the cost or more, depending on whether they owned or operated the particular site in issue.

States are also responsible for maintenance costs at sites.

If a site is not on the national priority list, however, it’s not eligible for federally financed remedial action.

Superfund may also be used to finance emergency removal actions in acute situations such as where you have acutely toxic substances or fire, or explosion is threatened, or public drinking water supplies are threatened.

These emergency actions may continue for six months or until $1 million is spent, whichever comes first.

Those two, this emergency removal and the long-term cleanup action, those two areas form the heart of the federal Act.

Given that federal coverage, what is left for New Jersey?

Actually, quite a lot, if you look at the state scheme in relation to the federal scheme.

First, in regard to remedial actions, the states are responsible for ten percent of the share of the costs, and perhaps even more.

Since that is not eligible for compensation on the federal level, that is something that’s clearly an appropriate area of state fund expenditure.

Both the Bradley-Randolph colloquy and some further legislative history from Congressman Florio in the House debate, support this, although Exxon has never conceded this point.

Beyond that is the issue of petroleum spills.

Exxon has conceded that the state may use its special tax to finance the cleanup and removal of petroleum spills and related damage claims.

They tend to make this… or claim that this is a peripheral purpose of the New Jersey fund, but if you look at the statute itself and the legislative findings, it’s crystal-clear that the state was very concerned about petroleum spills because of our beaches, the tourist industry, and so forth.

Having a contingency plan available in case there is a catastrophic occurrence in regard to petroleum is thus an essential part of the New Jersey fund.

The New Jersey fund also provided coverage for property damage.

Although Congress debated the possibility of covering property damage, they decided at the last minute to exclude it from coverage under Superfund so that’s another area that the New Jersey fund may be used for.

Beyond that, the New Jersey fund may be used for administrative costs, personnel, equipment expenditures, and things of that nature.

All of these areas are significant, and are those areas not covered on the federal level.

Consequently, they may appropriately be the subject of a state fund.

Mary Carol Jacobson:

Interestingly, Exxon started out in this case saying that we could use our fund for very few of these purposes.

In fact, even in the jurisdictional statement at page 8 they suggest that the only possible use of the state fund is to pay for prepositioning costs which are mentioned in the second part of Section 114-C.

It was clear from the legislative history, however, that this use, prepositioning and equipment cost, was simply illustrative and not exclusive.

Another area that has been ignored by Exxon are the regulations contained in the National Contingency Plan relating to eligibility.

Those regulations provide… and as they have been interpreted by EPA, provide that eligibility for Superfund financing is done on a case by case basis because of the limited funding involved.

Exxon talks about eligibility and compensability, but it never gets right down to the fact that what may be compensated by Superfund is to be determined by EPA on a case by case basis because of the realistic funding limitations faced on the federal level.

It is this opportunity to supplement the federal fund in cases where Congress has not been able to cover the area that gave rise to the actual compensation test that was endorsed by the New Jersey Supreme Court and that we have already discussed.

One other important factor is to realize that this pre-emption language came out of the oil spill context where it had a very different effect.

In the oil spill context, when they first debated pre-emption, the Congress was contemplating a program that was much more comprehensive, be it in a limited sphere, than the Superfund program.

They were looking at a program to take care of all future spills into navigable waters, and cover all related damages of the kinds that Congress deems could be accommodated with the funds to be made available.

When they shifted the concept into the Superfund area, they broadened the coverage in the sense of applying to abandoned sites.

It no longer was a question of taking care of future spills, but all the sites that had already been polluted, and recognized that they could only address this on a priority basis.

Therefore the federal coverage, in a sense, shrank to what they actually could cover and thereby expanded to what the states would be able to use a special state tax for.

If you look at the legislative history that comes out of the Oil Spill bills, the House was very definite in saying that the pre-emption was limited in nature and was not meant to displace the states.

States were expected to have state funds to use to supplement the federal program, and that’s essentially what we say Congress intended when they adopted the Superfund measure, to allow the states to supplement although not to duplicate federal cleanup efforts.

Although New Jersey has not taken legislative action to change its spill fund, one of the reasons for that is that this litigation has been pending for the last four and a half years and in the course of that time the state fund has been administered consistently with the position that we have taken in this litigation, so the fact that the state statute recognized that a federal Act would be adopted, certainly is not at all dispositive of the issue before this Court.

When you look at the legislative history of this particular provision, when you look at the language of the provision which relates the limits on state taxation to coverage on the federal level… I mean, when you look at the purpose of the statute as a whole, of promoting cleanups in New Jersey and elsewhere, it is inconceivable to us that Congress could have intended to wipe out the New Jersey Spill Act tax.

The wiping out of the tax would mean that the state would have to delay cleanups, perhaps eliminate cleanups, go back to the drawing board to come up with a new tax, and where you have a dedicated tax you don’t have to compete with general revenues for much needed cleanup dollars.

In any event, this was a decision made by the New Jersey legislature that cleanup should be done by the oil and chemical companies and those people who benefited from the substances rather than from the general taxpayers.

If there are no further questions, I’ll conclude the argument for New Jersey.

Thank you.

Warren E. Burger:

Very well.

Mr. Gribbon, do you have anything further?

Daniel M. Gribbon:

If you please, Mr. Chief Justice.

May if please the Court, let me make clear that it is our position that this is a question of law.

The case was put to the courts below on motions for summary judgment as to what the proper meaning of Section 114-C was.

Our view of it differs from that of the New Jersey District Court and it also differs, as Justice White pointed out, from the view that the State is now putting up here.

We do regard that as a question of law, as to just what Congress meant in enacting 114-C.

The figures that it referred to came into this case in response to New Jersey’s defense of, don’t look to the purpose, look at what we did with the money.

And that is a basic difference between them.

Daniel M. Gribbon:

We believe that pre-emption clearly goes to purpose, and really has nothing to do with the manner in which the expenditures were made.

So, we made the alternative argument that based on New Jersey’s own official records, it was clear that they had not limited their expenditures to non-CERCLA qualified sites, and that is all that the legal issue is about.

Lest there be too much concern for New Jersey being hobbled in its efforts to do something about hazardous waste, this is a very small pre-emption that Congress felt necessary when it put the whole burden of the federal waste cleanup program on oil and chemicals.

It has nothing to do with general revenues.

I believe that Justice Stevens pointed out, they can spend their general revenues any way they want to.

It has nothing to do with money that they can borrow, and New Jersey has borrowed $100 million and has it sitting up there, which it hasn’t used.

So, it really is a very modest inroad into what they might do and it was put there clearly, as the legislative history will show, because Congress was concerned about duplicative taxes, not just New Jersey but any other state, on oil and chemicals, which largely out of expediency had been made to carry the whole financial burden of the federal waste program.

John Paul Stevens:

Mr. Gribbon, on that, right on that point, in your view could they have a special fund raised from the oil and chemical companies just to finance their ten percent share of–

Daniel M. Gribbon:

I think they could.

John Paul Stevens:

–But that’s hard to square with the language–

Daniel M. Gribbon:

That doesn’t qualify.

They can’t get that ten percent from the federal government under CERCLA.

That has to be paid by the state.

John Paul Stevens:

–But if you’re looking at the purpose of the money, it’s to clean up things that are eligible.

Daniel M. Gribbon:

Legislative action frequently is not complete, and this was done in an awful hurry.

For example, the language is broader than oil and chemicals, as counsel has pointed out.

Our position there is that the legislative history is so very clear that the only thing they were worried about was the duplicative tax on oil and chemicals.

That would probably be a decision that the Court would arrive at.

And by the way, Justice Stevens, counsel conceded that there was a certain amount of overlap between 114-B and 114-C.

There is so much overlap there that 114-C isn’t necessary.

114-B takes care of the double taxation problem which they would like to limit 114-C to.

Warren E. Burger:

Thank you, counsel.

The case is submitted.

The honorable Court is now adjourned until tomorrow at 10 o’clock.