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WASHINGTON-A federal appeals court decision upholding the constitutionality of Superfund's imposition of retroactive liability leaves legislation as the only possibility for reform, Superfund reform advocates say.

If anything, the decision demonstrates that Superfund is still in dire need of reform, they say.

A three-judge panel of the 11th U.S. Circuit Court of Appeals in Atlanta ruled unanimously in United States vs. Olin Corp. last week that a district court judge had erred in ruling that Superfund retroactive liability did not apply to the cleanup of an Alabama site once used by Olin Corp. for certain manufacturing chemicals from 1951 to 1982.

U.S. District Court Judge William Brevard Hand of Mobile, Ala., ruled last year that Congress had never expressly intended the Comprehensive Environmental Response, Compensation and Liability Act of 1980, which created Superfund, to apply liability retroactively (BI, June 3, 1996; May 27, 1996).

Judge Hand also held that Superfund couldn't be enforced in the Olin case because of the U.S. Constitution's commerce clause, which allows Congress to regulate intrastate activities that substantially affect interstate commerce. Judge Hand said that the pollution at the McIntosh, Ala., site did not cross state lines and so was beyond the scope of the commerce clause.

The 11th Circuit disagreed on both counts.

"Because the legislative history of CERCLA documents how the unregulated management of hazardous substances, even strictly within individual states, significantly impacts interstate commerce, we conclude the statute can be applied constitutionally under the circumstances of this case," Senior Circuit Judge Phyllis A. Kravitch wrote for the 11th Circuit.

The appeals court also dismissed the argument that Congress had not intended Superfund liability to be applied retroactively. Although CERCLA "contains no explicit statement regarding retroactive application of its cleanup liability provisions," Congress clearly intended liability to indeed apply retroactively, wrote Judge Kravitch. She cited the remarks of those commenting on the bill as it was debated, CERCLA's own language holding that its reach extended to "any person who at the time of disposal owned or operated" a facility where hazardous substances had been deposited, and other indications of legislative intent.

Disappointed as they are that the 11th Circuit reversed Judge Hand's decision, Superfund reform advocates were neither surprised nor particularly discouraged about its impact on current congressional efforts to reform the pollution law.

"It might have had some impact if the case had gone the other way. It hasn't changed the playing field at all," said John Arlington, senior counsel for the American Insurance Assn. in Washington.

Mr. Arlington added that he believes the case has gone as far as it will. "I think it's highly unlikely this case will be appealed. It was a unanimous decision and Olin is already cleaning up the site, so it's really a moot case."

Peter Lefkin, senior vp-government and industry affairs for Fireman's Fund Insurance Co. in Washington, agreed that the decision will have "fairly little" impact on congressional Superfund action.

"I think most people had expected the Olin decision to be reversed and were predicating their hopes for the overhaul of the Superfund program based upon two facts: One, the taxes had expired and Ways and Means Committee Chairman (Bill) Archer (R-Texas) said they would not be reauthorized until the program was overhauled; and, two, the Superfund liability regime does not work even if it is legal," Mr. Lefkin said.

David Farmer, senior vp-federal affairs in the Alliance of American Insurers' Washington office, said: "Basically, this decision simply emphasizes the need for congressional reform of the Superfund statute. We are disappointed that the 11th Circuit Court of Appeals did not agree with the trial court's decision. We respectfully disagree with their analysis.

"It is going to energize the reform community into redoubling their efforts to reform this law, which is flawed, unfair and poorly administered," he predicted.

But one pro-reform observer is concerned that the decision might slow down reform efforts on Capitol Hill.

"We are disappointed but not surprised by the decision. We believed that a decision favoring Olin would have given Congress a bit more motivation to complete Superfund reform this year. Now, unfortunately, that extra motivation won't be there," said Paul Brown, director of government affairs for the Risk & Insurance Management Society Inc. in New York.

"The decision, though, clearly indicates that Congress must address the issues of joint and retroactive liability quickly to avoid any more confusion in the future," he added.

United States vs. Olin Corp., 11th U.S. Circuit Court of Appeals; No. 96-6645, March 25, 1997