DIVISION OF LEGISLATIVE SERVICES
VIRGINIA LEGISLATIVE ISSUE BRIEF
Number 24                            July 2001

Regulation of Out-of-State Waste:

Waste Management Holdings v. Gilmore

Dennis A. Walter
Staff Attorney

Austin Wallace, a research assistant with the Division of Legislative Services,
contributed to the preparation of this Issue Brief.

On June 4, 2001, the United States Court of Appeals for the Fourth Circuit issued a decision in the case of Waste Management Holdings, et al. v. Gilmore, No. 00-1185. The plaintiffs, a waste management company, the owners of a waste transfer facility, the owners of a waste transfer company, Charles City County, and the owners of a landfill in Brunswick County, commenced an action in federal court seeking a declaratory judgment on the constitutionality of a number of Virginia statutes enacted in 1999. These statutes sought to regulate the disposal of municipal solid waste (MSW) in Virginia by limiting the amount of waste that could be disposed of in Virginia landfills and by imposing additional regulations on the transport of waste on Virginia's roads and rivers. The defendants in the case were Governor James Gilmore, Secretary of Natural Resources John Paul Woodley, and Director Dennis Treacy of the Department of Environmental Quality (DEQ), in their official capacities.

In February 2000, United States District Judge James Spencer issued a decision declaring the statutory provisions unconstitutional. The Commonwealth appealed Judge Spencer's decision, and in June 2001, the Fourth Circuit Court of Appeals issued a decision affirming Judge Spencer's decision with respect to the statutory provisions (i) creating a cap on the amount of waste that can be disposed of in Virginia landfills, (ii) banning the transport of waste by barge on the Rappahannock, James, and York Rivers, and (iii) creating additional regulations on the transport of waste by truck. The court returned the case to Judge Spencer for further proceedings with respect to the statutory provisions creating additional regulations for the transport of waste by barge on Virginia rivers.

Since the issuance of the June 4, 2001, decision, the Commonwealth has requested that the Fourth Circuit Court of Appeals reconsider its decision. This request is currently pending. Should the request be denied, the Commonwealth may still appeal the decision to the United States Supreme Court. At the time this issue brief was written the Attorney General had not indicated whether such an appeal will be pursued.

Background

The Waste Management case arose from the enactment of a number of statutes in 1999 that sought to regulate the transportation and disposal of MSW in Virginia landfills. MSW generally includes solid waste generated by residential, commercial, and certain industrial uses. DEQ has reported that, as of November 1998, there were 70 active landfills in Virginia accepting MSW, many of which accepted out-of-state MSW. While the exact number of landfills in Virginia that have accepted out-of-state MSW has remained in dispute, seven "regional" landfills were responsible for the disposal of 97 percent of the out-of-state MSW in Virginia. These regional landfills are privately operated under "host agreements" with the localities in which they are located. Pursuant to these agreements, the regional landfill pays the host county a fee based on the volume of waste deposited at the landfill. These agreements also require that the operators provide certain services to the locality, including free waste disposal and recycling services for the locality and funding the closure of any local landfills that do not comply with federal and state regulations.

In order to meet the financial requirements to operate these landfill facilities and perform the other obligations contained in the host agreements, the operators of these regional landfills rely heavily on the disposal of MSW generated outside of Virginia. During the course of the Waste Management litigation, information was presented by the parties that 75 percent of the MSW accepted at landfills operated by Waste Management was generated outside Virginia. For the Brunswick regional landfill, it was estimated that almost 100 percent of the MSW deposited there originated outside Virginia.

Pursuant to the host agreements it has signed, Waste Management is authorized to dispose of more than 2,000 tons of MSW per day at four of the five regional landfills it operates. Waste Management expected that for the year 1999 it would exceed that daily amount at these facilities, in some cases by a substantial amount. For example, in 1998, the Charles City County Landfill accepted less than 2,000 tons per day; in 1999, the landfill accepted more than 2,800 tons per day. The Brunswick landfill, which is owned and operated by plaintiff Brunswick Waste Management Facility, LLC, accepted approximately 2,800 tons per day in 1999, as compared with 2,400 tons per day in 1998. Before the enactment of the statutory provisions in 1999, Brunswick anticipated that more than 5,000 tons per day of out-of-state MSW would be disposed of at its landfill. In contrast to these out-of-state MSW disposal amounts, there were no landfills that accepted only Virginia-generated MSW at a level of more than 2,000 tons per day in 1998 or 1999, and it was anticipated that only one or two of these might ever be expected to reach that level in the future. During the course of the litigation, DEQ stated that most landfills operated by local governments receive less than 100 tons of MSW per day, and a few receive closer to 500 tons per day.

The issue of out-of-state MSW reemerged as a story of national and local prominence during 1999 as plans to close the Fresh Kills Landfill in New York City were finalized. As the plans provided for the Fresh Kills Landfill to stop accepting waste in December 2001, the New York City Department of Sanitation began negotiating interim and long-term contracts for the disposal of waste after Fresh Kills closed. Waste Management was awarded a number of contracts for the interim disposal of this waste, and much of the MSW handled by Waste Management under these contracts was deposited in its regional landfills in Virginia. In addition to the interim disposal contracts, Waste Management bid on contracts for the long-term disposal of more than 12,000 tons per day of New York City-generated residential MSW.

In its request for bid proposals, the New York City Department of Sanitation indicated that preference would be given to proposals that called for the transportation of MSW by rail or barge over those that called for transportation by truck. In response to New York City's preference for non-truck transportation, Waste Management proposed to send approximately 60 percent of the New York City-generated residential MSW to the Charles City County Landfill by barge. Other than waste generated on Tangier Island and other Virginia islands, no Virginia-generated MSW is transported to Virginia landfills by water.

At the time it was negotiating for the residential MSW contracts, Waste Management also had contracts to dispose of commercial waste generated in New York City and surrounding communities. Waste Management sent this commercial waste to the Charles City County Landfill by truck; it planned to convert its transportation operations for this commercial waste from truck-centered to barge-centered should they receive the long-term disposal contracts for the disposal of residential MSW.

In furtherance of its plans to transport the commercial waste and residential MSW by barge, Waste Management negotiated a contract with plaintiff Hale Intermodal Marine Company for the lease of four barges. Each barge would be capable of carrying 5,000 tons of MSW in containers that can be stacked five high. In addition, Waste Management agreed to purchase 400 containers from another company for use in transporting the waste.

Waste Management and Hale expected that they would begin barging waste to Virginia in March or April 1999. Waste Management planned to transport approximately 2,500 tons of MSW per day from New York City to a transfer facility on the James River. This waste would then be unloaded and delivered by truck to the Charles City County Landfill for disposal. In order to facilitate the transfer of the waste from the barges to trucks, Waste Management invested more than $5 million in improvements at the James River facility and more than $5 million for cranes to be used in offloading the containers from the barges.

1999 Code of Virginia Provisions

Prior to the 1999 Session of the General Assembly, DEQ issued a report on the increasing importation of MSW into Virginia from other states. During the 1999 Session of the General Assembly, bills containing regulations on waste disposal in Virginia were passed and signed into law. There are five basic provisions of the legislation passed in 1999:

1. "The Cap Provision" (new § 10.1-1408.3). The Cap Provision provides that the amount of waste that any landfill in Virginia may accept cannot exceed either 2,000 tons per day or the average amount accepted by the landfill in 1998, whichever is greater. Under the statute, the Virginia Waste Management Board may grant exceptions if, after considering the impacts on public health, the environment, and the transportation infrastructure, the Board determines that granting the exception would protect human health and the environment, there is a need for the additional capacity, and the increase is consistent with the maximum disposal limits.

2. "The Stacking Provision" (amendments to § 10.1-1454.1). These amendments require the Waste Management Board to promulgate regulations governing the transportation of MSW on rivers in Virginia by ship, barge or other vessel and the loading and unloading of such waste. Under the statute, these regulations must prohibit the stacking of containerized waste more than two containers high. Prior to the adoption of these regulations, no facility in Virginia is permitted to receive waste by ship, barge, or other vessel.

3. "The Three-Rivers Ban" (new § 10.1-1454.2). The Three-Rivers Ban prohibits the commercial transportation of hazardous or nonhazardous solid waste by ship, barge or other vessel upon the Rappahannock, James, and York Rivers.

4. "The Trucking Certification Provision" (amendments to § 10.1-1408.1). This provision prohibits landfill operators from accepting MSW from vehicles with four or more axles unless the transporter can certify that the waste in the vehicle is free of any substances that are not authorized to be disposed at the facility.

5. "The Four or More Axle Provision" (new § 10.1-1454.3). This provision requires the Board to adopt regulations concerning the commercial transport of MSW by "any tractor truck semitrailer combination with four or more axles." Included within these regulations is the requirement that owners of such trucks must make certain financial assurances; owners of trucks with less than four axles and owners of trucks carrying other cargo are not required to make such financial assurances.

Language was placed in the Stacking Provision, the Three-Rivers Ban and the Four or More Axle Provision that these regulations are to be enforced to the fullest extent permissible under the United States Constitution.

Case Analysis

Following the enactment of these provisions, the plaintiffs commenced an action in federal court challenging the constitutionality of the provisions.

In defense of the statutory provisions, the Attorney General first argued that the lawsuit was barred by the doctrine of sovereign immunity under the Eleventh Amendment to the U.S. Constitution. The Eleventh Amendment provides that the "judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state[.]" The court rejected the defendants' argument, however, as the Eleventh Amendment does not prohibit lawsuits in federal court against state officers who are enforcing an unconstitutional statute. Accordingly, the court found that the lawsuit could proceed against Secretary Woodley and Director Treacy. The court held that the action must be dismissed as against Governor Gilmore, however, as his enforcement responsibilities with respect to the statutes in question were too remote.

The defendants next argued that localities in Virginia do not have the authority to enter into host agreements and, therefore, any agreements between the waste disposal companies and localities are invalid and unenforceable. Specifically, the defendants argued that under the Dillon Rule, which provides that localities possess only those powers that are (i) expressly granted to them by the General Assembly, (ii) necessarily or fairly implied in or incidental to any powers expressly granted, or (iii) essential and indispensable, the authority granted to localities for the disposal of waste could not be read as authorizing the making of host agreements. The court rejected this argument and held that § 15.2-932 of the Code of Virginia expressly authorizes localities to enter into contracts for the disposal of waste within the locality, regardless of whether the waste was generated within or outside the locality.

The defendants also argued that the statutes should be upheld because of the presence of savings clauses in the Stacking Provision, the Three-Rivers Ban, and the Four or More Axle Provision that provide that these provisions will be implemented only to the extent permissible under federal law. The court rejected this argument because it found that the savings clauses were completely inconsistent with the other language in the statutes and the savings clauses were, therefore, of no effect.

The court then examined the plaintiffs' arguments that the statutory provisions were unconstitutional because they violated the Commerce Clause and the Supremacy Clause found in the U.S. Constitution.

The Commerce Clause, located at Article I, § 8, clause 2 of the U.S. Constitution, reserves to Congress the power to "regulate commerce . . . among the several states[.]" From this express Congressional power, courts have recognized that the Commerce Clause also restricts the powers of states to regulate or impose burdens on interstate commerce. See, e.g., Fort Gratiot Sanitary Landfill, Inc. v. Michigan Department of Natural Resources, 504 U.S. 353 (1992). This limitation, known as the "dormant" or "negative" Commerce Clause, provides that, in the absence of Congressional approval, regulatory measures designed to benefit in-state interests at the expense of out-of-state interests are invalid. To determine whether state legislation violates the "dormant" Commerce Clause, a court must determine whether the state measure is basically a protectionist measure or whether it can reasonably be viewed as a law directed to legitimate local concerns that only incidentally affects interstate commerce.

Under the "dormant" Commerce Clause analysis, state laws that discriminate against out-of-state interests on their face will be held invalid unless the state can prove that (i) there is a justification for the law unrelated to economic protectionism, and (ii) there are no nondiscriminatory alternatives adequate to preserve the local interests at stake. See, e.g., Envtl. Tech. Council v. Sierra Club, 98 F.3d 774, 785 (4th Cir. 1996). If the court finds that a statute regulates out-of-state and in-state interests evenhandedly and only indirectly affects interstate commerce, the law will be held valid unless the burdens on commerce are clearly excessive in relation to the local benefits.

The "dormant" commerce clause analysis has been applied by courts around the country to statutes seeking to limit or prohibit the interstate transportation of waste. The U.S. Supreme Court has held that solid waste is an article of commerce and that, under the "dormant" Commerce Clause, state laws that impose burdens on waste generated outside the state and disposed of within the state are generally invalid. See, e.g., Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334 (1992); Fort Gratiot Sanitary Landfill, 504 U.S. 353.

After examining the historical background leading to the introduction of the legislation and the sequence of events leading to the enactment of the statutes, the court found that the General Assembly and the Governor acted with a discriminatory purpose against out-of-state waste. The court then looked to see if there was a justification for the enactment of the statutes other than economic protectionism and if there were any nondiscriminatory alternatives adequate to preserve the local interests. The court found that while the laws might be justified by a reason other than economic protectionism, such as the potential risks to public health by the transportation and disposal of MSW generated outside Virginia that does not meet the same restrictions and regulations as MSW generated within Virginia, the means used in the Cap Provision, the Trucking Certification Provision and the Four or More Axle Provision to address this concern were not the least discriminatory possible. The court did find, however, that the Stacking Provision and the Three-Rivers Ban could be valid under a "dormant" Commerce Clause analysis. The court found that there was a question of fact with respect to whether the Stacking Provision was the least discriminatory means of protecting the public health and safety; therefore, it sent this portion of the lawsuit back to the District Court for further proceedings.

The court then considered whether the remaining statutory provisions were violative of the Supremacy Clause found in the U.S. Constitution. Article VI of the U.S. Constitution provides that the "Constitution, and the laws of the United States which shall be made in pursuance thereof . . . shall be the supreme law of the land[.]" Generally, a court reviewing a statute to determine if it violates the Supremacy Clause will consider whether the state law impedes Congressional intent in a particular area. In determining whether federal law supercedes an action by a state, the courts look to (i) the pervasiveness of the federal regulatory scheme, (ii) the need for national uniformity, and (iii) the danger of conflict between state laws and the administration of the federal program. Pennsylvania v. Nelson, 350 U.S. 497 (1956). Accordingly, federal legislation that is enacted pursuant to Congress' constitutionally delegated authority will override conflicting state or local actions. Courts have held that even when Congress' intent in an area is unclear, any conflict between federal and state law must be resolved in favor of the federal law.

In determining the validity of the Three-Rivers Ban under the Supremacy Clause, the court noted that Congress has enacted a licensing scheme for the use of vessels such as barges in "coastwide trade" throughout the United States. The U.S. Supreme Court has held that such a license gives the license holder the right to operate freely in "state waters" subject only to state police powers. States may impose upon federal licensees reasonable, nondiscriminatory conservation and environmental protection measures otherwise within their police power, but a state may not completely exclude a federally licensed ship operating in interstate commerce from its waterways since the federal license is supreme over state laws. Waste Management, at 43.

After examining the provisions of the Three-Rivers Ban, the court found that the statute was in direct contradiction to the licensing scheme enacted by Congress and was, therefore, invalid under the Supremacy Clause. Accordingly, it affirmed the decision of Judge Spencer that the Three-Rivers Ban was unconstitutional.

Conclusion

As the Fourth Circuit noted in the Waste Management decision, the power of states to regulate the transport and disposal of out-of-state waste is severely limited. Under its constitutional powers, Congress can regulate the transport and disposal of waste, either by direct federal regulation or by authorizing the states to adopt regulations. As courts have noted, however, in order for a state law with respect to out-of-state waste to be valid, Congressional intent to authorize such regulation must be "unmistakably clear" or "expressly stated." See, e.g., Envtl. Tech Council, 98 F.3d 774. There currently are a number of bills before Congress that would grant states additional powers to regulate the importation of out-of-state waste. Similar bills have been introduced in previous sessions of Congress; none have passed. Until Congress acts, states such as Virginia will be limited in their ability to reduce or eliminate the amount of out-of-state MSW and other waste that is disposed of within their jurisdictions.

© Commonwealth of Virginia.