United States
Environmental Protection
Agency
Office of Solid Waste July 1982
and Emergency Response SW - 942
Washington, DC 20460
Solid Waste
&EPA Using Compensation
and Incentives
When Siting
Hazardous Waste
Management Facilities
-------
OTHER EPA HANDBOOKS IN THIS SERIES
Using Mediation When Siting Hazardous Waste Management Facilities—A Hand-
book
Discusses the new approach of using an independent environmental mediator to
help people resolve their differences. Describes what mediation is, what it can be
expected to accomplish, how to know when it is needed, and whom to go to for
assistance
Consulting with the Public When Siting Hazardous Waste Management Facilities—
A Handbook
Discusses techniques to help developers and State agencies communicate more
effectively with the public.
Identifying Potential New Sites for Hazardous Waste Management Facilities—A
Handbook
Discusses criteria and procedures that can be used to narrow the universe o1
possible facility locations to those with the most potential for withstanding
intensive environmental review.
This handbook was prepared by Urban Systems Research and Engineering,
Inc., Cambridge, Massachusetts, under contract number 68-01-5034.
Publication does not signify that the contents necessarily reflect the views of
the j U.S. Environmental Protection Agency. Identification of specific sites or
facilities does not represent endorsement by either the contractor or the Agency
of those establishments or the technologies employed. Mention of commercial
products does not constitute endorsement by the U.S. Government. Errors and
omissions are the sole responsibility of the authors.
Questions concerning this report should be addressed to: Curtis Haymore, U.S.
EPA, 401 M Street, SW., Office of Solid Waste (WH-562), Washington, D.C.
20460
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Using Compensation
and Incentives
When Siting
Hazardous Waste
Management Facilities
A Handbook
This handbook (SW-942) was prepared by
Robert McMahon, Cindy Ernst, Ray Miyares, and
Curtis Haymore for the Office of Solid Waste
US. F, y, Mr-".-""it,-! Fro1;\ ;,':>;i Agency
Rrg-on V :.;rr,•..••,/
230 Soutn U.J,,.Jorn Sir-set
Chicago, Illinois 60604
U. S. ENVIRONMENTAL PROTECTION AGENCY
1982
-------
Acknowledgments
This handbook is a product of the combined efforts of Urban Systems Research
and Engineering, Inc ; EPA's Office of Solid Waste; State agencies; and private
individuals concerned about the siting of hazardous waste management facilities.
Curtis Haymore served as EPA's Project Officer. In addition to his important
contributions to the text, his guidance and direction were essential in ensuring that
the handbook would be useful to States and to developers of hazardous waste
management facilities. At USR&E, Isabel Reiff and Robert McMahon served as
Project Directors for the research effort. Susan Farrell, Sharon Appel, and Mary Jo
Holin were the principal researchers. Robert McMahon is the principal author of
the handbook. Cindy Ernst and Ray Miyares made significant contributions, and
Jim Hudson and Steve Thomas served as internal reviewers at USR&E. Jo
Bachelder and Ellen Kane typed the numerous drafts of the handbook.
A number of State hazardous waste agencies and private developers participat-
ed in the research and review of the handbook. Their contributions and
cooperation are appreciated. Michael O'Hare, formerly of the MIT Energy Impacts
Project, made important contributions in the area of compensation theory and
techniques, and his work provided an excellent foundation for the project. The
significant work of MIT in the field of compensation is reflected in the bibliography.
Mr. O'Hare's review comments were constructive and are appreciated. Any errors
are, of course, the sole responsibility of the authors.
U,S. Environments! Protection Agency
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402
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Contents
Chapter 1. Introduction 1
Why Is Siting Controversial? 1
What Can Be Done? 3
Chapter 2. Compensation Techniques 5
Monetary Payments 5
In-Kind Replacement/Restoration Actions 8
Contingency Funds and Insurance 11
Land Value Guarantees 14
Chapters. Incentives 17
Chapter 4. State Roles 20
Should States Directly Provide Compensation or Incentives
for Private HWMFs? 20
What State Financing Methods Could Be Used? 22
Should States Require Private Facility Developers to Provide
Compensation or Incentives? 22
Chapter 5. Binding Agreements 27
Model Agreement Between a Community and a Facility Owner 27
Model Agreement Between a Facility Owner and an Individual 32
Appendix A. Mitigation Techniques 37
Introduction 37
Facility Design Changes 37
Facility Operation Changes 38
Selecting Mitigation Alternatives 39
Appendix B. Examples of State Compensation Legislation 43
Connecticut (Public Law 80-472) 43
Kentucky (KRS, Chapter 68) 43
Massachusetts (Chapter 21D of the General Laws) 44
iii
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Appendix C. Bibliography 47
Compensation Concepts, Strategies, and Implementation
Considerations 47
Compensation Case Studies and Examples 51
iv
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Chapter 1
Introduction
This handbook is one in a series designed to improve the process of siting new
facilities to manage hazardous waste. Participants in this process need to be aware
of all the technical facts, all the difficult, but necessary, trade-offs, and all the
techniques that can be used to address local concerns. This handbook discusses
two of those techniques: compensating people and communities for costs they
bear because of a facility in their locality, and providing incentives to localities for
hosting a facility to manage hazardous waste. No attempt is made to recommend a
plan for participants to follow, particularly regarding the complex process of
negotiating. The handbooks on consulting with the public and on environmental
mediation will discuss some of those techniques in greater detail. This handbook
provides information on compensation and incentives without prejudging their
usefulness in specific siting situations; it attempts to show how these techniques
can be valuable in overcoming many siting problems. The techniques discussed
assume that the facility already meets all Federal and State requirements.
WHY IS SITING CONTROVERSIAL?
Adverse effects occur when the characteristics of a specific facility interact with
the conditions existing at the site where the facility is located. Thus, a facility with a
capacity of 200,000 gallons per day may stimulate 40 trucks coming and going to
the facility each day. Site-specific access conditions and land use characteristics
will influence the severity of this traffic impact and the perception of its
significance. There may be few adverse effects in a heavily industrialized
community with existing good access to the facility. In a suburban location, on the
other hand, traffic may be a critical issue.
Obviously, the effects of a facility to manage hazardous waste are very site
specific and depend on local concerns. In general, however, the public is
concerned about environmental quality, health, quality of life, economic issues,
and burdens to public services. Potential effects include those shown in Exhibit 1.
These impacts may affect surrounding landowners, the host community, and
neighboring communities. Even when public concern centers on identifiable
potential effects of facilities, the community often views these effects differently
from "experts." The public emphasizes the uncertainty of risks and questions the
ability of Government, industry officials, or anyone to ensure long-term safety.
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Exhibit 1. Potential Adverse Effects Associated with Hazardous Waste
Facilities
s&tting, and cftgngos in visual
*
S^5SIS^S^^*^~ •^^t?*«?.^^^^^ • ' '•
*C;^'
ovttncuuw ' ., .. f i . *. ,!„ 1 !>' S*\* .' *t , ' ',' . , ? ,V
The construction of hazardous waste management facilities (HWMFs) also
provides positive benefits to individuals, groups, the community, and society as a
whole. For example, properly regulated facilities help eliminate "midnight dump-
ing" and provide environmentally sound disposal. These benefits, however, often
are distributed outside of the host community. Like other controversial facilities,
such as prisons,,,power plants, and airports, HWMFs have widespread societal
benefits and concentrated local costs and impacts.
-------
WHAT CAN BE DONE?
Many of the adverse effects listed in Exhibit 1 can be prevented or reduced; that
is, they can be mitigated. Mitigation represents the first line of defense in
addressing local concerns and will reduce the need to provide compensation and
incentives. Mitigation may involve, for example, redesigning a facility to provide
extra protection against ground-water pollution or noise. For a more detailed
discussion of mitigation, see Appendix A.
Compensation and incentives may be used to respond to any remaining adverse
effects by redistributing the costs and benefits that result from a hazardous waste
facility. Compensation and incentives are not required by the Resource Conserva-
tion and Recovery Act (RCRA), but may make hazardous waste facilities more
acceptable to the host and neighboring communities.
Compensation is a tool for developers and States to repay (not exclusively
monetarily) individuals, local governments, and groups for facing unavoidable,
intangible, and unpredictable adverse effects It is a means of dealing with impacts
that remain unmitigated even after strict regulatory requirements are met.
Compensation does not generate new costs: it redistributes siting burdens back to
the generators of hazardous waste.
Incentives (as used in this handbook) provide benefits above the costs
associated with a hazardous waste facility. If people are fully compensated for the
impacts of a facility, incentives will make them better off than they were before the
facility siting. It is a technique that may make facilities desirable by demonstrating a
developer's or State's goodwill.
The distinction between incentives and compensation, however, is not always
possible to make. It is almost impossible, for example, to determine the precise,
"correct" amount of compensation to apply in a siting situation. The distinction
can be useful in deciding what response to make in many situations. Exhibit 2,
using some typical impacts, illustrates the difference between the techniques.
Compensation and incentive payments are never bribes, secret contracts to act
against the public interest for personal gam Compensation and incentive
payments are public agreements to accept a benefit in exchange for bearing the
burden of a local hazardous waste facility.
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Exhibit 2. Sample Response* to Typical Facility Impacts
j^Slll'lS:^^
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Chapter 2
Compensation Techniques
Why compensate? All potential adverse effects of a new facility cannot be
eliminated, even with strict regulatory requirements and additional mitigation. The
remaining impacts result from technical problems, such as the difficulty of
predicting the type and magnitude of impacts because of a lack of knowledge;
uncertainty, because some occurrences, such as tornadoes and truck accidents,
occur by chance; and economic reasons, because it may be cheaper to pay for
some consequences than to analyze, estimate, and avoid them. Compensation
guarantees that no citizen is penalized by those remaining impacts for living in a
community that provides a service for an entire State or region.
Compensation addresses unavoidable effects, intangible effects, and uncertain
effects. Unavoidable effects may include increased traffic in the vicinity of the
hazardous waste facility or the destruction of valued open space. Intangible effects
are difficult to measure—community image and the quality of life, for example.
Effects caused by uncertainty, such as risk-related issues, are difficult to predict
reliably
The four types of techniques applicable to compensating for these effects from
siting HWMFs are the following:
• monetary payments
• in-kind replacement of affected resources or services
• contingency funds and insurance
• land value guarantees and payments
Each of these four techniques is discussed below.
MONETARY PAYMENTS
Compensation can be in the form of a cash payment to an affected individual,
group, or community. (Monetary payments for land value declines are discussed
later.) These payments are in addition to any applicable Federal requirements.
Monetary payments to an affected individual or community provide the recipient
with a great deal of flexibility. They allow the recipient to decide how to deal with
the costs suffered because of the HWMF. In this sense, they are easier to
administer than other forms of compensation. While giving the recipient flexibility,
monetary payments are also more susceptible to accusations of "buying off" the
recipient. It is particularly important to have a direct connection between the
burden of the recipient, the payment, and the disbursement of the payment to
offset the burden.
-------
Monetary payments are generally best suited to effects that are measurable and
for which costs can be defined. For example, if a community will need two
additional local health agents to monitor the HWMF, these costs are easily
calculated and can be compensated. Negative community image and risk are not
as easily priced, but are still suitable for specific monetary payments. The
Connecticut and Kentucky waste-based tipping fees (see the case example in
Exhibit 3) illustrate the suitability of monetary payments for dealing with these
intangible effects. These approaches recognize the great difficulty in defining
impacts and costs and, therefore, simply assume that adverse effects are related to
the amount of revenues generated at a HWMF and charge compensation based on
gross receipts The host community then deals with the issue of distributing these
revenues to compensate its citizens for both tangible and intangible adverse
consequences.
Monetary compensation can be either a one-time or a continuing payment. One-
time payments are in cash (or its equivalent) and are sometimes made through a
device called "tied impact payments" that are linked to certain identified impacts.
States may "earmark" funds to communities, for example, so that they can be
used only for certain activities like road improvements or recreation. Developers
can also earmark funds through their agreements with communities. Developers,
for example, can even offer to reimburse communities for consultant and
administrative expenses necessary to evaluate and respond to the developers'
proposal. One-time payments are also appropriate when purchasing property at
fair market value. This method contrasts with land value guarantees discussed in
the fourth part of this chapter. Continuing payments may take the following forms:
• Property Tax Payments. Taxes above those normally required for property of
comparable value because of higher tax rates, higher assessment percentages,
or accelerated payments
• Payments in Lieu of Taxes: For both publicly and privately owned/operated
facilities, these are negotiated payments that address the specific costs of a
facility. In the case of a private facility, they may be the sole source of
payments. Payments in lieu of taxes for a publicly owned/operated facility
generally require enabling legislation.
• Gross Receipts Taxes: These taxes are paid to communities in addition to
normal property taxes and may be paid through a negotiated arrangement or
set formula (see Connecticut example in Exhibit 3).
Exhibit 3. Monetary Compensation Payments
.•.v-':V.£^^«&^^
•: •.--"' -liiL', &°~h<*j^&^°^.9jfe*.%i&^
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Exhibit 3. Monetary Compensation Payments—Continued
!0.^,'p9^acftt^M^.,fM5rattsfc«®'•_._,,.„. .„_.„,,_-,,. . . ,
'";;^'''"" ''""'' "" '"'"""' '''''"'V^'*«^^;:3i^i^fe>;,'v" '
'! cQrr^a^^^f^;:':f"'; i •:
Tipping Fees: These are fees that are levied on the facility and are based on
each unit of waste (truckload, pound, cubic yard, gallon) accepted at the
facility.
Adjustments to State-Local Aid Formulas: Slates have assistance programs to
funnel aid to communities that can be adjusted and used as a transfer
mechanism for monetary payments. In addition to these specific programs,
many States provide general revenues to localities based on population, local
tax base assessments, and other factors. The presence of a facility may affect
the community's share from these funds.
-------
Of all the payment schemes, tipping fees and facility taxes are the easiest to
negotiate, calculate, and collect. The other approaches are more responsive to
actual impact costs, but often require difficult calculations and distribution
schemes. Landfills, which have a limited lifespan, will, of course, produce less
revenue from tipping fees than incinerators, processing, or transfer facilities unless
the fees are correspondingly greater.
The costs of continuing payments must be calculated differently from one-time
payments. Payments in the future are worth less than their face value today and
must be adjusted when comparing the two approaches. This process of finding the
present value of future payments (called discounting) is illustrated in Exhibit 4.
Some communities may come to depend on continuing payments as a source of
revenue. In these cases, the community may be more willing to reach compro-
mises to keep facilities open or to approve expansions.
Because the magnitude of effects may change, communities may want
monetary payment schemes reviewed after a period of time. A conversion
provision can be included in the basic agreement requiring a periodic review to
renegotiate the terms and conditions of the monetary payment scheme. An
example is contained in the model binding agreement in Chapter 5. Although
compensation agreements based on continuing payments offer a document that
may be easier to negotiate, additional one-time payments can be negotiated as
needed.
There are several combinations of providers and recipients involving the State
and the private developer as potential providers, and communities, individuals, and
groups as recipients The monetary payment transfer mechanism will vary
depending on the provider and recipient Exhibit 3 illustrates the appropriateness
of particular mechanisms for different combinations of provider and recipient.
The above comments indicate the complex trade-offs between the different
types of monetary payments A combination or mix of monetary payments is
probably a useful approach to consider in developing compensation schemes. See
Exhibit 5 for an example.
Exhibit 4. Present Value of Future Monetary Payments
interest (find the multiplication factor in the table below):
* *
agree t»
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Exhibit 4. Present Value of Future Monetary Payment*—Continued
1 host community to up-
grade access road ' /
V v '•"•• .• . ,, ' ' .'. ' $425,000
$80,008 : f :•• i "•': f >
4&tooQ : ::; '..'»^:
Tipping foetohosl community
tipping fee to neighboring commu-
Praswrt Value (assuming a 20-year planning period and 1O
''
m 10%
5 /••••«;«# -4.21* 3.9W 3.971
W... •" Z?l!£--7.300 &7W @.14$ 8.01$ <4.^,-'«p?>,
JO , ' IZJKt .t1,47fl ft«8 8.S13 «^f-
W"r- *&«8» -13.^15 -11,lOtt.- 9,427
to " '. t$.7m ta.m•• • SMS
IN-KIND REPLACEMENT/RESTORATION ACTIONS
Instead of providing a monetary payment to a community or an affected party,
the provider can offset the burdens it imposes by replacing the affected resource
or service. See Exhibit 6 for examples. Again, this compensation is beyond Federal
requirements. This technique is most appropriate for those impacts that a
developer or the State is able to provide directly. For a private developer, this ability
may be limited. In general, the HWMF developer will be better able to provide
nonconstruction-related items, such as training and property
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Exhibit 5. Example of Joint State/Developer Monetary Payments for a
Private HWMF
The major advantage of in-kind compensation is that it is visibly linked with
specific effects, unlike monetary payments that seem less directly connected.
Second, it is particularly effective in muting bribery or payoff criticisms. Some of
the drawbacks to this technique include the following:
• In-kind replacement actions are less able to address intangible issues, such as
quality of life and community stigma problems. The mere presence of a facility
in a community may raise the community image problem. A developer can do
very little to compensate directly for this issue using in-kind replacements.
• The developer or the State may not be able to provide some of the in-kind
services and resources shown in the examples; it may be a lot easier to simply
pay the host community money
• The host community may not want the provider involved in replacing resources
or services. Communities may wish to handle these functions themselves.
• Similarly, an affected resident may also prefer to receive straight monetary
payments rather than some comparably valued resource.
• Some in-kind services and resources lend themselves to one-time compensa-
tion, but other service impacts of the HWMF may be recurring and require long-
term continuing cost commitments.
10
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Exhibit 6. In-Kind Replacement/Restoration Actions
OVA) us^ this techn(fM in
to ^^sr
M«M»!lWlir toft* **»'
Devetoper or Repaving or
State
specialized
firemen and police
Raptecingar
fjMOg property,
CONTINGENCY FUNDS AND INSURANCE
Contingency funds and insurance are promises to pay for adverse conse-
quences that cannot be reliably predicted and are unlikely to occur. As discussed
previously, even with strict regulation, some risk will always remain. The
contingency funds and insurance discussed in this section would be in addition to
any that might be required by law and would provide communities with additional
assurance that should an accident or default occur, adequate money will be
available to compensate for adverse impacts. Contingency arrangements for
property value losses are discussed in the next section because of their special
importance in HWMF siting.
11
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Contingency funds can guarantee operator performance or protect against
unexpected events Performance requirements could include operating, maintain-
ing, and closing a facility using standards that exceed legal requirements. The cost
of meeting these requirements can be often calculated in advance. Unexpected
events, such as accidents, fires, and spills, on the other hand, cannot be predicted,
but their occurrence might pose significant environmental or public health issues.
This section focuses on financial arrangements for unexpected events; alternative
contingency and performance mechanisms are briefly described because they are
sometimes used interchangeably Some of the mechanisms are:
• Letter of Credit. This is an irrevocable engagement by a bank, at the request of
a hazardous waste facility operator, that it will honor demands for payment by a
regulatory agency Letters of credit are generally limited to performance
requirements, such as closing a facility
• Surety Boner. This mechanism is a contract by which a surety company is
answerable for the default or debts of a facility operator. The surety company
agrees to satisfy these responsibilities if the operator does not act in
accordance with the terms of the surety bond
• Hazardous Waste Trust Fund: This is a versatile financial mechanism that can
fund the operation or maintenance of a facility, the cleanup of accidents, or the
payment of personal damage claims.
• Emergency Response Fund This technique funds the cleanup of accidents and
pays damages related to unexpected hazardous waste events.
• Liability Insurance' This is a means for covering the costs associated with
accidental and unexpected occurrences in the operation of a facility. Rather
than pay continuing fees into a trust or emergency fund, operators pay a
premium to an insurer who guarantees financial responsibility for paying claims
brought against the insurer
There are a number of ways of financing contingency funds. They can be
supported by States or developers, or both. The funds can be financed by one-
time payments, payments that continue over a period of years, or by supplemental
payments as they are needed Contingency funds and insurance can cover a
single facility or many facilities For example, a Slate could appropriate one lump
sum from its general fund or appropriate an incremental amount annually. A State
could have bond issues on a one-time only or periodic basis Alternatively, a State
could tax hazardous waste generators, transporters, or facility operators. The
facility owner could also make a lump-sum payment before opening the facility,
pay into a State-operated fund on a waste processed basis, reimburse the fund for
expenditures, or a combination of the above The examples cited in Exhibit 7
illustrate some of these arrangements.
Regardless of the financing approach used for contingency funds, State-
operated funds offer a distinct advantage over developer-operated funds. Devel-
oper-operated funds require a mechanism for determining when the situation
warrants expenditures from the fund, and what those expenditures should be. This
could be decided by a third party, such as a court, the State, or a mediator.
Instead, the community and developer could negotiate whenever an event occurs.
12
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Exhibit 7. Contingency Funds and Insurance
Case Examples:
New JtaWK estt&istwd' a spiff compensation fund in W?6 (Chapter
of *e Xte* * «?M ^wended Chapter 73, Acts of 1$8Q), tt -is ,a
lapsing revolving fund financed by a per-barrel tax on all hazardous
waste fadUQS in the State. The fund authorizes the Department of Envi-
ronmental rtatapw fgBP) to take remedial actions if the discharger
does not && scion, OEP has wide discretion in responding to events,
Any dSsgftiifger who tags to comply w* a ,B£P direcVve to latte for
three fees the eost of removal. Money may be disbursed from the fund
for a number of purposes, Including waste removal costs and damage
costs (including loss of income, damage to real or personal property,
restoration of n$tunit resources, or loss of fax revenue), Tftf l«f$ c«n_,
also tie used to pay for cleanup of sites that are abandbneti or pose an
imminent hazard. Revenues to date are between $10 and $16 million •
per year*~-wftuiiy aH of tt from tax levies. Revenues are expected K>
increase to 150 wfflten per year in the near future. As the fund has
beewtm more publicized, more claims are being made by persons affect-
ed by hazardous waste accidents. There is a $1.5 million limitation per
site on the fund.
Tennessee requires applicants to post a performance bond to ensure
availability of funds in the event of abandonment, insotvefley, or Qtftef
inabilities of the applicant to meet site requirements. All forfeited bonds
are dsp?s^W in a special Hazardous Waste Trust Fund that the
can draw on, ftwiete can be used for removal and disposal of
wastes, reclamation of sites, detoxification, and perpetual care of aban-
doned sttes. Third-party claims cannot be made against the fund.
Michigan established a Hazardous Waste Service Fund (Act 64, Section
43) i& afcw Urn Sfa* fo deal with hazardous waste emergeneie&. The
Sfato is aytaftsef to spend money upon a tinding of "actual or potan-
M&^Fmmenta) damage, " Seed money in the form of a $1 million
appropriation was used to establish the fund; Costs are to be recovered
by litigation against responsible parties. The Department of Natural Re-
sources fe in, ffffi. pro/Bess of promulgatJng rules to determine methods of
payment from the fund.
Recipients
Abutting
Host Communities Communities fndMOuals
Bwf jynef for emergency Personal
perpetual response fund insutanca
monitoring Emergency
Emergency response fund
response fund g^ guarantees
insurance pools
Hazardous waste
t&rnpensmjrt
fund
13
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«"* Insurance— Continued
, .ic- ??ntll!9el*;:y,
In this case, however, valuable response time may be lost and the potential for
tension between the community and hazardous waste facility operator increases.
Experience with contingency funds has been almost exclusively with State-
operated funds. This arrangement has worked well in those States with funds. It
has avoided the problem of developer discretion in using the funds and has
allowed for remedial response as well as payment of damage claims. The real
problems with State-operated funds have arisen with attempts to obtain developer
reimbursement of the funds.
LAND VALUE GUARANTEES
While empirical evidence is fragmentary and often conflicting, a noisome facility,
such as a HWMF, is likely to stimulate some degree of property value loss in a
certain area around the facility, depending on the uses of adjacent land. Such
impacts are also possible, to a lesser extent, along routes heavily traveled by waste
haul vehicles Changes in property values reflect many of the other impacts raised
in this handbook—noise, traffic, risk, and odors. As these impacts are unlikely to
be completely mitigated, some type of guarantee to reimburse for property value
declines is likely to be a common compensation request in new hazardous waste
facility siting The virtues of land value guarantees are (1) that the expected cost to
the facility operator is low, because he believes he is unlikely to cause significant
property value declines, and (2) that property owners are protected against
potentially large losses. See Exhibit 8 for land value guarantee examples.
A corollary impact to property value effects suffered by individuals and
corporations is the tax base loss in a community. Decreased property values mean
lower tax receipts and revenues for a community. This section discusses
alternatives for compensating property value and tax base losses.
14
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Exhibit 8. Land Value Guarantees
£to'f^ «6era(fens for moW^ the capital of Alaska from Juneau,
.{qpHptttt '*'' ' '*'"""" " 'v " "~"
$«K*J*? <
mti boum
«s»«e«s it ptoptety vatet
art
w
5
value, then
:»e ^qp^^ tt 1$
&e sxemiseti, FeppwtK ******
ftoittf . , Gosmfrtte .
J3fcu£? -iilM*' n*"^c<*w# i>a&&Aa /%£ fft<9 l%*t/ f$ffmtm&fif>& 'jff* \&%l£&s Iktus^.'
f'fff ~frrC7 ^7fE»3«W*i i)F5«*Pi?' W* If q!r tiGiy tJffll&if^tX.&A? «•( VpCn#EK an9p^-
fwfufe (axes on the lost value
on the lost Guarantee current value (or'
value, adjusted for inflation index value to inflation) only if
pay the difference between
the sale price and the current
(tor '
Ib fi^w». I=^»»T|? $»^» Oi<*»w, To SrfafeWj ^«** *¥«« .«,
i^'^f^^ct^x^sw 4 ,lMee^}Ot»ts^sr^^.^^t
(*»»«* |««#«fafl«rt v^« boundo^ jr. >
and housing price index; conip&fe Consider adjacent landowners
taw#»wie*s ?W|l^E
: unaffected by facility developer
Negotiate value reWbursw
15
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Exhibit 8. Land Value Guarantees— Continued
When to Cerrpertsate MeOwds to fasum
There are two means for compensating property value losses of individuals:
purchase of the affected property at fair market value; or some method of cash
compensation reflecting the decreased property value. States are not appropriate
providers of this type of compensation because it may require purchasing property
for the primary purpose of making restitution to individuals for non-State actions
(unless the State is the developer). Compensation should probably be paid only
once, generally after the facility is in operation but before a fixed period has
elapsed. The single compensation payment reduces the administrative load and
avoids double-counting Delaying compensation payments until after the facility is
in operation avoids the payment of short-term property value losses generated by
construction. Finally, a time limit on compensation claims (for example, 5 years)
reduces the administrative load, minimizes problems of calculating land inflation
over long periods, and decreases uncertainties about costs.
Only those individuals who owned property before the introduction of the HWMF
should be eligible for compensation for property value losses. Once a facility is
introduced into an area, property values will adjust to reflect the impact of that
facility; thus, individuals who purchase homes in the impacted area after the facility
is introduced will already have been implicitly compensated by the market through
the reduction in the price they pay for that home. In short, if an individual with full
knowledge chooses to purchase a home next to an HWMF, the State or a
developer should probably not be obligated to compensate that individual for
having made that choice unless conditions have changed.
Accompanying property value losses are tax base losses to a community. If the
impact area surrounding a new HWMF declines in total property value, for
example, by $80,000, and the local tax rate is $1.50 per $100 of assessed
valuation (and assuming 100 percent assessments), the locality will lose $1,200 in
tax revenues the first year, and corresponding amounts each following year. When
these amounts are significant, it may be appropriate for the developer to pay the
locality the present value of the stream of lost property taxes, and deduct that
amount from the compensation given to individual property owners. Alternatively,
the developer could choose to make continuing, as-needed payments rather than
a one-time cash payment.
16
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Chapter 3
Incentives
Why use incentives? Unlike mitigation or compensation techniques that address
costs or impacts incurred in the siting of a HWMF, incentives need not be directed
at specific impacts Incentives (as used in this handbook) are benefits in addition to
compensation, which addresses specific adverse effects. Incentives may induce
participants to resolve a siting controversy when compensation alone might fail.
There are obviously a fine definitional line and often little operational difference
between compensation and incentives. The examples shown in Exhibit 9 are
representative of incentives. Undoubtedly, additional variations on donation
recipients and on the types of additional public services and amenities could be
provided in a particular community.
In situations where the developer or State has responsively addressed adverse
effects using mitigation and compensation, incentives may be appropriate given
the following considerations.
• The use of incentives can demonstrate commitment to a community by
showing that the developer or State is willing to perform beyond the minimum
requirements Thus, if the loss of open space is an issue, then providing more,
or better quality, parkland than was lost would be an incentive that might
resolve the dispute
• Incentives that are unrelated to impacts should be based on a careful
assessment of needs in the community An offer to donate land for a park may
have no strategic or goodwill value if the area has adequate recreation
resources An offer to accept local industrial waste for free, however, may be
done for little cost to the developer and have tremendous political and
economic value in a community where local industry finds it difficult or
expensive to dispose of its hazardous waste. Similarly, a rural area with few
public amenities or services is more apt to positively respond to such incentives
as donated police equipment, firetrucks, or recreation facilities.
• The goodwill from using incentives during the operation of a facility is an
important factor in keeping a facility in business.
The most important consideration in the use of incentives is their potential to
raise suspicions that the facility is worse than it really is, or that the developer is
somehow acting unethically. There may be a greater likelihood that incentives will
be accepted if the community or potential recipient suggests them first
The facility developer or State has considerable flexibility in using incentives. A
provider must essentially make a judgment on what the siting market requires in
17
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Exhibit 9. Incentive Techniques
toe,- Used a»«^.*^iM** »t
waste c^sposal facility in an abandorwa ml^le silo complex in
' the use of its first aid equipment; and the use of its well water to local
' any of these offers since the Grandview site began operations in 1973.
facility in 1977 in a nearby missile silo complex in Bruheau, Idaho. It
and is contemplating alternative uses for the site. The success in getting
,t.t ,
Con's successful use of incentives at its GranoView site. During the
operation of its Grandview site, Wes-Con
, ,„, ,f !,t> *5i>9 tjfO&IM.. fhgJI^-ttifaKMP^tPlifefr fia$
an estimated value of $5,000 per year. In
Chemical Waste Management, Inc., which operates a disposal facility in
Livingston, Alabama, donated an artttulance to the community Kansas
Industrial Environmental Services, which operates & land disposal facility
' **
Bod's ftome Sewce, wh/ch operafes a rwardmx watfe landfill in Wright
"
(tei^JW .. f*tete <«*>os».ft>r Jd» i& mtst WHt*a*pfrai>i*
e1**'^ fiema f
' ';, .. :)f»cfcw»d.. * to/sat iKiali^sse®*
Public services
firetruck, parks, ,f
tww^n '•areas,'.
road improvements .
municipal bonds at
'generally unrelated to' specific impacts.
18
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Exhibit 9. Incentive Techniques—Continued
'i'°
recreation areas,
Additional State
funding in other
of a
terms of the type and amount of incentive. How much should the provider pay in
incentives? It is not possible to answer that question here, but two factors should
be considered:
• Long-term monetary payments to the community (tied to the amount of waste
being disposed) that are in addition to compensation may be more expensive
than one-time incentives such as the donation of public amenities.
• In-kind services will generally be the least expensive incentives, and may have
an equal strategic value. These include free disposal services to local industries
and the sharing of facilities and equipment (for example, firetrucks).
It is generally inappropriate for the States to require a private developer to
provide benefits beyond what is required to compensate for actual adverse effects.
Although States have wide latitude in what they can require of a private developer,
as discussed in Chapter 4, requirements for incentives are not likely to be favorably
received by a developer who has carefully provided a fair compensation package.
Private developers generally oppose States' requiring incentives from developers.
They feel that incentives are basically a concern of the developer and the
community. The private sector is not opposed, however, to States' providing
incentives to supplement the private developers' incentives. As seen in Exhibit 9,
there are a number of potential opportunities for the State to use incentives in
HWMF siting. If States provide incentives, they should be careful to explain to the
public the legitimate State purpose involved.
19
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Chapter 4
State Roles
States face difficult decisions in their attempt to site new facilities to ensure that
adequate capacity is available to treat and dispose of hazardous waste. The role
each State chooses for itself will be tailored to the problems it faces and its ability
to address them. When considering the usefulness of providing compensation or
incentives to communities and individuals, Slates can provide an atmosphere that
allows and perhaps encourages them, can require them of developers, can directly
provide them, or can assume a passive role. This chapter discusses the two active
State roles and the important issues States should consider in implementing either
approach. Although the approaches are discussed separately, States can use
some combination of approaches to suit their special needs. Appendix B contains
the legislative language from several State laws that provide for compensation and
incentives
SHOULD STATES DIRECTLY PROVIDE COMPENSATION
OR INCENTIVES FOR PRIVATE HWMFs?
Do States have the legal authority to provide compensation or incentives? The
power to tax and spend in the public interest is a fundamental right possessed by
every State. States are free to determine what goods and services they will provide
and how they will be financed. Indeed, States routinely make payments to citizens
and communities in pursuit of a wide range of public goals. Highway and school
aid, urban rehabilitation, welfare grants, and tax abatements are all forms of Stale
expenditures. In each of these areas there is no legal doubt that such expenditures
are authorized.
In general, the test of State power to spend is not whether the State will benefit
from the expenditure, but whether the public interest is served. Although the courts
will normally not interfere with a determination that the public purpose is served by
compensation or incentive expenditures, States can ensure the validity of
compensation and incentive expenditures by structuring arrangements so that
payments are made after all State regulatory approvals are obtained. This
approach will help to ensure that the public interest is indeed being served by the
State expenditure.
Do States expose themselves to added liability by directly providing compensa-
tion or incentives? Providing compensation or incentives to facilitate the siting of a
HWMF will not normally subject the State to liability for damages even if that
decision proves to have unexpected consequences for the community or
20
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neighboring property owners. Under the rule of sovereign immunity, the courts
have held that a State is immune from liability for its acts, particularly if the acts
involve discretion. The decision to provide compensation or incentives to a
community to facilitate the siting of a hazardous waste facility is the type of
discretionary activity that immunity rules protect. Unless a State expressly binds
itself to guarantee the safety of a HWMF, it will be immune from suit. This is true
even if the State was negligent in making its decision.
Several reasons follow why States may want to provide compensation and
incentives directly.
• State provision of compensation and incentives may be an effective induce-
ment to both developers and communities in aiding the siting of facilities that
benefit the State as a whole.
• Any State provision of compensation or incentives may help to resolve
differences between communities and the developer and thus help to shorten
the siting process.
• State authority to override local vetoes is not a panacea. Even in States with
these provisions, compensation and incentives may still play an important role
in resolving siting issues
• State compensation or incentives may be the only way in those States with
strong home rule laws that States can get facilities sited.
• State provision of incentives or compensation may lessen the perception of
unethical payoffs between the developer and a community.
Several reasons why States may want to avoid directly providing compensation
and incentives follow:
• State provision of compensation and incentives may be viewed by private
developers as public interference with the competitive structure of the
hazardous waste facility industry within a State and among States.
• Some view direct State involvement as an unnecessary subsidy of the private
sector. In short, compensation costs are considered to be part of the cost of
doing business and are, therefore, the responsibility of the private sector.
• State involvement may set a political precedent for payments for other public
and private facilities. This concern has been voiced by a number of State
hazardous waste officials. If States wish to limit this possibility, special language
can be written in the compensation legislation that argues the extraordinary
circumstances surrounding hazardous waste facility siting.
• State compensation or incentive payments may undermine the credibility of the
State regulatory role in the siting and operational review of HWMFs. This is an
important argument and one that is of concern to many State hazardous waste
agencies. The fact that States would be providing compensation and incentives
to communities and individuals rather than to developers minimizes, however,
potential conflict of interest in State roles. There is also precedent for State aid
to and regulation of a particular party. For example, States subsidize municipal
wastewater treatment plants and the same State agencies regulate them. States
provide a number of subsidies, such as economic development loans to private
industry, and also regulate their activities. One precaution that States could
implement to minimize conflict-of-interest charges is to have a State agency
separate from the regulating agency be responsible for the compensation
activities
21
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Many States are constitutionally prohibited from making long-term monetary or
special privilege commitments. Thus, annual payments would have to be
legislatively enacted each year.
Although State-provided compensation or incentives will help to relieve some of
the economic burden on private developers, it does allow generators of
hazardous waste to escape part of the cost of handling their waste and to place
it on others. Unless a separate tax is imposed on waste facilities, the
opportunity to induce generators to produce less waste is lost.
WHAT STATE FINANCING METHODS COULD BE USED?
Three sources for financing State-provided compensation or incentives are the
following:
• State moneys from the general funds
• fees or taxes on private facility operators or waste generators
• grants or loans from Federal agencies
These approaches are summarized in Exhibit 10.
A number of specific State statutory constraints, such as limits on bonding,
affect the finance decision. States should also consider the equity and hazardous
waste disposal market impacts of their financing decision Sole reliance on State
general funds burdens all of the State residents and may act as a subsidy to out-of-
State hazardous waste generators who dispose in the facility associated with the
compensation. These effects can be eliminated by a State-imposed tax or fee on all
hazardous waste facilities or by having similar programs in adjacent States.
Because of potential inter-State effects in hazardous waste disposal, States may
want to consider formal inter-State compensation and incentives arrangements, for
example, agreement on the levels of compensation and incentives and their
requirements, and joint funding of common compensation funds. These arrange-
ments could be made through separate memoranda of understanding among State
agencies, through regional commissions, or through special, newly developed
hazardous waste commissions. RCRA expressly allows for inter-State agreements
and organizations for hazardous waste management.
SHOULD STATES REQUIRE PRIVATE FACILITY
DEVELOPERS TO PROVIDE COMPENSATION OR
INCENTIVES?
In general, States have the power to require private developers to provide
compensation. In the absence of a statutory provision expressly limiting such
power, an agency or board, authorized by State law to issue permits for siting
HWMFs, may impose certain conditions on its approval of applications for such
permits. Among these may be a requirement to compensate the community or
22
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Exhibit 10. Alternative Financing Methods lor State-Provided
Compensation
These bonds are These are
backed by the suitable for
"full faith and compensation
ewwr'oftfw , mttwoim
issuer and are one-time capital
-
towet interest rates
revenues from
48»r
capable of being
J(&tuH**f*4u**«& ,*b4&feift£
pMMIpKfHp^r '«
this mechanism.
funds may These
4$M» IWJ 9 , » «««fi*® * l i»(«W>.4l*«*%
compensation
such as
ancf, " aa»Jes«*«|ir "«j|^
', that can be used
''for,
from disposers or
to
capita} and
ImStSjf,-
pvfibSffiaM&ff $&£ c
, J^^rf^^PK *^^^ ^ ' "c
<^BP^nm^lQ''^Bjjra^ife jKji*
t *«'W^((pWHqp, ^gj^i^TOp ^w*»
23
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Exhibit 10. Alternative Financing Methods for State-Provided
Compensation—Continued
**gtfw* : . CWtoKp . ; ::u^s/ift»n(ist .'..,•>
of ffiase af» pfse.^
are dsrived to i
strictiyfrom < farMi^u^-Ut
-------
individual property owners for losses they will suffer as a result of the facility's
location.
Indeed, courts have approved "required dedications" of land and money to
compensate for the adverse consequence of a development when such dedica-
tions were made conditions of permit issuance. The only limit that has been
placed on such requirements is that the funds or other property demanded must
be intended for a purpose related to the use to which the property will be put, and
must not be so great as to be regarded as unreasonably onerous in light of that
use. Thus, as long as compensation requirements are limited to payments that
approximate the likely damages that will be caused by the facility, they are likely to
be legally permitted.
The fact that permitting authorities have considerable latitude in formulating
compensation requirements does not mean that their discretion is unfettered,
however. Their powers are limited by principles of due process and equal
protection, as well as by the provisions of any State administrative procedure act
that applies. A board's actions may thus be overturned, for example, if compensa-
tion conditions are imposed in some instances and not in others, unless there is a
rational explanation of this difference.
In the absence of discrimination or specific arbitrary and capricious conditions
that violate constitutional or administrative law principles, a permitting authority
may feel free to impose conditions requiring payment of compensation in
proportion to the damages actually expected to be imposed by the facility.
Both Connecticut and Kentucky have recently passed legislation requiring
private facility developers to provide compensation to communities on a formula
basis. Massachusetts, also, has passed legislation requiring developer-provided
compensation, but has left the amount to be negotiated between the developer
and the community. Several positive features of States' requiring developers to
provide compensation are-
• Requirements for compensation and incentives will force hazardous wastn
generators to "internalize" more of the costs of producing their products and to
tend to make business decisions that better serve the public interest.
• State requirements for developer-provided compensation or incentives tend to
legitimize the concepts Specific State requirements in the amount of the
payments, such as those mandated in Connecticut and Kentucky, tend to mute
charges of bribery or illegal payoffs.
• State requirements are also likely to standardize the negotiation process and
therefore provide some "ground rules" to help speed up the siting process.
In addition to these supportive arguments, a number of concerns have been
voiced by States and the private sector about State compensation and incentive
requirements:
• New facilities may be at a competitive disadvantage compared to existing
facilities, perhaps making new sites financially unattractive. One solution is to
establish an incentives and compensation fund, supported by both new and
existing facilities. In either case, increased enforcement may be necessary to
ensure that illegal dumping does not increase.
• Specific monetary payment requirements may make it difficult for facilities to
obtain private capital financing Specific formula approaches are, in effect,
continuing liens on a facility's revenues.
25
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• Requirements for specific types or amounts of compensation remove some of
the flexibility of the developer and recipient to reach mutually agreeable
solutions.
• It is generally inappropriate for the State to require a developer to provide
benefits above that required to redress actual or potential adverse effects.
Incentive requirements appear to be questionable on legal grounds.
Given the potential controversial nature of State compensation requirements,
States should incorporate the views of private developers and the general public in
developing compensation programs.
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Chapter 5
Binding Agreements
It will often be important to potential recipients that promised compensation or
incentives will be legally required, particularly if the obligations will continue into
the future. Developers may also need a way to demonstrate their trustworthiness
and commitment. One method is for the developer to formally and legally pledge
his performance in a contract with the recipients. Where possible and appropriate,
the developer will generally prefer a promise of support or a promise to refrain from
opposition from the recipient in exchange for the developer's pledge. In order to
guarantee the performance of both parties, a mechanism to bind them to their
agreement is desirable.
In siting HWMFs, two points will color negotiations over compensation and
incentive agreements:
• Agreements between local governments and developers to support the siting of
a facility are, of course, not binding on the residents of communities. Thus, for
some adverse impacts, the developer will have to develop agreements with
individual residents or groups. Even agreements with groups may not prevent
minority factions in the group from using legal means to oppose a facility siting.
• Local governments cannot contract away their right to control hazardous waste
facilities, such as through zoning, occupancy permits, and building permits.
Thus, a developer will find it impossible to gain the promise he seeks most—a
guarantee that he can build and operate his facility. Rather, the agreement is
more of a mechanism for developers to demonstrate their commitment.
In the following sections, two model agreements are discussed, one agreement
between a developer and a community, and one between a developer and a
private citizen
MODEL AGREEMENT BETWEEN A COMMUNITY AND A
FACILITY OWNER
The annotated model agreement below sets forth section by section a number of
provisions for mitigation, compensation, and incentives to the "City of Zenith" for
potential and certain impacts of a HWMF to be constructed and operated by
"Babbit Waste Systems, Inc." Therefore, care must be taken that the City of Zenith
gives consideration for all of these promises.
In a contract such as the model agreement, the necessary consideration might
conceivably take the form of a promise to accept the facility or not to oppose it.
27
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Note that no such promise appears in this agreement. Even if one did appear, it
might be null and void because it exceeded the city's power, because a city
ordinarily may not contract away its right and duty to serve the public interest.
Alternatively, the contract might include a promise to forgo any legal remedies
that may be available against the owner to obtain damages for the adverse impacts
of the facility That promise is also not made in the model agreement (and indeed is
explicitly rejected in the proviso of paragraph IV.A.), because few cities would
likely be willing to agree to it.
Another alternative would be for the agreement to recite all of the harms possibly
to be suffered by the city and to state that the site owner's promises are to
compensate for those harms. This approach was not taken for two reasons: (1) in
reality, it would be merely another form of a promise of forbearance such as is
rejected in paragraph IV.A , and (2) because many of the impacts recited would
not be actionable in court (for example, because they would not render the facility
a nuisance), a promise to forgo legal action might be illusory and thus not proper
consideration.
A fourth alternative is to tie certain promises to certain harms and thereby to
trade forbearance from action for those harms only for the compensation agreed
to. This approach is explicitly taken in paragraph I.A. However, this is only a partial
solution, and the model agreement emphasizes this fact by reciting a list of harms
in the preamble much longer than those to be compensated under paragraph I.A.
The alternative selected, therefore, is to make the entire agreement contingent
upon some action by the city, rather than any promise. That action is the passage
of a resolution supporting the site owner's application, but it could as well be a
resolution approving the site, if such a resolution were part of the necessary
regulatory procedure. Thus, paragraph V.A makes the compensation agreement a
unilateral contract that does not go into effect until one side—the city—has
completed its obligation under it. If the city does not pass the necessary resolution,
the contract is not effective. If it does, that action is adequate consideration for all
the promises made by Babbit Waste Systems, Inc.
Sections I, II, and III of the model agreement contain a few examples of
compensation, mitigation, and incentives that can be included in the agreement.
Many more examples, of course, could be devised
Model Compensation Agreement
between
The City of Zenith
City Hall
Room W1
Zenith, Winnemac
and
Babbit Waste Systems, Inc
101 Main Street
Zenith, Winnemac
WHEREAS Babbit Waste Systems, Inc plans to build a hazardous waste
management facility (HWMF) on a site that it owns in the City of Zenith, and
that is located at ; and
28
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WHEREAS the construction and operation of the HWMF will result in increased
traffic in the City of Zenith, requiring additional expenditures by the City of
Zenith for traffic control and road maintenance; and
WHEREAS the construction and operation of the HWMF may result in odors,
noise, and/or air pollution and thereby cause damage to the residents of
Zenith and to public facilities owned by the City of Zenith; and
WHEREAS the construction and operation of the HWMF may result in adverse
impacts on the beauty and quality of the environment of Zenith and thereby
lower property values and reduce the property tax base of the City of Zenith;
and
WHEREAS the construction and operation of the HWMF may result in ground-
and/or surface-water pollution and thereby cause damage to the public water
supply owned and operated by the City of Zenith, and
WHEREAS the construction and operation of the HWMF will result in the need
for additional expenditures by the City of Zenith for public services, facility
inspections, and ground- and surface-water monitoring, and
WHEREAS the construction and operation of the HWMF may increase the risk
of other damages to residents of Zenith and/or to the City of Zenith, and
WHEREAS Babbit Waste Systems, Inc. has agreed to undertake the mitigation
measures specified in this agreement, and
WHEREAS Babbit Waste Systems, Inc has agreed to compensate the residents
of Zenith and the City of Zenith for such costs as are specified in this
agreement;
The parties have agreed as follows:
/ Cash Compensation and Fees
A Babbit Waste Systems, Inc shall pay the following amounts to the City
of Zenith as compensation for the costs that will be imposed on it by the
construction and operation of the HWMF
(1) Upon approval of the site by the State Facility Siting Board:
$ , as capital for extensions of local services;
(2) Upon commencement of operation of the HWMF
as compensation for start-up expenses connected with
extension of local services.
B Babbit Waste Systems, Inc shall also pay the following amounts to the
City of Zenith
(1) During the two (2) years commencing on the first date of operation of
the HWMF, a fee of one dollar ($1 00) per wet metric ton of waste delivered to
the HWMF;
(2) Thereafter, a fee as mutually agreed by the parties from time to time;
provided that, if the parties are mutually unable to agree on a fee at any time,
the fee shall be set at an amount equal to sixty cents ($.60) per wet metric
ton of waste times the number of whole years that the HWMF has been in
operation
29
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Paragraph A of Section I contains conventional tied-impact payments for the
capital expenses and start-up costs of servicing the facility. Paragraph B sets up a
tipping fee and allows it to be renegotiated from time to time.
//. Provision of Services and Other Compensation
A. Babbit Waste Systems, Inc shall provide, without charge, disposal ser-
vices for up to kilograms per month of hazardous wastes, as defined by
the Resource Conservation and Recovery Act, 42 U S C. §6903(5), generated
by any party or parties designated by the City of Zenith.
B. Babbit Waste Systems, Inc. shall purchase the site located at
or an equivalent alternative site mutually agreed upon by
the parties, and construct thereon a recreational facility to be dedicated to the
City of Zenith, as further specified in Appendix I to this agreement
As an incentive, paragraph A of Section II promises free disposal services to the
City or its designee Paragraph B promises to dedicate a recreational facility to the
City. This promise may be regarded as a compensation device, if there will be
some loss of recreation in the city as a result of the facility; it may otherwise be
regarded as an incentive. Note that the preamble says nothing about lost public
facilities as an impact of the facility. Such a reference could, of course, be
incorporated if it were needed.
///. Conditions of Construction and Operation
A. Prior to commencement of construction, Babbit Waste Systems, Inc. shall
purchase and maintain insurance coverage for liability to third parties for
personal injury and property damage in an amount not less than
$ per occurrence.
B. Waste shall be transported to the HWMF only along the route specified
in Appendix II to this agreement No wastes shall be received at the HWMF
except during the hours of 9.00 a m to 5.00 p m Mondays through Fridays
No more than truckloads of waste shall be delivered to the
HWMF per day
Paragraph A of Section III provides for liability insurance, in the event of third-
party damage Paragraph B includes some mitigation measures that will alter
operation of the facility.
IV Additional Compensation in the Event of Breach
A. In the event that any one or more of the conditions stipulated in this
agreement shall not be met, the City of Zenith shall be entitled to further
compensation for the damage caused by breach of the said condition. The
compensation shall be determined according to the procedure described in
paragraphs B, C, and D below, provided that the City of Zenith's right to such
further compensation shall not derogate from any right to other remedies that
may be available to it under law.
30
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6 In the event that a dispute shall arise over whether any one or more of
the conditions stipulated in this agreement have been met, the question shall
be decided by a committee of three experts, appointed according to paragraph
C below. The decision of the said committee shall be final and binding on
those parties
C. The committee of experts shall be appointed as follows
(1) In the event that Babbit Waste Systems, Inc. rejects a claim by the
City of Zenith that any one or more of the conditions in this agreement have
not been met, the City of Zenith may demand that the claim be resolved by
the committee
(2) Within fifteen (15) days of written demand to this effect by the City
of Zenith, each party shall appoint one member of the committee
(3) The third member, who shall act as chairperson, shall be chosen by
the two members appointed by the parties, and failing agreement between
them, by
O. In the event that the committee of experts shall decide that one or more
of the conditions stipulated in this agreement have not been met, the additional
compensation to which the City of Zenith is entitled under paragraph A. above
shall be determined as follows-
(1) The City of Zenith shall submit a claim to Babbit Waste Systems,
Inc, who shall respond to that claim within ninety (90) days
(2) If Babbit Waste Systems, Inc rejects the claim, representatives of
both parties shall meet, together with a mediator who shall be named by the
chairperson of the committee of experts that determined that the condition had
net been met
(3) With the help of the said mediator, the parties shall negotiate in
good faith and shall attempt to evaluate the further costs imposed on Zenith by
breach of the relevant condition
(4) Should the parties fail to reach agreement on this matter, the
question shall be submitted to arbitration before an arbitrator who shall be
appointed by the mediator
(5) The arbitrator's decision, which will be final and binding on both
parties, will stipulate the sum of compensation to be paid, or services to be
provided, and the time when such compensation will be paid or services pro-
vided.
(6) The arbitrator shall determine which of the parties shall pay the costs
of the arbitration
Section IV could be completely removed from the agreement without affecting
the substantive obligations under it. The section is purely procedural and
establishes a mediation and arbitration procedure for handling breaches of
contract conditions. If this provision were omitted, such breaches would have to be
litigated In either event, however, the same substantive rights would be at issue
31
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V. Effective Dates
A. This agreement shall become effective and binding on the parties when
the application of Babbit Waste Systems, Inc for approval of the site is
approved by the State Facility Siting Board if, within one (1) month of the
signing of this agreement, the Governing Board of the City of Zenith shall have
passed the resolution, contained in Appendix III of this agreement, in support of
the said application.
B This agreement may be terminated by either party if both of the following
conditions are met'
(1) Written notice of the termination, together with a request for a stay
of the proceedings on the application of Babbit Waste Systems, Inc. for
approval of the site by the State Facility Siting Board, is received by the Board
prior to its ruling on the application
(2) Written notice of the termination is delivered by hand to the other
party at the office address provided in the heading of this agreement, above.
As noted above, Section V transforms the model agreement into a unilateral
contract and solves the problem of consideration Paragraph A also states that the
agreement is not effective unless the site is approved.
Paragraph B is designed to protect the site owner in the situation that the board
passes the required resolution but then either it or its members or other community
representatives take action to undermine the effectiveness of the resolution. In
such a case, the site owner may terminate the agreement if he alerts the Siting
Board of the fact in time for it to delay its decision on the application until it has had
time to consider the effect of the lack of an agreement. The same paragraph also
protects either party in the event that anything else occurs to make the agreement
unsatisfactory during the possibly long period of time between the filing of the
application for site approval and the ruling on it.
MODEL AGREEMENT BETWEEN A FACILITY OWNER AND
AN INDIVIDUAL
The model agreement sets forth a number of provisions for mitigation,
compensation, and incentives to "Samuel Dodswortn" for the potential and certain
impacts of a HWMF to be constructed and operated by "Babbit Waste Systems,
Inc."
The problem of securing proper "consideration" is not as difficult in private
compensation agreements as it is in agreements with local governments because
private parties may freely agree to support a hazardous waste facility in the future,
regardless of the public interests affected Nevertheless, the best structure for a
private compensation contract is the same as for an agreement with the
Government—a unilateral contract Such an agreement does not go into effect
unless one of the parties (here, Samuel Dodsworth) completes the action that
constitutes the consideration for the other party's promises.
Sections I, II, and III of the model agreement contain a few examples of
compensation, mitigation, and incentives that can be included in the agreement.
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They differ, of course, from the items contained in the model agreement with the
City of Zenith. Some of the provisions, however, are similar.
Model Compensation Agreement
between
Babbit Waste Systems, Inc
101 Main Street
Zenith, Winnemac
and
Samuel Dodsworth
1 Rosebud Lane
Zenith, Winnemac
WHEREAS Babbit Waste Systems, Inc. plans to build a hazardous waste
management facility (HWMF) on a site that it owns, located
at adjacent to property located at that is owned
by Samuel Dodsworth (the "abutting site")
WHEREAS the construction and operation of the HWMF will result in increased
traffic on Rosebud Lane in front of the abutting site; and
WHEREAS the construction and operation of the HWMF may result in odors,
noise, and/or air pollution and thereby cause damage to Samuel Dodsworth
and to the abutting site, and
WHEREAS the construction and operation of the HWMF may result in adverse
impacts on the beauty and quality of the environment of Zenith and thereby
lower the property value of the abutting site; and
WHEREAS the construction and operation of the HWMF may result in ground-
and/or surface-water pollution and thereby cause damage to the well water
presently used to supply the abutting site; and
WHEREAS the construction and operation of the HWMF will result in the need
for ground- and surface-water monitoring on the abutting site; and
WHEREAS the construction and operation of the HWMF may increase the risk
of other damages to Samuel Dodsworth and/or to the abutting site; and
WHEREAS Babbit Waste Systems, Inc has agreed to undertake the mitigation
measures specified in this agreement, and
WHEREAS Babbit Waste Systems, Inc. has agreed to compensate Samuel
Dodsworth for such costs as are specified in this agreement;
The parties have agreed as follows
/. Cash Compensation and Fees
A. Babbit Waste Systems, Inc shall pay Samuel Dodsworth, upon approval
of the site by the State Facility Siting Board, the amount of $ ,
as compensation for the annoyance, noise, odor, and other temporary impacts
on the abutting site from construction of the HWMF.
B. Babbit Waste Systems, Inc. shall also pay Samuel Dodsworth the
following additional amounts for so long as Samuel Dodsworth refrains from
bringing suit for any property damage to the abutting site arising out of the
operation of the HWMF-
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(1) During the two (2) years commencing on the first date of operation of
the HWMF, a fee of $ per month;
(2) Thereafter, a fee as mutually agreed by the parties from time to time;
provided that, if the parties are mutually unable to agree on a fee at any time,
the fee shall be set at $ per month
Paragraph A of Section I contains a single lump-sum fee stated to be a
compensation for the major construction impacts of the facility. Paragraph B sets
up a monthly fee in exchange for continued forbearance from bringing an action
for damages. This fee may be renegotiated from time to time.
// Provision of Services and Other Compensation
A Babbit Waste Systems, Inc. shall provide, without charge, disposal
services for up to kilograms per month of hazardous wastes, as defined
by the Resource Conservation and Recovery Act, 42 U.S.C. §6903(5),
generated by Samuel Dodsworth.
B Babbit Waste Systems, Inc shall purchase from Samuel Dodsworth for
$ , a buffer strip designated as lot A on the plan attached as Appendix I
to this agreement and shall plant thereon a hedge, acceptable to Samuel
Dodsworth, and sufficient to form a visual screen between the HWMF and the
abutting site.
C. Babbit Waste Systems, Inc. shall reimburse Samuel Dodsworth for the
purchase and installation of ground- and surface-water monitoring devices, as
specified in Appendix II to this agreement, and shall further reimburse Samuel
Dodsworth for monitoring services and maintenance of the said devices in an
amount not to exceed $ per year
As an incentive, paragraph A of Section II promises free disposal services to
Samuel Dodsworth. Paragraph B promises to create a buffer strip between the
facility and the abutting site. This promise is a mitigation device, peculiarly suited
for dealing with abutters. Another mitigation device appears in paragraph C, which
provides that Babbit Waste Systems, Inc. will pay the costs of ground- and surface-
water monitoring on the abutting site.
///. Conditions of Construction and Operation
A. No wastes will be stored or disposed of on the HWMF at locations less
than yards from the abutting site or yards from Rosebud Lane.
B. Babbit Waste Systems, Inc shall institute the practices specified in
Appendix III to this agreement for the prevention of hazardous waste spills at
the HWMF.
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Paragraph A of Section III provides for setbacks and sideyards, to mitigate the
impact of the facility further. Paragraph B includes additional mitigation measures
in the form of spill prevention practices.
IV Compensation for Damages
A Babbit Waste Systems, Inc. shall establish a fund of $ that will
be used to mitigate any effects of the HWMF on individual residents of Zenith,
with whom Babbit Waste Systems, Inc enters into agreements substantially
similar to this agreement, and to compensate such residents for those
decreases in property values that result directly from construction and/or
operation of the HWMF.
B Claims for mitigating measures and/or compensation for Samuel
Dodsworth shall be decided by an assessment board of three people who shall
be appointed in the manner specified in paragraph C below
C The assessment board shall be appointed as follows'
(1) Within fifteen (15) days of submission of a claim to Babbit Waste
Systems, Inc., each party to this agreement shall appoint one member of the
board
(2) The third member, who shall act as chairperson, shall be chosen by
the two members appointed by the parties, and failing agreement between
them, by
D. After affording Samuel Dodsworth and a representative of Babbit Waste
Systems, Inc. the opportunity to be heard on the claim, the assessment board
shall determine Samuel Dodsworth's entitlement to compensation and/or
mitigating measures. The board may attach whatever conditions it deems
appropriate to the award of such compensation and/or mitigating measures.
E The liability of Babbit Waste Systems, Inc under this agreement for all
claims submitted by Samuel Dodsworth shall be limited to the sum of the fund
established under paragraph A, provided that this fund shall in no way restrict
the legal liability of Babbit Waste Systems, Inc for claims not submitted to the
assessment board, or for claims that cannot be met because of depletion of
the fund
Section IV, unlike the similar one in the public compensation agreement, could
not be completely removed without affecting the substantive obligations of the
parties The section establishes a procedure for handling claims arising from
operation of the facility and creates a fund to compensate those claims. However,
the section permits compensation in instances where the harms caused are not
actionable in a court proceeding either as a breach of contract or as a tort. Note
that Samuel Dodsworth may pursue a claim under this procedure without
disturbing his right to a monthly fee under paragraph I.B. Once the compensation
fund is depleted, however, he cannot pursue a remedy without forfeiting his
monthly fee.
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V Effective Dates
A This agreement shall become effective and binding on the parties when
the application of Babbit Waste Systems, Inc. for approval of the site is
approved by the State Facility Siting Board if Samuel Dodsworth shall have
cooperated with Babbit Waste Systems, Inc. in any hearings before the said
Board
B This agreement may be terminated by either party if both of the following
conditions are met
(1) Written notice of the termination, together with a request for a stay
of the proceedings on the application of Babbit Waste Systems, Inc. for
approval of the site by the State Facility Siting Board, is received by the Board
prior to its ruling on the application
(2) Written notice of the termination is delivered by hand to the other
party at the office address provided in the heading of this agreement, above.
As noted above in the previous agreement, Section V transforms the model
agreement into a unilateral contract and solves the problem of consideration.
Paragraph A also states that the agreement is not effective unless the site is
approved. Paragraph B is designed to protect the site owner in the same manner
as the comparable paragraph in the public compensation agreement. In addition,
this paragraph diminishes the ambiguity of the word "cooperated" in paragraph A.
A court would normally interpret "cooperate" to mean "reasonably cooperate" if
the issue were raised before it. However, paragraph B allows Babbit Waste
Systems, Inc. to terminate the agreement if it believes that the quality of the
cooperation it is receiving is inadequate. Paragraph B also allows Samuel
Dodsworth to terminate the agreement if he believes that the cooperation being
demanded is too burdensome. The practical impact of paragraph B, if neither party
terminates the agreement, is that this fact alone is strong evidence that the
cooperation given was "reasonable."
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Appendix A
Mitigation Techniques
INTRODUCTION
Why mitigate'' Mitigation prevents or reduces adverse impacts. Even though
Federal and State regulations require facilities to lessen their possible impacts,
there are several reasons why mitigation above that required by regulatory review
processes may be appropriate in siting HWMFs.
• It is often cost-effective to avoid impacts rather than to pay compensation or
pay for the consequences of an avoidable accident.
• Minimizing impacts will better enable the hazardous waste facility to develop a
"good neighbor" track record—which is especially important for staying in
business
• Mitigation minimizes the problem of estimating the cost of impacts and
negotiating compensation.
• Mitigation may be strategically useful in demonstrating commitment and
credibility when negotiating with local groups.
Because mitigation is very site-specific, this section does not cover every
mitigation technique that may be appropriate in siting facilities, but it does provide
some examples for two generic types of mitigation—changes in the design of
facilities and changes in the operation of facilities. Both types of mitigation are
appropriate for a wide range of potential impacts, including traffic, noise, air
pollution, ground- and surface-water pollution, odors, overall risk problems, and
aesthetics.
The research in EPA's Siting of Hazardous Waste Management Facilities and
Public Opposition suggests that disposal facilities that leave waste in place and
relatively intact (landfills, surface impoundments, and injection wells) tend to raise
more issues requiring mitigation in the siting process than transfer and storage
stations or treatment and incineration facilities.
FACILITY DESIGN CHANGES
Changes to the facility design beyond those required by the permitting agency
may include deletions, such as decreasing the size of the facility; modifications,
such as increasing the height of an incinerator stack; or additions, such as
purchasing additional land to buffer neighboring properties. Facility changes also
37
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encompass changes in the vehicles used to haul hazardous waste to a facility,
such as the addition of a spill containment system. See Exhibit 1 1 for examples of
facility design changes.
Some design changes, however, are potentially very costly and may render the
proposed facility financially unattractive In addition, redesigning major features of
the facility is more difficult and costly after detailed plans have been prepared. It is
especially important, therefore, to involve the local public early in the design
process so community concerns can be addressed.
Except where a facility is State-owned, facility design changes beyond
permitting requirements are generally inappropriate for States to require and
impossible for States to provide However, there are instances, particularly with
respect to offsite impacts, where it may be more practical and feasible for a State to
mitigate adverse impacts. For example, the State could purchase a buffer zone or
improve the access road to a site without compromising its regulatory responsibili-
ties While State sharing of this type of mitigation would potentially relieve the
economic burden on the private sector, more appropriate State incentives could be
used to deal with the issues that this mitigation technique is intended to resolve.
These include site banks and facility development loans to the private sector.
Exhibit 11. Facility Design Changes
of
'"'' '
FACILITY OPERATION CHANGES
Changes to the operation of a facility beyond the requirements of the permitting
agency encompass changes in the onsite operations, such as operating hours,
38
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changes in offsite operations, such as waste hauling routes; and restrictions on the
types of waste allowed in the facility. When the State is the owner or the operator of
a facility, operation changes beyond the requirements of the RCRA permit are
clearly legitimate mitigation measures for the State to provide. As a means of
stimulating further HWMF operating credibility, the State may also require private
operators to fund third-party participation in monitoring.
State operational requirements on private developers, however, must be
exercised with some caution Although operational changes can be an effective
and inexpensive way of mitigating impacts, some requirements—such as in-
creased security and monitoring—are not trivial. Unlike design changes, the costs
of which may be paid once by the developer, operational requirements may pose
recurring costs. See Exhibit 12 for examples of facility operation changes.
Exhibit 12. Facility Operation Changes
^-^;:^|i^^p.||^^»}p
.
^^^
i^^^-ffijj^^ W
expense) Is likely to be the most effective assurance of the developer's
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Exhibit 12. Facility Operation Changes—Continued
promises to the community. The implementation requirements for
independent monitoring include; financing, a binding agreement,
determining monitoring issues (e.g., ground-water, staff training,
emergency containment systems), choosing the independent monitor
(private laboratory, environment^ group, community representatives, a
combination of these), and determining the frequency of monitoring and
access to the facility.
Operating hour restrictions represent a useful technique for mitigating
traffic-related noise impacts and traffic during sensitive hours such as
evenings and weekends. There is precedent for this technique in the
planned restrictions on airport flight operations.
Waste haul route changes offer opportunities to reduce traffic, traffic-
related noise impacts, and risks associated with spills and accidents.
Waste type restrictions at the facility may alleviate fears associated with
the handling and disposal of certain wastes. The Wes-Con facility in
Grandv/ew, Idaho, does not accept kepones, military poison gas, or
pressurized gas, regardless of the suitability of fter site for these
wastes.
SELECTING MITIGATION ALTERNATIVES
Selecting the appropriate mitigation alternative is obviously not a clear-cut
exercise. A hypothetical example is shown in Exhibit 13 to illustrate the difficulty in
selecting among possible alternatives As seen in this example, the selection and
evaluation ot mitigation measures should consider a number of factors. These
factors include'
• cost
• effectiveness
• implementation feasibility
• secondary effects
In most cases, mitigation measures will add costs to the overall project. The
magnitude of these costs, of course, depends on the type of impact being
mitigated It is possible to minimize mitigation costs by considering as many
mitigation alternatives as possible. For example, in the truck traffic impact example
in Exhibit 13 the cost range is fairly large In general, as shown in the example, it is
easiest to compare costs when expressed in present-value form.
Effectiveness refers to the ability of the proposed mitigation measure to prevent
or reduce the impact of concern. The level and type of mitigation for a specific
impact beyond that required by local or State regulatory agencies may result from
the negotiation process between the developer, the State, the community, and the
parties affected In short, the amount of mitigation required may be a very
subjective issue
Like any other project, mitigation measures may face implementation feasibility
constraints. These may include legal authority problems, administrative feasibility
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Exhibit 13. Mitigation Alternatives for Dealing with HWMF Truck Traffic
Impacts (Hypothetical Example)
Mitigation
Alternatives
A, flWbct
size of
facility
B. fteroute
baffle
along
afferent
higttmy(&)
C, Construct
tmnstsr
sraSw in
another
ares; um
tong+fafuf
trueks
D. Limit
operating
hours to
weeMays,
9-M a.m.
to S.-QQ
pM,
9 These sr» cost
•arid are express
for the facility.
Cost* Effectiveness
$3,iOQ,00Q VMH cirf truck
(tost profits) traffic by
SO96
$750,000 Will eliminate
(cosf of traffic in
repairing residential
alternative area; wilt
route) shift traffic to
rural route;
difficult to
enforce
$4,200,000 Will cut truck
traffic by
75%
$500,000 Will eliminate
(lost profits) truck traffic
during
sensitive
hours
>$ (
-------
issues, and political acceptability problems. In broad terms, implementation
feasibility is concerned with the issues shown below:
Implementation Feasibility Criteria Issues
Legal authority Whether or not the implementation
or institutional arrangements are
legal
Administrative capability Whether the firm or public agency
has necessary skills to perform
required administrative responsibilities
Political acceptability Whether the public supports the
implementation scheme
Implementation feasibility may be particularly difficult to evaluate if the proposed
mitigation scheme involves some type of joint public/private arrangement or
action. For example, using the traffic impact example, Alternative B involves
rerouting traffic along different highways to avoid residential areas. State and local
highway regulations, however, may preclude the use of alternative routes. In this
case, implementing a rerouting alternative may simply be infeasible.
Finally, an important issue to consider is the indirect or secondary impact(s) that
may be induced by the mitigation measure. Simply put, a solution to one problem
may lead to another problem. The transfer station alternative (Alternative C) is a
good example This alternative essentially involves siting two hazardous waste
disposal facilities instead of one. The additional facility may require as much
complex negotiation as the original disposal facility. The traffic rerouting alternative
may pose similar indirect impact issues, because the amount of traffic is not being
reduced, rather, the problem is only relocated. The example illustrates the trade-
offs that have to occur in responding to impacts. The most effective measure—the
transfer station alternative—is also the most expensive and is complicated by the
political problems of siting another facility. The least expensive option—the
limitations on operating hours—does not totally prevent the problem.
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Appendix B
Examples of State Compensation
Legislation
CONNECTICUT (PUBLIC LAW 80-472)
Sec. 12. (NEW) Within thirty days following the end of each calendar quarter, the
owner or operator of a hazardous waste disposal facility shall report to the chief
elected official of the municipality in which such facility is located and to the
commissioner of environmental protection, on a form furnished by said commis-
sioner, the number of gallons or cubic yards of hazardous waste received by such
facility in such calendar quarter, and the gross receipts of such facility in such
calendar quarter. The owner or operator shall remit to the municipality, with such
form (1) payment in an amount equal to five cents per gallon or three dollars and
fifty cents per cubic yard for each gallon or cubic yard of hazardous waste
received in such quarter, or (2) payment in an amount determined in accordance
with the following table at the percentage applicable to each level of quarterly
gross receipts, whichever is greater:
Quarterly Gross Receipts
Payment as Per Cent
Over Not Exceeding of Gross Receipts
$ 0
1,250,000
2,500,000
$1,250,000
$2,500,000
10.0
5.0
25
If a hazardous waste disposal facility is located in more than one municipality, such
owner or operator shall report to each such municipality and such payment shall
be made pro rata, based on the number of gallons or cubic yards of hazardous
waste disposed of in each such municipality.
KENTUCKY (KRS, CHAPTER 68)
The fiscal court of any county may license off-site waste management facilities
located within the county with the imposition of a license fee at a percentage rate
not to exceed two percent (2%) per annum of the gross receipts of such a waste
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management facility owned or operated by self-employed individuals, partnerships,
or corporations. The proceeds from the license fee shall be used to defray the
general revenue requirements of the county where the facility is located. For
purposes of assessing the licensing fee provided for in this section, off-site waste
management shall consist of establishing and operating a facility whose principal
purpose is treatment, storage, disposal, or a combination of these activities, but
shall not include those treatment, storage, or disposal activities which occur
incidental to or which are not otherwise distinguishable from a broader manufac-
turing operation at the site of said operation.
MASSACHUSETTS (CHAPTER 21D OF THE GENERAL
LAWS)
Section 12. No facility shall be constructed, maintained or operated unless a
siting agreement shall have been established by the developer and the local
assessment committee of a host community pursuant to sections twelve and
thirteen of this chapter and said agreement has been declared to be operative and
in full force and effect by the council. After said declaration by the council, a siting
agreement shall be a non-assignable contract binding upon the developer and the
host community, and enforceable against the parties in any court of competent
jurisdiction.
The siting agreement shall specify the terms, conditions and provisions under
which the facility shall be constructed, maintained and operated if the developer
chooses to construct, maintain and operate a facility on said site, including, but not
limited to the following terms, conditions, and provisions:
1) facility construction and maintenance procedures;
2) operating procedures and practices, the design of the facility and its
associated activities;
3) monitoring procedures, practices and standards necessary to assure and
continue to demonstrate that the facility will be operated safely;
4) the services to be provided the developer by the host community;
5) the compensation, services, and special benefits that will be provided to the
host community by the developer, and the timing and conditions of their
provision,
6) the services and benefits to be provided to the host community by agencies
of state government, and the timing and condition of their provision;
7) any provisions for tax prepayments or accelerated payments, or for payments
in lieu of taxes;
8) provisions for renegotiation of any of the terms, conditions, or provisions of
the siting agreement, or of the entire agreement;
9) provisions for resolving any disagreements in the construction and interpreta-
tion of the siting agreement that may arise between the parties; and
10) appendices of the compensation to be paid abutting communities estab-
lished pursuant to the provisions of section fourteen of this chapter.
The siting agreement may also include, but shall not be limited to, the following
provisions:
1) provisions for direct monetary payments from the developer to the host
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community in addition to payments for taxes and special services and
compensation for demonstrable adverse impacts;
2) provisions to assure the health, safety, comfort, convenience, and social and
economic security of the host community and its citizens;
3) provisions to assure the continuing economic viability of the project; and
4) provisions to assure the protection of the environment and natural resources.
None of the terms, conditions and provisions of a siting agreement shall operate
to derogate in any way from the requirements established by any general or
special law.
Any financial benefits received by host communities or abutting communities,
other than taxes on real or personal property, shall not be deducted from any
amounts of state assistance, reimbursements or distributions provided by general
and special laws or under the local aid fund established by section two D of
chapter twenty-nine.
Section 13. A siting agreement may be established (1) by the signature of the
chief executive officer of a host community who has been directed by a majority
vote of the local assessment committee of said host community to sign and the
signature of any officer of the developer expressly authorized by the developer to
sign said agreement, or (2) by arbitration pursuant to section fifteen of this chapter.
Section 14. The chief executive officer of any abutting community may, within
sixty days of the determination by the secretary and the council that a preliminary
project impact report is in their judgment in compliance with applicable law,
petition the council for the establishment of compensation to be paid by the
developer to the abutting community for the demonstrably adverse impacts to be
imposed upon said community by the construction, maintenance and operation of
a hazardous waste facility in a host community. As a condition precedent to the
filing of said petition, the chief executive officer shall agree in writing on a form
prescribed by the council, and he is herewith given the authority to bind his city or
town to such an agreement, that his city or town shall either accept the
compensation to be determined by the council or the compensation established by
arbitration pursuant to the procedures established in this section in full settlement
of any claims for demonstrably adverse impacts imposed by the current proposed
project. The chief executive officer shall also agree, as an essential part of said
condition precedent, that he will sign an agreement with the developer accepting
the amount established by the council or by arbitration pursuant to this section,
which agreement shall be a nonassignable contract binding on the abutting
community and the developer, and enforceable as such in any court of competent
jurisdiction.
The council, after due notice to the developer, the local assessment committee,
and the chief executive officer of the abutting community which has petitioned
shall conduct a public hearing to determine and establish the compensation to be
given to the abutting community by the developer. If the chief executive officer of
the abutting community or the developer is aggrieved by the amount of
compensation established by the council, either party may appeal to the council to
establish an arbitration panel, which shall be comprised of three arbitrators, to
resolve the dispute. The council, upon such appeal, shall establish said arbitration
panel by appointing one arbitrator selected by the chief executive officer of the
abutting community, one arbitrator selected by the developer, and the third an
45
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impartial arbitrator, who shall be selected by the chief executive officer of the
abutting community and by the developer and who shall act as chairman of the
panel or, if the chief executive officer of the abutting community and the developer
agree, a single impartial arbitrator acceptable to the chief executive officer of the
abutting community and the developer.
If an arbitration panel or single arbitrator has not been selected within thirty days
after an appeal for arbitration has been filed, the council shall appoint the arbitrator
or arbitrators necessary to complete the three person panel, which shall act with
the same force and effect as if the panel had been selected without the intervention
of the council.
The arbitration panel by a majority vote or single arbitrator shall within forty-five
days after establishment determine the amount of compensation to be paid by the
developer to the abutting community. The council, upon request of the arbitration
panel or the single arbitrator, may extend the time for the conduct of arbitration.
The arbitrators or arbitrator, subject to appropriation, shall receive from the
council such compensation for each day or part thereof for his services as a
majority of the council shall establish. He shall also receive, subject to appropria-
tion, all reasonable expenses actually and necessarily incurred in the performance
of his official duties.
The developer shall agree in writing on a form prescribed by the council that, as
a condition precedent to the establishment of a siting agreement, he shall accept
the amount established by the council or by arbitration pursuant to this section as
the amount of compensation he shall pay to the abutting community. The
developer shall also agree, as an essential part of said condition precedent, that he
will expressly authorize one of his officers to sign an agreement with the chief
executive officer of the abutting community, which agreement shall be a
nonassignable contract binding on the developer and the abutting community and
enforceable as such in any court of competent jurisdiction.
The provisions of chapter two hundred and fifty-one shall govern the conduct of
arbitration proceedings pursuant to this section, including the provisions of said
chapter for judicial review of an arbitration award.
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Appendix C
Bibliography
COMPENSATION CONCEPTS, STRATEGIES, AND
IMPLEMENTATION CONSIDERATIONS
Bacow, Lawrence S. Creating Markets for Development Externalities. MIT Energy
Laboratory Working Paper (MIT-EL-80-Q30WA), July 1980.
This short paper (20 pp.) presents some of the reasons why compensation
techniques are not used more often in the siting of controversial facilities. The
author suggests how to overcome some of the obstacles in using compensation.
Bacow, Lawrence S., and Kretzmer, David. Draft Legislation for an Energy Facility
Siting Process Incorporating Compensation. MIT Energy Impacts Project, Discus-
sion Paper No. 18, October 1979.
In outlining legislation to guide energy facility siting, the authors advocate a
siting procedure including compensation agreements between a community and
facility for negative effects on the community as a result of facility construction
and operation An Energy Facility Review Board is also recommended to, among
other things, ensure compensation agreements.
Bacow, Lawrence S., and Rose, Judah. Compensating Diffuse Interest Groups for
Social Costs. MIT Energy Impacts Project, Document No. 14, Part B, September
1979.
Discusses usefulness of compensation as a tool for assuaging the concerns of
geographically diffuse opposition groups (public interest groups rather than
directly affected residents) in siting energy facilities. Identifies key problems of
opposition based on ideological benefits and the difficulty of binding compensa-
tion recipients to contractual agreements under existing legal rules.
Becker, Jeanne Felbeck. The Use of Incentives and Compensation to Overcome
Public Opposition to the Siting of Hazardous Waste Landfills. University of
Wisconsin, Milwaukee, May 1980.
This paper explores compensation and incentives specifically related to
hazardous waste facility siting. Issues, objectives, techniques, and implementa-
tion are all thoroughly considered. Additionally, hazardous waste management
in Wisconsin is detailed.
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Blackburn, Anthony J., et al. A Comprehensive Policy to Ameliorate Adverse
Impacts of Transportation Facilities. Urban Systems Research & Engineering, Inc.,
for the Department of Transportation, 1975.
Alternatives for the reduction of the adverse impacts of transportation facilities
are reviewed, and techniques including tied and untied assistance payments for
the treatment of impacts are proposed. Draft legislation is outlined involving
compensation to municipalities and commercial and residential landowners.
Detailed development and rationale for the compensation policy are presented.
Booz, Allen & Hamilton, Inc. Hazardous Waste Management Capacity Develop-
ment on the Delaware River Basin and New Jersey: A Program Strategy. Prepared
for Delaware River Basin Commission and N.J. Department of Environmental
Protection, April 1980.
Presents a hazardous waste development strategy incorporating some compen-
sation techniques including direct cash payments to communities in which
facilities are located using tipping fees.
Brenner, Robert D. Social, Economic and Political Impacts of National Waste
Terminal Storage Repositories. Center for International Studies, Princeton Univer-
sity, January 1979.
Mostly deals with mitigating socioeconomic impacts associated with the
construction of nuclear waste storage facilities. Also critiques O'Hare's "auction
method," arguing for up-front impact mitigation with cash compensation as a
last resort.
Chemical Manufacturers Association. A Statute for the Siting, Construction and
Financing of Hazardous Waste Treatment, Disposal, and Storage Facilities. No
date.
This model siting legislation attempts to address local needs and concerns and
to provide a mechanism for selecting and authorizing acceptable sites for
hazardous waste management. The key mechanism offered in the legislation is a
council of State-oriented individuals and local citizens with the ultimate authority
to approve a site. The model legislation is presented with comments and a
rationale for each section.
Clark-McGlennon Associates, Inc. Handbook series prepared for the New England
Regional Commission's TheSearch for Solutions. November 1980.
Handbooks include:
1. A Decision Guide for Siting Acceptable Hazardous Waste Facilities in New
England;
2. An Introduction to Facilities for Hazardous Waste Management: A Handbook
on Siting Acceptable Hazardous Waste Facilities in New England;
3. Criteria for Evaluating Sites for Hazardous Waste Management: A Handbook
on Siting Acceptable Hazardous Waste Facilities in New England;
4. Institutional Arrangements for Developing Hazardous Waste Facilities in
New England;
5. Negotiating to Protect Your Interests: A Handbook on Siting Acceptable
Hazardous Waste Facilities in New England.
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The last handbook listed above deals with compensation and negotiation
techniques for hazardous waste facility siting with an emphasis on the
problems/perspectives of New England. It provides answers to many basic
questions concerning these techniques—their purpose, usefulness, rationale,
and how they can be used successfully in the siting process.
Cole, R. J., etal. Compensation for the Adverse Effects of Nuclear Waste Facilities.
Battelle Memorial Institute, Human Affairs Center, Seattle, Washington, July 1978.
This paper presents one of the most complete analytical decisionmaking
frameworks for incorporating compensation into facility siting. It concerns
nuclear waste facilities, but the ideas are widely applicable. Valuable as a
complete checklist of issues to consider in developing a compensation program,
although many of the individual issues are not well developed.
Ervin, D., and Fitch, J. B. "Evaluating Alternative Compensation and Recapture
Techniques for Expanded Public Control of Land Use," Natural Resources
Journal, Volume 19, No. 1, January 1979.
Thorough presentation of three compensation techniques based on the
concepts of "equity" (compensation for sufferers) and "recapture" (funds for
compensation should come from windfall gains of "winners"). Techniques
include transferable development rights, zoning by eminent domain, and zoning
auctions.
Farkas, Alan L. Addressing Local Opposition to the Establishment of New
Hazardous Waste Disposal Sites. Booz, Allen & Hamilton, Inc., January 1980.
Assesses several roles for States in siting hazardous waste facilities with a brief
discussion of States directly providing or requiring private developers to provide
compensation. Also considers incentives including statutes and siting boards,
postclosure management, public financing of private facilities, and public
ownership of facilities.
Hagman, Donald, and Misczynski, Dean. Windfalls for Wipeouts: Land Value
Capture and Compensation. American Society of Planning Officials, Chicago,
1978.
Long and detailed work defining and making policy arguments for mitigating
impacts and recapturing benefits in land use projects. Includes in-depth
discussion of models and specific case examples.
Kretzmer, David. Binding Communities to Compensation Agreements for Facilities.
MIT, Laboratory of Architecture and Planning, May 1979.
A comprehensive discussion of compensation agreements between utility
companies and the communities in which they are located, addressing the
questions of whether or not a community can bind itself to a host facility and, if
not, the kinds of compensation agreements that can be formulated instead.
Presents a detailed analysis of the legal basis for compensation agreements, a
potential legal structure for the formulation of binding agreements, and a
fictional case with a model compensation agreement.
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Mulch, Jerome E. "Feasible and Prudent Alternatives: Airport Development in the
Age of Public Protest," Public Policy, Winter 1976.
This article describes the development of opposition to airports and the legal
authority behind the purchase of aviation easements, the use of airport
assessment districts, or the provision of sound attenuation materials to
communities. Specific costs for implementing various alternatives nationwide as
well as issues surrounding the cost efficiency and effectiveness of compensation
are also discussed.
Mumphrey, A. J., and Wolpert, J. "Equity Considerations and Concessions in the
Siting of Public Facilities," Economic Geography, Volume 49, April 1973.
Ponders a model examining comparative economic efficiency and equity of
potential facility locations resulting in either direct payments or no payments at
all. Includes discussion of technique selection and compensation rationale.
O'Hare, Michael. "Compensation for Development Impacts—Streamlining the
Development Process by Fair Division of the Spoils," Environmental Comment,
September 1978.
Recommends techniques such as direct monetary payments to affected parties,
State tax credits, and grants to local governments to ensure that real economic
costs and net benefits are incorporated in facility costs.
O'Hare, Michael. "Not on My Block You Don't—Facility Siting and the Strategic
Importance of Compensation," Public Policy, Volume 25, No. 4, Fall 1979.
Outlines characteristics shared by all noxious facilities and describes specific
compensation techniques. Discussion of site selection through auction process
where compensation costs are incorporated, including a detailed cost-benefit
analysis of development and a quantitative method for determination of cost-
effectiveness.
O'Hare, Michael, and Sanderson, Debra R. "Fair Compensation and the Boom-
town Problem," Urban Law Annual^ 977), pp. 101-133, 1977.
Early exploration of compensation techniques, primarily tunneling funds from
the project sponsor to the town and individuals affected either directly or via
State and Federal agencies. Many existing laws and regulations providing for
compensation are cited. Technique selection methods are also discussed.
Rivkin Associates. Socioeconomic Impact Analysis for Juneau and the
Matamuska-Susitna Borough. Prepared for the Capital Site Planning Commission,
February 1978.
This study presents an analysis of a proposed indemnification scheme to
compensate Juneau property owners under a proposal that would shift the State
capital from Juneau to Matamuska-Susitna.
Sanderson, Debra R. Compensation in Facility Siting Conflicts, Part A: Facility
Siting, Social Costs and Public Conflict. MIT Energy Impacts Project, Document
No. 11, June 1979.
Short introductory paper concerning the sources of opposition in siting energy
facilities and how opposition is often related to the social costs triggered by the
project. Types of compensation and problems associated with the evaluation of
impacts are considered.
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Sanderson, Debra R. Rationales for Compensation in Energy Facility Siting
Processes. MIT Energy Impacts Project, Discussion Paper No. 11, July 1978.
Early discussion of the desirability of the compensation technique. Focuses on
issues surrounding the use of compensation as a means of increasing equity, for
dealing with social costs and demoralization costs associated with risks, and for
strategic goals and economic efficiency.
Sanderson, Debra R., and O'Hare, Michael. Predicting the Local Impacts of Energy
Development. A Critical Guide to Forecasting Methods and Models. MIT Labora-
tory of Architecture and Planning, prepared for the U.S. Energy Research and
Development Administration, May 1977
This study offers an introduction to mathematical predictive models for the
"second-order" impacts of energy development. Includes a review of models
and their uses for projecting employment, population, service and public
revenue, and expenditure impacts. Critiques of the salient features of 33
projection models are also presented.
Susskind, Lawrence, and O'Hare, Michael. Managing the Social and Economic
Impacts of Energy Development. MIT Laboratory of Architecture and Planning,
December 1977.
A study focusing on "boomtowns" including an introduction to the auction
technique where communities bid for a facility, i.e., they indicate the price at
which they are willing to accept a proposed facility. The State compensation and
siting legislation of Wyoming and North Dakota are also reviewed.
Urban Systems Research & Engineering, Inc. Buy Now, Fly Later: Land Banking
for Airport Development. Prepared for the Department of Transportation, March
1975.
This study examines the economic, political, and legal factors influencing airport
expansion and thoroughly analyzes the feasibility of advance land acquisition
(land banking) as a means of accommodating those factors.
COMPENSATION CASE STUDIES AND EXAMPLES
Bacow, Lawrence S., and Sanderson, Debra R. Facility Siting and Compensation:
A Handbook for Communities and Developers. MIT Energy Laboratory Working
Paper (MIT-EL-80-037WP), September 1980.
Using seven case studies involving the siting of controversial facilities, this
handbook examines several hypotheses concerning the use of compensation.
The book is an excellent reference for examining the limitations of compensation
and for determining which types of siting decisions lend themselves to
compensation arrangements.
Brownstein, Alan, and Gregor, John. "State Taxation Policies: The Problem in
Siting Power Plants," Electric Perspectives, March 1978.
Discussion of compensation provided by utilities in the form of taxes to host
communities using Pennsylvania and New Jersey as examples. A State role in
allocating utility tax payments according to a formula based on projected inputs
is advocated Provides an analogous structure for hazardous waste facility
compensation.
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Centaur Associates Siting of Hazardous Waste Management Facilities and Public
Opposition. Prepared for the Environmental Protection Agency, 1979.
This report includes more than 20 detailed case studies involving the siting of
HWMFs and public opposition Cases dealing with compensation techniques
include Allied Chemical Case Study, SCA/Earthline (Wilsonville) Case Study,
SCA/Earthlme (Bordertown) Case Study, and Wes-Con, Inc. Case Study.
Easton, Eric B. "Metro Denver's Siting Ordeal," Sludge Magazine, July-August
1978
Describes the $1,800 performance bond required of Metro Denver, a regional
wastewater district, for potential crop damage in its geotechnical testing of sites
for a proposed sludge disposal area in Adams County, Colorado.
Fredman, Ben Medical Area Total Energy Plant. MIT Energy Impacts Project, MIT
Laboratory of Architecture and Planning, May 1979.
Description of the increasing battle over an energy facility and hospital
expansion in an urban, poor neighborhood in Boston Compensation included
payment of $1.5 million to the City of Boston in lieu of taxes plus other provisions
and services for people displaced by the project.
Higgs, Karen M. The Northeast Massachusetts Resource Recovery Facility. MIT
Energy Impacts Project, MIT Laboratory of Architecture and Planning, June 1979.
Discussion of the selection of a site and design for a regional resource recovery
facility in northeastern Massachusetts Also includes an analysis of the limited
success of the compensation scheme consisting of a $1 /ton royalty to the
community housing the facility and a $500/ton royalty to a community housing
a temporary landfill.
McFall, Trudy Parson. "Housing Allocation Plans Have Positive Implications for
Local Housing Authorities," Journal of Housing, February 1978.
Describes housing allocation or "fair share" plans developed by regional/State
planning agencies to identify distribution patterns for subsidized housing.
Includes discussion of bonus subsidy and planning funds awarded to communi-
ties with allocation plans.
Merwin, D. J , and Greene, M. A Framework for Monitoring Social and Economic
Impacts Associated with the Construction of the Skagit Nuclear Project. Battelle
Memorial Institute, Pacific Northwest Division, September 1977.
Includes discussion of a utility-funded impact monitoring system and utility
payments to Skagit County for law enforcement and education impacts through
prepayment of taxes. Also discusses implementation issues including legal
requirements and the calculation and distribution of compensation.
Newkumet, L. J. "Philadelphia—EPA Consent Decree: Land-based Alternatives to
Ocean Dumping," Sludge Magazine, July-August 1979.
Discusses the creation of an "environmental trust fund" from penalties collected
by EPA against sludge dumping violations by the City of Philadelphia.
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Peele, E. Internalizing Social Costs in Power Plant Sitings: Some Examples for Coal
and Nuclear Plants in the United States. Oak -Ridge National Laboratory, 1976.
Describes the direct payment compensation to Wheatland, Wyoming, area
counties impacted by a coal-fired power plant built by Missouri Basin Electric.
Payments covered impact costs associated with construction work force and
costs associated with Citizens Monitoring Committee. Legal requirements and
the costs and financing of the compensation are also discussed.
Rose, Judah, and McKehnie, Deborah. Pilgrim I and II: Siting Procedures and
Public Responses MIT Energy Impacts Project, Document No. 12, Part C, April
1979.
This is an excellent case study that implicitly demonstrates the difficulty in using
compensation to successfully combat all public opposition. While the article
does not deal with compensation attempts, the opposition illustrates how difficult
a local compensation scheme to overcome public opposition may be.
Sanderson, Debra R. Compensation in Facility Siting Conflicts, Part C: Negotiated
Compensation Agreements for Assessing Social Costs. MIT Energy Impacts
Project, Discussion Paper No. 11, June 1979.
An excellent short introductory piece on the progression from the identification
of projected impacts to a negotiated compensation settlement. A case study of
the attempt by Washington Public Power Supply System (WPPSS) to build five
nuclear power plants in Washington is used, and a process is abstracted from
this case and offered as an appropriate compensation negotiation model.
Swan, Raymond. "Indianapolis Project: From Lagoons to Landspreading," Sludge
Magazine, May-June 1978.
Concerns compensation techniques for a sludge landspreading project includ-
ing the operation of ground-water monitoring wells, sales of sludge fertilizer at
low prices, emergency spill containment systems on sludge-hauling trucks, and
the purchase of a liability insurance policy to cover potential property damage or
other losses.
Wondolleck, Julia M. The Montague Nuclear Power Plant: Negotiation, Information
and Intervention. MIT Energy Impacts Project, Document No. 12, Part B, April
1979.
Short paper detailing the history of the proposed Montague Nuclear Power Plant
discussing the utility's failure to consider or to use compensation techniques.
Also describes the concept of a "mitigation council" to determine compensation
liability when impacts occur rather than at the time of facility plan-
ning/construction.
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US. Environment?! Protection Agency
Region V ! ! -:r;v
230 So:-: .:• -i
Chici .0, iiiino * uJ.
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DATE HUE
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Agency
Official Business
Penalty for Private Use
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Book
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EPA
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