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World Resources Company to Lee Wilmot

1600 ANDERSON ROAD / McLEAN, VIRGINIA 22102 / TEL: 703/734-9800 / FAX: 703/790-7245 May 17, 1996
BY TELECOPIER -- Twelve (12) pages total -- to 603-890-1298 -- and by regular mail

Lee R. Wilmot
Corporate Safety Health and
Environmental Manager
HADCO Corporation
12A Manor Parkway
Salem, NH 03079

Dear Lee:

I enjoyed seeing you again at the stakeholders' meeting April 17 in Salem and appreciated your distributing copies of HADCO's second draft1 of the Final Project Agreement, as well as the comments by EPA Region I2 and New Hampshire DES3 on HADCO's first draft. As you recall, the group set today as the deadline for stakeholders to submit comments to HADCO on the second draft; May 31 as the deadline for HADCO to send a third draft to the stakeholders; and June 19 at 2:00 PM for the next meeting in Salem. I look forward to our next meeting -- your even-handedness in presiding has made them a pleasure.

My comments on HADCO's second draft are divided in four sections, entitled as follows and beginning on the next page:

1. Introduction

2. The Final Project Agreement Must Be a Legally Enforceable Contract.

3. EPA Has Raised Fundamental Questions About the Nature of the Subject-Matter of the Contract. Those Questions Will Only Be Answered When the Expedited Federal Conditional Delisting Process that EPA Is Now Developing Is Completed; Yet They Must
Be Answered Before Enforceably Definite Terms of the Final Project Agreement Can Be Drafted. Therefore, Completion of the Federal Conditional Delisting Must Precede Com-pletion of the Final Project Agreement.

1 I use "second draft" to refer to your drafted dated April 16, 1996. The "first draft" is the one dated March 13, 1996, that you distributed at the March 18 stakeholders' meeting.
2 Memorandum, dated April 5, 1996, to you from Joan Jouzaitis, Joshua Secunda, and Ken Rota of EPA Region I. Herein I use the term "EPA's comments" to refer to that memo.
3 Letter, dated April 5, 1996, to you from Kenneth W. Marschner of New Hampshire DES. Herein I use the term "New Hampshire's comments" to refer to that letter.

4. New Hampshire's Delisting Regulations Are "More Stringent" than EPA's. HADCO's Proposed Method of Achieving "Waivers" from Those "More Stringent" Re- quirements Is Not in Accord with New Hampshire Law. HADCO Is Ineligible to Apply for a New Hampshire Delisting, or for Waivers from the Delisting Regulations, Until After Ob- taining the Federal Delisting. Since It Will Not Be Known Whether New Hampshire Intends to Exercise Its Power to Impose Additional Delisting Conditions, Which Must Be Stated in the Final Project Agreement, Until the New Hampshire Delisting is Granted, the Completion of the Final Project Agreement Must Also Await that Event.

1. Introduction

I think we can all agree with Ken Marschner's statement at the last meeting that the heart of this project is developing a streamlined delisting process for F006 sludge sent to smelters for metals recovery. Although the project is an "experiment," in which HADCO's F006 sludges are the "guinea pig," to date no one has advanced any reason why the experiment cannot be attempted under existing regulations.4 In other words, this is not one of those XL project -- much discussed in the EPA guidance documents on Project XL -- for which a "special dispensation" to violate existing law must be given. In the view of World Resources Company ("WRC"), a major improvement in HADCO's second draft, over the first, is the inclusion of language explicitly requiring HADCO to apply for state and federal delistings.5

Existing regulations, then, provide the mechanism for the delistings necessary for the actual "experiment" -- unmanifested shipment of HADCO's electroplating sludge to smelters6 -- to begin. In the federal context, there is no provision for varying or waiving the delisting requirements set forth at 40 C.F.R. 260.22 (1995). How EPA chooses to apply that regulation in making a decision on HADCO's application is a matter that the law demands be left to the agency's sound discretion. While New Hampshire does allow waiver of its "more stringent" (than federal) delisting requirements, its own regulations (discussed in the last section of this letter) also govern the obtaining of such a waiver.

We do not think it is necessary or appropriate to include in the FPA terms that merely state what the government is already required to do or what the parties might or might not agree in the future, such as the following (from second draft paras 7 and 8; emphasis added, paragraph break omitted):

4 I'm puzzled by EPA's comment (at 3) that a "site-specific rulemaking" would be needed in addition to a conditional delisting under 40 C.F.R. 260.22(1995).

5 See new section III of second draft. Since the provisions of section III relating to compliance with California and New York are left blank, WRC reserves comment on those states' laws until a later time, and here we exclusively discuss federal and New Hampshire law.

6 WRC notes in passing that delisting conditions should allow HADCO to continue to ship to our company or another approved recycler, as an alternative to direct shipment to a smelter.

... EPA regional offices and State Agencies shall consider a conditional delisting of HADCO's sludge, providing that HADCO manages the collection, storage and transportation of its sludges to approved reclamation sites ... HADCO will ship its delisting WWT sludges to reclamation sites agreed to by the parties to this FPA.

Such language is a legal nullity because it establishes no enforceable obligation. Existing law, 40 C.F.R. 260.22 (1995), already requires EPA to "consider" a petition to delist F006 sludge. If EPA grants the delisting, New Hampshire will in turn will be required to "consider" HADCO's application.7 And stating what the parties may or may not agree to do in the future seems pointless to us.

On the other hand, some terms of the second draft are too enforceable, in the sense that they impose constraints on agency discretion beyond those imposed by existing law. To that extent, we think, such terms would be invalid. For example, the second draft would require EPA to decide on HADCO's delisting application within a set number of days (to be determined). However, existing law imposes no such limitation. WRC understands and sympathizes with HADCO's complaint that delisting decisions have in the past taken too long, and we hope that EPA can "move this one along" expeditiously. But existing law must be followed. The FPA cannot and should not try to alter the requirements of the delisting regulations.

Having said what we dislike, now it behooves us to say what we think the FPA should be: We think EPA's guidance demands that any XL Final Project Agreement be a legally enforceable contract. In this case, we think the FPA cannot be completed until after the conditional delistings have been issued (although some drafting can certainly proceed in the interim). Our thoughts are developed below, in a way we hope will be accessible to non-lawyers in the group (may the other professionals show reciprocal pity on us!).

2. The Final Project Agreement Must Be a Legally Enforceable Contract.

In law, a "contract" is a sub-class of the more inclusive term "agreement." Essentially, a contract is an agreement that is legally enforceable, whereas an "agreement" may or may not be legally enforceable.8 Two signers of (i.e., "parties to") an agreement have made


7 Under New Hampshire law, a petition for delisting of F006 sludge may only be filed by one who has already obtained federal delisting., N.H. Code of Admin. Rules Env-Wm 406.01(a)(2) and 402.06(a) (unpublished Aug. 24, 1994, amendment, obtained from N.H. Office of Legislative Services).

8 Black's Law Dictionary (3d ed. 1990) defines "agreement" as "[a] meeting of two or more minds; a coming together in opinion or determinations" and adds, "Although often used as synonymous with "contract," agreement is a broader term, e.g. an agreement might lack an essential element of a contract." "Contract" is defined as "[a]n agreement between two or more persons which creates an obligation to do or not to do a particular thing." The dictionary quotes another definition of "contract" from a respected scholarly work, the Restatement (Second) of the Law of Contracts, at 3: "'A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some recognizes as a duty.'"

-----------a contract -- that is, a legally enforceable commitment -- if one party's promises are suffi-ciently definite and precise -- and if the other party has sufficient means of determining compliance or default with them -- that, in the event of default, the legal system can be in- voked to enforce the promises or, at a minimum, the agreement can be terminated for non-compliance. On the other hand, an agreement is not a contract -- is legally unenforceable -- if one party's hope that the other party will perform its commitments depends entirely on the latter's "moral obligation" or "good faith."

Since an "agreement" is not necessarily a "contract," and since EPA has called the type of document that we are try to write a "Final Project Agreement," it is worthwhile asking whether EPA intends for the FPA to be an unenforceable "agreement" or a legally enforceable "contract."

EPA's guidance document, "Draft Principles for Development of Project XL FPA's For Public Release 1/12/95" (herein "Draft Principles"), does not directly answer the question. However, five of the six pages that concern the "substance" of the FPA are devoted to "Legal and Enforcement Issues."9 In those pages numerous passages use the term "commitment" -- a term that in law is associated with a legally binding promise.10 A reading of those passages (at 10-14), set forth below, leaves no doubt, at least in our mind, that the Final Project Agreement must be a legally enforceable contract (footnote added):

9 See Draft Principles 2(a) at 9.

10 The law dictionary defines "commitment as follows (irrelevant definitions omitted): In short, the essence or core of the FPA will be an enforceable contract, although other, non-enforceable provisions will be contained as well. Some of those non-enforceable provisions will be "introductory" material, not directly pertinent to the enforceable terms, that might best be placed in the "recitals" that precede the enforceable terms.12 However, some non-enforceable provisions may be interspersed with enforceable ones; careful drafting can make the distinction between enforceable and non-enforceable terms and is worth repeating:
11 The Draft Principles go on to describe the "other mechanisms" (at 14-15), as follows:
HADCO has chosen the first option, by deciding to use the existing federal and state delisting regulations and the New Hampshire waiver regulations. (It is thus unnecessary to consider the "other approaches" here.) Clearly, therefore, the FPA in this project will be "accompanied by other legally enforceable documents," in the form of the delistings and waivers themselves. The Draft Principles are ambiguous on whether those other documents should be executed before, contemporaneously with, or after the FPA. On the one hand, an FPA cannot "be accompanied" by other legal documents (as the quotation in main text above suggests) if those documents do not yet exist. On the other, the same passage also says that an FPA may "set out a plan of action to pursue other mechanisms that will establish the remainder of the terms." We think that the ambiguity suggests resolution in accord with the particular situation. In this case, for reasons we develop in the remainder of this letter, we believe the delistings and waivers must be completed before the FPA, so that they can truly "accompany" it.

12 For example, the Draft Principles, at 9, recommend that the FPA include an "overview of the project (i.e., what the sponsor plans to do, what concepts are being tested)." We suggest that the overview (now I of second draft) be placed in an introductory "recitals" section, labeled such, as is commonly done in contracts. (The second draft contains recitals -- the three "WHEREAS" clauses.) We think the expanded recitals could be in standard narrative, rather than endless "Whereas." Note that the recitals precede the words "NOW, THEREFORE, the parties agree as follows," which denote the start of the enforceable promises of the contract.

13 Commitments intended to be enforceable must be drafted with especial care, to ensure that it is clear what a party is agreeing to, how compliance can be verified, and the consequences of non-compliance. In this case, the enforceable "minimum level of performance" could be for HADCO to send the F006 sludges for smelting in accordance with previously established conditions of federal and state delistings. Enforceable terms for determining whether such direct shipment was "environmental performance superior to the baseline" would also have to be included.14 On the other hand, HADCO's hopes or expectations of future actions that might or might not be taken, depending on whether and how much savings resulted from such direct shipment -- such as installing a sludge dryer or sending copper-bearing dust15 for reclamation -- would probably have to be written into the initial16 FPA as unenforceable terms.17

One last comment about the contractual nature of the FPA should be made. Notably, in the lengthy quotation above, all of the "commitments" are to be made by the sponsor -- in this case, HADCO. Contracts are distinguished from gifts by the fact that each contracting party normally expects something in return -- a "consideration" or "quid pro quo." What will be the "consideration" or "quid pro quo" that HADCO will receive in return to its enforceable commitments? The answer is that HADCO will be the first company allowed to use the streamlined conditional18 delisting process that is the purpose of the

Greater vagueness or uncertainty obviously can be permitted in terms that no party intends to be enforceable.

14 While we believe that writing the FPA provisions incorporating the delisting conditions must await agency action on the delistings, we see no reason that the drafting of the FPA provisions regarding the baseline environmental performance cannot proceed in the interim.

15 HADCO may, of course, choose to follow New Hampshire's or EPA's comments (at 7 and 2, respectively) and agree, in the initial FPA, to install a sludge dryer or to send the copper dust to the smelter.

16 The Draft Principles recommend that the FPA include "provisions for potential modifications the FPA during the life of the project."

17 In the law of wills, the term "precatory language" is used to refer to terms in a will that express the will-writer's hopes, wishes, desires, or expectations, but are insufficiently definite to be enforceable (i.e., to dispose of property). Black's Law Dictionary (6th ed. 1990). Unenforceable expressions of HADCO's good intentions in the FPA might, by analogy, be referred to as "precatory terms."

18 I discuss only conditional delisting in this letter, although Paragraph 6 of HADCO's second draft proposes that HADCO's sludge be unconditionally delisted if selected constituents are found to exist at less than the maximum levels allowed in any of the previous F006 delistings set forth in paragraph 4. We spent considerable time at the April meeting discussing the appropriateness of having any form of unconditional delisting in the Final Project Agreement, and you indicated that all mention of unconditional delisting would probably be deleted. I therefore merely note in passing that WRC agrees with EPA's comment that paragraph 6 unacceptably "oversimplifies the delisting process." EPA's comments at 6.

project to develop. As we understand the project, the agencies want to conduct a controlled experiment, using HADCO's F006 sludges as the "guinea pig," to see whether a "streamlined" delisting procedure can be developed for sending such sludges for metals recovery, a procedure that would "achieve environmental results superior to the baseline." The task of writing the FPA is, therefore, largely one of devising enforceable controls for the experiment. (Since the experiment cannot actually "begin" until the controls are in place, and since crucial controls will be derived from the delisting documents themselves, the latter must logically precede final drafting of the FPA. We elaborate the point in the next two sections.)

Experiments sometimes fail. The conditional delistings may be denied, in which case, as we see it, an FPA should never be executed. Or it may become apparent, soon after the FPA is signed and the experiment begins, that the environmental performance is in fact not "superior to the baseline." HADCO surely is aware of such risks of failure. They do not in our view present a barrier to concluding a legal enforceable FPA at the appropriate time.

3. EPA Has Raised Fundamental Questions About the Nature of the Subject-Matter of the Contract. Those Questions Will Only Be Answered When the Expedited Federal Conditional Delisting Process that EPA Is Now Developing Is Completed; Yet They Must
Be Answered Before Enforceably Definite Terms of the Final Project Agreement Can Be Drafted. Therefore, Completion of the Federal Conditional Delisting Must Precede Com-pletion of the Final Project Agreement.

EPA's comments raise a cluster of fundamental questions that in WRC's view must be answered before drafting of the FPA can be completed. EPA's most basic question could be stated as follows: "What are the constituents of HADCO's sludge and their range of variation over time?" As EPA puts it (at 4-5):

EPA's interest in historical data is entirely consistent with the Draft Principles (at 10-11; paragraph break omitted):
Moreover, WRC believes that many of the key terms of the Final Project Agreement will depend upon EPA's determination of the "baseline" constituents in the sludge: not just the frequency, number, and constituents for sampling, but also the permissible ranges of variation of the sludge, and most important, the enforceable "management conditions" of the delisting that will apply to the generating facility, the transporter, and the smelter. EPA writes (at 3): Furthermore, as EPA explains, determination of the nature of the sludge is necessary before it can compare the sludge to a given smelter's "typical" feedstock, to determine if the smelter should be "approved":

If the "showing" referred to in the last line cannot be made, the effort of drafting a Final Project Agreement can be saved, because none can be entered. On the other hand, if the "showing can be made, it will be specific to a particular smelter, since each smelter's typical feedstock is different. In short, the Final Project Agreement must list the "approved" smelter, and must therefore be written after the first "showing" has been made.19 (The FPA should be modifiable later, by agreement of the parties, if another smelter were approved.20)

19 New Hampshire's comments (at 7) pose related questions that, we think, also must be answered before the FPA can be completed:

A detailed review of Canadian rules must be accomplished to ensure the project's international compatibility. A demonstration should be made that the smeltering operation has appropriate air permits to accept HADCO's sludge. Slag disposition from the sludge reclamation must be done in an environmentally sound manner. Certification will be needed to document an end market on the "smelted" sludge to ensure that the copper is sold from the smelter.

20 As noted earlier, the Draft Principles, at 9, require the FPA to contain "provisions for potential modifications to the FPA during the life of the project."

To conclude, we believe that the considerations raised by EPA are appropriate; that EPA must make the judgments required, as the agency charged with protecting the public interest; that the determinations must be made in accordance with sound science as determined by the agency; and that they logically must be completed before the XL "experiment" can "begin" or the FPA can be completed.

3. New Hampshire's Delisting Regulations Are "More Stringent" than EPA's. HADCO's Proposed Method of Achieving "Waivers" from Those "More Stringent" Re- quirements Is Not in Accord with New Hampshire Law. HADCO Is Ineligible to Apply for a New Hampshire Delisting, or for Waivers from the Delisting Regulations, Until After Ob- taining the Federal Delisting. Since It Will Not Be Known Whether New Hampshire Intends to Exercise Its Power to Impose Additional Delisting Conditions, Which Must Be Stated in the Final Project Agreement, Until the New Hampshire Delisting is Granted, the Completion of the Final Project Agreement Must Also Await that Event.

Under New Hampshire law, having a federal delisting is a prerequisite to applying for a New Hampshire delisting.21 Federal law allows state and federal hazardous-waste programs to operate simultaneously and lets states adopt requirements that are "more stringent" than federal ones.22 In its delisting regulations, New Hampshire has imposed such "more stringent" requirements.23 However, New Hampshire regulations also provide for "waivers" from the "more stringent" requirements, under certain conditions described below.

HADCO's second draft, at sec. III(B)(1), indicates that the company intends to seek a waiver from New Hampshire's more stringent" delisting regulations. The second draft, id., would have New Hampshire agree to grant the waiver before a federal delisting is granted:

However, a waiver may be requested only by "[A]ny person who is or would be directly and adversely affected by the strict application of a hazardous waste rule."24 Until HADCO has obtained the federal conditional delisting, it is ineligible to request a New Hampshire delisting, and therefore, until that time, it cannot claim to be "adversely affected" by the fact that the New Hampshire delisting regulations are more stringent.

21 See footnote 7 above.

22 RCRA 3009, 42 U.S.C. 6929

23 Cf N.H. Code Admin. Rules Env-Wm Part 406 with 40 C.F.R. 260.22 (1995)

24 N.H. Code Admin. Rules Env-Wm 212.01(a) (unpublished Aug. 24, 1994, amendment, obtained from N. H. Office of Legislative Services).

Once the federal delisting is obtained, HADCO would become eligible to request the waiver. The waiver is available from "any requirement in the hazardous waste rules that is more stringent than [federal] requirements."25 The request for the waiver must be in writing and must include the following:26
A waiver may be granted only if the applicant submits all of the information required above.27 Moreover, the state can grant the waiver only if it determines that all of the following criteria have been met:28


25 Id.212.01(b).

26 Id.212.02(a).

27 Id.212.04(b).

28 Id.212.04(a).
Even if HADCO had already obtained the federal delisting, the New Hampshire waiver regulations would preclude the state from agreeing in advance to grant the waiver, as HADCO has proposed.

Because New Hampshire's delisting regulations are more stringent than EPA's, new Hampshire has power to impose additional conditions in its delisting that will not appear in the federal delisting. If such additional conditions are imposed, they will need to be written into the FPA, by the same logic that requires EPA's conditions to be written in (see Section 2 above). New Hampshire's power to write additional conditions will not be yield until, at the earliest, the waiver is granted, and probably not until the state delisting is granted as well. Final writing of the FPA must therefore must wait the granting of the New Hampshire delisting.

I appreciate HADCO's consideration of these comments, and I look forward to seeing you again on June 19.

In addition to sending me the "third draft," would you be so kind as to send me copies of any comments on the second draft, or other comments on this XL project, that you receive from EPA or any state agency or any other stakeholder? Thanks.

With kindest personal regards, I am,

Sincerely yours,

/s/ Will Gotschall
William P. Gotschall
General Counsel

cc (by fax and regular mail):

Kenneth W. Marschner, Administrator
Waste Management Compliance Bureau
New Hampshire Department of Environmental Services
6 Hazen Drive
Concord, NH 03301-6509
Tel. 603-271-2943
Fax. 603-271-2456

Joan M. Jouzaitis, Environmental Engineer
U.S. Environmental Protection Agency
J.F.K. Federal Building, A4P2 - SPN
Boston, MA 02203
Tel. 617-565-9009
Fax. 617-565-1141

Steven C. Linder, P.E.
EPA Region IX (H-3-1)
75 Hawthorne Street
San Francisco, CA 94105
Tel. 415-744-2036
Fax. 415-744-1044

James Sullivan, Environmental Engineer
EPA Region II
22nd Floor (HWCB)
290 Broadway
New York, NY 10007-1866
Tel. 212-637-4138
Fax. 212-637-4949

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