Flow Control Face Off

WHERE WASTE WINDS UP can be costly and sometimes controversial. Disposal site owners must keep “feeding” their facilities with waste to cover the costs of construction and operation. So to maintain a certain amount of waste flowing to their facilities, local governments sometimes impose directives — or flow control laws — requiring haulers to transport trash to sites of their choosing.

In 1994, the U.S. Supreme Court prohi-bited state and local authorities from enacting waste laws that interfere with “commerce,” as defined by the U.S. Constitution. Yet some communities continue to mandate where trash be disposed of. When this happens, the issue usually winds its way through the courts.

To get a handle on the past legal battles and how the private and public sector challenges will affect the industry, Waste Age recently spoke with the legal advisors for the opposing sides.

Both general counsels for their associations, David Biderman represents the Washington, D.C.-based Environmental Industry Associations' (EIA) private sector members and Barry Shanoff represents the Silver Spring, Md.-based Solid Waste Association of North America's (SWANA) local government members.


Explain flow control and the significance of the Carbone case.

Shanoff: Generally speaking, flow control is a system under which a governmental entity, by ordinance, regulation or other official directive, compels haulers to process or dispose of waste at a designated facility. In 1994, the U.S. Supreme Court invalidated a municipal law that required all nonhazardous solid waste within the jurisdiction to be processed at a designated privately-owned transfer station. The high court found that the law discriminated against interstate commerce by favoring a single waste processor and thereby excluding out-of-state and other in-state processors from the market. [C&A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383.]

When does a community's approach to managing the flow of locally generated waste violate the Commerce Clause?

Shanoff: Article I, Section 8, Clause 3 of the U.S. Constitution empowers Congress “to regulate Commerce with Foreign Nations, and among the several states…” The Supreme Court has long interpreted the Commerce Clause as having a “dormant” aspect, limiting the power of states and local authorities to pass laws or adopt practices that impose substantial burdens on interstate commerce, even where Congress has not directly acted.

To determine whether a local activity violates the dormant Commerce Clause, the high court has instructed lower courts to undertake two separate inquiries.

First, a judge must decide whether the governmental authority is “regulating” the market or merely “participating” in it. A local government may enter a market with the same freedoms as a private party. Thus, it may pick and choose its business partners, its terms of buying and selling goods and services, and its goals. This kind of activity is deemed “market participation” and falls outside the scope of the Commerce Clause.

On the other hand, if the governmental activity amounts to “regulation” of interstate commerce, then the judge moves to a second tier of inquiry: whether the activity (i) discriminates against interstate commerce or (ii) regulates evenhandedly with only incidental effects on interstate commerce.

If a court finds that an activity discriminates against interstate commerce, the government must show a legitimate local purpose that cannot be achieved by nondiscriminatory means. Few cases exist where a governmental entity has met this burden. Even if a local activity treats in-state and out-of-state interests equally, it is still subject to evaluation under a test that weighs the burdens on commerce against the local benefits. Local government programs usually survive attacks from the private sector where courts apply this balancing test.

What is the public sector's position on controlling the flow of waste?

Shanoff: Two years ago, a federal appeals court in New York ruled that a county ordinance requiring haulers to transport waste to a designated public facility did not discriminate against interstate commerce. [United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority, 261 F.3d 245 (2d Cir. 2001), cert. denied, 534 U.S. 1082 (2002).] The court noted a significant difference between the county ordinance and the situation in Carbone: The ordinance equally affects all private businesses — in-state and out-of-state. Thus, the ordinance will be sustained unless the challengers prove that the burdens on interstate commerce outweigh the local benefits. The case was sent back to the district court where evidence and testimony was presented. At press time, a decision was pending.

The United Haulers decision affects local authorities and waste haulers only in New York, Connecticut and Vermont. Some public officials there may now feel empowered to enact or reinstate designation to public facilities. Elsewhere, however, public sector solid waste managers for the most part continue to develop and manage their programs with approaches and solutions that do not involve overt regulatory controls.

From a national perspective, views vary widely among local governments and public authorities on the benefits and necessity of measures to influence how and where municipal solid waste will go. These opinions are not a function of population or geography. Communities thousands of miles apart might have similar attitudes on waste management mechanisms, while two cities in the same county or, for that matter, two counties in the same state, might differ completely on the subject.

SWANA, whose members are predominantly public sector waste management officials, supports the principle of free movement of municipal solid waste across jurisdictional boundaries, subject to traditional state and local government responsibilities.

What alternatives to flow control have local governments successfully used to manage waste generated within their boundaries?

Shanoff: Citing the “market participation” doctrine, federal appeals courts have upheld a variety of waste management programs where local governments have contracted for or franchised collection and disposal services under arrangements where the service provider is obliged to deliver the waste to a designated facility. Similar outcomes have occurred even where jurisdictions have entirely displaced the local waste collection market and assumed exclusive responsibility for collection and disposal. Some communities have lowered or even eliminated tipping fees at their landfills and transfer stations in an effort to lure waste. Replacing diminished or lost revenue from these facilities can be accomplished by generator fees, taxes and special assessments, and service-specific user fees. Other measures include long-term contracts with haulers.

Why do haulers continue to challenge attempts by communities to manage waste?

Shanoff: Understandably, the private waste industry vigilantly guards and vigorously defends its assets and operations. Meantime, communities are obliged fulfill their statutory responsibilities, such as developing programs and systems for integrated waste management and the full range of related services to residential, commercial and industrial generators. Many haulers view efforts by local government to accomplish these objectives as a threat — particularly when such initiatives might alter a profitable equilibrium in the community or otherwise affect the ability of private sector to collect, transport and dispose of waste as it sees fit.

What recent legal decisions have there been?

Shanoff: Aside from the United Haulers decision two years ago, very few rulings have been handed down. The federal appeals courts have produced none, although there is an appeal pending in the fifth circuit. There is a widely scattered handful of decisions by district courts, but they have slim value as legal precedent. This situation may reflect the fact that the contours of permissive local activity in the post-Carbone era have been fairly well staked out.

Recounting 25 years of flow control litigation, SWANA has published “Transboundary Restrictions on Solid Waste Flow, “a compilation of the most significant and influential decisions by federal appeals courts and the U.S. Supreme Court. Key factual and legal elements of each decision are noted. [See www.swana.org]

What are the prospects for federal legislation?

Shanoff: A number of bills have been introduced in the House and Senate. One or two of them have a distinct parochial focus such as curbing the flow of waste from Ontario to Michigan. However, the chances for passage of waste flow related legislation this session — even a narrowly tailored measure — are very slim.

What factors might cause the US Supreme Court to hear another flow control case?

Shanoff: The high court will accept (or reject) a flow control case for the same reasons it accepts (or rejects) other types of cases — nationally urgent or significant issues; conflicting rulings by several federal appeals courts on the same important federal issue; or a trend among federal appeals courts to decide an important federal question in a way that conflicts with a Supreme Court decision. For now, the flow control arena is simply not producing rulings of that sort.

Do you see an end to cases involving flow control?

Shanoff: No. Litigation is always lurking wherever local governments act rashly or haulers believe that the private sector knows best.


Explain flow control and the significance of the Carbone case.

Biderman: Flow control refers to government laws or other arrangements that require or incentivize waste to be disposed of at preferred disposal facilities (landfills, incinerators or transfer stations). Flow control is used by local governments who cannot compete fairly with private disposal facilities and need to assure a constant flow of waste (and revenue) to pay for their own facilities.

In Carbone, the U.S. Supreme Court ruled that Clarkstown, N.Y.'s law requiring all waste generated in that town be disposed of at a certain transfer station was unconstitutional. This 1994 decision is significant because hundreds of other localities had similar flow control laws that were nullified as a result of the Carbone decision. Local governments have tried to overcome Carbone in 2 ways: First, by competing with other disposal facilities on price and service instead of relying on a flow control monopoly. Second, some courts have authorized limited exceptions to the Carbone decision (e.g., “market participation doctrine,” “economic” flow control) that direct waste without running afoul of the Commerce Clause.

When does a community's approach to managing the flow of locally generated waste violate the Commerce Clause?

Biderman: According to the U.S. Supreme Court's decision in Carbone and more recent court decisions, local governments violate the Commerce Clause when their waste management laws unreasonably interfere with interstate commerce. For example, if a local waste authority passes a law requiring all waste generated within the boundaries of that authority to be disposed at a specified transfer station or landfill, the Commerce Clause is violated. This is because competing disposal facilities, which may or may not be in other states, are prohibited from receiving that waste.

On the other hand, when a local government contracts with a waste hauler and under the terms of that agreement, the hauler is required to dispose waste at a designated disposal facility, the courts have generally held this is permissible under the Commerce Clause.

What is the private and public sectors' position on controlling the flow of waste?

Biderman: The private sector's position on waste flow is that governmental borders should not restrict the movement of solid waste. This is because such restrictions inevitably increase costs for the solid waste industry and their customers. Many cities, especially those forced to use a county or waste authority-designated facility, also oppose flow control. State and local governments should not impose flow control restrictions that are anti-competitive, and should not have the authority to limit the amount of waste that crosses state lines. With the closure of thousands of landfills throughout the United States over the past decade, regional landfills have developed that provide cost-effective and environmentally protective waste disposal for all Americans.

How has flow control affected communities and their residents, and commercial businesses?

Biderman: The principal impact of flow control on businesses and residents is they are forced to pay above-market disposal costs. After New Jersey's flow control system was found unconstitutional in 1997, average statewide disposal costs at the county-owned incinerators dropped by more than $22 per ton. In Hennepin County, Minnesota, the tip fee declined by about $30 per ton when its flow control law was ruled illegal. This has happened in several other markets after flow control was declared unlawful, because without flow control, government-owned disposal facilities are forced to compete with more efficient, private sector disposal facilities by reducing their disposal fees.

What alternatives to flow control have local governments successfully used to manage waste generated within their boundaries?

Biderman: Some local governments have reduced their disposal fees and now fairly compete with private sector disposal facilities. Others have privatized the waste disposal function while retaining regulatory oversight. A third group continues to direct waste under some of the limited exceptions to the Carbone decision (e.g., using franchise arrangements).

Why do there continue to be challenges to communities who attempt to manage the flow of their waste?

Biderman: Local waste generators and waste companies challenge some communities' flow control systems because these systems increase costs, without any corresponding benefits. Generators, including many towns and municipalities, do not want to pay an above-market rate for waste disposal services. In the mid-1990s, the Minneapolis City Council unanimously opposed Hennepin County's flow control system. Many New Jersey mayors strenuously objected to the state flow control laws that forced waste to county disposal facilities that were far more expensive than what was available on the open market. Flow control also adversely affects the NSWMA's hauler members, who prefer to use closer, cheaper, or their own disposal facilities instead of a designated disposal facility, and NSWMA's members who own and/or operate landfills that would receive waste in the absence of flow control.

While a few public sector representatives continue to allege that flow control provides public health or environmental benefits, this argument is illusory. A 1995 EPA report concluded flow control does not provide environmental benefits and does not help promote waste reduction or recycling. In the 21st Century, when all U.S. disposal facilities are subject to stringent regulatory oversight by the state and federal governments, and a dynamic marketplace is characterized by frequent waste stream changes (due to increased recycling, implementation of pay-as-you-throw-type systems, etc.), flow control is an obsolete management tool.

The diversity of opposition to flow control laws is illustrated by the recent cases. In a recent Washington case, an apartment complex operator filed a lawsuit alleging Tacoma's flow control law requiring waste be disposed at the local incinerator. In a recent Kentucky case, a local manufacturer successfully challenged a county waste flow arrangement. The NSWMA filed a lawsuit in August 2002 challenging a Mississippi waste authority's flow control law; a federal court struck down the law, and the authority has appealed the case.

What recent legal decisions have there been?

Biderman: In September 2001, a federal appeals court in New York ruled in the United Haulers case that the Carbone decision did not apply if a local government owned the designated disposal facility. This decision appears contrary to both the spirit of Carbone and several subsequent federal court decisions that struck down local flow control laws. So far this year, two federal courts have disagreed with the United Haulers decision's analysis. Most notably, in NSWMA v. Pine Belt Solid Waste Management Authority, the court declared a Mississippi waste authority's flow control laws unconstitutional, adding that even if the United Haulers “logic” was applied, the same outcome would have resulted. The authority has appealed the decision to a Fifth Circuit Court of Appeals, and a decision is expected next year.

What are the prospects for federal legislation?

Biderman: It is highly unlikely that Congress will pass legislation authorizing flow control anytime soon. Local governments have demonstrated in the 10 years since the Carbone decision that they do not need flow control authority.

What factors might lead the U.S. Supreme Court to review another flow control case?

Biderman: The Supreme Court may agree to review another flow control law if there is a conflict between two different appeals courts over a fundamental principle. For example, if appeals courts in New York and Texas reach fundamentally different positions on some aspect of flow control law, the Supreme Court might want to resolve this conflict if it is brought to their attention. The odds of getting the Supreme Court to review any case are low — usually about 1-in-10, and since the Carbone decision in 1994, the Court has declined at least 3 petitions seeking the review of flow control decisions.

Do you see any end to cases involving flow control?

Biderman: Because many local governments are experiencing substantial budget deficits but are not willing to increase property or other taxes on residents or businesses, they are looking for additional revenue from other sources. Combined with recent and unfounded uncertainty about the continued validity and scope of the Carbone decision, some local governments are trying to resurrect flow control. In many instances (Pine Belt, Mississippi, New Hanover and Buncombe Counties, North Carolina), the NSWMA and its members are opposing such efforts, including challenging their legality in court. Dauphin County, Pennsylvania apparently plans on directing waste flow to the Harrisburg incinerator to help pay off about $125 million in debt associated with that troubled disposal facility. Because some local governments continue to create local waste disposal monopolies via flow control, I anticipate that the NSWMA and its members will continue to fight for lower waste disposal costs by opposing these efforts over the next few years.