Questions and Answers About the Cleanup Plan

By Brooksher Banks

All of the major industry trade organizations representing virtually every segment of the industry endorse the Small Business Fabric Care Superfund Coalition Reauthorization Proposal, as well as the vast majority of the state associations. However, that does not mean each and every individual drycleaner fully understands and supports the proposal at this time.

Conversations with many individual drycleaners who have expressed their concerns about the proposal either privately or publicly, indicate there is some misunderstanding about what the proposal is designed to do, and how the specific provisions will help us accomplish our goals. When given a chance to have their concerns and questions addressed directly and thoroughly, most drycleaners come to better understand, and support, the proposal.

Superfund is a very detailed piece of legislation that has confounded even those most qualified to understand its complexities.It is not surprising then, that our industry proposal may also seem difficult to understand, complex and perhaps a bit overwhelming. Those responsible for taking the solutions that were discussed and agreed to by a very broad cross-section of the industry, and turning them into legislative language and a summary that could be understood by the vast majority, had an enormous job to tackle.

As a drycleaner, I have to be honest and tell you the idea of adding yet another expense to my operation doesn't exactly thrill me. But I can accept it because there is a problem and it's not going away. Just ask those that have already suffered catastrophic losses due to Superfund.

The summary of the proposed legislation suggests our proposal offers a creative, cost-efficient solution to a problem that has confounded regulators, lenders, shopping center owners, municipal sewer authorities, and the more than 30,000 small business facilities that make-up the neighborhood fabric care industry. Having been actively involved in the development of this proposal, and weighing out the pros and cons of alternative plans, I can tell you I really agree this is true.

Those who have expressed opposition to the proposal and have since come to support it due to a better understanding, generally recognize that this proposal came about as a response to the almost certainty that a reauthorization of Superfund will be passed, and a reality that an industry position must be heard and reflected in any new legislation.

As with anything, the reality is you can't please all the people all the time, and our proposed solution is not immune to that. However, it seems all might agree that potentially being held liable, and financially accountable, for clean-up under present Superfund legislation, is unjust, unfair, and potentially crippling to our entire industry.

It is my hope that the current mood of Congress regarding the common sense approach to creating and enforcing regulations continues.

To see that this mood continues will require each of us to become involved in the electoral process so that members of Congress truly do represent us. In the meantime, we as an industry can't afford to sit and wait for the results of the next two elections to ensure that occurs. If we're successful in having Congress and regulators adopt a more common sense approach with reasonable clean-up levels, then the need for our industry's fund will be diminished. The liability issue of Superfund must be addressed now while it is on the Congressional agenda.

The balance of this article addresses the concerns about the proposal that seem to be expressed most often. Bill Fisher, IFI executive vice president, contributed a great deal of time and effort providing information that follows to help address the concerns of all drycleaners. I hope this will help answer the questions you may have. If you would like further clarification you may contact any of the sponsoring organizations of the Small Business Fabric Care Coalition.

Not at all. Our amendment does not exempt drycleaners from Superfund. Instead, it shifts liability for clean-up from a plant-by-plant basis to the industry as a whole, by establishing the national drycleaning clean-up fund.

The proposal is funded through a registration fee and a per-gallon-fee on solvents, both administered through an elected administrative council composed of industry members. Funds are handled by this council and are in no way administered or collected by the Federal Treasury.

The fees that are paid under our proposal are, in effect, a way of stretching out payment for clean-up of existing contamination. Unless Congressional reform of Superfund eliminates a cleaner's liability for private property contamination, clean-up costs will have to be paid. Our proposal sets up a way in which cleaners can afford to do this.

Our proposal has a mechanism that will "cap" the size of the fund and cleaners wouldn't have to continue paying if all sites are cleaned up to mandatory standards. If we're successful in getting Congress and the regulators to develop a more common sense approach to the problem, then only the absolute worst sites would require clean-up.

This proposed legislation allows states to continue their own programs upon State certification that the state program is substantially equivalent to the program that the industry has proposed. If such is found to be the case, the state program will continue as before. This proposal is really a common plan for those states that don't already have adequate coverage as long as those states meet the required standards of the program.

First, remember it is estimated that at least 75 percent and as many as 95 percent of the drycleaning plant sites in the United States could face clean-up action. That is a pretty significant portion of the industry. This does not suggest that everyone who falls into this category is or was a "bad operator." The fact of the matter is, up until recent years, no one knew we had a problem. Our proposed legislation would allow everyone to start with a clean slate, with a knowledge of what is now considered mis- management of the handling of waste. This means cleaners who persist in irresponsible behavior would be subject to stringent penalties under the pollution prevention requirements of this legislation.

The fee structure was reached by consensus at an industry roundtable composed of representatives from every segment of the industry including large plants, small plants, Korean-American operators, trade associations, etc. In particular, the annual site fee was lowered dramatically from its original level so that it would not place an undue cash flow burden on even the smallest of plants. For the same reason, the largest portion of the money needed for the fund is raised from solvent fees. This offers two benefits: First, all other things being equal, small plants will pay less of a solvent fee than large plants because they use less solvent. Second, since solvent is purchased monthly, the fees become a pay as you go funding mechanism. Small stores believe this to be the best method.

The cost of the site fee and solvent fee to the average sized drycleaner will be approximately $410 per month. Certainly, unusually large operators will have to pay considerably more under the provisions of the program because their solvent volume will be so much higher. However, the volume of solvent used is for the most part proportional to the amount of business an operation does. It is unlikely, therefore, that the unusually large cleaners are any more susceptible of going out of business as a result of this legislation than the average sized drycleaners.

For the most of us using reasonably up-to-date equipment, the cost will average about 6 cents per garment, or about 18 cents additional per drycleaning ticket. If your plant uses outdated, more wasteful equipment, the cost could be as much as 16 cents per drycleaning piece, or 48 cents per drycleaning ticket. These are just estimates and depend on the efficiency of your cleaning department.

Although in most states, petroleum use is low, the same or similar problems of groundwater and related contamination do occur in facilities that use petroleum. Once petroleum is used, it is subject to Superfund and drycleaners can be forced to clean-up these sites as well. Because of its chemical properties, petroleum contamination is easier to clean up, thus the lower solvent fee in the proposal.

First, recognize Superfund applies to all "hazardous substances," and therefore includes much more than just carcinogens. So if anything, our efforts would have to focus on seeking a more rational classification of hazardous substances. It is also correctly argued that the efforts to introduce better risk assessment and cost/benefit analysis into the legislative and regulatory process would help provide some much needed relief to small business industries such as ours.

It is vitally important for us to address these issues. However, these are issues that are likely to take several years to address, and in the meantime we have to survive the devastating effects of private party litigation triggered by the Superfund laws... our liability won't go away even if risk assessment cost/benefit analysis legislation is passed.

The mere existence of a fund to cover clean-up costs doesn't admit there is anything dangerous about the use of perchloroethylene. The classification of perchloroethylene as a hazardous substance has been published for some time now, and there haven't been any lawsuits regarding exposure yet. The establishment of a fund does not change the industry's position with respect to the safety of perc; it merely changes the mechanism for paying for the clean-ups that are already required under Federal law.

There is some "junk science" that some environmentalist groups use to call perc a possible human carcinogen. The real fact is that there has been no sound research done to prove that perc is not a carcinogen. Our legislative proposal provides a million dollars a year to perform such studies so regulatory decisions can be based on facts, not emotion.

While it may be impossible for everyone in the drycleaning industry to agree on every solution to an extremely complex problem, it's vitally important that we communicate with each other. The debate over the Superfund problem this year has brought many viewpoints to the table. For the survival of our industry, it is important that, each one of us understand the problem and approach solutions rationally and realistically.

A: If the fund is voluntary, we run the risk of "adverse selection," which is a situation that occurs when only those operators who know they have a problem end up contributing to the fund. The greatest danger here is the real possibility that an insufficient number of drycleaners would participate, resulting in inadequate funding to cover those that do.

A: Some suggest we simply try to get a Grandfather clause where drycleaners are simply not accountable for any contamination that occurred as a result of disposal practices before 1980.

The problem is that it is impossible to tell when the contamination took place. Also, this would be considered a "carve-out", which we have been advised will not be supported by Congress.

It seems that smaller drycleaners who have less efficient equipment and can't afford to up-grade are likely to be put out of business due to the solvent fee.

It is not realistic to expect this will be the case. First, just as many plant owners who have already invested in new equipment have done, these operators can add a nominal per-garment charge to cover the costs associated with being a more environmentally conscientious drycleaner.

Also, remember that the Environmental Protection Agency already has a plan in place for the eventual phase out of transfer units.

A: It's true that there are not many examples, but our legislation is actually modeled after the Underground Storage Program which was enacted by Congress in 1988.

This program, successfully managed at the state level, protects gas station owners by providing funds for clean-ups and preventing litigation. It has proven successful, and has served as a starting point for the development of our proposal.

A: No, it does not. However, since the fund will clean-up the property, it will be very difficult to prove damages to property, and therefore difficult to prove the land has decreased in value.

A: Limited pollution liability coverage is available. We are told there is a policy offered by NIE Insurance which costs a minimum of $10,000 to $12,000 for the first three years (approximately $3,300 to $4,000 annually) for the first site, and covers first party clean up and third party liability up to one million dollars with a minimum deductible of $5,000 to $10,000, the average plant generally being assessed a $10,000 deductible.

A site inspection may be required at the drycleaner's expense before a policy will be issued. NIE will not cover known, pre-existing contamination, including contamination detected during the site inspection.

Of course, if there is a dispute as to whether contamination was known or pre-existing, that issue would have to be decided through negotiation or litigation.

Further, the NIE policy is only available to drycleaners in 24 states. By contrast, our proposal ensures contaminated drycleaning sites are cleaned up without litigation, and regardless of when the contamination occurred, what the drycleaner knew about the contamination, or what state the site is located in.

It is also of interest to note that the state clean-up program in Florida requires drycleaners to obtain third-party liability insurance.

Such insurance will be made available to cleaners, however, the process for getting this type of insurance is highly complicated, and the Florida based company planning to offer the insurance has been undergoing the approval process to offer policies for well over a year. It is expected that insurance will be made available by Oct. 1, 1995.

A: The protocol for both will evolve and improve as Superfund legislation goes through. This will force reasonable clean-up standards and remediation. It is likely this will be addressed and implemented at the state level.

A: The bottom line here is this: perc is perc.

A: The EPA will make three-year, staggered appointments based on recommendations made through the industry associations and organizations.

A: No, the IRS will not be involved because this is not a tax. It's a self-insurance fund. There are actually a number of checks and balances built in to the system.

First, substantial penalties will apply to any distributor who tries to sell perc without assessing a fee, motivating them to police the program.

Also, drycleaners have to have a registration number. If they don't have one they can't buy solvent. The registration number will be issued through the Council.

Drycleaners and distributors who don't pay the fee will face state and federal charges, plus steep state fines.

Similarly, anyone who provides false information about the number of employees will be subject to stringent penalties.

A top, national accounting firm will also be engaged to "audit" the program.

A: Each state will be allocated a portion of the funds based upon the number of drycleaning plants in the state.

Note that states will be required to prioritize which sites in a state are the "worst," and therefore require clean-up before other sites which prove to have a lesser degree of contamination. States are allowed $200,000 per year, per location. So each state can evaluate and anticipate what their needs are in a given year, and "budget" accordingly. No additional fees would be assessed.

A: Naturally, we are all in favor of a change in clean-up standards. Other industries have been lobbying Congress to change Superfund clean-up standards, and we pledge to support any realistic plan in that direction.

Instead of duplicating the efforts of others, we have focused our efforts on liability and funding issues that are of special concern to drycleaners. It is important to note that even if Congress adopts more realistic cleanup standards, drycleaners will still face exorbitant clean-up and litigation costs unless our proposal is adopted.

Brooksher L. Banks is the president of Fashion Park Cleaners, Inc. in Little Rock, AR, and the president of the FLARE Advisory Board of Directors. He grew up working in the family business, and has been actively involved in many industry events and organizations including Varsity International Conference of Cleaners and as a director of the Texas Laundry and Drycleaning Association.