Statement of Robert E. Harmon
Chairman of the Board of Directors
Harmon Industries, Inc.
June 10, 1997

Chairman Chafee, members of the Committee, good morning. My name is Robert E. Harmon. I am the Chairman of the Board of Directors of Harmon Industries, Inc. I appreciate the opportunity to appear before the Committee this morning to discuss important issues of federal-state relations in enforcement of the environmental laws. I am accompanied today by Harmon's attorney, Ms. Terry J. Satterlee of Lathrop & Gage L.C. of Kansas City. With your permission, I would like to read to you a brief prepared statement explaining the reasons for Harmon's interest in these issues.

Harmon Industries is the leading supplier of railroad signal, train control, and related equipment for use in the railroad industry. The company is headquartered in Blue Springs, Missouri, and has assembly and manufacturing facilities across the country. My father founded the company which is now Harmon Industries in 1946. Today, Harmon employs more than 1,500 workers in the United States, and had sales of more than $175 million in 1996; the company's stock is publicly traded on the NASDAQ national market system.

I believe Harmon's case well illustrates the way in which conscientious regulated industries who are seeking in good faith to comply with their obligations under the environmental laws can be whipsawed by EPA's claimed "overfiling" authority. If EPA has this authority, regulated industries cannot negotiate binding agreements with authorized State agencies, since EPA may later disagree with and completely override the State resolution.

One of Harmon's assembly facilities is located in Grain Valley, Missouri, which is a rural agricultural area outside Kansas City. The Grain Valley plant assembles circuit boards for use in railroad control and safety equipment.

As was common in the industry at the time, prior to 1987 Harmon employees used small quantities of organic solvents to remove soldering flux from circuit boards they were assembling. The solvents were kept at the employees' work benches in small jars. Residues were collected in a 3 to 5 gallon pail, and dumped by Harmon maintenance employees approximately once every 1 to 3 weeks on the ground outside the back door of the Grain Valley plant. This practice probably began in the late 1970s.

Harmon's management was unaware that employees were disposing of used solvents until it discovered the practice during a routine internal safety inspection in November 1987.

Upon learning of this practice, we promptly took every action we could to stop, and remedy the effects of, this disposal practice. Harmon's management immediately ordered the disposal practice stopped, fired an employee who refused to comply and demoted or reassigned several others, and retained environmental consultants to investigate the extent of any resulting contamination. Harmon also voluntarily reported the discontinued disposal practice to the Missouri Department of Natural Resources ("MDNR"), the agency delegated the authority by EPA to implement and enforce the federal RCRA hazardous waste program within the State of Missouri. It is undisputed that, prior to Harmon's voluntary notification to MDNR in June 1988, neither MDNR nor EPA was aware of the way in which Harmon's employees had been disposing of solvent residues, or of the contamination of the soil at the immediate disposal area at Harmon's Grain Valley plant.

Harmon conducted an extensive scientific investigation of the Grain Valley plant property between late 1987 and February 1996, with MDNR's intensive oversight and approval. As of January 1994, this investigation had cost Harmon over $1.4 million, excluding attorney's fees and other indirect costs. MDNR issued Harmon a "post-closure" permit in July 1996. Harmon anticipates additional costs of approximately $500,000 during the 30-year post-closure period.

Since June 1988, MDNR reported the status of the ongoing investigation to EPA during quarterly program meetings, and promptly provided EPA with copies of all significant correspondence, plans and other documents concerning MDNR's dealings with Harmon. To Harmon's knowledge, EPA has at no time sought to intervene in, or assume responsibility for, MDNR's enforcement of RCRA with respect to Harmon.

Besides the costs of investigating and remedying the existing contamination problem, Harmon has instituted costly changes to its manufacturing process to insure that the past disposal problem does not recur. During December 1987, while its investigation was ongoing, Harmon changed its assembly process to a state of the art technology using a nonhazardous cleaning material, rather than organic solvents, to remove soldering flux from equipment being assembled. As a result of these changes, Harmon ceased generating hazardous waste at the Grain Valley facility. These changes had an initial cost exceeding $800,000, and Harmon incurs ongoing costs of approximately $125,000 every year as a result.

In the end, Harmon's environmental consultants concluded that the contamination at the Grain Valley plant was limited, and posed no significant threat to human health and the environment. Both MDNR and the EPA have accepted this conclusion. In a state-court consent decree negotiated between Harmon and MDNR, MDNR imposed regulatory sanctions on Harmon, but agreed not to seek monetary penalties against Harmon based on its voluntary self reporting and its prompt action to investigate and remedy any contamination. `The decree specifically provides that "Harmon's compliance with this Consent Decree constitutes full satisfaction and release from all claims arising from allegations contained in plaintiff's petition." The consent decree provides in  23(a) that it will terminate when, among other things, "MDNR issues a post-closure Part B permit. " This condition was satisfied on July 31, 1996.

Even though MDNR has been authorized by EPA to run the RCRA program in Missouri, and despite Harmon's extensive dealings and settlement with MDNR, after entry of the state-court decree EPA continued to pursue a separate federal action seeking over $2.7 million in RCRA penalties. EPA sought these penalties for exactly the same conduct which was the subject of Harmon's state-court consent decree with MDNR.

During the administrative penalty proceedings, both the Al-I and the EPA's Environmental Appeals Board held, without extended discussion, that EPA had the authority to "overfile" in this way when it was dissatisfied with an authorized State agency's resolution of a RCRA case.

We believe EPA's actions are contrary to the letter and spirit of the RCRA statute, and we accordingly filed suit in federal court last Friday, June 6, to set aside the penalty. Because of the importance of the issues presented in Harmon's case to regulated industries across the country, Harmon's position was supported before the agency by two private parties as amicus curiae, and we anticipate support from industry groups in the court action.

MDNR's enforcement of RCRA with respect to Harmon's solvent disposal has been rigorous, and EPA has never contended that MDNR's action were inconsistent with RCRA requirements or otherwise inappropriate. In connection with its extensive investigation of the site, Harmon submitted, revised as requested, and obtained MDNR approval for, two detailed site investigation plans, as well as a closure and post-closure plan. Harmon also submitted to MDNR two detailed reports describing the results of its consultant's investigations, in addition to the Phase I report Harmon submitted in June 1988. In connection with its investigation of the site, Harmon installed 29 groundwater monitoring wells, drilled 27 soil borings and 69 soil probes, and took and analyzed a large number of soil and water samples over a five-year period before MDNR was satisfied that the extent of contamination at the site had been adequately defined. Moreover, throughout its investigation Harmon's representatives were in frequent contact with MDNR.

The practical consequences of EPA's decision in Harmon's case are significant. Congress made clear in RCRA that it intended State agencies to take the lead in enforcing RCRA's hazardous waste provisions, subject to the States' compliance with the program's broad, national goals. However, under the EPA's decision no regulated entity can enter a settlement agreement with an authorized state agency, without also formally making the federal EPA a party to the agreement. The possibility always exists, even after conclusion of a final settlement agreement with the State, that EPA will choose to second-guess the State's exercise of its enforcement discretion, and file a duplicative federal enforcement action. Indeed, during the administrative hearing the Al-I suggested that Harmon should have dealt with both the State and EPA when it originally negotiated the consent decree. This duplicative, redundant regulation is hardly what Congress intended when it spoke of a "federal-State partnership."

Any suggestion that the States may be too lenient on regulated entities, or may settle RCRA disputes based on ulterior motives, are simply unfounded. The States have every incentive to vigorously enforce environmental laws, and MDNR's actions in this case (which EPA has not challenged) show that the States take these responsibilities seriously. While it may be true that the States are more conscious of the consequences of their regulatory actions on the local economy and the competitiveness of local firms, I assume this is what Congress intended, consistent with Congress' overall initiative to introduce more cost-benefit analysis into this country's enforcement of its environmental laws. Of course, if any State is consistently disregarding its obligations to vigorously enforce the RCRA program, EPA retains the right to withdraw its authorization of the State program, and directly enforce RCRA's hazardous waste program in any such state.

EPA's standard response to criticisms of its claimed overfiling authority has been to argue that it needs this authority to insure, at a minimum, that companies which violate RCRA's requirements disgorge any economic benefits they derived from their noncompliance. This argument does not apply here, however. The AJL rejected EPA's argument that Harmon received between $600,000 and $975,000 in economic benefit through its solvent disposal practice; instead, EPA's own AJL ruled that Harmon received an economic benefit of only $6,072 by failing to dispose of its small volume of solvent residues through an appropriate off-site disposal facility. MDNR's agreement not to seek to recoup economic benefit from Harmon hardly justifies a separate federal enforcement action.

The consequences of EPA's claimed "overfiling" authority are perhaps best illustrated in connection with the RCRA requirement that any hazardous waste disposal facility must have in place liability insurance to protect against accidental releases of pollutants. Harmon's insurance agent attempted to acquire this coverage, but could not find a policy which would cover defense costs, on-site occurrences, or pre-existing pollution, as the RCRA regulations require. After lengthy discussions, MDNR agreed in the state-court consent decree that Harmon need not comply with the insurance requirements, so long as it demonstrated to MDNR twice a year that it had made reasonable, good-faith efforts to procure the necessary insurance.

During the administrative proceedings, EPA presented no evidence to dispute Harmon's testimony that it was unable to obtain the liability insurance required by RCRA. Nevertheless, the Al-I rejected Harmon's reliance on the waiver of the liability insurance requirement in the state-court consent decree, since "[Harmon's] consent decree is immaterial to EPA's enforcement action." According to the Al-I, EPA is free to determine that the State "has not exercised its enforcement discretion properly," and therefore Harmon was not entitled to rely on the decree. On appeal, the EAB specifically refused to reduce or eliminate the penalty based on the liability insurance requirements, based on Harmon's reliance on the consent decree with the State of Missouri, which excused Harmon from the liability insurance requirement. The EAB reasoned that "this exercise of enforcement discretion on the part of the State does not prevent the Region from taking its own enforcement action against Harmon." Thus, Harmon was penalized by EPA for violating a regulation which an authorized State agency had agreed would not apply to Harmon in a judicially approved consent decree.

It is our view that RCRA was clearly written to allow the States to control the implementation of RCRA for so long as they are authorized by EPA. Harmon's experience illustrates that EPA thinks it can override an authorized State's implementation of RCRA at any time, for any reason or for no reason. Neither an authorized State nor a company being regulated can make any agreement free of fear that the federal government will step in and set the agreement aside, even after millions of dollars have been spent.

Once again, thank you for the opportunity to appear before you to discuss these important issues. Both Ms. Satterlee and I would be happy to answer any questions you may have.