WASHINGTON -- State and local governments, the solid waste industry, and key senators agreed yesterday that Congress should grandfather existing waste flow control laws and contracts, but they remained divided on how to treat future handling of municipal solid waste.

At a hearing before a subcommittee of the Senate Environment & Public Works Committee, state and local interests kept up the pressure on Congress to overturn the Supreme Court's May 16 ruling in C&A Carbone v. Clarkstown, N.Y., which struck down a New York town's flow control ordinance.

The ruling makes it difficult for state and local governments to guarantee a steady waste supply at disposal facilities, which in turn will make it "virtually impossible for communities to get financing to build" new facilities, said Sen. Frank Lautenberg, D-N.J.

The court's decision puts at risk existing bonds, including tax-exempt revenue bonds, used to finance facilities because revenue is no longer assured to pay debt service without a guaranteed waste stream, he said.

Laurenberg, who chairs the sub-committee on superfund, recycling, and solid waste management, held the hearing on a bill he is sponsoring with Senate Majority Leader George Mitchell, D-Maine, to partially restore flow control authority to state and local governments.

Michael Hogan, counsel to New Jersey's commissioner of environmental protection, said his state is particularly vulnerable to effects of the Carbone ruling because there is more than $2 billion of capital investment at stake.

"How control is absolutely critical" to New Jersey's management of solid waste, Hogan said. "Should waste flow regulation not be permitted in the future, the financial ramifications to the counties and municipalities could be enormous," he said.

Trash hauler C&A Carbone, along with Jersey City and Northvale, N.J., this week challenged New Jersey's flow control regime in federal court in Newark. The New Jersey department of environmental protection had ordered haulers to comply with state's regulations even after the Supreme Court issued its ruling.

Richard F. Goodstein, divisional vice president of Browning-Ferris Industries Inc., known as BFI, said at the hearing that the "marketplace works." He urged Congress not to confer monopoly power on the public sector when there is a viable private waste industry already in place.

BFI owns and operates more than 100 recycling and composting facilities that were recently built without public financing, Goodstein said. However, BFI is "quite sympathetic" to local communities who built facilities that relied on previously legal flow control laws and he urged adoption of a grandfather clause to protect them.

Lautenberg's bill would grandfather existing laws and contracts and allow state and local governments to control the future flow of residential waste. However, waste from commercial, institutional, and industrial sources could be controlled by governments only if they set up a competitive process for designating trash facilities and set strict procedural requirements.

BFI and WMX Technologies Inc. supported exclusion of commercial waste, while state and local interests support public authority to control the flow of all municipal solid waste.

Mitchell called the bill a "balanced approach" that protects local interests while allowing for competition.

But Sen. John Warner, R-Va., said that while he supports grandfathering of existing laws and contracts, he is "uncertain" how to address handling of waste not covered by a grandfather clause. "Somehow the marketplace has to have a voice," he said.

Sen. David Durenberger, R-Minn., who is co-sponsoring a separate flow control bill with Sen. Howell Heflin, D)-Ala., advocated return of full flow control authority to state and local governments in response to the Carbone decision. There is a total of $18 billion of bond financings at risk nationwide, Durenberger said. The alternative of raising local taxes to finance waste facilities "is not the solution," he said.

Sen. Lauch Faircloth, R-N.C., said he has been meeting with state and local officials who are "desperate" for a return of flow control authority. There is "chaos" in local governments in the wake of the Carbone ruling, he said.

But BFI's Goodstein urged Congress to wait at least a year to see how the market works under the ruling. "Nothing about a grandfather-only approach would preclude the [next] Congress from addressing the issue," he said.

Randy Johnson, commissioner of Hennepin County, Minn., said a bill that only grandfathers existing laws and contracts is not enough. Johnson, who testified on behalf of the National Association of Counties, the National League of Cities, and the Solid Waste Management Association of North America, said states like Ohio would be penalized because all of the solid waste districts' existing designations in Ohio expired on June 27.

Ohio counties are waiting to see what Congress will do before flow control is reinstated, but the proposed grandfather clause technically would not cover the Ohio regime, Johnson said.

New Jersey's Hogan suggested language to the Lautenberg bill to protect states from unnecessary litigation in any competitive process for designating facilities in the future to receive waste. The proposed "competitive designation process... will cause much uncertainty in the disposition of solid waste and with those bondholders who financed the investment made by counties," he said.

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