WASHINGTON - Municipalities could suffer enormous financial repercussions if the Supreme Court rules that ash from municipal waste-to-energy facilities must be treated as a hazardous waste, a panel of court watchers said yesterday.

"The fiscal exposure of cities is very substantial," said Richard Ruda, chief counsel of the State and Local Legal Center. The center files briefs with the court on behalf of municipalities and monitors court developments.

The issue of ash disposal comes to the court this term in a case called City of Chicago v. Environmental Defense Fund Inc., in which Chicago is challenging a U.S. Court of Appeals for the Seventh Circuit ruling that incinerator ash must be treated as a hazardous waste.

Speaking at a seminar sponsored by the law firm of Jones, Day, Reavis & Pogue, Ruda said Chicago officials estimate the cost of treating ash as hazardous waste at about $50 million annually. "It's a very big money case," he said.

The impact could be felt nationally. In a friend-of-the-court brief filed on behalf of a host of municipal groups, the legal center said New York City estimates its disposal costs would increase by more than $200 million annually if municipal ash is designated as hazardous.

With cost increases of that magnitude, municipalities would have to think twice before building or maintaining facilities.

Timothy B. Dyk, chairman of the issues and appeals section of Jones Day's litigation group, said that if the court rules that the ash must be disposed only in hazardous waste landfills, "there will be less incentive to even have these facilities."

A key to unraveling the dispute is interpretation of a provision of the Resource Conservation and Recovery Act, which provides that a "resource recovery facility recovering energy from the mass burning of municipal solid waste shall not be deemed to be treating, storing, disposing of, or otherwise managing hazardous waste." Left unstated in the law is whether the ash that results from incineration is exempt from hazardous waste disposal requirements.

Usually in such cases, federal courts defer to the regulatory agencies in charge of administering the laws. In this case, the Environmental Protection Agency now supports Chicago's position that ash should not be subject to hazardous waste treatment. But the agency previously had interpreted the law to mean that the ash was not exempt, a waffling posture noted by the seventh circuit appeals court.

Ruling in the case in January, the court said the "EPA has changed its view so often that it is no longer entitled to the deference normally accorded an agency's interpretation of the statute it administers."

Another major "waste case" before the justices is C&A Carbone Inc. v. Clarkstown, N.Y., a dispute over the constitutionality of ordinances that require disposal of waste only at a designated local facility.

Robin S. Conrad, vice president of the U.S. Chamber of Commerce's national litigation center, said the case is unusual in that Clarkstown's law prohibits the export of waste, whereas other recent cases have involved laws that restricted the import of waste into communities.

"The common denominator appears to be that states want waste if it pays, but they don't want it if it doesn't," Conrad said. Clarkstown's law is an example of flow-control ordinances, which are passed to ensure that bond-financed facilities are economically feasible. Without them, the facilities may not be able to attract enough waste, and the fees it generates, to pay off bondholders.

But Ruda of the State and Local Legal Center said that "the common denominator to us is waste disposal, a problem of monumental importance that states are struggling to deal with in a responsible way."

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