C H A P T E R 1 5
Environmental Law
TRUE-FALSE QUESTIONS
1. Failure to comply with environmental laws can result in civil fines but not criminal penalties.
2. The Clean Water Act is inapplicable to ponds that are not adjacent to open water.
3. The need to file a lawsuit in each case and the complexity of the common law made nuisance a
cumbersome way to control environmental pollution in an industrialized society.
4. Policy statements issued by the EPA have the force of law.
5. Environmental law does not cover land-use regulation.
6. Environmental laws establish minimum standards to which companies must adhere.
7. The EPA is a cabinet-level department
8. The principal goal of the Clean Water act is to eliminate the discharge of pollutants into the non–
navigable waters of the United States.
9. The Toxic Substances and Control Act applies only to chemical substances manufactured in the
U.S., not to imported chemicals.
10. According to the EPA, in order to avail itself of the third-party defense, one of the steps a
prospective purchaser must do is hire an environmental professional to conduct a site assessment.
11. The Resource Conservation and Recovery Act bans the disposal of hazardous wastes onto land
without treatment to render them less hazardous.
12. An important step in comprehensively managing environmental liability and reducing penalties for
noncompliance is to conduct periodic environmental audits.
13. The BP oil spill in the Gulf of Mexico led to the largest accidental oil spill in history.
14. State environmental laws may not be more stringent than federal laws.
15. Kentucky unveiled the first statewide cap-and-trade program to reduce greenhouse gases in the U.S.
16. The Clean Air Act requires that national ambient air quality standards be set without regard for cost
considerations.
17. A fundamental element of the U.S. scheme of pollution control is the policy that the polluter pays.
18. The Securities and Exchange Commission (SEC) has no requirements in regard to disclosing
environmental liabilities.
19. Contractual arrangements to shift environmental liability between companies are binding on federal
and state governments.
20. Canada withdrew from the Kyoto Protocol.
MULTIPLE-CHOICE QUESTIONS
1. Company X was responsible for 40% of the environmental pollutants on a hazardous waste site
whereas Company Z was responsible for the remaining 60%. Under CERCLA which of the
following is true regarding the imposition of liability on the parties?
A. Company X and Company Z are subject to joint and several liability meaning that either can be
held liable for the total cleanup costs, and no contribution between the parties is available.
B. Company X and Company Z are subject to joint and several liability meaning that either can be
held liable for the total cleanup costs, but contribution between the parties may be available.
C. Regardless of whether both companies are still in business, Company X is responsible for only
40% of the cleanup costs, and Company Z is liable for only 60% of the costs.
D. Liability depends on who was the initial polluter because that party has primary liability for the
total costs whereas the other company has secondary liability in the event that the first polluter is no
longer in business.
2. Under which of the following may a parent corporation be held liable under CERCLA for facilities
ostensibly operated by a subsidiary?
A. As an owner of a subsidiary whose corporate veil has been pierced
B. As an operator of the facility
C. Both as an owner of a subsidiary whose corporate veil has been pierced and as an operator of the
facility
D. Under no circumstances may a parent corporation be held liable
3. Most environmental laws are administered by the
A. Council on Environmental Quality
B. Environmental Protection Agency
C. National Environmental Policy Commission
D. Resource Conservation and Recovery Agency
4. The Environmental Protection Agency was created
A. by an executive order
B. by an act of Congress
C. by the vote of a majority of state governors
D. none of the above
5. The Clean Air Act does not require which of the following?
A. That the EPA must establish national ambient air quality standards.
B. That every state must meet their individual air quality standards.
C. That air quality in areas that already meet national standards cannot deteriorate.
D. That the EPA must preserve natural visibility in the wilderness areas.
6. Laws addressing wilderness preservation, wildlife protection, coastal zone management, energy
conservation, and national part designation are referred to as _______ laws.
A. Protection law
B. Environmental law
C. Endangerment laws
D. Natural resources laws
7. Under the Clean Air Act, if a nonattainment area fails to develop an adequate plan to attain the
national standard, which of the following penalties may be imposed?
A. No penalties may be imposed by the federal government because only individual states may
impose penalties.
B. Limits on the use of federal highway funds.
C. Limits on drinking-water hookups.
D. Both limits on the use of federal highway funds and limits on drinking-water hookups.
8. Which of the following refers to the belief that decisions with environmental consequences should
not discriminate against poor and minority communities?
A. Fair allocation
B. Brownfield containment
C. Environmental justice
D. Equitable allocation
9. The principal regulatory program established by the Clean Water Act is the _________.
A. National Pollutant Discharge Elimination System
B. Federal Pollutant Reduction System
C. Uniform Water Pollution Requirements
D. Nationwide Clean Water Policy
10. When can a corporate officer be held civilly liable under the Clean Water Act?
A. Corporate officers are strictly liable whenever a violation by their company is established.
B. Only if the corporate officer specifically ordered the unlawful discharge.
C. If the corporate officer had the authority to exercise control over the activity that caused the
unlawful discharge or if the officer knowingly violated the act.
D. Corporate officers may never be held liable in an individual capacity.
11. The management of hazardous waste is governed by the ____ as amended.
A. Clean Air Act
B. Clean Water Act
C. Solid Waste Disposal Act
D. Federal Superfund Law
CHAPTER 15 ENVIRONMENTAL LAW 225
12. ________ is imposed upon the generator of hazardous waste by the Resource Conservation and
Recovery Act.
A. Negligence liability and responsibility
B. Individual liability and responsibility
C. Cradle to grave responsibility
D. Joint and several liability
13. Which of the following is false regarding the adoption of the policy that the polluter pays?
A. The European Union has adopted the policy that the polluter pays.
B. Asia rejected the concept that the polluter pays.
C. Delhi, India has begun more strict enforcement of some laws based on the concept that the
polluter pays.
D. The U.S. environmental scheme adheres to the idea that the polluter pays.
14. Which of the following authorizes the federal government to take remedial action in response to a
release of hazardous substances into the environment?
A. CERCLA
B. Solid Waste Disposal Act
C. Resource Conservation and Recovery Act
D. Clean Air Act
15. Under CERCLA the Superfund money is spent
A. on a first come first served basis.
B. based in part on a national priorities list.
C. in chronological order from the date of the discovery.
D. according to the allocation voted by Congress.
16. ________ liability is the responsibility of an acquirer of corporate assets for the liabilities of the
seller.
A. Parent
B. Successor
C. Subsidiary
226 MANAGERS AND THE LEGAL ENVIRONMENT
D. Environmental
17. What does the Superfund Recycling Equity Act do?
A. It exempts recyclers from liability in private-party actions under CERCLA.
B. It exempts recyclers from suits brought by the state or federal government.
C. It provides a 10% federal rebate for recycling expenses incurred by corporations engaged in
recycling activities.
D. It provides a 5% federal rebate for recycling expenses incurred by corporations engaged in
recycling activities.
18. What was the result in Pakootas v. Teck Cominco Metals, Ltd., the case in the text in which the
plaintiffs sued the defendant, a Canadian corporation, regarding an order under CERCLA pertaining
to its contamination of water in Canada that reached the U.S.?
A. The court ruled that the defendant lacked the minimum contacts necessary to require it to
submit to the jurisdiction of a U.S. court.
B. The court ruled that subject matter jurisdiction did not exist.
C. The court ruled that the defendant was subject to jurisdiction in the U.S. court.
D. The court ruled that the defendant lacked the minimum contacts necessary to require it to submit
to the jurisdiction of a U.S. court and that subject matter jurisdiction did not exist.
19. Under CERCLA which of the following is true if the EPA does cleanup work?
A. The EPA can recover its cleanup costs from responsible parties.
B. The EPA can recover its cleanup costs only from the present owner only.
C. The EPA can recover its cleanup costs only from the owner at the time of disposal.
D. The EPA can recover its cleanup costs from either the present owner or the owner at the time of
disposal, but from no one else.
20. What level of culpability does CERCLA require before authorizing an award of punitive damages
against a polluter?
A. Intentional violation of the law
B. Recklessness
C. Negligence
D. It is only required that the defendant be the responsible party in regard to the pollution with the
defendant’s mental state being irrelevant.
21. Which of the following laws applies to pesticide products?
A. Toxic Substances Control Act
B. Federal Insecticide, Fungicide and Rodenticide Act
C. Federal Rat Act
D. Uniform Pesticide Act
22. Which of the following laws governs the quality of drinking water served by public drinking-water
systems?
A. Clean Sip Act
B. Chemical Control Act
C. Safe Drinking Water Act
D. None of the responses are correct
23. Which of the following is currently the world’s top carbon polluter?
A. Brazil
B. India
C. The U.S.
D. China
24. Abandoned or historically polluted sites are governed by the _______ whereas the _______ covers
current and future hazardous waste treatment facilities.
A. Comprehensive Environmental Response, Compensation, and Liability Act; National Pollutant
Discharge Elimination System
B. Resource Conservation and Recovery Act; National Pollutant Discharge Elimination System
C. Resource Conservation and Recovery Act; Comprehensive Environmental Response,
Compensation, and Liability Act
D. Comprehensive Environmental Response, Compensation, and Liability Act; Resource
Conservation and Recovery Act
25. The _______ occurs when individuals exploit a limited shared resource and contribute to its
depletion knowing that there will be a detrimental impact in the long term.
A. impact on the masses
B. destructive resources impact
228 MANAGERS AND THE LEGAL ENVIRONMENT
C. tragedy of the commons
D. absolute negative
26. A[n] ______ is an effect of a purchase or use decision by one set of parties on others who did not
have a choice and whose interest was not taken into account.
A. externality
B . bystander influence
C. afflicting action
D. effectation
27. Which of the following is false regarding defenses to liability under CERCLA?
A. A defense to liability is that the release of hazardous substances was caused solely by an act of
God, such as an earthquake.
B. A defense to liability is that the release of hazardous substances was caused solely by an act of
war.
C. A defense exists for purchasers of brownfields, contaminated sites that are eligible for cleaning
and reclaiming with assistance from the Superfund.
D. A defense exists if the defendant is less than 50% at fault for the contamination.
28. Which of the following was the result before the U.S. Supreme Court in American Electric Power
Co. v. Connecticut, the case in the text involving whether eight states, New York City, and land
trusts could recover against electric power corporations for contributing to global warming in
violation of federal common law and state nuisance law?
A. The court ruled that no cause of action existed under either federal or state law because the case
involved a nonjusticiable political question.
B. The court ruled that the plaintiffs could proceed to a jury trial under both federal common law
and state nuisance law.
C. The court ruled that a cause of action under federal common law was available but that the
plaintiffs could not proceed under state nuisance law.
D. The court ruled that a cause of action under federal common law was foreclosed but remanded
the case for consideration of whether state nuisance law would provide a cause of action.
29. Which of the following is true regarding the authority of administering agencies?
A. The environmental laws give broad authority to the administering agencies to conduct on-site
inspections of plant facilities and their records.
B. The environmental laws give limited authority to the administering agencies to conduct on-site
CHAPTER 15 ENVIRONMENTAL LAW 229
inspections of plant facilities and their records.
C. The environmental laws give no authority to the administering agencies to conduct on-site
inspections of plant facilities and their records.
D. The environmental laws give limited authority to administering agencies to conduct on-site
inspections of plant records, but facilities may not be directly inspected by administering agencies.
30. Environmental ________ is a systematic and ongoing process for determining whether property
contains or emits hazardous substances and whether a company is in compliance with environmental
laws
A. awareness
B. justice
C. due diligence
D. risk management
31. Toby is the commissioner of environmental matters for State X, the state with the cleanest air in the
nation. U.S. Pollution Company wants to move into State X. Unfortunately, State X has had a
severe economic downturn. Many of the citizens are ready to trade some environmental cleanliness
for jobs. Toby is on the hot seat. The governor and others say that State X has done very well and
has always beaten all other states in meeting national ambient air quality standards. In fact, State X
is so far in compliance that Pollution Company could operate for many years before there was a
problem. What would you suggest to Toby regarding compliance with the Clean Air Act?
A. Toby should disregard the Clean Air Act so long as his state is meeting national ambient air
quality standards.
B. Toby should disregard the Clean Air Act so long as his state is meeting national ambient air
quality standards, and he can show an economic downturn of at least 10% in his state over the past
12 months.
C. Toby should disregard the Clean Air Act so long as his state is meeting national ambient air
quality standards, he can show an economic downturn of at least 10% in his state over the past 12
months, and he can show an increase in the unemployment level of at least 5% in his state over the
past 12 months.
D. Toby should not disregard the Clean Air Act because it requires that air quality in those areas
that meet the national ambient air quality standards not be allowed to deteriorate.
Fact Pattern 15-1 (Questions 32-33 apply)
Gretta is the CEO of a paper company built near a river used in interstate commerce although the
state in which the company is located is land locked and not near the coast. Gretta determines that a
significant amount of money needs to be spent to comply with the federal Clean Water Act. She is
already in trouble with stockholders because of low profits and does not wish to spend extra money
on pollution control. Therefore, she instructs employees to simply dump waste into the river. She
32. Refer to fact pattern 15-1. Is Linda correct in her argument that the Clean Water Act would not
apply based upon the location of the plant?
A. Yes, Linda is correct that the Clean Water Act would not apply because the state does not border
the coast.
B. Yes, Linda is correct that the Clean Water Act would not apply because a river would not be
considered a navigable waterway.
C. Yes, Linda is correct that the Clean Water Act would not apply because the state does not border
the coast and also because a river would not be considered a navigable waterway.
D. No, Linda is incorrect; the river would be considered a navigable waterway; it does not matter
that the state is not on the coast; and the Clean Water Act would apply.
33. Refer to fact pattern 15-1. Does Gretta have any greater danger in this situation than being fired?
A. Yes, she can be held individually liable for the pollution since she knowingly violated the Clean
Water Act; and she could face a fine as well as jail time.
B. Yes, she can be held individually liable for the pollution since she knowingly violated the Clean
Water Act; but she could only be fined, not sent to jail.
C. So long as the majority shareholder approves of her actions, she cannot be fined or sent to jail for
any environmental violation.
D. No.
34. Which of the following was the result in New Jersey v. EPA, the case in the text involving whether
the EPA violated the clean Air Act when it delisted electric utility steam generating units from the
list of sources of mercury pollution listed in the Clean Air Act and instituted a cap-and-trade system
whereby plants emitting more than their allotments of mercury could buy credits from other plants?
A. The court upheld both the delisting and the cap-and-trade provision.
B The court upheld the delisting provision but invalidated and the cap-and-trade provision.
C. The court invalidated the delisting provision but upheld and the cap-and-trade provision.
D. The court invalidated both the delisting and the cap-and-trade provision.
35. Tina is the president of Bank X which holds a mortgage on a company found liable for illegal
disposal of hazardous waste. The company has stopped paying on its loan to Bank X. Tina would
like to foreclose, but she does not want the bank to become liable under CERCLA as an owner.
What should she do?
CHAPTER 15 ENVIRONMENTAL LAW 231
A. Tina should do nothing because foreclosure would automatically result in the bank becoming
liable under CERCLA for clean-up costs.
B. Tina should go ahead and foreclose because so long as the bank did not participate in the
management of the facility prior to foreclosure, the bank will not be considered liable under
CERCLA for clean-up costs.
C. Tina should immediately arrange for the bank to become involved in managing the facility
because so long as the bank participated in the management of the facility prior to foreclosure, the
bank will not be considered liable under CERCLA for clean-up costs.
D. Tina might as well go ahead and foreclose because as a mortgage holder, the bank is already
automatically liable under CERCLA for clean-up costs.
ESSAY QUESTIONS
1. Explain in detail EPA practice in regard to approving a state program in lieu of the EPA’s federal
program.
2. Set forth the Clean Air Act’s four types of air quality goals.
3. Explain what the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery
Act (RCRA) authorizes the EPA to do.
4. The federal government originally did not regulate the pollution created by industry. As
environmental law developed, the government began to issue permits to businesses to control and
regulate the amount of their pollution. Many industries claim that the cost of compliance with
current environmental laws unduly hampers their ability to compete effectively in the marketplace.
232 MANAGERS AND THE LEGAL ENVIRONMENT
Is it fair to business owners to be burdened with these costs? Are the strict liability provisions in the
federal environmental acts ethical and fair? Discuss fully.
5. Who are potentially responsible parties under CERCLA?
6. Compare the substantial continuity test in regard to successor liability with the mere continuation
test. Which test is applied by the majority of states?
7. Define the term “navigable waters” as used in the Clean Water Act and set forth what the U.S.
Supreme Court has said that the term includes and excludes. Why was the U.S. Supreme Court
concerned with limiting the scope of the term “navigable waters”?
8. What is the Kyoto Protocol? Is the U.S. a signatory?
