WILL THE SUPREME COURT TAKE THE OPPORTUNITY TO DECIDE WHETHER COMPELLED COSTS OF RESPONSE ARE RECOVERABLE UNDER CERCLA §113(F), §107(A) OR BOTH?

Posted on October 26, 2011 by William Session

In Morrison Enterprises, LLC v. Dravo Corporation, the Eighth Circuit held that a party who has incurred costs responding to a contaminant it did not release into the environment [Morrison], is limited to recovery of such costs pursuant to Section 113(f) CERCLA.  The Eighth Circuit so held because Morrison incurred its response costs pursuant to an administrative or judicially approved settlement under §§106 or 107concluding that the payment of these costs were “compelled”.  More specifically, because Morrison’s response costs were incurred implementing a remedy pursuant to an Administrative Order on Consent (and a subsequent judicial order), the Eighth Circuit concluded that it was of no consequence that Morrison never released the contaminants in question nor owned or operated the facility where the contamination originated.  The Eighth Circuit said that despite the acknowledged fact that Morrison was remediating a contaminants released by another party at a separate and distinct facility, any effort to recoup its response costs were limited to a CERCLA §113(f) contribution action.  

 The Eighth Circuit noted that the Supreme Court in United States v. Atlantic Research had specifically reserved the precise issue presented by Morrison’s appeal, i.e., whether a party sustaining expenses pursuant to a consent decree following a suit under §§106 or 107(a) could recover such compelled costs under §107(a), §113(f), or both.  The Eighth Circuit held that §113(f) provides the exclusive remedy for a party in this procedural situation.  Morrison disagreed with the Eighth Circuit’s holding and has filed a Cert Petition on the issue reserved by the Supreme Court in Atlantic Research. 

 The Cert Petition points out that the issue of whether compelled costs are recoverable under §107(a) or §113(f) has vexed the lower courts, resulting in confusion and a split of authority amongst the circuits.  The Cert Petition also makes the argument that the plain language of CERCLA permits a §107 claim to recover compelled costs given the absence of a single word  or provision in CERCLA §107(a) limiting cost  recovery claims to only those costs which are “voluntarily” incurred.  

 Amici Curiae Pharmacia Corporation (f/k/a/ Monsanto Company) and Solutia Inc., filed a brief in support of Morrison’s Cert Petition.  The Amicus Brief points out that the Eighth Circuit’s holding in Morrison ignores the text of CERCLA and directly contradicts the Supreme Court’s holdings in Aviall and Atlantic Research, where the Supreme Court made it clear that courts must follow the language in the statute.   The Amicus Brief also discusses how the Eighth Circuit’s opinion conflicts with one of the principal goals of CERCLA:  encouraging private party cleanups.  One of the most significant incentives for a private party to step forward and work with the government to investigate a site and conduct a cleanup is the right to pursue other parties to recover its costs.  Limiting such a party to contribution under §113(f) significantly weakens that incentive because the government can (and will) unilaterally settle with recalcitrant parties to protect them from the performing party’s contribution claim. 

 

EPA’s Proposed New Air Standards Affecting the Oil and Natural Gas Industry

Posted on October 23, 2011 by Donald Shandy

On August 23, 2011, the United States Environmental Protection Agency (EPA) proposed new air standards for the oil and natural gas industry (the Proposed Rule).  The Proposed Rule includes EPA’s first federal air standards for wells that are hydraulically fractured, along with requirements for several other sources of pollution in the oil and natural gas industry that currently are not regulated at the federal level. There are four major air components of the Proposed Rule: (1) a New Source Performance Standard (NSPS) for volatile organic compounds (VOC); (2) an NSPS for sulfur dioxide (SO2); (3) an air toxics (NESHAP) standard for oil and natural gas production; and (4) an air toxics (NESHAP) standard for natural gas transmission and storage.


Section 111 of the Clean Air Act (CAA) requires EPA to set NSPS for industrial categories that cause, or significantly contribute to, air pollution that may endanger public health or welfare. These performance standards must reflect the degree of emission limitation achievable through the application of the “best system of emission reduction” (BSER), which EPA determines has been adequately demonstrated within the industry. 


EPA’s existing NSPS for VOCs were issued in 1985. The existing standards address only VOC leak detection and repair (LDAR) at new and modified natural gas processing plants.  Other potential sources of VOC emissions in the oil and natural gas industry currently are not subject to nationwide regulation.  EPA is proposing new standards for several processes or pieces of equipment used in oil and gas production that have not previously been subject to federal regulation, including: well completions at new hydraulically fractured natural gas wells and at existing wells that are fractured or “re-fractured,” which would require the use of “green completions”; centrifugal and reciprocating compressors; pneumatic controllers; and condensate and crude oil storage tanks.


The NSPS for SO2 were also issued in 1985 and apply only to natural gas processing plants. EPA is proposing to strengthen the performance standards for plants processing gas with the highest hydrogen sulfide content in order to further reduce sulfur dioxide emissions from these facilities.

Section 112 of the CAA requires EPA to address emissions of hazardous air pollutants (HAP) from stationary sources.  Section 112(d) requires EPA to promulgate NESHAPs applicable to major sources of HAPs.  For major sources, technology-based maximum achievable control technology (MACT) standards must reflect the maximum degree of emission reductions achievable, considering cost, energy requirements, and non-air quality benefits and environmental impacts.  Unlike Section 111 NSPS standards that apply only to new or modified sources, Section 112 standards are applicable to both new and existing stationary sources.  EPA is proposing changes to the NESHAP standards for major sources in both the natural gas production and storage and transportation subcategories.


The public comment period on the Proposed Rule currently runs through October 24, 2011.  It will be interesting to track the response from the oil and natural gas industry to EPA’s proposal. 

Native American Water Rights in Oklahoma-Chapter 3

Posted on October 18, 2011 by Linda Martin

March and September 2009 blog entries discussed issues involving Native American water rights in the Illinois River and its watershed.  The issues arose in connection with a federal district court case in Oklahoma involving poultry litter pollution.  State of Oklahoma v. Tyson Foods, Inc., et al., Case No. 05-CV-329-GFK.  In that case, the non-party Cherokee Nation signed an agreement with the State of Oklahoma wherein the State acknowledged that the Cherokees had “substantial” interests in the Illinois River and its watershed and wherein the Cherokees assigned to the State of Oklahoma any and all of their claims against the poultry defendants.  The poultry defendants challenged the agreement, and for various reasons, the Court concluded that the agreement was not valid and did not grant standing to the State to assert the claims of the Cherokee Nation.


Other tribes did not fail to notice the purported agreement between Oklahoma and the Cherokee Nation, with the State acknowledging the “substantial” interest of the Cherokee Nation in the water resources of the State of Oklahoma, the Illinois River, and its watershed. Indeed, on August 18, 2011, the Chickasaw and Choctaw Nations of Oklahoma filed a case involving Native American water rights in the United States District Court for the Western District of Oklahoma.  Chickasaw Nation and Choctaw Nation of Oklahoma v. Mary Fallin, in her official capacity as Governor of the State of Oklahoma, et al., Case No. CIV-11-927-C.  In this case, the Chickasaw and Choctaw Nations of Oklahoma seek declaratory and injunctive relief to protect their federal rights, their present and future water rights, regulatory authority over water resources, and the right to be immune from state law and jurisdiction in and to certain waters located in the State of Oklahoma.  The background facts are as follows:


In June, 2010, the Oklahoma Water Resources Board (“OWRB”) entered into an agreement with the Oklahoma City Water Utility Trust (“Trust”), agreeing to sell to the Trust certain of the OWRB’s rights to store waters of the Kiamichi Basin in the Sardis Reservoir and to control withdrawals of the water from the reservoir.   The tribes claim that a fundamental element of the agreement is that the OWRB will issue a water use permit that grants the Trust the right to annually withdraw water from the Sardis Reservoir and/or the Kiamichi Basin in an amount roughly equal to ninety percent (90%) of Sardis’ estimated sustainable yield.  The tribes take issue with the sale, transfer and appropriation of water, which they assert was given to the tribes under various treaties with the United States granting them exclusive dominion and control over the water resources on their tribal lands in Oklahoma.


The suit alleges that Oklahoma officials earlier “acknowledged” tribal water rights in the waters in question, as evidenced by State officials seeking participation in a proposed interstate transaction involving the Kiamichi Basin waters.  Paragraph 44.  Similarly, the suit alleges that the State of Oklahoma “recognized [from the earlier poultry litigation] that ‘the Cherokee Nation has substantial interests’…” in the waters and natural resources in the Illinois River watershed.  Paragraph 45.  Thus, the earlier agreement with the Cherokee Nation (in which there was an acknowledgement of some level of sovereign rights of the Cherokee Nation in the Illinois River watershed), and the State’s participation in negotiations with the tribes over an interstate transaction related to the Kiamichi Basin waters, are apparently being invoked as indications of the State’s acquiescence in tribal rights in and to certain Oklahoma waters.

Some think that the State of Oklahoma has held its breath for years over the possibility that a court of competent jurisdiction will have the issue of tribal ownership of water squarely in front of it.  Others think that the tribes don’t actually want to litigate the matter for fear of how it might turn out.  Not so any more, as the Chickasaw and the Choctaw Nations place their ownership rights of water resources of the State of Oklahoma squarely in issue in this case, suing the Governor, the OWRB, the City of Oklahoma City and the Trust for the purported granting of rights to the Trust in the Sardis Reservoir and the Kiamichi River and its tributaries.  A ruling in favor of the tribes establishing tribal sovereignty over water rights in certain Oklahoma water bodies and lakes and watersheds will stand Oklahoma on its ear, if it ever happens.  Will the case be settled or go to trial?  Do the tribes or the State really want to risk letting a court decide these questions?  Stay tuned.

Supreme Court Asked to Clarify Superfund Cost Recovery Options

Posted on October 14, 2011 by Daniel Riesel

This fall, the United States Supreme Court will decide whether to revisit a question it left open in United States v. Atlantic Research:  Whether a party who has incurred cleanup costs following an Environmental Protection Agency (“EPA”) lawsuit may recover its costs under § 107 of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), or instead is limited to a contribution action under CERCLA § 113.  The distinction between these cost recovery provisions has divided lower courts for much of the last decade, and forms the basis for the July 2011 certiorari petition in Morrison Enterprises v. Dravo Corp

In 2004, the Supreme Court ruled that contribution under CERCLA § 113(f) is only available while or after a plaintiff had been sued under CERCLA – and thus could not be used to recover “voluntary” cleanup costs when a Potentially Responsible Party (“PRP”) remediates a Superfund site prior to litigation.  Cooper Industries v. Aviall Services.  Three years later, the Court clarified in Atlantic Research that voluntarily-incurred response costs were instead recoverable under § 107(a), which “reimburses other parties for costs that those parties incurred.”

Atlantic Research, however, did not resolve whether Section 107 could ever apply during or following CERCLA litigation.  In a footnote, the Supreme Court “recognize[d] that a PRP may sustain expenses pursuant to a consent decree following a suit under” CERCLA without “reimbur[sing] the costs of another party.”  The Court declined to decide “whether these compelled costs of response are recoverable under §113(f), §107(a), or both.” 

That question recently arose in Morrison Enterprises v. Dravo Corp.  After being separately sued by EPA for their contributions to groundwater contamination, Morrison and Dravo entered consent decrees governing the cleanup of their respective “sub-sites”.  Morrison then sued Dravo under CERCLA 107, seeking to recover costs incurred in treating trichloroethylene (“TCE”) that Morrison alleged had originated from Dravo’s upgradient site.

The Eighth Circuit Court of Appeals affirmed the dismissal of Morrison’s suit, stating as a bright line rule: “§ 113(f) provides the exclusive remedy for a liable party compelled to incur response costs pursuant to an administrative or judicially approved settlement under §106 or §107.”  Other circuits courts have held that parties who incur costs under a administrative order with the state, W.R. Grace & Co.-Conn. v. Zotos Intern., Inc., or who contributed money to a cleanup fund under a private settlement agreement, Agere Systems, Inc. v. Advanced Environmental Technology Corp., could maintain cost recovery actions under CERCLA § 107.

The distinction is critical to Superfund plaintiffs and defendants.  For contribution actions under CERCLA § 113, the parties must share “common liability,” recovery is subject to equitable allocation and may be barred by prior settlements, and the statute of limitations is three years.  Under § 107, on the other hand, there is no settlement bar or common liability requirement, recovery is joint and several, and the statute of limitations is six years after the initiation of on-site construction of the remedy.

The Supreme Court is scheduled to consider the Morrison certiorari petition during its September 26, 2011 conference.

USEPA Dioxin Toxicity Reassessment Again Delayed

Posted on October 10, 2011 by Michael Rodburg

Dioxins, a class of chemicals whose most notorious denizen is 2,3,7,8-terachlorodibenzodioxin, a/k/a TCDD, have been of public concern since the 1970's, but their pathway to regulatory consensus has been a series of twists and turns, potholes and dead ends ever since.  Once branded the most potent animal carcinogen ever tested, its human carcinogenicity remains controversial today.  On August 29, 2011, following swiftly on the heels of a Science Advisory Board (SAB) review critical of several aspects of USEPA’s May, 2010 reanalysis of key issues related to dioxin toxicity, USEPA announced  that it would delay the cancer risk portion of its final Integrated Risk Information System (IRIS) assessment and move only to a final non-cancer assessment by the end of January, 2012.  The USEPA reanalysis was in response to a 2006 critique by the National Academy of Sciences (NAS).

TCDD gained notoriety in the 1970s as a contaminant in Agent Orange, the defoliant of choice used during the Vietnam War between 1962 and 1971.  It is a chemical that is not commercially produced; rather it is the inadvertent by-product of numerous processes, including the manufacture of some chemicals, pulp and paper, and most combustion processes, including the burning of household waste.  Because of the ubiquity of the sources from which dioxins are produced, the public may be exposed through eating beef, dairy products, pork or fish, or by living near municipal waste incineration. 

USEPA's first risk assessment of dioxins was issued in 1984; seven years later it began a reassessment in a process that is ongoing.  USEPA's 1994 draft reassessment went through SAB review in 1995, which resulted in a revised reassessment in 2000, a second SAB review in 2000-2001, a second revised draft reassessment in 2003, a NAS review in 2006, a USEPA response to NAS' comments in 2010, and the August 26, 2011 SAB review of USEPA's response to the NAS report.  The beat goes on.

Dioxin levels in the environment, mostly in soil, sediments and biota, have been declining regularly since the early seventies as pollution control efforts have ratcheted down inadvertent production and emissions.  USEPA's reassessment impacts mostly whether and to what extent a site requires clean-up.  A significantly lowered USEPA cleanup target for dioxin in soils raises the specter of reopening hundreds of sites that were remediated under current guidance to a 1 part per billion target for residential soils and a 5-20 ppb target for non-residential soils.  USEPA estimates that 104 CERCLA sites may need to be re-evaluated if it adopts a substantially lowered target.  Even without a cancer risk assessment, USEPA's announcement that it would move forward with its non-cancer risk is likely to result in final guidance that sets a cleanup target for dioxin in residential soil at 72 parts per trillion, a 92.8% reduction from the current target, and a commensurate lowering for non-residential soils to .95 ppb. 

USEPA's decision to split the cancer and non-cancer assessments likely pleased no one, including USEPA Administrator Lisa Jackson, who stated in 2009 that the Agency would complete the assessment by December 2010.  Environmentalists have pushed hard on USEPA for years and are likely not pleased that the cancer analysis has been again derailed by scientific critique.  Many in industry have resisted lowered clean up levels for years, echoing many of the criticisms of USEPA's cancer risk analysis by the NAS and SAB.  SAB's 84 page report issued on August 26, 2011 generally lauded USEPA's efforts in its May, 2010 report responding to the 2006 NAS Report. 

 
Nonetheless, SAB provided additional recommendations "to further enhance the transparency, clarity, and scientific integrity" of the Report.  Two critical elements of TCDD assessment were singled out as deficiencies by SAB: "(1) nonlinear dose-response for TCDD carcinogenicity, and (2) uncertainty analysis of TCDD toxicity."  With everything else going on within and outside USEPA in the legislative, political and regulatory arena, it will be interesting to see if USEPA can or will meet its self-imposed deadline of end of January 2012 for the non-cancer risk assessment; surely the cancer assessment is not now likely to proceed with much haste.

 

For more information, please contact the author, Michael Rodburg.

The Tide Changes in Tri-state Water War

Posted on October 4, 2011 by Richard Horder

In June of this year, a three judge panel of the Eleventh Circuit made an important ruling in the decades-long battle between Alabama, Florida and Georgia over rights to the water reserves of Lake Lanier in Buford, Georgia.  Reversing a United States District Court decision in 2009 by Judge Magnuson, the Eleventh Circuit held that water supply for Altanta’s more than 4 million metro population is an “authorized purpose” of the Buford Project under the Rivers and Harbor Act of 1946  (“RHA”) and that the United States Corps of Engineers (“Corps”) has one year to make a final decision as to how much water Atlanta may draw from Lake Lanier.

To better understand the magnitude of this decision, a brief journey through the history of this long battle is instructive.  In the 1950s, the Buford Dam was constructed and pursuant to the RHA, the Lake Lanier Reservoir was created in North Georgia to control flooding, float barges downstream, and generate power.  According to the Eleventh Circuit’s most recent decision, the reservoir was also created to act as a water supply for the metro Atlanta area although the breadth of the need for this resource was unknown at the time.

As many know, the metro Atlanta area has been one of outstanding growth in the last several decades as the city and its surrounding suburbs have more than tripled their population to more than 4 million in 2010.  This growth has demanded a much greater demand for water, which -- under the RHA -- the Corps had agreed to supply from Lake Lanier.  However, in 1990, the State of Alabama sued the Corps to stop the agency from providing any more water from Lake Lanier to the metro Atlanta Area.  Alabama needs water from Lake Lanier to maintain the operation of its nuclear power plant.  Florida, who later intervened, needs fresh water from Lake Lanier to sustain its multi-million dollar shellfish industry.

United States Senior District Judge Magnuson was specially appointed to hear the several related water cases consolidated in the Middle District of Florida because Georgia, Alabama and Florida judges were conflicted.  In 2009, Judge Magnuson held that it was illegal for the Corps to draw water from Lake Lanier for Atlanta’s needs and that the three states had until July 2012 to reach an agreement regarding water supply or Atlanta would thereafter be allowed to draw only the amounts allowed in 1970—more than 40 years ago.  The Eleventh Circuit’s recent decision clearly reverses the tide.  However, what does this decision really mean for the future?  Both Alabama and Florida are expected to appeal this most recent decision to a full panel of the Eleventh Circuit.  Thus, the water war is not over. 

Governor Deal of Georgia, although pleased about this latest decision, promises to continue efforts to come to an agreement with Alabama and Florida.  Hall County, located in north Georgia and currently drawing more than 18 million gallons per day from Lake Lanier, also reports that it will continue its plans to build an 856 acre reservoir to limit its dependency on Lake Lanier.  At the end of the day, Georgia will still have to work diligently to design alternative water supplies for the metro Atlanta area, but there is no doubt that this most recent decision gives the rapidly growing city more time and a little breathing room.

 

For questions or comments regarding this article, please email Richard Horder.

Obama Administration Withdraws Proposal to Lower the Ozone NAAQS

Posted on October 3, 2011 by Eva O'Brien

On September 2, 2011, President Obama directed EPA Administrator, Lisa Jackson, to withdraw the agency’s proposal to lower the primary National Ambient Air Quality Standard (“NAAQS”) for ozone, a component of smog.  The Administration’s justification for abandoning the proposal to tighten this air standard was the importance of reducing regulatory burdens and uncertainty for business at a time of uncertainty about an unsteady economy.  As a result, the 8-hour ozone NAAQS will remain at the current level of 0.075 parts per million (“ppm”), instead of being reduced to between 0.070 ppm and 0.060 ppm, as EPA had proposed.  Unless pending litigation results in the court speeding up the process, it is not expected that EPA will review this NAAQS final rule again until 2013.


Although the ozone NAAQS is not being reduced, the existing 0.075-ppm standard will result in significant areas of the country being designated nonattainment.  As a result, proposed industrial projects will be required to undergo more rigorous Nonattainment New Source Review permitting, and will need to offset nitrogen oxides and volatile organic compound emissions.  States with nonattainment areas may need to impose new emissions restrictions on existing sources as part of their State Implementation Plans in order to achieve compliance.  These consequences are not without costs.


Nonetheless, the Obama Administration’s action temporarily subdues the significant controversy that the March 2008 proposal and September 2009 revision had generated.  In the Bush-era’s March 2008 proposal, by attempting to establish the primary and secondary ozone NAAQS at 0.075 ppm, the primary standard was higher than the 0.060 to 0.070 ppm range recommended by the Clean Air Scientific Advisory Committee.  This resulted in allegations from environmental groups that the EPA was ignoring science in favor of business groups, while business and industry generally thought the standard was still too stringent.  Subsequently, EPA’s formal announcement in September 2009 regarding reconsideration of the rule to include lower standards led to heavy criticism that its estimate of cost impacts were too low, that the rule would strongly and negatively impact jobs and the economy, and that the agency was ignoring the science in order to push the philosophical agenda of environmental activist groups.

Perhaps the maxim that a good negotiation ends with no side being completely satisfied is applicable here—the Bush-era standard of 0.075 ppm upsets environmentalists and industry alike.  Unless the D.C. Circuit Court of Appeals turns up the timetable, both sides will have to be content (to be upset) until 2013.  In the meantime, perhaps the more interesting aspect of the Administration’s action was the political move that prevents further wrangling by Congressional members—a stream of senators and representatives have been taking jabs at environmental regulatory aims that they argue will harm the economy and job creation.  Throughout the NAAQS revision process, politics have certainly played a role, now to the point that perhaps electoral concerns may be directly influencing EPA’s regulatory agenda.  As other regulatory measures are still in the cross-hairs, including the air toxics standards for industrial boilers (Boiler MACT) and mercury and toxics standards for utilities (Utility MACT), we will undoubtedly continue to see politics play an important role in the implementation of new air standards and regulations.

 

For further information or questions about this article, please contact the author, Eva Fromm O'Brien.