Posted on November 2, 2016
Superfund practitioners have long known that unilateral orders issued by EPA under Section 106(a) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), commonly known as the Superfund statute, can be very potent enforcement tools. Recipients of such orders who “willfully” choose to defy them, “without sufficient cause,” face the prospect of potentially ruinous civil penalties under Section 106(b) and treble damages under Section 107(c)(3). The term “sufficient cause” is not defined in CERCLA and has been subjected to very limited judicial interpretation. Making matters worse, by virtue of Section 113(h), Section 106 order recipients cannot obtain pre-enforcement review of such orders. Instead, they must wait until EPA brings an enforcement action, or one of the other triggers listed in Section 113(h) occurs (while the penalties and treble damages continue to accumulate, for a period which could last for years), before they can obtain a judicial determination of whether or not their defiance was “without sufficient cause.” This enforcement scheme has thus far withstood due process challenges on the ground that no penalties or treble damages can be imposed until there is a court hearing. Waiting for that court hearing can produce extreme apprehension on the part of defiant order recipients.
In United States v. Glatfelter, one of the prodigious number of reported decisions relating to the Lower Fox River Superfund Site, the Court of Appeals for the Seventh Circuit, after concluding that permanent injunctions will not be available to enforce Section 106 unilateral orders, suggested how that apprehension might be relieved:
“Nothing we have said prevents the government from seeking declaratory relief to establish that a PRP lacks sufficient cause for noncompliance, such as the arbitrariness of the selected remedy or a defense to liability.”
This suggestion may trigger a whole new round of litigation regarding Section 106 orders. For instance, does a private litigant enjoy the same right to seek declaratory relief?
Posted on July 26, 2016
The importance of a thorough technical evaluation of monitored natural attenuation (MNA) at chlorinated solvent and other groundwater-contamination sites cannot be overestimated. Regulatory acceptance of MNA as a preferred remedial alternative can save millions of dollars in response costs compared to common presumptive remedies. Because “active” remediation technologies rarely achieve complete contaminant treatment or removal, MNA is an implicit, if not specifically evaluated, component of most groundwater remedial actions. A proposal to use MNA as the primary cleanup mechanism, however, is often met with resistance from regulators, notwithstanding years of supportive data. Such resistance may be attributable to antiquated agency policies or, perhaps, an inadequate evaluation of evolving MNA science.
The use of MNA at groundwater sites has typically required a showing of a stable or shrinking plume, source control, sustainable natural attenuation conditions, and acceptable risk to health and the environment. Today, mathematical and modeling tools can systematically establish data trends demonstrating that remedial action objectives will be achieved through natural attenuation in a reasonable time frame.
Unfortunately, even if confronted with irrefutable data, many state regulators will reject meaningful consideration of MNA unless the attenuation mechanism can be pigeon-holed into policies that focus on the demonstration and scoring of anaerobic biodegradation conditions at a site. That is because after almost two decades, EPA’s 1998 Technical Protocol for Evaluating Natural Attenuation of Chlorinated Solvents in Ground Water remains the framework for MNA evaluations and decision-making in many states. Because the 1998 Protocol presumed that the primary effective mechanism for natural attenuation was anaerobic biodegradation, the Protocol has unduly restricted state policies for screening and approval of MNA remedial action.
Numerous studies since the publication of the 1998 Protocol, however, have shown that a viable MNA remedial strategy can be supported by attenuation mechanisms other than anaerobic biodegradation These studies have documented other viable contaminant-destructive attenuation mechanisms and evaluation tools, such as aerobic cometabolism enzyme degradation, magnetic susceptibility, compound specific isotope analysis, and improved sampling and modeling techniques. Greater awareness of these scientific developments by regulators and environmental professionals will result in MNA being an increasingly important remedial tool at many groundwater sites.
We have learned the hard way that it’s much more difficult and expensive to clean up sites using default remedies than first thought. Fortunately, it is becoming increasingly apparent that nature has an ability to degrade various chemicals more quickly and effectively than previously believed. Regulatory acceptance should not, and need not, include unreasonable technical hurdles, such as imposing attenuation “causation” requirements that are neither feasible nor necessary to support what cannot be disputed. That a proposed MNA remedy does not neatly fit into the traditional anaerobic degradation box, and cannot with precision be attributed to one or more alternative degradation mechanisms potentially active at a site should not be determinative. At the end of the day, the data don’t lie. The MNA determination ought to begin with, and remain focused on, the empirical data and data trends.
Posted on April 14, 2016
In the CERCLA world, the low hanging fruit has largely been picked. Long gone are the days of the run-of-the-mill $3M RI/FS leading up to a $30M RD/RA. We are getting to the tough stuff now – the megasites – and all the difficult issues related to PRP involvement in RD/RA (whether via consent decree settlement or compliance with a UAO) are on steroids.
One of those more difficult issues in the context of multi-party megasites relates to financial assurance (“FA”) requirements in RD/RA UAOs and consent decrees. The 29-page April 2015 EPA FA Guidance, while helpful on some levels, is remarkably thin (2 paragraphs) when it comes to dealing with multi-party sites. And in a breathtaking understatement, especially with regard to big-ticket sites, EPA notes in the guidance that “FA matters can get complicated with multi-PRP-led cleanups….”
Recently, added pressure has been placed on the Agency in this area as a result of a March 31, 2016 EPA Inspector General report stating that “[d]ata quality deficiencies and a lack of internal controls prevent the EPA from properly overseeing and managing its financial assurance program for RCRA and CERCLA.” In particular, EPA’s OIG analysis indicates (among other things) that there are 128 CERCLA sites with no (or expired) financial assurance in place and the estimated cleanup costs for those sites is over $3.7B.
As Proposed Plans and RODs continue to roll out from the Agency with billion-dollar-plus price tags – typically related to multi-party contaminated sediment sites – the difficulty of up-front funding of these hugely expensive remedies becomes obvious. PRPs at multi-party sites will have varying abilities and business desires to up-front fund liquid FA mechanisms, and while some entities will prefer (and be able) to provide assurance by a financial test or corporate guarantee, many will not.
And EPA’s willingness to deal with multiple mechanisms (either different mechanisms from multiple parties or multiple mechanisms from a PRP group) is limited. In fact, the use of multiple financial assurance mechanisms is discouraged under the 2015 FA Guidance. Further, the September 2014 Model Remedial Design / Remedial Action Consent Decree along with the September 2015 Model Unilateral Order for Remedial Design / Remedial Action specifically state that while PRPs may use multiple mechanisms, this can only occur with liquid mechanisms – trust funds, surety bonds guaranteeing payment or letters of credit. Interestingly, the 2014 Model CD also allows the use of insurance policies, indicating that the Agency’s thinking about the liquidity of insurance policies has evolved.
The viability of financial assurances is not simply an EPA-driven issue. Given the multi-decade cleanup process and huge stakes involved at CERCLA megasites, and with the overlay of joint and several liability, PRPs need to be thinking carefully about the financial viability of their co-PRPs when entering into CDs or PRP agreements to perform under a UAO. And regardless of how EPA ultimately decides to deal with this issue at megasites, PRPs no doubt will be pushing each other to ensure long-term equitable responsibility for meeting their FA obligations at this new breed of Superfund sites.
Posted on August 7, 2015
Earlier this year, I posted in this blog a discussion of EPA’s 35 year – and still unfinished – journey toward full implementation of the financial assurance (“FA”) mandate of CERCLA Section 108(b). Section 108(b) obligates EPA to identify “classes of facilities” that will be required to demonstrate financial ability to respond to future releases of hazardous substances and to promulgate rules establishing those FA requirements. Inexplicably, Section 108(b) remained dormant for 28 years. Litigation initiated by NGOs in 2009 and 2010 prompted the agency to identify the hardrock mining and several other industries as priority targets for regulation. The task of developing the FA requirements for those industries, however, remained a work-in-progress.
Ever vigilant, environmental advocacy groups filed a Petition for Writ of Mandamus in August 2014 taking EPA to task for its delays and inaction. The theme of the litigation is that (1) Section 108(b) is a critical component of CERCLA’s overall scheme, (2) EPA’s failure to issue FA rules has resulted in cleanup delays, funding shortfalls and increased public health risks, and (3) EPA’s inaction cannot be justified by competing priorities within the agency. In May of this year, the D.C. Circuit Court of Appeals issued an order requiring EPA to expedite implementation of Section 108(b) to the greatest extent possible, update its rulemaking schedule for the identified industries, and disclose to the litigants the regulatory “framework” for the hardrock mining industry, which EPA acknowledged had been completed. EPA’s website suggests that it will publish the hardrock mining rule in August 2016.
In short—the more things change, the more they stay the same. Perhaps the low priority assigned to this CERCLA provision suggests that the cleanup response track-record of even the priority industries may not justify a need to regulate under Section 108(b) - a process that will involve complex issues with significant financial consequences. Nevertheless, Section 108(b) remains the law of the land. Congress must either follow-through with its periodic efforts to amend Section 108(b) or EPA must finish this long journey. No benefit inures to the public, affected industries or the agency from the existing uncertainties and delays.
EPA’s foot-dragging in implementing Section 108(b) is in contrast with its recent action emphasizing FA as an enforcement priority in CERCLA settlement agreements and UAOs. The agency’s April 2015 Guidance to Regional Counsel is touted as the first comprehensive document issued by EPA to assist with the development of FA requirements and provide transparency in the use of its Superfund authority. Space limitations do not permit a detailed review of this 22 page guidance, which includes modified model FA language and sample documents. Some take-aways from a first read of the guidance:
- The Guidance does not address future Section 108(b) requirements.
- It is suggested that the EPA Regions have flexibility to include or exclude certain FA mechanisms at specific sites, BUT headquarters consultation and approval is often necessary.
- The financial test and corporate guaranty mechanisms are perceived by EPA as having a higher risk of not achieving FA objectives and imposing increased administrative burdens on the Agency; therefore, it is suggested that those mechanisms should be used with caution.
- The Guidance recognizes the complications arising at sites involving numerous, dissimilar PRPs, with a preference for requiring jointly-funded versus separate FA mechanisms.
- The Guidance emphasizes the need for agency diligence in the ongoing evaluation of site conditions and costs, with increases in the initial FA amount to be required as appropriate.
- Practical considerations for evaluating the financial test and guaranty FA options are addressed in an appendix.
Notwithstanding suggestions of flexibility in the use of FA tools on a site-by-site basis, this comprehensive new guidance does not appear to include much good news for the settling PRP. In fact, EPA’s stated concerns on the use of the financial test, corporate guaranty and insurance policy FA mechanisms could further complicate an already contentious issue in CERCLA settlement negotiations. What impact the guidance may have on FA negotiations as new sites arise, of course, remains to be seen.
Posted on January 9, 2015
While Congress designed CERCLA to enhance EPA’s ability to respond to hazardous contamination, the statute requires a level of cooperation between federal and state authorities for certain CERCLA activities, including the NPL listing process. But like parents forcing middle-schoolers to dance in etiquette class, Congress’s efforts to make EPA coordinate with States often begins with squabbles over who leads and ends with squashed toes.
So how much state involvement is required under CERCLA? More than you might think. For example, CERCLA section 121(f) states that EPA must provide “for substantial and meaningful involvement” by each State in the “initiation, development, and selection of remedial actions to be undertaken in that State.” This includes state involvement in decisions whether to perform preliminary assessments and site inspections, allocation of responsibility for hazardous ranking system scoring, negotiations with potentially responsible parties, and participation in long-term planning processes for sites within the State. CERCLA section 104(c)(3) mandates that before EPA can provide a Superfund remedial action in a particular State, the State must provide EPA with specified assurances in writing. Those assurances include the State’s agreeing to undertake “all future maintenance of the removal and remedial actions provided for the expected life of such actions” and paying “10 per centum of the costs of the remedial action, including all future maintenance.” These statutory provisions are confirmed and enhanced by EPA’s own regulations. See, e.g., 40 C.F.R. 300.500; id. at 300.510. Further, two EPA guidance memoranda outline a process “to include State input in NPL listing decisions” and to resolve disputes “in cases where [an EPA] Regional Office . . . recommends proposing or placing a site on the [NPL], but the State . . . opposes listing the site.” See Memo. from Elliot P. Laws, Asst. Admin. EPA Off. of Solid Waste and Emergency Response (“OSWER”), to EPA Reg. Admins., at 1 (Nov 14, 1996); Memo. from Timothy Fields, Jr., Asst. Admin. OSWER, to EPA Reg. Admins., at 1 (July 5, 1997) (Fields Memo.). This policy requires EPA regional offices to “determine the position of the State on sites that EPA is considering for NPL listing . . . as early in the site assessment process as practical,” to “work closely with the State to try to resolve [any] issue[s],” and to provide the State with “the opportunity to present its opposing position in writing” before EPA Headquarters “decide[s] whether to pursue NPL listing.” Fields Memo. at 2.
EPA has historically taken these laws, rules, and guidance to heart, consciously trying to avoid stepping on state feet in the NPL listing process. Of the over 200 sites that EPA has proposed for listing since 1995, only the Fox River Site in Wisconsin was proposed over state opposition—and that listing was never finalized. EPA’s deference makes sense considering that a failure to obtain state assurances generally means EPA cannot access the Superfund to finance its remedial activities. Unfortunately, there are signs EPA’s cooperative approach may be changing. EPA recently proposed the 35th Avenue site in Birmingham, Alabama, for NPL listing without Alabama’s concurrence. While EPA claims state support for the listing (79 Fed. Reg. 56,538, 56,544 (Sept. 22, 2014)), the rulemaking docket contains letters of opposition from both the Alabama Department of Environmental Management and the Alabama Attorney General. Alabama has made clear that it has no ability to fund any remedial efforts at the site, and has no intention of providing any of the required assurances. Moreover, EPA did not follow its own guidance regarding the “nonconcurrence” dispute. In short, while EPA and Alabama are facing one another, EPA may have shown up to this dance wearing jackboots.
Posted on January 7, 2015
Much of my legal work deals with hazardous material remediations driven by CERCLA or state equivalents. The allocation of these costs among liable parties, in court or out, is generally conceded to be expensive and ultimately unsatisfying to most of them. I never thought I would see it in another area of environmental law but now I have.
Dams are regulated in my state by the New Jersey Department of Environmental Protection. It is a big job. Most of our lakes and ponds are dammed streams or rivers. At one point New Jersey had 196 dams where a failure might result in probable loss of life and/or extensive property damage. 50 of these need repairs at an estimated cost in excess of $33 million. There were also another 396 dams where failure might result in significant property damage. 317 are in need of repair to bring them up to state standards at a cost in excess of $126 million. Who pays for the necessary repairs to these dams and how?
A case decided by our intermediate appellate court on January 2nd of this year answers this question in a most CERCLA-like way. In New Jersey Department of Environmental Protection v. Alloway Township the Appellate Division interpreted provisions of the Safe Dam Act (N.J.S.A. 58:4-1 to 4-14). This Act “casts a ‘broad net’ of liability … so that its remedial purpose … is served” by imposing “significant obligations” on the owner or person having control of a reservoir or dam. At issue in this case was a privately owned lake created by an earthen dam that now has township road on top which is supported by a county bridge and culverts that are part of the dam.
The New Jersey Department of Environmental Protection (“NJDEP”) brought an action against the person owning the property below the lake and the dam, the township that maintained the road on the dam and the county that maintained portions of the dam. The court held “there are four classes of people who are subject to the statute: (1) dam owners; (2) reservoir owners; (3) those who control the dam; and (4) those who control the reservoir. It follows that if a party fits into any one of those categories, the [NJDEP] may seek enforcement of the SDA against that person.” All the parties fell into at least one of those classes.
The Appellate Division also blessed the allocation of liability made below. There, the judge, sitting in the Chancery Division - General Equity Part, made an equitable allocation of the costs of compliance: sixty-five percent to the County, twenty-five percent to the property owner, and ten percent to the Township.
What – equitable allocation in another environmental program? Cheer up CERCLA lawyers. Our skills may be useful in dam regulatory litigation.
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on September 23, 2014
Financial responsibility is a familiar environmental law concept. Many of us have negotiated financial assurance provisions in site consent agreements. RCRA’s closure and post-closure financial responsibility requirements at treatment, storage and disposal (TSD) facilities are well-established. Financial responsibility obligations are also a component of many other federal and state environmental programs.
I suspect, however, that few practitioners are aware of a CERCLA financial responsibility provision that has been in existence since the Act’s inception. CERCLA Section 108(b) mandates that the President identify classes of facilities that will be required to demonstrate a financial ability to cleanup releases of hazardous substances. These facilities will be obligated to provide evidence of financial responsibility that is consistent with the degree and duration of the risks associated with their production, handling, treatment, storage and disposal of hazardous substances. The requirements of Section 108(b) are intended to assure availability of funds should the businesses go bankrupt or otherwise become financially unable to conduct future environmental response actions.
Section 108(b) generally imposes two regulatory tasks on EPA: Identify the classes of facilities for which financial responsibility requirements will be developed and promulgate regulations establishing those requirements. For twenty-eight years, EPA deferred breathing regulatory life into Section 108(b). EPA’s inattention to Section 108(b) ceased to be an option in 2008. Litigation commenced by the Sierra Club and others resulted in a federal court order requiring EPA to identify industries that would be first in line for Section 108(b) rulemaking. EPA determined in 2009 that the hard rock mining industry would be its first priority. In early 2010, EPA published advance notice of its intent to regulate additional classes of Section 108(b) facilities: chemical manufacturing, petroleum and coal products manufacturing and the electric power generation, transmission and distribution industry.
Although deadlines have come and gone, to date no financial responsibility rules have been proposed. Nevertheless, the lifeless form of Section 108(b) has finally begun to stir. EPA advised Senate lawmakers in June of this year that financial responsibility requirements for the hard rock mining industry would be issued by 2016. In the meantime, the NGOs remain ever vigilant. Armed with data indicating that, particularly during the recent recession, taxpayers and disadvantaged communities suffered the adverse consequences of EPA’s inaction, environmental advocacy groups filed a Petition for Writ of Mandamus demanding that the agency promptly comply with Section 108(b)’s rulemaking requirements. In contrast, many industry groups contended that the Section 108(b) rulemaking being developed is based on a flawed analysis of potential risk and ignores the impact of existing state and federal financial responsibility laws and regulations that have achieved most of the objectives of Section 108(b). Legislation introduced in the House of Representatives in 2013, generally supported by the affected industries, included significant amendments to CERCLA Sections 108(b) and 114(d).
Whether you believe that Section 108(b) is outdated and unnecessary, or that immediate and comprehensive implementation of its mandates is of paramount importance, I would submit that EPA’s seemingly cautious approach to Section 108(b) rulemaking is justifiable. Considering the financial consequences, the identification of target industries must be based on a careful and comprehensive evaluation of the actual risks associated with a particular industry’s handling of hazardous substances and the historic “track-record” of that industry’s ability to financially respond to releases. The extent to which existing federal and state financial assurance programs address the identified risks must also be carefully scrutinized to avoid unnecessary cost and duplication. EPA’s selection of acceptable financial assurance mechanisms is also of critical importance. Elimination of the so-called “financial test” method, for example, may impact the capacity of financial and credit markets to provide the necessary financial assurance and adversely affect global competitiveness.
Future rulemaking that is based on a thorough and defensible analysis of actual risk and is limited to filling in any gaps in existing financial assurance programs will best serve the public, the environment and the regulated community.
Posted on July 30, 2014
More than thirty years after the enactment of CERCLA, basic questions relating to the liability provisions remain. These issues can become critical when attempting to apply the limitation periods set out in the statute. One of the unsettled questions is whether an Administrative Order on Consent (AOC) can give rise to the Section 107 cost recovery claim, or are the potential plaintiffs limited to a claim for contribution under Section 113. This question can loom large when trying to determine the applicable limitations period because a three-year statute of limitations applies to contribution claims, as opposed to the usually more generous limitations periods – three years for removal actions and six years for remedial actions -- provided for Section 107 cost recovery claims.
The Supreme Court has addressed the relationship between Section 107 cost recovery claims and Section 113 contribution claims in two cases: Aviall Servs., Inc. v. Cooper Indus. and U.S. v. Atl. Research Corp. In Aviall, the Court held that a Section 113(f) contribution action can only be brought during or following a suit under CERCLA Sections 106 or 107, or after liability is resolved in an administrative or judicially approved settlement. In Atl. Research, the Court held any party, including a potentially responsible party (PRP), may bring a Section 107 action to recover cleanup costs but observed that Sections 107 and 113 provided distinct causes of actions that were available to PRPs depending on whether they were seeking recovery or contribution. The Court noted that it was deciding the question of whether compelled costs of response can be recovered under Section 107(a), Section 113(f), or both.
Since Atl. Research, circuit courts have not allowed cost recovery claims when a contribution claim is available. This issue was addressed recently by the Sixth Circuit Court of Appeals in Hobart Corp. v. Waste Mgmt. of Ohio. More specifically, the court considered whether the plaintiff was limited to a claim for contribution – and thus subject to the three-year limitations period – because it had entered into an AOC to prepare the Remedial Investigation/Feasibility Study. Following the lead of other circuit courts, the Sixth Circuit declined to apply a bright-line test but focused on whether under the AOC the plaintiff had resolved its liability to the government for some or all of the response costs. If so, then recovery was limited to a contribution action under Section 113. The court held the AOC had resolved the plaintiff’s liability and called attention to three specific provisions in the AOC: the release was operative upon the effective date of the AOC, contribution protection was available as of the effective date of the AOC, and the effective date was the date that the AOC was signed (rather than the date of the completion of the work).
Hobart is another reminder that litigants must evaluate their case very carefully before they assume they will have a Section 107 claim for costs incurred to satisfy the terms of an AOC. At this point, it seems clear that for many AOCs, the only available claim will be one for contribution, especially when the terms of the AOC foreclose further adjudication of legal liability. But the courts have taken on this issue on a case-by-case basis. There may be some cases, as in ITT Industries v. BorgWarner, Inc., where the AOC is found not to be a “settlement” under Section 113(f) and a cost recovery claim may exist. But until there is further guidance from the Supreme Court, the safest approach is likely to be to assume that only a Section 113 contribution claim is available to recover costs incurred under an AOC.
Posted on March 5, 2014
Environmental response trusts created as a result of corporate bankruptcies demonstrate that workable mechanisms exist to protect against future environmental liability. This prompts the question: Can this concept be expanded and become an official amendment to CERCLA, or a separate Brownfields law?
The Revitalizing Auto Communities Environmental Response Trust (“RACER Trust”), the largest response trust every created, owns, manages and remediates the former holdings of General Motors. It includes 89 properties, 60 of which needed environmental remediation, with over $640 million provided to RACER Trust, nearly $500 million of that designated to address environmental liability. The RACER Trust holds the liability for onsite contamination when it sells a property as long as the new owner allows the remediation work to continue. This liability shield also travels with the land, providing security to future purchasers with regard to unexpected contamination that could otherwise cost thousands or millions of dollars. What is unique about this and other trusts, is the cooperative nature which the Trustees and the regulatory agencies have displayed in addressing contamination and remedial activities, very different than the standard contentious approach which routinely exist at sites today.
There have been several legislative proposals in the 113th Congress to provide fixes to CERCLA, the cornerstone law of environmental remediation. The proposed legislation, however, is more focused on transferring authority over clean-up of sites to the states and implementing credit for state contributions to the remediation. In its testimony to the House Energy and Commerce Committee last May, EPA’s Office of Solid Waste and Emergency Response laid out the reasons for its opposition to many of the legislative proposals. The main points of concern are over the potential delays, increased administrative and litigation costs, and conflicting clean-up authority at sites.
But instead of legislation that could result in further slowing down an already protracted process, what about creating opportunities and enticements for development of contaminated properties? Whether under the CERCLA regime, or through the Brownfields program, there are ways to create environmental liability shields that would restore these properties to useful status, providing industry and jobs for the surrounding communities. In 2007, a nascent proposal to address this issue was developed. The draft legislation called for the creation of the Recovered Property Protection and Assurance Trust or R-PAT for transfer of contaminated properties and their associated environmental liabilities to a quasi-governmental trust. The R-PAT concept would have required a current property owner to pay a significant fee in order to place the land in the trust, and then cleaned up and conveyed, liability-free, to a purchaser. For various reasons, including the quasi-governmental nature of the trust and the floundering economy, the proposal was a non-starter.
However, given the dearth of other viable proposals, perhaps it is time to re-examine the trust concept and how contaminated properties can be best put back to profitable use. If we really want to streamline CERCLA or improve the Brownfields program, then let’s talk about how to get the land back into use, how to remove the time consuming and wasteful antagonism surrounding remediation and how to provide bullet-proof shields for bona fide purchasers now and in the future.
Posted on February 28, 2014
In the words of Justice Thomas in United States v. Atlantic Research Corp., the Circuit Courts have “frequently grappled” with the interplay between Sections 107(a) and 113 of CERCLA. These are the two provisions of the Statute that enable “covered persons”, commonly referred to as potentially responsible parties or “PRPs”, to recover response costs from other PRPs. In Atlantic Research, the Court held that Section 107(a)(4)(B) provides PRPs with a cost recovery cause of action; whereas, Section 113 provides PRPs with two separate contribution claims. One right to contribution exists under Section 113(f)(1) but, according to the Court in Cooper Indus., Inc. v. Aviall Servs., Inc., only “during or following” a Section 106 or 107 enforcement action. The second contribution remedy is found in Section 113(f)(3)(B) for a PRP who has “resolved its liability” for some or all of a response action or for some or all of the costs of such an action in a consent decree or an administrative order on consent (“AOC”). The Court, in Atlantic Research, explained that Section 107(a) allows a PRP to recover costs that it has itself incurred from other PRPs; whereas, the Section 113 contribution remedies allow a PRP to recover amounts it has paid to reimburse others who have actually incurred the costs. These distinctions would seem clear enough, but the lower courts have struggled to apply them.
At least part of the explanation for that struggle can be traced to the statement of the Court in Atlantic Research, that “[w]e do not suggest that 107(a)(4)(B) and 113(f) have no overlap at all,” citing the case where a PRP incurs its own costs pursuant to a consent decree following a Section 106 or 107 suit:
“In such a case, the PRP does not incur costs voluntarily, but does not reimburse the costs of another party. We do not decide whether these compelled costs of response are recoverable under 113(f), 107(a), or both.” (emphasis added).
In Bernstein v. Bankert, the Seventh Circuit resolved that issue, ruling, consistently with most other Circuit Courts, that after Atlantic Research, a plaintiff cannot pursue a cost recovery claim when a contribution claim is available. Thus, CERCLA plaintiffs cannot have “both,” as the Atlantic States footnote had suggested might be the case. For many Superfund practitioners, however, much of the rest of the amended panel decision in Bernstein appears to be novel.
The plaintiffs in Bernstein entered into two AOCs with EPA under Section 113(f)(3)(B), one in 1999, the other in 2002. Under the 1999 AOC, the plaintiffs performed a study to identify a removal action to be conducted at the site. In 2000, EPA determined that the plaintiffs had successfully completed the requirements of the 1999 AOC. Plaintiffs then agreed to perform the selected removal action pursuant to a 2002 AOC. At the time of the Seventh Circuit decision, the plaintiffs were continuing to perform the work required by the 2002 AOC. Plaintiffs brought suit in 2008, seeking cost recovery and contribution from other PRPs with respect to both AOCs.
The Seventh Circuit concluded that the plaintiffs had a Section 113(f)(3)(B) contribution claim as to the 1999 AOC because they had “resolved” their liability to EPA, but the claim was barred by the statute of limitations. Plaintiffs argued that Section 113(g)(3), the statute of limitations applicable to contribution claims, contained a “gap” which should be filled by applying Section 113(g)(2), the statute of limitations applicable to removal actions, such as the work required by the 1999 AOC. The Seventh Circuit concluded that it need not resolve the “gap” argument because the claims under the 1999 AOC, filed in 2008, were barred under either Section 113(g)(2) (three years from the 2000 completion of the removal action) or Section 113(g)(3) (three years from the date of the 1999 AOC).
As to contribution claims under the 2002 AOC, the Seventh Circuit focused on the statutory phrase “resolved its liability” as a limitation on the availability of the contribution remedy under that section. Analyzing the language of the AOC (which appears to have been based upon EPA's model AOC for removal actions), the court concluded that a party “resolved its liability” when it completed the requirements of the AOC to the satisfaction of EPA, an event which had not yet occurred. Only then would EPA's “conditional covenant not to sue” the settling parties become effective. Since work in fulfillment of the requirement of the 2002 AOC was ongoing, the court held that the plaintiffs had not “resolved” their liability and therefore had no contribution claim under Section 113(f)(3)(B). Moreover, the Court concluded that a party has not “resolved its liability,” within the meaning of that provision, until “the nature, extent or amount of [the] PRP's liability” is determined, or settled at least in part with EPA. The 2002 AOC, like virtually all other AOCs entered in the Superfund program, contained a reservation of rights on the part of the settling parties to contest their liability. The Court then went on to conclude that since the plaintiffs did not have a contribution claim under Section 113(f)(3)(B), they had a cost recovery claim under Section 107(a)(4)(B) because they had incurred necessary costs of response consistent with the National Contingency Plan.
The defendants-appellees moved the Seventh Circuit for a panel rehearing of its first decision, supported by EPA as amicus. The Seventh Circuit denied reconsideration, but granted rehearing, “in part, to address some issues raised by the EPA:
Specifically, the EPA identified certain passages of our original opinion which suggested that a party may never structure a settlement agreement with EPA in such a way as to resolve their liability immediately upon execution of that agreement. That is not the case. A party responsible for an instance of environmental contamination may obtain an immediately effective release from the EPA in a settlement, or it may obtain only a performance-dependent conditional covenant not to sue with an accompanying disclaimer of liability. Whether, and when, a given settlement 'resolves' a party's liability is ultimately a case-specific question dependent on the terms of the settlement before the court. In this case, the terms of the settlement did not provide for a resolution upon entering into the agreement.
The Seventh Circuit panel interpreted Section 113(f)(3)(B) to authorize contribution actions only once a contribution plaintiff has “resolved its liability” in a settlement, but then went on to conclude that resolution of liability does not occur until the requirements of the settlement have been completed and accepted by EPA and until the liability of the PRP has been “determined.” Given the fact that response actions can take decades to complete, this reading of the statute could result in very substantial and likely unanticipated delays in the effectiveness of the covenants not to sue contained in Section 113(f)(3)(B) settlements. Moreover, the same statutory phrase, “resolved its liability,” also appears in Section 113(f)(2), the provision affording protection for settling parties against contribution claims. Before this decision, most Superfund practitioners are likely to have thought that the benefits of a settlement under Sections 113(f)(3)(B) and Section 113(f)(2) accrued when the settlement agreement was signed. Many will be surprised to learn that, at least in the Seventh Circuit, they will not enjoy those benefits until they finish the work required by their settlements and until that work is approved by EPA. Even then, they may not have those benefits if they reserved their right to contest liability, as is commonly the case in Superfund AOCs.
The interpretations of Section 113 in Bernstein appear to be contrary to commonly held understandings of Section 113 (even by EPA) and contrary to the analysis of the Sixth Circuit in RSR Corp. v. Commercial Metals Co. Therefore, many Superfund practitioners believed that such a split might motivate the Supreme Court to grant the petition for certiorari; however, the petition was denied on January 27. While EPA had served as amicus curiae in support of reconsideration of the original panel decision, EPA did not file an amicus brief in support of the petition.
The Seventh Circuit decision is surprising for several reasons:
- Although the Seventh Circuit did not have occasion in Bernstein to analyze the impact of the phrase “resolved its liability” on consent decrees, the reasoning of the court would suggest that the benefits of Section 113(f)(3)(B) will not accrue to signatories of consent decrees until the requirements of the consent decree have been completed and accepted by EPA. Since CERCLA requires that settlements involving remedial actions be documented in consent decrees, that effectiveness could easily be delayed for many decades. In the meantime, signatories to consent decrees in the Seventh Circuit may not have contribution rights under Section 113(f)(3)(B) or contribution protection under Section 113(f)(2).
- The Seventh Circuit reasoned that such delays could be avoided by specific language in AOCs or consent decrees, making the covenants not to sue in settlements effective immediately. This reasoning, however, would appear to overlook Section 122(f)(1) which requires that discretionary covenants not to sue contain reservations of rights for “future liability.” The reasoning also appears to overlook the fact that there are many hundreds, if not thousands, of AOCs and consent decrees that have been signed over the years which contain the same EPA “model” language found in the Bernstein AOCs. If the reasoning of the Seventh Circuit in Bernstein is followed elsewhere, those settling parties may have a major surprise awaiting them.
- No other circuit court has interpreted Section 113(f)(3)(B) in the way the Seventh Circuit did in Bernstein. No other circuit court has placed such emphasis on the term “resolved its liability” to shift the effectiveness of settlements from the point when the settlement agreement is signed until potentially decades later.
- The Seventh Circuit decision logically defers contribution protection, a key incentive for PRPs to settle with EPA, potentially for decades. Will settlements with EPA be more difficult to achieve in the Seventh Circuit?
- Under Bernstein, settling parties do not obtain the benefits of Section 113 unless their liability is “determined.” Forcing settling parties to concede their liability may prove to be a major deterrent to settlements.
- The Seventh Circuit ruled that the plaintiffs had a Section 107(a)(4)(B) cost recovery claim even though their Section 113(f)(3(B) contribution claim had not yet matured. What happens when that contribution claim matures? Do the Bernstein settling parties then lose their Section 107(a)(4)(B) claim? What statute of limitations will then apply? What standard of liability will then apply?
CERCLA is notorious for its ambiguities and lack of clarity. This decision by the Seventh Circuit will likely do little to shed light on the interplay between CERCLA cost recovery and contribution. In the meantime, settling parties in the Seventh Circuit may have different rights than settling parties in other circuits.
Posted on December 9, 2013
EPA is seeking stakeholder input on its draft Groundwater Remedy Completion Strategy. Released on October 29, 2013, the strategy is advertised as a guide for evaluating remedy performance and improving decision-making to more effectively and expeditiously move groundwater sites to completion. Having experienced the problems associated with the “set it and forget it” approach to groundwater remedial action, my interest was piqued by the prospect of a new EPA strategy incorporating more flexibility in evaluating remedial action objectives, remedy performance and systematic risk assessment.
The potential impact of EPA’s remedy completion strategy is arguably diminished, however, by a lack of clarity as to its scope and purpose. The stated objective of documenting a uniform approach to efficiently completing groundwater remedial actions is qualified by an ambiguous disclaimer that the strategy does not change other guidance or policy, is not intended to alter the way the agency develops remedial objectives and cleanup goals and is not intended to interfere with the federal or state site decision-making process. So, what exactly does EPA hope to accomplish in proposing this new strategy?
The elements of the strategy consist of understanding site conditions, designing a site-specific remedy evaluation process, developing performance metrics, conducting remedy evaluations and making appropriate site management decisions. The focus of EPA’s strategy as presented is largely procedural. The strategy does not address common site impediments to achieving an effective and expeditious groundwater exit strategy. To that extent, it is primarily a restatement of a remedy evaluation process that has been the subject of numerous articles and that, in fact, has historically been implemented at many sites.
But perhaps my initial reading is too narrow. The strategy hints at more substantive remedy completion issues, such as addressing site remedial action objectives that become impracticable and unnecessary for the protection of health and the environment, as well as the need to more consistently evaluate remedy change at mature groundwater sites.
From the perspective of focusing on site groundwater scenarios that often delay remedy completion, I suggest that the draft strategy falls short of the goal line. Rather than simply allude to the remedy completion obstacles that presumably inspired the agency’s effort, EPA might better achieve its stated purpose if it revises its strategy to include more discussion of how the strategy may apply to common groundwater completion impediments. For example, it would be useful for the strategy to address the cost and inefficiencies of continuing to operate and maintain asymptotic pump and treat systems at low-threat sites, how to better incorporate plume stability trend information in the evaluation of remedy change, changes in exposure pathway risks and the impact of natural attenuation mechanisms, institutional controls and land use on remedy modification and remedy completion decision-making.
What I had hoped to see in the draft strategy was EPA’s blessing of a more flexible and common sense approach to specific groundwater remedy completion obstacles. My first reading of the draft strategy suggested to me that it was essentially a redundant procedural roadmap for remedy evaluation. But upon reflection, I think it could be more. Indeed, it could also be – and I hope, after consideration of stakeholder comments, will be – a tool for encouraging more consistent regulatory acceptance of remedy change and evolving risk assessments to overcome the inertia of inflexible remedial action objectives and remedy selection impacting many groundwater sites.
Posted on October 22, 2013
In 2009, CERCLA practitioners were thrilled to finally have a new Supreme Court case to work and play with. Even better, Burlington Northern & Santa Fe Railway Co. v. United States, 129 S. Ct. 1870 waded into the murky area of “arranger” liability. However, two recent cases addressing the potential arranger liability of NCR for the same business practices but at two separate sites, and both relying on Burlington Northern, illustrate that in this area the Supreme Court has just given us more language to argue about.
Both cases addressed the same business arrangements: NCR’s sale of a PCB emulsion to paper coaters, their sale of coated paper back to NCR, and the resulting contamination when recyclers deinked the paper and released PCBs into major water bodies from 1954 to 1971. The cases even relied upon the same language from Burlington Northern – that “an entity may qualify as an arranger … when it takes intentional steps to dispose of a hazardous substance.”
However, with respect to the PCB cleanup of the Fox River, the federal district court for the Eastern District of Wisconsin held that NCR had “knowledge alone” and was not liable as an arranger. The court found that even though NCR knew that remnants - “broke” - contained the emulsion and released PCBs when recycled, “there was no evidence that NCR had any purpose in selling its emulsion to [a coater] other than to produce a commercially viable product. Broke was simply not part of the equation.” This court viewed the arrangements as the sale of a useful product. Appleton Papers Inc. and NCR Corporation v. George A. Whiting Paper Co. Across Lake Michigan and 15 months later, the federal district court for the Western District of Michigan held the opposite - that NCR was liable as an arranger for the PCB cleanup of the Kalamazoo River. The court focused on NCR’s efforts to encourage recycling of the broke, and found that “not later than 1969, NCR understood the … broke .. was no longer anything but waste and was no longer useful to any paper recycler who understood the true facts as NCR did.” Georgia-Pacific Consumer Products LP, et al, v. NCR Corporation, et al. Given the size of the cleanup bills in both rivers, keep an eye out for the appellate decisions.
Posted on July 22, 2013
On July 10, 2013, a divided Fourth Circuit Court of Appeals held the Comprehensive Environmental Response, Compensation and Liability Act’s (“CERCLA’s”) federally-mandated commencement date preempts not only state statutes of limitations but also statutes of repose, an issue that has split federal courts and left considerable uncertainty about the timeliness of claims arising under CERCLA and environmental common law.
One of the unique aspects of CERCLA is that it imposes a universal statute of limitations on toxic torts and other state law claims for damages “caused or contributed to by exposure to any hazardous substance or pollutant or contaminant.” 42 U.S.C. § 9658(b)(4). This statute of limitations runs from the time the plaintiff discovers, or reasonably should have discovered, the cause of the injury or damages. CERCLA expressly preempts state statutes of limitations that set an earlier commencement date, such as the date of the tortious conduct or the date of the injury.
CERCLA’s “federally required commencement date” has generated considerable commentary and confusion, with federal courts split over the scope of CERCLA’s preemptive effect. One particularly divisive issue involves whether CERCLA preempts state statutes of repose, which are separate from statutes of limitations. Statutes of repose generally provide a longer period in which to file a claim, but they cannot be tolled and often begin to run earlier as well. Noting that the federally required commencement date under CERCLA refers only to “statutes of limitations,” the Fifth Circuit has held “the plain language of [CERCLA] does not extend to statutes of repose.” Burlington N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355, 362 (5th Cir. 2005).
In Waldburger v. CTS Corporation, 2013 WL 3455775 (4th Cir. July 10, 2013), the Fourth Circuit adopted the contrary position, finding the relevant text of CERCLA to be ambiguous and interpreting it to preempt a North Carolina statute of repose. Reversing the United States District Court for the Western District of North Carolina, the Fourth Circuit held that courts and lawmakers have often used the terms “statute of repose” and “statute of limitations” interchangeably, and that the application of CERCLA’s federal discovery rule was more consistent with the statute’s remedial purpose. It therefore held a state repose period that required real property claims to be filed within 10 years of the tortious action did not apply to a nuisance claim alleging the discovery of groundwater contamination several years after the final alleged discharge. In dissent, Judge Stephanie Thacker argued that, “the plain and unambiguous language of § 9658 indicates only statutes of limitations were intended to be preempted.”
The Waldburger ruling will benefit plaintiffs harmed by the latent effects of environmental contamination, who may not become aware of their injuries until after a state statute of repose has run. Such plaintiffs must exercise reasonable diligence, however, to establish they did not have reason to know of the harm at an earlier date.
Posted on May 3, 2013
After being taken to task by states and its own Inspector General for lack of final guidance on Vapor Intrusion, EPA has just released draft guidance documents for hazardous substances and petroleum products for comment. The guidance documents are already generating discussion on the blogosphere, with comments due to EPA by May 24th. Below are some of the issues EPA will have to address for its guidance for hazardous substances, and those of us addressing vapor intrusion for our clients.
Will the guidance collapse under its own weight? EPA’s recommended framework relies upon collecting and evaluating multiple lines of evidence to support risk management decisions, detailed investigation of vapor intrusion including rigorous data quality objectives and recognition of seasonal/temporal variability in levels, consideration of options for building mitigation and subsurface remediation, decisions on how institutional controls can be crafted and monitored, and how the public will be involved. The practical question is how much evidence and process is enough for a rational decision, and how costly and time-consuming an evaluation effort is justified? Rarely are actions taken quickly in the CERCLA or RCRA world, but if there are risks, then they should be acted upon, and applying the guidance in other contexts will be challenging. There already appears to be a consensus that EPA’s approach will be costly, and give vapor intrusion a life of its own in remedial decision-making. EPA will have to address this issue, or find its guidance bypassed or ignored, given the need for timely decisions.
Should we all buy stock in fan manufacturers and makers of synthetic vapor barriers? EPA offers (only on page 125 of 143) the question of weighing relative costs of characterization vs. engineered exposure controls. If EPA guidance is followed, the cost of implementing the guidance will at times greatly exceed the cost of engineering controls. Clients want the deal “done” and are not likely to wait for a lengthy deliberative process.
What role will EPA acknowledge for OSHA standards? EPA proposes guidance for residential and non-residential buildings, but as a practical daily matter, there are separate standards and approaches for workplace and non-workplace scenarios. EPA doesn’t directly address that issue in the 2013 guidance, even though the Agency had helpful statements in its 2002 proposal. The issue gets even more complicated given the unsurprising obligation to consider potential future land uses. If the default scenario is residential use, will the workplace vs. non-workplace distinction disappear?
Déjà vu all over again? Yogi Berra may have been commenting on repeats of the Mickey Mantle/Roger Maris back-to-back home runs, but it is pretty clear we will be reopening sites that may have had vapor intrusion issues, and assessing old sites at which the issue was never raised, or addressed following different procedures. EPA settled the question in November 2012 for CERCLA five-year reviews by declaring vapor intrusion a mandatory topic, and plans to adopt final Hazard Ranking System amendments for vapor intrusion. The guidance document applies to RCRA sites as well, but EPA knows that the guidance will surely find application at many types of sites where volatile chemicals may have been present. Although the document is limited to CERCLA/RCRA guidance, its general purpose is to be helpful, and EPA should probably re-emphasize that not only are all sites different, the recommended framework may not even be practical when applied through other state programs. At risk of over-generalizing, practitioners have learned to recognize the advantages of not following CERCLA and RCRA approaches.
EPA will receive many comments, and there is some cleanup work to be done on the guidance documents, but look for the final documents to be completed in months, not years.
Thanks to Jeff Carnahan, LPG, EnviroForensics, for sharing with me his expertise on vapor intrusion. However, the thoughts expressed here are solely mine.
Posted on April 1, 2013
A group of Harvard law students has come up with a novel strategy to achieve more stringent regulation of firearms in the United States, namely environmental citizen suits.
Frustrated by the slow pace of Congressional efforts to strengthen regulation of firearms, this group of students has filed citizen suit notice letters against dozens of hunt clubs and firing ranges in the South and Midwest. The notice letters allege that the hunt clubs and their members:
• Violate the Clean Water Act by discharging pollutants from point sources over navigable waters without a permit
• Violate the Clean Air Act by emitting hazardous air pollutants without a permit
• Dispose of hazardous wastes, including lead and other heavy metals, without a RCRA disposal permit or compliance with the RCRA uniform waste manifest requirements
• Own and operate facilities where CERCLA hazardous substances are released into the environment; and
• Cause or contribute to the unpermitted disposal of solid waste.
This group of students, the Harvard Environmental Law & Litigation Society, is only recently organized, but they are clearly ambitious. One of the students, Angel Del Norte, who spoke on condition of anonymity, said, “We hope our efforts will blow some of those gun crazy deep South Bubbas out of the water.”
One of the targeted organizations, the Poteau Piscine Club in south Alabama, is working to organize a unified response to the citizen suit notices. The club’s President, Robert E. Lee (“Bobby”) Rhebop, stated in a press release that all of the organizations targeted in Alabama had agreed to contribute to a joint legal defense fund. Rhebop added, “If those pointy headed snot noses in Boston think they know something about guns, I can’t wait ‘til they see the business end of my .357. I’ll teach ‘em what a discharge from a real point source can do.”
Reaction has also spread rapidly in Texas. One of the targeted hunt clubs has persuaded their local legislator to introduce a bill in the state senate that would authorize Texas residents who attend Harvard to carry concealed weapons on the Harvard campus. As one proponent of the bill said “If we pass this sucker, I bet every Texan in Harvard will start getting straight A’s.”
To date no one from EPA has commented on the notice letters.
Posted on January 25, 2013
In Bernstein v. Bankert, the Seventh Circuit follows the Second, Third, Eighth, and Eleventh Circuits in holding a CERCLA plaintiff with a contribution claim under Section 113(f) does not have a cost recovery claim under Section 107. But when does a signatory to an administrative order on consent (AOC) have a contribution claim?
Plaintiffs incurred response costs arising out of two administrative orders on consent (AOC). The first AOC resulted in an engineering evaluation and cost analysis of removal options. The second AOC resulted in implementation of the selected removal action.
The first AOC was carried out to its completion. Completion of the second AOC was conditioned, however, upon the “complete and satisfactory performance by Respondents of their obligations under this Order” and issuance of a Notice of Completion by EPA, and neither condition had occurred at the time of the summary judgment.
The district court held plaintiffs could only sue in contribution and the limitations period had run on claims under both AOCs.
The court of appeals agreed on the claim arising out of the first AOC since that AOC had been completed and too much time had passed before suit was filed. It disagreed on the claim arising out of the costs incurred under the second AOC, however, because Section 113(f)(3)(B) of CERCLA gives a contribution action to a person “who has resolved its liability to the United States … in an administratively … approved settlement,” and the second AOC had not yet been completed. Thus, plaintiffs had not “resolved their liability” to the United States and could only bring a claim under Section 107 for which the limitations period had not yet run. The court of appeals also held that whether costs are incurred voluntarily or involuntarily is irrelevant since 113(f)(3)(B) focuses only on whether liability had been “resolved.”
There was no discussion of what might happen if the second AOC was completed during the course of the litigation so all CERCLA lawyers should stay tuned.
Posted on December 14, 2012
Although the still-divided Congress is unlikely to pass significant new environmental legislation over the next four years, the second-term Obama administration has an opportunity to pursue its environmental agenda through the EPA with diminished fear of impacts on the next election.
The current term saw a period of strong leadership at EPA, but there is a feeling that the agency has not allowed the other regulatory shoe to drop. EPA stalled on several important regulations, as if anticipating the Romney complaint that excessive regulation was a cause of the recession. Having escaped the prospect of a president hostile to its mission, EPA is now prepared to roll out a queue of pending air pollution regulations in the coming weeks. The regulations will include final national ambient air quality standards, revised power plant emission standards, and expanded boiler emission rules.
Since the election, articles and opinion pieces have abounded that speculate on the Obama administration’s second-term approach to climate change. On November 12, 2012, the New York Times published an op-ed article suggesting that the administration could tackle both climate change and the recession by imposing a carbon tax. A similar suggestion was made in the New Yorker on December 12, 2012. This is undoubtedly a worthwhile concept, but it is probably a regulation too far.
The second Obama term could be an opportune time to revisit old chestnuts and resolve issues that have bedeviled both the regulated community and environmental advocates. For example, the EPA and the Army Corps of Engineers have been muddling through a proposed guidance document that aims to clarify the Supreme Court’s murky definition of “waters of the United States” subject to EPA jurisdiction under the Clean Water Act. But why should EPA and the Corps issue mere guidance rather than promptly promulgate binding regulations, which are subject to judicial review? As a result of adopting binding standards the agencies could gain, in addition to regulatory certainty, a strong basis to resist efforts to make the federal government the national waterfront rezoning authority.
Another stalled national environmental initiative that would benefit from robust leadership in the Obama II administration is EPA’s effort to update its regulations for industrial cooling water intake structures. EPA proposed regulations, designed to protect aquatic organisms, have remained in draft form since March 2011; additional data has been collected and is being analyzed in the interim. Pending final federal regulations, states have been left to adopt varying approaches to this important issue.
Finally, this period of relative freedom from election concerns might allow the administration to address a significant example of environmental unfairness, CERCLA’s scheme of sticking certain liable parties with the “orphan share” of environmental remediation costs that arise from contamination, generated over the last two centuries of industrial development, for which no financially solvent responsible party can be identified. The orphan share is often laid at the doorstep of a financially solvent polluter that caused some, but not all, of the pollution at a Superfund site. Fairness dictates that the public fund the orphan share, as opposed to the party that is prepared to step forward and clean up its own portion of the mess. Perhaps such a policy might have a sobering effect on the members of the public who clamor for a return to pristine conditions, so long as they don’t have to pay for it.
Posted on December 7, 2012
Since the early days of the Superfund program, EPA has required settling parties to provide financial assurance of the PRPs’ (potentially responsible parties) ability to perform the cleanup work. EPA regulations afford PRPs a choice of financial assurance mechanisms to fulfill this requirement including: a self-funded trust, bonds, letters of credit, insurance or the satisfaction of the “financial test” provided in 40 CFR §264.143(f).
As originally promulgated, the financial test applied to owners and operators of hazardous waste facilities permitted under RCRA. EPA has adopted this test for Superfund financial assurance requirements and state agencies have likewise borrowed it for their own programs. For many years, the “financial test” was the least cumbersome method for PRPs to satisfy their long-term financial assurance obligations. It was also attractive to PRPs because as long as at least one large company met the test, the other PRPs could save the cost of employing alternative financial assurance mechanisms such as prefunding their entire obligation or purchasing letters of credit. Further, while the financial test in 40 CFR §264.143(f) does include very specific and complex financial criteria, in practice EPA often found submission of financial statements or other public financial reports by large companies to be sufficient.
In recent years, perhaps in recognition of the new economic order where major airlines, automobile manufacturers and even manufacturers of famous brands such as Twinkies have filed for bankruptcy, EPA has made strict compliance with the financial means test a settlement priority. All of the forms for financial assurance are now prescribed via EPA’s website. Perhaps the most challenging form for a financial means proponent is the sworn letter from the company’s CFO or accountant certifying that the company satisfies the different elements of the financial test. The letter must be updated and resubmitted every year. The form letter may be found here.
In an era where CFOs and accountants are already burdened with a host of new Sarbanes-Oxley requirements and other regulatory controls, companies are less than enthusiastic about preparing another set of certifications to EPA concerning their company’s financial status. A further challenge presented by the letter is that it must be submitted on behalf of the specific entity participating in the settlement or its parent. Often, a parent corporation cannot or does not want to guaranty a subsidiary’s obligations, and its subsidiary’s financials may not be maintained in a format which makes compliance with the EPA letter practical or feasible.
EPA’s renewed emphasis on financial assurance requirements is understandable in today’s economic climate and even has some benefit for performing parties interested in ensuring that other settling PRPs likewise perform. Indeed, PRP Groups, with the self-interest of protecting themselves from each others’ business failures, often require their group members to provide letters of credit for the benefit of the Group or prefund their Superfund settlement shares into a Group- controlled trust, even if other financial assurance mechanisms have been selected to satisfy EPA.
Whether PRPs like it or not, what is clear is that the era of less than strict compliance with EPA’s financial assurance requirements for Superfund settlements is over.
Posted on November 21, 2012
On October 9, 2012, the Supreme Court denied a petition for certiorari in Solutia, Inc v. McWane, Inc., declining to further clarify the question raised and expressly left unanswered in footnote six of the Court’s opinion in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). The issue is what section of CERCLA provides private parties with the authority to recover their costs at Superfund sites from other “covered persons” liable under the statute — Section 107(a) or Section 113(f). The choice is important because different rules of liability and different statutes of limitation apply to contribution and cost recovery claims. In Solutia, the Eleventh Circuit ruled that a party subject to a consent decree is limited to a claim for contribution under Section 113(f) and does not also have a claim for cost recovery under Section 107(a).
In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that contribution under Section 113(f) is available to a private party only “during or following” a suit under Sections 106 or 107. In Atlantic Research, the question was whether a “covered person” under CERCLA could obtain cost recovery under Section 107(a)(4) in circumstances in which contribution was not available under the holding in Cooper Industries. In Atlantic Research, the Court explained that Sections 107(a) and 113(f) provide “clearly distinct” remedies available in different circumstances. Contribution under Section 113(f) is available “when a party pays to satisfy a settlement agreement or a court judgment,” because, then, the party “does not incur its own costs of response. Rather, it reimburses other parties for costs that those parties incurred.” “By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under § 107(a) without any establishment of liability to a third party. Moreover, § 107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site.”
That explanation left unanswered the question of what section of the statute applies in the common situation in which parties enter into settlements or sign consent decrees, agreeing to perform work. Those parties have a right to contribution under Section 113(f), but they also incur their own cost in cleaning up a site. In footnote 6 in the Atlantic Research opinion, the Court expressly declined to decide that question (“We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both.”).
Litigation of that unanswered question followed in the lower courts. The Eleventh Circuit in Solutia referenced decisions in the Second (Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010)), Third (Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204 (3d Cir. 2010)) and Eighth (Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594 (8th Cir. 2011)) Circuit Courts of Appeals to decide that parties settling their CERCLA liability with government agencies are limited to Section 113(f) contribution claims, even though they incur their own costs of response in complying with the settlement (“[w]e agree with our sister circuits that we must deny the availability of a §107(a) remedy under these circumstances in order [ ] ‘[t]o ensure the continued vitality of the precise and limited right to contribution”).
The Supreme Court’s denial of petition for certiorari in Solutia is not necessarily the final word on the long running saga of the interplay between Sections 107(a) and 113(f). For example, it may be appropriate to limit a potentially responsible party to Section 113(f) contribution claims when it is subject to a consent decree, because a consent decree would generally be filed with the court accompanied by a complaint, be subject to public comment, resolve a party’s CERCLA liability to the government, and provide the party with contribution protection. The Third Circuit in Agere found that the contribution protection granted to plaintiffs under a consent decree would allow plaintiffs complete recovery under §107(a), while at the same time shielding those plaintiffs from a contribution counterclaim. This would be a “perverse result,” as the plaintiffs had stipulated that they were responsible for a significant portion of contamination at the site. However, a different conclusion may be warranted under different facts. Indeed, the Court in Agere noted that it “need not decide the contours of the overlap postulated in Atlantic Research because, regardless of whether §107(a) and §113(f) remedies overlap at all, they cannot properly be seen to overlap here.” Thus, “the contours of the overlap” may be an issue to be decided another day.
Posted on August 10, 2012
“Let me be clear: EPA has never designated manure as a hazardous substance nor has the agency ever designated a farm a Superfund site and has no plans to do so.” So says Mathy Stanislaus, EPA Assistant Administrator, Office of Solid Waste and Emergency Response in testimony before the House Energy and Commerce Subcommittee on Environment and Economy on June 27, 2012. The subject of the hearing was a bill called the “Superfund Common Sense Act” (H.R. 2997), which seeks to clarify that livestock manure is not a hazardous substance, pollutant or contaminant for purposes of CERCLA response authority and EPCRA emergency reporting.
With such an unequivocal statement of agency intent, is this latest Congressional effort to ensure a “common sense” interpretation of CERCLA and EPCRA with respect to livestock waste simply an attempt by agricultural interests to create an unnecessary and unwarranted regulatory “free pass,” or a prudent effort to provide needed certainty to the regulated community?
EPA’s position appears to be that the proposed codification of Superfund “common sense” is an uncalled-for response to the concerns being voiced. Beyond his broad statement of agency interpretation and intent, Mr. Stanislaus argues that EPA’s 2008 final rule exempting animal waste at certain farms from air emissions reporting under CERCLA section 103 and EPCRA Section 304 further demonstrates that the agency is already exercising common sense in its regulation of livestock waste.
Notwithstanding these assurances, however, Mr. Stanislaus admits that this final rule is currently under EPA review to address various issues being raised by a range of stakeholders. He also references EPA’s ongoing efforts to develop emissions estimating methodologies to better quantify air releases at livestock operations, presumably for future regulatory purposes.
Needless to say, such statements offer little comfort to the bill’s sponsors and regulated community, which are similarly discomforted by other statements of Mr. Stanislaus. For example, Mr. Stanislaus testified that the Act would prevent EPA from responding under its CERCLA authority to “damaging” releases of hazardous substances associated with manure. Also, Mr. Stanislaus voiced the agency’s concern that the bill’s “common sense” provisions would prevent EPA from using CERCLA to issue abatement orders in response to releases presenting a substantial danger to health or the environment.
Proponents of the bill state that the Act is not about whether manure should be regulated, as animal feeding and other farm operations are already adequately regulated under the Clean Water Act, Clean Air Act and state-specific authorities. Rather, the issue is whether CERCLA’s environmental response provisions and requirements were intended to or should apply to manure management. Although recognizing that CERCLA has specifically exempted only the “normal application of fertilizer” from its definition of “release,” proponents argue that such definitional language is not dispositive of congressional intent with respect to the general characterization of manure as a CERCLA hazardous substance. They also point out that EPA has never issued guidance on what constitutes “normal application of fertilizer,” leaving that exemption and broader CERCLA issues to be resolved by the courts and agency.
Opponents argue that because constituents of manure, such as ammonia and hydrogen sulfide, are hazardous substances, there is no legal or scientific basis to totally exempt manure from the regulatory scheme of CERCLA and EPCRA. They also challenge the notion that CERCLA authority is unnecessary or duplicative by identifying gaps in the reach of other federal environmental laws, including authority to deal with natural resource damages and the recovery of response costs.
Whatever side of the fence you may be on, it does seem inevitable that, if the legal and scientific issues being debated are not addressed by Congress, they will almost certainly be considered and resolved in some fashion by EPA, state agencies and the courts. In light of this -- and notwithstanding EPA’s protests that codification of Superfund “common sense” is unnecessary because agency common sense already prevails -- is a legislative approach to clarifying these important issues preferable to the uncertainties of future agency rule making and the inconsistencies inherent in judicial rulings?
Posted on June 25, 2012
CERCLA practitioners are familiar with the Eleventh Circuit’s decision in Solutia, Inc. v. McWane, Inc., 2012 WL 695007 (11th Cir. Mar. 6, 2012). The court of appeals decided that Solutia & Pharmacia, the plaintiff, was limited to a contribution action for costs incurred in cleaning up lead contamination. In so holding, the Eleventh Circuit agreed with three other circuits which have held that a person who enters an administrative or judicially approved settlement under Sections 106 or 107 of CERCLA are limited to a contribution claim under Section 113(f). See Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir.2011); Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204, 229 (3d Cir.2010), and Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 128 (2d Cir.2010).
While Solutia’s holding is significant, the decision provides an important reminder of the importance of foresight in the outcome of a claim. Let me explain.
Solutia & Pharmacia had entered into a Partial Consent Decree (PCD) in August 2003. The PCD referenced two areas of contamination, a PCB site and the “Anniston Lead Site.” Solutia and Pharmacia reserved their rights in the PCD to seek contribution from parties who could be proven to be liable for the Anniston Lead Site.
In 2005 EPA undermined Solutia & Pharmacia’s reserved contribution rights. It entered into settlements with a number of parties that provided contribution protection for lead-related cleanup costs. By motion, Solutia & Pharmacia protested EPA’s action. The trial court agreed and offered to suspend their obligations under the PCD because of EPA’s breach. By either inaction or conscious decision, Solution & Pharmacia declined the offer.
In 2006, EPA and Solutia & Pharmacia entered into a “Stipulation Clarifying the Partial Consent Decree.” Under the Stipulation, Solutia & Pharmacia agreed to clean up certain “zones” around Anniston, labeled as A, B, C, and D, which were contaminated with lead and not just PCBs. The Stipulation provided that “it shall not be considered an admission of liability and is not admissible in evidence against the Defendants in any judicial or administrative proceeding other than a proceeding by the United States.”
Solutia & Pharmacia argued that because lead contamination was excluded from the PCD, it had a Section 107 claim for its lead-related cleanup costs. Had the case turned just on the PCD, Solutia & Pharmacia would have been in the same position as Texas Instruments in Agere Sys., Inc. v. Advanced Envtl. Tech. Corp.—even though it signed one consent decree for which it was limited to a contribution action, costs it incurred unrelated to that consent decree could be pursued under Section 107(a).
The court of appeals, however, agreed with the district court that the Stipulation obligated Solutia & Pharmacia to clean up areas where PCBs were commingled with hazardous substances disposed of the defendants. Hence the PCD, which was “clarified” by the Stipulation, embraced costs associated with more than remediation of PCBs limiting Solution & Pharmacia to a contribution claim for those costs.
But what of the prohibition on admissibility of the Stipulation into evidence in any judicial proceeding that did not involve the United States? The prohibition is not self-executing; the Stipulation was admitted in the district court and relied on heavily. Solutia & Pharmacia apparently decided to wait until its reply brief to argue nonadmissibility. That was too late. Because admissibility of the Stipulation was not contested in Solutia & Pharmacia’s opening brief, the argument was waived, the court of appeals held.
The defendants in the action had been awarded summary judgment in the trial court because they had contribution protection from lead-related cleanup costs. However, Solutia & Pharmacia had spent $14 million in cleanup costs in areas that were not covered by the PCD. It filed a motion to alter or amend the judgment because the defendants had not sought a summary judgment with respect to these costs. The argument was rejected in the trial court because it had not been raised before entry of the summary judgment.
The court of appeals affirmed this exercise of the trial court’s discretion because the defendants’ motion for summary judgment, in fact, had sought dismissal of all of Solutia & Pharmacia’s Section 107 claims, and Solutia & Pharmacia had never argued prior to the grant of summary judgment that they “voluntarily incurred costs unrelated to the Consent Decree.”
The burden is always on counsel to make and preserve arguments. This is as much a lesson from Solutia as its holding on the Section 107/113 issues.
Posted on May 14, 2012
The ACOEL blog has devoted several entries over the last two years to the question whether and how a plaintiff could recover, under CERCLA, costs it incurred for a cleanup performed under a consent decree or administrative settlement. One of the more intriguing developments for CERCLA practitioners has been the tension between and radical differences to cost recovery or contribution claims under Sections 107 and 113 of CERCLA. One of the more recent developments is the 11th Circuit decision in Solutia v. McWane (Full disclosure: I am counsel to several defendants in this case).
"Boots" Gale previously blogged about the District Court decision. The District Court dismissed Plaintiffs’ Section 113 claim on the basis that these Defendants had the benefit of CERCLA’s contribution protection obtained via their own administrative settlement with EPA. Initially, the District Court denied summary judgment on Plaintiffs’ Section 107 claim, but then reconsidered and reversed that decision.
The 11th Circuit noted that the Supreme Court's Atlantic Research decision declined to decide the issue of whether a party may bring a 107(a) claim for direct cleanup costs incurred via a consent decree entered as past of CERCLA Section 106/107 litigation. The 11th Circuit confirmed, however, the conclusion of the District Court that numerous federal Circuit Courts had reached that issue since that time, each one concluding Section 113 to be the party’s exclusive remedy, and denying the Section 107 claim. Relying in part on the conclusions reached by these other Circuit Courts, the 11th Circuit rejected Plaintiffs’ statutory interpretation arguments, and concluded that a party who has a CERCLA Section 113(f) claim cannot also maintain a CERCLA Section 107 claim. To find otherwise, the 11th Circuit concluded, would “thwart the contribution protection afforded to parties that settle their liability with the EPA…”, “destroy CERCLA’s statutorily-created settlement initiative…”, would allow a plaintiff to impose joint and several liability on defendants, and would prevent those defendants from asserting any Section 113(f) counterclaim since the plaintiffs would have their own CERCLA contribution protection via their consent decree.
The time has not run yet for the Plaintiffs in this case to seek certiorari from the Supreme Court. In light of the unanimity of the federal Circuit Courts on this issue, it seems unlikely that the Court would accept the case for decision, despite the importance of the issue and the Court’s decision not to reach the issue in its 2007 decision in Atlantic Research.
Posted on May 1, 2012
One of the more recent and interesting decisions in the world of CERCLA litigation practice was rendered just a few days ago by a federal district court in Pakootas v. Teck Cominco Metals Ltd. The judge in that case articulated the legal underpinnings of the often confused notions of CERCLA-based divisibility of harm and apportionment of liability determinations.
The judge explained that divisibility of harm does not defeat CERCLA liability itself but, instead, is a defense to joint and several liability citing with approval language from U.S. v. Monsanto Co. to the effect that “ . . . While it appears “divisibility” and “apportionment” are terms used interchangeably, what is potentially divisible is the harm, and if the harm is divisible, what is potentially apportioned is liability, assuming there is a reasonable factual basis for apportionment.”
Against this legal backdrop, the facts in Pakootas brought into sharp focus a commonly encountered situation for CERCLA litigants where multiple parties find themselves attempting to apportion response cost liability for different contaminants, released from different facilities that have become commingled, and are encompassed within what the EPA or state regulatory agency has deemed to be a single “site”.
In addressing an apportionment claim Judge Suko, sitting in the Eastern District of Washington, articulated the importance of the distinction between apportionment of liability in such situations and divisibility of harm. Judge Suko stated that the first inquiry in the apportionment battle must always be to fix responsibility for the harm for which a party might seek to apportion liability. The court appropriately held that a CERCLA liability determination is based upon the liability- imposing language of the statute itself:
. . . [L]iability attaches when three conditions are satisfied: (1) the site at which there is an actual or threatened release of hazardous substances is a “facility” under 42 U.S.C. Section 9601(9); (2) a “release” or “threatened release” of a hazardous substance from the facility has occurred, 42 U.S.C. Section 9607(a)(4); and (3) the party is within one of the four classes of persons subject to liability under §9607(a). Pakootas I, 452 F.3d at 1073-74.
In Pakootas the party seeking apportionment (Teck) was clearly a liable person under CERCLA and was undeniably associated with the release of contaminants that could be traced only to the facility it operated. Teck argued as an affirmative defense to a liability claim that the “harm” at the site should be “apportioned” since the contaminants released by Teck could be discretely indentified even though they had become “commingled” with those released by many others. Teck reasoned that it could defend itself against a joint and several liability claim by way of such “apportionment”. In so many words, Teck sought to apportion liability based upon divisibility of the contaminants associated with its releases.
Judge Suko observed that:
The fact for liability purposes the . . . Plaintiffs need to, and intend to, establish that Teck’s slag and/or liquid effluent released or threatens to release hazardous substances (certain metals) from the UCR Site does not, however, limit the scope of the releases or threatened releases from the Site for which Teck can be held liable and, in turn, does not limit the scope of the relevant harm for divisibility/apportionment purposes.
After a thorough examination of many of the more recent contribution/apportionment appellate decisions from around the country, Judge Suko ultimately determined that Teck failed to prove that contamination at the site involved was divisible and, as a result, would be subject to CERCLA 107 joint and several liability with other potentially responsible parties at the site.
If you find yourself representing a party in an apportionment dispute, this case seems to stand for the proposition that if you cannot determine everything that everyone may have done to create a contaminated site; you may be in trouble in pursuing an apportionment or contribution action. Additionally, and it is just my personal opinion, the decision represents one of the better anthologies of apportionment/divisibility jurisprudence I have seen in recent cases (and that includes some of the work of the Supreme Court).
Nevertheless, the high burden of technical or scientific proof Judge Suko would impose upon a party seeking apportionment/contribution could well hearken back to the days before post-BNSF days of “reason based” rules for apportioned liability. (See, e.g. J. Barkett, The Burlington Northern Decision, American College of Environmental Lawyers Blog (May 19, 2009).
Posted on April 4, 2012
A Superfund cleanup project is, of course, an exercise in "greening" the environment, in that the remediation project is designed to remove contamination from the environment and return the affected property to beneficial use. With the February 2012 publication of EPA's "Methodology for Understanding and Reducing a Project's Environmental Footprint" report, EPA has begun to formalize a process for ensuring that the remediation itself is done as greenly as possible.
The methodology describes a total of 21 metrics by which the greenness of a cleanup can be measured across five core elements: air, water, energy, materials and waste, and land/ecosystems. The report contains planning checklists (warranted to be "user-friendly") and a series of spreadsheets (which are assuredly not user-friendly) illustrating formats for organizing raw data and quantifying impact estimates.
While the methodology will primarily be applied to future remediation projects, the techniques are already being tested at a few ongoing remediation sites that have "volunteered" to pilot the methodology. For example, at one site in the Midwest that is in the middle of long-term groundwater pump-and-treat, an EPA consultant examined the project to determine whether the carbon emissions associated with the electricity (generated by the local utility at a coal-burning power plant) needed to run the pumps and associated air strippers could be reduced.
No word yet on whether the next level of meta-analysis will require investigating how to minimize the resources used to analyze the footprint “greenity” of the underlying project itself.