GIVING PRPs THEIR DUE: GENERAL ELECTRIC'S DUE PROCESS CHALLENGE TO CERCLA UNILATERAL ADMINISTRATIVE ORDERS HEADS TO THE SUPREME COURT

Posted on February 1, 2011 by Donald Fowler

Over the past three decades, EPA has issued more than 1,700 CERCLA UAOs to roughly 5,400 PRPs ordering the performance of response actions at CERCLA sites costing in aggregate in excess of $5 billion. Only a small handful of those orders, however, have ever been challenged in court, and vanishingly few have been subject to any independent third party review whatsoever.
 

 

Why is that? Well, as even EPA might agree, it is not because the Agency is infallible. No, the reason for EPA’s essentially unreviewed exercise of its UAO authority is the CERCLA statute itself, which (a) by operation of Section 113(h), precludes any challenge to a UAO order until the ordered response action has been completed (typically many years later at an average cost of $4 million dollars) and (b) by operation of Sections 106 and 107, subjects any PRP who elects to defy a UAO to treble punitive damages and additional penalties of $37,500 per day, which accumulate until EPA, at its sole discretion, brings an enforcement action.
 

In this regard, CERCLA is an outlier in administrative law. Though instances are common where federal statutes give agencies the power to issue administrative orders, virtually every other comparable scheme affords recipients of such orders either a prior hearing or the prompt opportunity for independent review after the order is issued. CERCLA, of course, provides neither.

 


So what justifies this unusual approach? It has been suggested on occasion that due process must be dispensed with because UAOs are needed to address emergency conditions. They can only be issued, after all, where an imminent and substantial endangerment to public health or the environment is shown. There are two problems with that rationale, however. First, the courts have largely upheld EPA’s position that “imminent and substantial endangerment” doesn’t really mean “imminent” or “substantial” – there really is no site involving a hazardous substance and a release (actual or threatened) that doesn’t meet the statutory criteria for UAO issuance. Second, as EPA has conceded in litigation, the fact is that EPA doesn’t issue UAOs in true emergencies; in those circumstances, it does the work itself and seeks to recover its costs later.

 


Okay, so even if true emergencies are not implicated, it’s still the case that EPA has a need to act quickly and that allowing pre- (or prompt post-) issuance review would unduly impede cleanup of hazardous sites, right? Well, as it turns out, that’s not true, either. Analysis of EPA’s CERCLIS database reveals an average 8-year lag-time between identification of a site and issuance of a UAO and a 4-year lag between remedy selection and UAO issuance. Obviously, there’s plenty of time in the system for a little due process.

 


So why haven’t past procedural due process challenges to this UAO scheme (and there have been a number of them) succeeded? The courts that have rejected those challenges have commonly concluded that the challenging PRPs couldn’t show a pre-hearing deprivation of property, as is required to trigger Fifth Amendment protections. Those courts reasoned that a PRP could simply refuse to comply with and wait for EPA to sue to enforce the UAO, and in that event would suffer no pre-hearing deprivation of property since penalties and damages could only be awarded following a court hearing.

 


Though the conclusion is facially appealing, its fallacy is demonstrated by the record of the most recent constitutional challenge brought by GE. There, following extensive discovery from EPA and expert testimony on both sides, GE was able to demonstrate empirically that a PRP that elected to defy a UAO would be immediately punished by the equity and capital markets, which would recognize the massive contingent liability such defiance would create and account for it by lowering the PRP’s stock value and increasing its cost of financing, with consequent impacts on its ability to bid for new projects or to hire additional employees, among other things. Indeed, although he took issue with GE’s assessment of the magnitude of the impact, even EPA’s economic expert agreed that defiance would occasion such harmful effects and that they would be significant. And the District Court agreed, as well, that defiance would not avoid a deprivation of property, though it ultimately ruled against GE on the basis that the burden to EPA of providing hearings outweighed the private party interests favoring such hearings.

 


On appeal the D.C. Circuit rejected the district court’s finding of a pre-hearing property deprivation, however, and ruled instead that such harmful impacts did not involve constitutionally protected property rights and so dismissed GE’s constitutional challenge on that predicate ground without reaching the District Court’s balancing analysis. The potential implications of that holding – which GE believes is inconsistent with Supreme Court precedent – extend well beyond CERCLA confines, and so GE has sought certiorari review.  The government’s response to GE’s petition is due February 4.


Stay tuned.

Chemical Disclosure - or my secret name's no secret any more

Posted on December 28, 2010 by Susan Cooke

Since passage of the Federal Insecticide, Fungicide, and Rodenticide Act in 1972, environmental statutes and regulations have sought to balance legislative mandates seeking disclosure of chemical identities and properties against trade secret protection concerns. This tension can be seen in the labeling of cosmetics, the submittal of test data under the Toxic Substances Control Act (“TSCA”), and the disclosure of chemical additives to fluids used for hydraulic fracturing. In all three situations, efforts to increase access to chemical identity information are likely to create further challenges to trade secret protection.

 

 

            On the cosmetics labeling and TSCA front, a bill introduced in the House of Representatives this past July, entitled the Safe Cosmetics Act of 2010, would have required cosmetics labels to identify the name of each ingredient in descending order of its “predominance”, with the same information provided for internet sales. Regardless of the type of sale, the ingredients would not be afforded trade secret protection. While the bill was not enacted, the concerns that kept it alive even in the waning days of the Congressional session may be a harbinger of a new version in the upcoming session.

 

 

            A bill to amend TSCA also filed in the House last July would have required a manufacturer to provide an upfront justification for any trade secret claim made in an information submittal under TSCA, with EPA required to evaluate the submittal within 60 days thereafter. While this bill did not pass either, EPA had previously announced its intention toreview chemical identity CBI claims in health and safety studies submitted under TSCA, and it subsequently proposed amendments to its TSCA regulations that would require upfront justification of a chemical identity claim. In addition, EPA has substantially increased the chemical information available on its Envirofacts database, and is now providing free access to its TSCA inventory of chemicals.

 

 

            Additives to hydraulic fracturing fluids have likewise been the subject of much attention, and have sparked initiatives in a number of states to require their disclosure. Beginning next year, Arkansas will require disclosure hydraulic fracturing fluids on a well by well basis, although allowing more generic disclosure of proprietary chemicals. The information will be publicly available for review on the website of the Arkansas Oil and Gas Commission. In Wyoming, the additives are reported to the staff of the state’s Oil and Gas Conservation Commission, rather than to the public, and the Commission has granted a number of requests for trade secret protection, although the requests themselves are matters of public record. 

 

 

            Colorado requires oil and gas drillers to keep an inventory of the chemical additives at the site of each well, with state regulators getting a copy of the inventory upon request. Pennsylvania requires material safety data sheets covering the fracing fluid materials to be included with each drilling plan submitted for approval, with the MSDS sheets made available to the landowner and to local government and emergency responders. Both Colorado and Pennsylvania are considering expansion of those requirements.

 

 

            In September EPA issued letters to nine companies engaged in hydraulic fracturing related activities seeking the identity of the fracing fluid additives and copies of studies about their health and environmental effects. All of the companies have now responded to the EPA request, with Halliburton establishing a public website to disclose information about those additives. In addition, a number of trade associations, including the American Petroleum Institute, have lent their support to a voluntary disclosure registry under development by the Groundwater Protection Council, which includes a number of state officials responsible for groundwater protection, and the Interstate Oil and Gas Compact Commission, with data to be disclosed on a well-by-well basis. 

 

 

            How efforts such as those just described will address trade secret issues remains to be seen, particularly given the concerns raised about potential contamination of drinking water supplies by fracing fluids. However, it appears that the day has passed when one could claim trade secret protection and provide support for that claim only when the information was actually requested. And the new riff on that old refrain sung by Johnny Mathis and Doris Day appears more likely to be that “my secret name’s no secret any more”.

Governor Manchin (D-WV) Sues EPA Over Failure to Issue Mining Permits

Posted on October 12, 2010 by David Flannery

On October 6, 2010, and at the direction of Governor Joe Manchin (D-WV), the West Virginia Department of Environmental Protection (WVDEP) filed a complaint against EPA and the Army Corps of Engineers in U.S. District Court for the Southern District of West Virginia. The complaint alleges that two actions by EPA, requiring surface mine permit applications to undergo enhanced scrutiny and setting a new water quality standard based on conductivity, are unlawful and have brought the permitting process to a standstill. WVDEP is seeking a court order declaring EPA’s actions to be unlawful and enjoining their implementation.

 

WVDEP argues that EPA’s actions 1) are substantive rule changes that did not go through formal rulemaking required by the APA; 2) require the Corps to apply illegal presumptions during environmental assessments of new surface mine permits; 3) usurp West Virginia’s authority to implement its own water quality standards and effectively issue NPDES and SMCRA permits; 4) impose new water quality standards that are not based on sound science; and 5) have caused undue delays in the issuance of surface mining permits and threaten the supply of coal available for the nation’s energy needs.

 

Governor Manchin is in a hotly contested race for the US Senate in which his opponent is accusing him of being a "rubber stamp" for President Obama. Undoubtedly this action will be offered as a response to that criticism.

PCB-Containing Caulk: EPA Mixes Its Messages

Posted on September 22, 2010 by Ralph Child

EPA has issued an Advanced Notice of Proposed Rulemaking that broadly re-opens the question whether to authorize PCBs in caulk and under what conditions. EPA did not propose any new rules on the issue, but sought comments on what to do.   This balance of this post reviews EPA’s regulatory efforts on this issue and the comments on the ANPRM, and then summarizes some options for building owners while the agency ponders.

 

 

            Last year EPA announced that in “recent years” it had learned that many 1950 to 1978 buildings may contain caulking with PCB concentrations higher than 50 ppm, indeed often quite a bit higher. Linda Bochert’s post of November 3, 2009 linked to the EPA’s PCBs-in-caulk website, which the agency established to provide guidance for preventing exposures and conducting safe building renovations. 

 

 

            Last year’s guidance conspicuously avoided a central issue: EPA’s position on the legal status of PCB-containing caulk. EPA’s position actually is clear: PCBs at levels above 50 ppm in caulking are not authorized, hence are illegal to maintain. Yet EPA has never mounted a program to identify and remedy PCB-containing caulk, and last year’s guidance tacitly condones leaving PCBs in place indefinitely. So EPA de-emphasizes its legal interpretation. Quite possibly that is because EPA managers have not viewed PCB-containing caulking as causing actual health impacts whereas remediation certainly poses high costs and raises its own health risks.   

 

        

            The bottom line?  Clear-cut and sensible regulatory answers remain far in the future. Meanwhile EPA is sending mixed messages – PCBs in caulk are unauthorized but don’t overreact while we ponder. Building owners, prospective purchasers and contractors must sort out their own answers about what to do or not do.

 

Regulatory Background

 

            In truth, EPA long has had general awareness of PCBs in old caulk. If the concentrations are below 50 ppm, the caulk qualifies as an excluded PCB product and is not regulated by EPA. If the concentrations are higher, EPA considers the use to be illegal to maintain because EPA has never issued a use authorization for PCBs in building materials. 

 

 

            When over-50 ppm PCBs in caulk are reported to EPA, generally EPA has required remediation under TSCA’s rules. EPA New England (Region 1) has had a number of such matters. The Region also insists that cleanups must meet the requirements of the PCB spill regulations, which generally require cleanup in occupied buildings to levels well below 50 ppm.

 

 

            Yet there is no obligation under TSCA for building owners to test for PCBs in caulk or to report exceedances to EPA. Many building owners ignore the issue, even if they are aware of the general possibility. So unauthorized caulk persists in many buildings, or goes away during renovations or demolition, awaiting potential discovery in unplanned circumstances. 

 

 

            That has led to a number of mini-crises, particularly for public school systems facing growing parental and school staff awareness.   PCBs in schools have been much discussed in New York and elsewhere. In January 2010 the New York City schools and EPA entered into an extensive consent order to evaluate school buildings and study ways to encapsulate or treat PCBs over a period of several years. 

 

    

            In practice then, EPA has sent mixed messages. It has commendably - albeit tacitly -recognized that immediate and costly removal of unauthorized PCBs in caulk usually is not warranted. Yet the use remains unauthorized.  Given the strictures of TSCA and the ill repute of PCBs, that remains unsettling for many building owners and prospective purchasers.

 

 

            Efforts to authorize PCBs in caulk: the 1994 NOPR

 

            The mixed messages from EPA and the issues of cost and health risks call out for clear cut regulatory answers, but also hamper EPA from issuing definitive regulations.   It has already tried and retreated before. 

 

 

            Specifically, in 1994 as part of unrelated PCB rule changes, EPA proposed to authorize PCBs in pre-TSCA building materials, with conditions, similarly to intact asbestos containing materials.   The NOPR included EPA’s conclusion that continued use at concentrations above 50 ppm did not pose a significant risk as long as the materials were in good condition. 59 Fed. Reg. 62788, 62810 (12/6/94).

 

The proposed conditions had many downsides from a building owner’s perspective, because leaving the materials in place, once discovered, would have then required:

 

·        Notice within 30 days to EPA and potentially exposed individuals;

·        Marking in a prominent location;

·        Quarterly air monitoring and wipe sampling for one year and annually thereafter until removal of the material;

·        Removal or containment (by encapsulation with a sealant) if wipe sampling or air monitoring showed exceedances of workplace standards;

·        24-hour notice to EPA of such exceedances;

·        Record-keeping.

 

EPA’s final rule issued deferred the issue while indicating EPA intended to issue a supplemental notice of proposed rulemaking and asking for further information on how much of a problem this is or not.  63 Fed. Reg. 35383, 35386 (6/29/98)

 

            The 2010 ANPRM and Comments

           

            Over a decade later, EPA has issued an ANRPM on unrelated PCB rule changes, and used it to request comments on whether EPA should reconsider the 50 ppm level for excluded PCB products. That request also specifically called for comment on whether EPA should issue a use authorization for PCBs in caulk.  ANRPM, 75 Fed. Reg. 17645, 17664 (April 7, 2010). The ANPRM did not, however, describe any revised levels or conditions that EPA might propose for PCBs in caulk. 

 

 

             Many of the comments on the APNRM on this issue call for more study, but otherwise reflect an unsurprising range of recommendations. Comments from the Children’s Environmental Health Network urged EPA to cease any thought of authorizing an increase in the 50 ppm level. Comments from the American Federation of Teachers recommended a “suspension” of the allowance of PCB-containing caulk below 50 ppm while research is done. Massachusetts DPH comments tracked EPA’s position of 1994 by recommending leaving intact caulk alone, and included its own recent guidance to that effect. MIT’s comments proposed a facility-specific and detailed risk management approach. Comments from the National Association of College and University Business Officials recommended issuance of a use authorization for intact materials, perhaps conditioned on an I&M program.

 

 

            Overall, the ANPRM attracted relatively few comments on this issue, by contrast with voluminous comments from the utility sector on other issues. The paucity of attention may mean that PCBs in caulk still have not reached a widespread awareness in the commercial real estate community, which provided exactly no comments. Or building owners just may prefer the status quo.

 

 

           

Continued Regulatory Uncertainty: Working Out Own Answers

               

                It seems likely that EPA will not be providing any new rules on this issue in the foreseeable future.  That leaves the regulated community to work out its own answers as best it can. 

 

 

                It appears that many building owners have determined not to look for PCBs in caulk, even in buildings where they might be expected.  There is no requirement to do so and there have been no reports of actual health impacts due to PCBs in caulk. 

 

 

                Other building owners have chosen to test for PCBs in caulk in order to reduce regulatory risk, but only when renovations or demolition are undertaken for other reasons.  Only if unauthorized PCBs are found then do they conduct remediation under the health and safety and disposal restrictions under the PCB rules. 

 

 

                Some prospective purchasers are including this issue in their due diligence, particularly if renovations are planned, and building attendant costs into the pricing.  But some do not, relying on the absence to date of regulatory requirements, regulatory pressure or health impacts.

 

 

                Some owners are writing requirements into construction contracts to make sure that contractors identify and handle any such caulking appropriately, similarly to contractual provisions for asbestos-containing materials. 

 

 

                Given EPA’s mixed message – PCBs in caulk are unauthorized but don’t overreact – each of those practices may be sensible. Building owners and prospective purchasers must choose their own paths based on their own policies and risk tolerance.

Is United Haulers the Final Word on Local Flow Control?

Posted on August 17, 2010 by Thomas Lavender, Jr.

The most recent Supreme Court examination of the validity of solid waste flow control ordinances under the dormant Commerce Clause occurred in United Haulers Ass’n v. Oneida-Herkimer Solid Waste Management Authority, 550 U.S. 330 (2007). In United Haulers, the Court held that flow control ordinances which favor a state-created solid waste authority, but treat in-state and out-of-state private entities the same, ‘do not “discriminate against interstate commerce” for purposes of the dormant Commerce Clause.’ Id. at 345. In such case, the validity of a nondiscriminatory ordinance with an incidental effect on interstate commerce is analyzed under balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). Id. at 346.   However, if the flow control ordinance favors a single private entity over other private entities, the holding in C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383 (1994), controls. Id. at 341.   

 

 

United Haulers has been the linchpin for local governments to launch flow control ordinances. However, although the United Haulers decision upheld the validity of a flow control ordinance against a commerce clause challenge, the decision was based on an ordinance that was expressly authorized by the New York legislature and which required the disposal of solid waste at a landfill operated by a solid waste authority created by the New York legislature.   In United Haulers, the New York legislature enacted specific legislation which allowed Oneida and Herkimer Counties to “impose ‘appropriate and reasonable limitations on competition’ by, for instance, adopting ‘local laws requiring that all solid waste . . . be delivered to a specified solid waste management-resource recovery facility.’”   Id. at 335. Additionally, the flow control ordinance in United Haulers directed that all waste in Oneida and Herkimer Counties be disposed of at the Oneida-Herkimer Solid Waste Management Authority (“Oneida-Herkimer Authority”), which was created by the New York legislature and was therefore a political subdivision of the state. Id. at 335. As such, under United Haulers, it is clear that a local flow control ordinance authorized by state legislation and directing solid waste to a public waste authority created by state legislation does not violate the commerce clause if it satisfies the Pike balancing test. It is likewise clear that a flow control ordinance which directs all solid waste generated within the boundaries of a local government to be directed to a privately-owned facility is still controlled by the holding in C & A Carbone, Inc. v. Clarkstown and invalid. 511 U.S. at 391. However, the United Haulers decision does not specifically address the significance of the authorization for the flow control ordinance by the New York legislature. 

 

 

According to a 1995 EPA report to Congress, state legislatures in 35 states have expressly authorized the enactment of flow control ordinances by local governments. For those states in which flow control is not expressly authorized by the state legislature, it is unclear whether a flow control ordinance enacted by a subdivision of the state would withstand a commerce clause challenge. At the very least, the absence of state authorization for flow control measures may affect the analysis of certain elements under the Pike balancing test.  Additionally, in states in which the state legislature has not expressly authorized the enactment of flow control ordinances by local governments, a local flow control ordinance could be preempted by state solid waste laws and therefore invalid even if it does not violate the commerce clause; thus, leaving open the question of whether or not United Haulers has opened the door forever on local flow control.

 

 

At least one frontal challenge to local flow control is pending in S.C. In Sandlands, LLC, et al. vs. Horry County, et al., Case No. 4:09-cv-01363-TLW-TER (currently pending in United States District Court in the District of South Carolina), a landfill and affiliated hauling company are challenging a county’s ability to restrict the exportation of waste to out-of-county landfills on commerce clause and preemption claims. The plaintiffs are attempting to distinguish United Haulers as well as arguing that the ordinance is preempted by State law. The impacts of the ordinance are being felt on disposal facilities in the region as the State has implemented a regional planning approach for siting disposal facilities. While the defendants removed the commerce clause question to federal court, the federal court has certified and the State Supreme Court has accepted the preemption question.

The Deck is Still Stacked in the Government's Favor -- Is This A Good Thing?

Posted on July 22, 2010 by Seth Jaffe

Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

Alabama Court Dismisses CERCLA Section 107 Claims for Compelled Cleanup Costs

Posted on July 8, 2010 by Fournier J. Gale, III

On July 2, 2010, the U.S. District Court for the Northern District of Alabama published a must read opinion regarding cost recovery claims under CERCLA.  See Solutia, Inc., et al. v. McWane, Inc., et al., Case No. 03-1345, Document No. 622 (N.D. Ala. July 2, 2010).The case was originally filed by plaintiffs in 2003 as a CERCLA cost recovery and contribution action against several industrial defendants located in Anniston, Alabama related to plaintiffs' cleanup of historic PCB contamination throughout the Anniston area. In June 2008, the Court had previously granted defendants' motion for summary judgment regarding plaintiffs' CERCLA Section 113 claims for contribution but had allowed plaintiffs to proceed with their CERCLA Section 107 cost recovery claims. However upon motion for reconsideration, the Court on July 2 issued a detailed opinion also dismissing with prejudice plaintiffs’ cost recovery claims under Section 107.

 

 

Of interest to CERCLA practitioners, the dismissal opinion provides a lengthy analysis, based on recent Circuit Court decisions, as to whether a plaintiff who seeks to recover costs of a cleanup performed pursuant to obligations under a consent decree or administrative settlement (aka “compelled” cleanup costs) can bring a claim under Section 107(a)(4)(B).  Notably, the U.S. Supreme Court did not decide the appropriate route for recovering “compelled” costs (under Section 107(a), 113(f), or both) in its most recent opinion addressing CERCLA Sections 107 and 113. United States v. Atlantic Research Corp., 551 U.S. 128 (2007). Nevertheless, the Northern District of Alabama agreed to reconsider defendants' motion to dismiss plaintiffs' Section 107 claims in light of Circuit Court decisions issued subsequent to Atlantic Research as well as new evidence.  Indeed, the Court agreed with the defendants' assessment that the majority of Circuit Court decisions decided after the Northern District’s previous denial of defendants’ motions for summary judgment have held that a party who incurred “compelled” cleanup has a viable Section 113 claim for contribution and not a Section 107 claim for cost recovery.

 

 

Ultimately the Court concluded that the recent Circuit Court decisions were correct in their assessment that Congress had intended for Section 113(f) to be the exclusive remedy to recover costs incurred pursuant to a judgment, consent decree, or settlement.  Because the Court agreed withdefendants' argument that plaintiffs’ costs related to its PCB cleanup were incurred by virtue of a prior consent decree, the plaintiffs only had a potential right to a Section 113 claim for contribution (which was previously dismissed) – not a Section 107 claim for recovery.

 

 

Again, the opinion is a helpful summary of evolving jurisprudence under CERCLA regarding Section 107 and Section 113 claims.  

A Combined Superfund and Stormwater Rant

Posted on July 7, 2010 by Seth Jaffe

Sometimes, the practice of environmental law just takes my breath away. A decision issued earlier last month in United States v. Washington DOT was about as stunning as it gets. Ruling on cross-motions for summary judgment, Judge Robert Bryan held that the Washington State Department of Transportation had “arranged” for the disposal of hazardous substances within the meaning of CERCLA by designing state highways with stormwater collection and drainage structures, where those drainage structures ultimately deposited stormwater containing hazardous substances into Commencement Bay -- now, a Superfund site -- in Tacoma, Washington.  

I’m sorry, but if that doesn’t make you sit up and take notice, then you’re just too jaded. Under this logic, isn’t everyone who constructs a parking lot potentially liable for the hazardous substances that run off in stormwater sheet flow? 

For those who aren’t aware, phosphorus, the stormwater contaminant du jour, is a listed hazardous substance under Superfund. Maybe EPA doesn’t need to bother with new stormwater regulatory programs. Instead, it can just issue notices of responsibility to everyone whose discharge of phosphorus has contributed to contamination of a river or lake.

The Court denied both parties’ motions for summary judgment regarding whether the discharges of contaminated stormwater were federally permitted releases. Since the Washington DOT had an NPDES permit, it argued that it was not liable under § 107(j) of CERCLA. However, as the Court noted, even if the DOT might otherwise have a defense, if any of the releases occurred before the permit issued – almost certain, except in the case of newer roads – or if any discharges violated the permit, then the Washington DOT would still be liable and would have the burden of establishing a divisibility defense. 

If one were a conspiracy theorist, one might wonder if EPA were using this case to gently encourage the regulated community to support its recent efforts to expand its stormwater regulatory program. Certainly, few members of the regulated community would rather defend Superfund litigation than comply with a stormwater permit.

You can’t make this stuff up.

A Bridge Too Far? EPA's War on Lead-Based Paint Takes Aim at Commercial Buildings

Posted on June 30, 2010 by Charles Efflandt

No one doubts that EPA’s war on lead-based paint serves the cause of mitigating an established health threat. With children being particularly at risk, the regulations to date have focused on lead-based paint in older homes and other “child-occupied facilities.” On May 6, 2010, however, EPA gave notice of its intent to take the battle to an undefined set of commercial and public buildings. Can a full-scale assault on commercial facilities, which will involve a more complex set of regulatory variables and which will venture farther from the core health risk concerns, succeed in achieving a proper balance of competing factors?

 

EPA’s May 6, 2010 Advance Notice of Proposed Rulemaking announcing the next step in the lead-based paint campaign was published only days after the April 22, 2010 effective date of the controversial Renovation, Repair and Painting Rule (“RRP Rule”). That rule regulates renovation and repair activities disturbing lead-based paint in older homes and child-occupied facilities. The RRP Rule affects contractors, landlords and others who perform RRP work for compensation.

 

The RRP Rule includes provisions for the required certification (for a fee) of firms performing covered RRP work, the training and certification (at a significant cost) of “Certified Renovators” through EPA-accredited classes, the required use of detailed RRP work practices when performing covered activities, the retention of compliance records, and the verification of compliance with work practice obligations. Even though the RRP Rule has a relatively narrow focus - residences and other child-occupied facilities - its requirements have generated substantial controversy.

 

Because the RRP Rule applies to numerous trades and contractors, as well as to certain landlords and other persons, issues related to obtaining the required training, safe implementation of the work practice requirements, costs of compliance and the possibility of a $37,500 per day, per violation penalty are only now being confronted by the regulated community as well as the regulators. Small contractors may be forced out of business, impacting competition. Needed RRP work may not be performed due to cost. Lead-contaminated waste disposal will create new environmental/health problems partially offsetting the benefits of the RRP Rule. Suffice it to say, EPA has not yet solved the numerous problems and complexities of implementing even these regulations focused on older homes and child-occupied facilities.

 

With this background, and setting aside for the moment legal mandates, one can reasonably question whether EPA is prepared to set its sights on a significantly more complex regulatory challenge- the renovation and repair of an estimated two to three million commercial and public facilities constructed prior to 1980. The ANPR includes no proposed language. Rather, the public is invited to respond to over 100 detailed questions and data requests.

 

At this time, the scope of EPA’s assault on the renovation and repair of commercial and public buildings is unknown. No current limitations on covered “commercial” and “public” buildings exist and both exterior and interior renovation and repair work are included in the ANPR. Unresolved questions include: What renovation and repair work should be covered? What activities create the most risk? Should exposure pathways be broadened to include nearby properties? How should the substantial amount of lead-contaminated waste be handled to avoid creating a different health and environmental hazard?

 

This much is known. The regulatory variables associated with extending the war on lead-based paint to commercial and public buildings are more numerous and the targeted health risks have expanded. I suggest that there is a real possibility that the regulations could fail to appropriately balance the legitimate interests of contractors, building owners and the public with the known and perceived health risks. Let us hope that the regulated community weighs-in on these issues and that the EPA gives careful thought to this next step in its campaign against lead-based paint.

 

The public comment period for this proposal ends July 6, 2010.

Just What We Need: More Community Engagement in Superfund Sites

Posted on May 26, 2010 by Seth Jaffe

Last week, EPA’s Office of Solid Waste and Emergency Response announced release of its Community Engagement Implementation Plan. Who could be against community engagement? It’s as American as apple pie. It’s environmental justice. It’s community input into decisions that affect the community. It’s transparency and open decision-making.

 

Call me a curmudgeon, but I’m against it. Study after study shows that, in terms of the actual risks posed by Superfund sites, we devote too many of our environmental protection dollars to Superfund sites, when we should be focusing on air and water. Why do we keep doing this? Because the community demands it. As Peter Sandman has noted, perceptions of risk are driven only partly by the actual hazard posed. To a significant degree, those perceptions are more driven by outrage over the situation. In some circumstances, what Sandman calls outrage management makes sense, but I’m skeptical that EPA’s community engagement initiative is really about outrage management.

 

In any case, here’s the public policy question of the day. Does it really make sense to spend scarce environmental protection resources, not to reduce risk, but to reduce outrage?

BNSF No Big Deal, says U. S. District Court

Posted on May 25, 2010 by Rick Glick

The U. S. District Court for the Eastern District of California has denied reconsideration of its pre-BNSF order finding defendants jointly and severally liable under CERCLA. U. S. v. Iron Mountain Mines. Defendants had argued that the Supreme Court in the BNSF case mandated the district courts to consider grounds for reasonable apportionment. They had earlier argued for apportionment before BNSF and then cited the Supreme Court’s decision as an intervening change of law that entitles it to reconsideration.

 

The court disagreed, finding that BNSF did not change the law, rather it simply reaffirmed existing law and applied it to a specific set of facts. It seems strange that the Supreme Court would grant cert in a case where the law is settled just to apply the facts. In fact, the working presumption in CERCLA litigation had been that joint and several liability is the rule and apportionment is rare, even though CERCLA doesn’t say that. Most practitioners saw BNSF as a game changer, reopening the possibility of a hard look given to reasonable bases for apportionment in mediated allocations and in court. But the District Court followed the lead of the Justice Department, which has consistently said BNSF marks no departure from standard CERCLA jurisprudence.

 

It sure would be great if the Supreme Court would provide some clarity in its environmental decisions. Few would think Rapanos helped much with our understanding of the Clean Water Act, and now we need to muddle through a certain lack of precision in representing clients in Superfund matters. While BNSF opens the window, it remains to be seen whether the opening is just a crack or will really let some fresh air in.

Fighting the Last War: The Relevance (and Irrelevance) of the Exxon Valdez Spill to the Deepwater Horizon Spill

Posted on May 24, 2010 by Bradley Marten

A number of us in the Pacific Northwest can remember the phone call that came in the spring of 1989 telling us to come to Alaska. There had been an oil spill, the caller said, and we had better get up there right away. We packed up and left, sometimes with just a couple of sets of clothes, and ended up staying for months, or years. We were lawyers, not scientists, and we could neither contain the spill nor predict its impacts. What we could do – or thought we could do – was assess blame and assign damages. That turned out to be harder than any of us imagined.

Nearly twenty years of litigation followed the Exxon Valdez spill, and there was not a single case, but many. By understanding some of the history of the Exxon Valdez cases, one can appreciate what the lawyers working on the Deepwater Horizon case have in front of them. At the same time, the many differences between the two spills suggest that history will not repeat itself. The legal response to the Deepwater Horizon case, like the cleanup response being carried out in the Gulf at this time, is likely to be far more complex, involve even more parties, and possibly even more time. By way of example:

  • The federal Oil Pollution Act of 1990 ("OPA 90"), one of the principal laws likely to be invoked in response to the Deepwater Horizon, was enacted after (indeed, in response to) the Exxon Valdez. While the elements of the liability case against responsible parties under OPA 90 are similar to those asserted under the Clean Water Act in the Exxon case, OPA 90 allows plaintiffs to potentially recover a broader range of compensatory damages, including: damages to real or personal property; subsistence use; federal, state, and local tax revenues; lost profits and earning capacity; and the cost of providing additional public services resulting from the spill. In that sense, the law is more complex now than it was at the time of the Exxon Valdez spill, involves more parties and more and different potential claims. There is also very little case law decided under it;
  • The causation issues in the Exxon Valdez case were far simpler than in the present spill. There was no question as to the cause of the 1989 spill into Prince William Sound – a tanker hit a reef. In the case of the Deepwater Horizon, on the other hand, press reports and briefings by BP point to a chain of events, each of which may have contributed to the explosion and to the still mounting damages;
  • Unlike the Clean Water Act, OPA 90 expressly allows for contribution claims among responsible parties that were not available under the Clean Water Act. Therefore, the party that initially responds to the spill (BP) may have statutory claims that they choose to assert against other responsible parties at some future time;
  • The Exxon case involved a single state (Alaska) and the federal government (and Alaska Native corporations). By comparison, several states have already become involved in the Deepwater Horizon spill (including Louisiana, Mississippi and Alabama), raising potential jurisdictional questions and possible conflicting claims among the governmental plaintiffs;
  • In oil spill cases, one of the potentially largest claims the government can bring is for natural resource damages. In order to do so, however, the government has to establish a "baseline" of pre-spill conditions. This is much more difficult to do in some of the ports and commercial areas along the Gulf Coast that are already impacted by hydrocarbons, as opposed to the relatively pristine waters of Alaska's Prince William Sound.
     

II. The Exxon Valdez Litigation

Against this backdrop, it may be helpful to review the history of the litigation that began in March, 1989 with the grounding of the oil tanker Exxon Valdez on Bligh Reef in Prince William Sound, Alaska. Estimates of the quantity of oil spilled range from 10.8 million to 30 million gallons. More than 1,200 miles of coastline were contaminated, 250,000 birds were killed, and 330 civil lawsuits were filed.

  • Criminal Prosecution

The state of Alaska criminally prosecuted the Exxon Valdez’s captain, Joe Hazelwood. The United States prosecuted Exxon for various environmental crimes, including criminal violations of the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act. Exxon Corporation pled guilty to one count of violating the Migratory Bird Treaty Act, and Exxon Shipping pled guilty to one count each of violating the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act. The corporations were jointly fined $25 million and were ordered to pay restitution of $100 million.

  • Civil Litigation: The Natural Resource Damage Claims

The United States and the state of Alaska sued Exxon for natural resource damages. That litigation was settled by entry of a consent decree under which Exxon agreed to pay $900 million over a period of ten years. The money was used at the direction of the Oil Spill Trustee Council for species and habitat restoration and recovery. The consent decree contain a reopener provision that allowed the governments to make additional claims of up to $100 million for natural resource damages not known when the settlements were reached.


In 2006 the Department of Justice and the State of Alaska asserted a claim against Exxon under the reopener provision, seeking payment of $92 million clean up oil the governments contend remains in the environment from the 1989 spill. Exxon responded that the nearly 350 studies that have been conducted demonstrate that the spill has left no lingering damages in Prince William Sound, and that the governments’ demands do not satisfy the requirements of the settlement agreement. No case has yet been filed.

 

  • The Private Party Claims

Most of the private civil lawsuits were consolidated before Judge H. Russell Holland in the United States District Court for the District of Alaska. The damages trial proceeded in phases: Phase I determined whether Exxon was liable for punitive damages, and held that it was. Phase II determined the amount of compensatory damages owed to the plaintiffs. Phase III determined the amount of punitive damages to award to the plaintiffs. Subsequent proceedings adjudicated the claims of members of the fifty classes of claimants in the consolidated class action lawsuit.
On August 11, 1994, following the second phase of the trial, the jury returned a verdict of compensatory damages against Exxon of nearly $287 million. On September 16, 1994, following the third phase of the trial, the jury returned a $5 billion punitive damages verdict against Exxon. Exxon appealed, marking the start of an additional fifteen years of litigation and three appeals to the Ninth Circuit and, ultimately, the Supreme Court.


In the first appeal, the Ninth Circuit remanded the punitive damage award to the district court to be reconsidered in light of intervening decisions by the United States Supreme Court addressing the constitutionality of punitive damage awards. In BMW v. Gore and Cooper Industries v. Leatherman Tools, the Supreme Court articulated factors a court must consider when reviewing a punitive damage award: the reprehensibility of the defendant’s conduct; the ration of the award to the harm inflicted on the plaintiff; and the difference between the award and civil and criminal penalties in comparable cases. The district court conducted an extensive analysis of those factors, and concluded the actual harm to plaintiffs was more than $500 million and a ratio of punitive damages to harm was 10 to 1, supporting the original $5 billion award. Nonetheless, the court reduced the punitive damages to $4 billion, to conform to what it viewed as the Ninth Circuit’s mandate. Exxon appealed.


While the second appeal was pending, the Supreme Court issued another punitive damages opinion, State Farm Mut. Auto Ins. Co. v. Campbell. State Farm instructed courts to weigh five specific considerations in calculating punitive damages, and “strongly indicated the proportion of punitive damages to harm could generally not exceed a ration of 9 to 1.” Those five factors are (1) whether the harm caused was physical as opposed to economic; (2) whether the conduct causing the plaintiff’s harm showed “indifference to or a reckless disregard of the health or safety of others;” (3) whether the “target of the conduct” was financially vulnerable; (4) whether the defendant’s conduct involved repeated actions as opposed to an isolated incident; and (5) whether the harm caused was the result of “intentional malice, trickery, or deceit, or mere accident.” The Ninth Circuit summarily remanded the second appeal of the punitive damage award to the district court for recalculation in light of State Farm. On remand, the district court again determined actual harm to be $513.1 million and increased the punitive damage award to $4.5 billion, a ratio of just under 9:1. Exxon appealed again, and this time, the plaintiffs cross-appealed, seeking reinstatement of the $5 billion award.


In the third appeal, Exxon argued that all of its settlement and other pre-judgment compensatory payments to the plaintiffs, which totaled approximately $493 million, had to be subtracted from the more than $500 million in actual harm before calculating the ratio of punitive damages to actual harm. As a result, Exxon argued, the measure of damages would be reduced to $20.3 million. Applying what it contended was the appropriate ratio, 1:1, Exxon argued that a punitive damage award should be capped at $25 million. This time, the Ninth Circuit accepted the District Court’s approximation of $500 million as the amount of actual harm, but in determining the appropriate ratio of punitive damages to actual damages, took into account the fact that while Exxon’s conduct (its “reckless decision to risk the livelihood of thousands by placing a relapsed alcoholic in command of a supertanker”) was particularly egregious and the economic damages significant, it was not intentional. And, as a mitigating factor, Exxon promptly took steps to ameliorate the harm. Thus, Exxon’s conduct, “though inexcusable,” warranted a ratio of 5:1 rather than 9:1, resulting in a punitive damage award of $2.5 billion dollars.


The parties then appealed to the United States Supreme Court. In 2008, the Supreme Court reversed the Ninth Circuit and limited the punitive damage claim to a 1:1 ratio, or roughly $507 million. However, the high court declined to decide whether Exxon was required to pay interest on the amount of the award, and sent the issue back to the Ninth Circuit. Two months later, the appeals court held that Exxon was required to pay the interest, dating back to 1996, roughly doubling the amount of the final award. The average award to the 33,000 claimants came to about $15,000 -- roughly 20% of the amount that was awarded by the jury in 1994.

III. What Happens Next


Press reports indicate that a number of economic damage cases have already been filed against BP, Halliburton and Transocean over the Deepwater Horizon spill, and there are almost certain to be many more, depending on the impact of the spill. The government has yet to file litigation, but it can be expected to do so, under a variety of federal laws including OPA, the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act, among others. There will be a lengthy and expensive natural resource damage assessment that the defendants will be expected to pay for. There are potential insurance claims, potential shareholder claims, and possibly contractual and statutory contribution claims between the responsible parties, among others. And if the sum of these were not enough to challenge even the most battle-tested lawyers on all sides, there is the reputational and political overlay which can dominate the legal and scientific issues at play, including Congressional hearings. A spill the size of this one not only impacts BP and its partners, but the entire industry. It also will test the legal system and the brightest minds in it.

For more information regarding the legal impacts of the Gulf spill, please contact Brad Marten or any other member of Marten Law’s Energy, Climate Change or Waste Cleanup practices.

Energizing Brownfields

Posted on May 7, 2010 by George von Stamwitz

It has always amused me how many people are involved with Brownfields work as compared to how few projects have been completed. It is tough to make the economics work on a Brownfield development in the best of times. Thanks to clean energy rules and incentives this may be changing.

 

Brownfields and clean energy have several synergies. Brownfields are often in industrial corridors, with great infrastructure and proximity to electrical grids. Biomass projects in particular need access to efficient transportation networks in order to move large volumes of material. Clean energy projects such as solar, wind and biomass plants work well with risk based remediation and institutional controls required for cost effective risk management at a Brownfields sites.



Add to these synergies a vast array of incentives, mandatory quotas and grants for clean energy and we just may have a path to economic viability for some Brownfields projects. EPA has a task force known as ER3 to help facilitate such projects. Keep your eye on a project in Charlotte, North Carolina known as ReVenture Park which seems destined to put wind energy, wastewater treatment and a biomass plant on a large, complex CERCLA/RCRA site.

Nanotechnology - Health and Risk Management Concerns

Posted on March 9, 2010 by Michael Rodburg

In June last year insurance giant Zurich issued a report of the work of its Emerging Risks Group study begun in 2006. The report stated that the risks with the greatest potential to affect Zurich and its customers are those associated with nanotechnology.

Similarly, an alphabet soup of regulators—foreign and domestic—is wrestling with largely unknown and largely theoretical risks. The human health and environmental alarms have been sounded by numerous commentators, without yet meaningful, documented empirical observation or controlled studies of human health and safety issues or environmental concerns. Regulation in a factual vacuum is potentially counterproductive and can stifle one of the 21st century’s most promising new technologies. But no one wants “another asbestos” or to have stood by silent in the spring while nanobots consume an ecosystem. This blog will skim the surface of an increasingly deeper and broader pond.

What is Nanotechnology?

Nanotechnology involves the manipulation of matter at the near atomic or nanometer scale--a nanometer is one billionth of a meter; a standard sheet of paper is 100,000 nanometers thick. Materials composed of or including devices and systems with components at the nanometer scale represent fundamentally new molecular organizations with highly different and potentially unpredictable properties and functions compared to their macromolecular cousins. The technology has found uses in a wide variety of commercial products including wound dressings, pregnancy tests, toothpastes, lubricants, paints, nonstick coatings, tennis racquets, air filters and many other products. In each of these products, the nano scale materials exhibit dramatically different characteristics than would be true of those materials at normal scale.  For example, gold is an excellent conductor of heat and electricity but simply reflects ordinary light. Properly structured gold nano particles absorb light and can actually convert light into heat (which, in turn, can be used for cutting purposes in thermal scalpels).  Nano sized particles of titanium dioxide provide UV protection while remaining transparent. Nano scale materials in thin films applied to eyeglasses, computer displays and cameras make them water repellant, anti-reflective or give them other useful physical characteristics.

 

Potential Health Issues

The primary human health concern for the extremely small size of nano materials is that they may be introduced into and affect the body in ways completely different than their bulkier macro cousins. See, e.g., Special Report, Nanotechnology: Benefits vs Toxic Risks, Functional Foods And Nutraceuticals (Feb. 2007) ("nanosized particles were found to traverse through lung tissue in unexpected ways, gaining access to blood and lymphatic systems"). 

The potential for different human health related characteristics such as enhanced adhesion, reactivity and absorption means that current methodologies for risk assessment simply are not applicable and safety data drawn from non-nano counterpart materials may be irrelevant.  See, Fischer Nanotechnology -- Scientific and Regulatory Challenges, 19 Villanova Envt. L. J. 315 (2008). For example, when inhaled, nano particles are deposited more efficiently and deeply into the respiratory tract than non-nano materials, and these nano materials may evade human body defense mechanisms that trap larger particles. In addition, nano materials themselves have sometimes been the subject of problematic animal studies. See Lynn, Size Matters: Regulating Nanotechnology 31 Harv. Envtl. L. Rev. 349 (2007).

Moreover, ordinary risk management tools may also simply “not work” in the presence of nano materials. For example, the use of facial masks designed for non-nano aerosols may not be effective for nano sized particles.

Nanotechnology concerns have been heightened by an article published in the European Respiratory Journal in which researchers reported that seven (7) young women suffered permanent lung damage following months of unprotected exposures to fumes and smoke containing nano particles in spray painting operations in China. The researchers concluded that the patients' illnesses appeared to be a "nanomaterial -- related disease.” While the results of this study have been questioned, the legitimacy of concerns with respect to high level environmental exposures to these materials remains. 

Regulatory Focus

An intense regulatory focus on developing an appropriate scientific basis for ensuring that nano materials do not present unreasonable human health concerns is underway. See e.g., Dept. of Health and Human Services, Approaches To Safe Nanotechnology - Managing The Health And Safety Concerns Associated With Engineered Nanomaterials (March 2009).  Giving further impetus to these concerns is the fact that there is a high concentration of nanotechnology applications in pharmaceutical, food and cosmetics applications, industry segments with direct and immediate human interactions. Every agency with jurisdiction over human and environmental health and safety has found or certainly will find reason to explore regulation. The USEPA has begun to issue rules about handling of and exposure to nano forms of alumina, silica and silver; the California Department of Toxic Substances is considering controls on carbon nanotubes. We can expect initiatives over time from the FDA and OSHA.

Insurance Company Reaction

For its part, the insurance industry has focused on product liability concerns. Insurance industry studies have expressed significant reservations about liability issues associated with nano materials. See Lloyd's of London Emerging Risks Team Report, Nanotechnology - Recent Developments, Risks and Opportunities (2007).  Indeed, one insurance carrier (Continental Western Insurance Group) has gone so far as to impose nano-technology exclusions in their standard CGL policies - notwithstanding the fact that no such claims have yet been presented. 

Conclusion

It is clear that nanotechnology offers tremendous scientific and commercial opportunities in the future. These opportunities, however, are likely to be accompanied by health and safety based product liability and environmental risks, and those risks need to be taken into account in the development and exploitation of these products.

This blog is based in part on a more expansive article: Michael Dore, Nanotechnology - Evaluate The Products Liability Risks, 198 N.J.L.J. 866 (December 14, 2009)

Has the BNSF Case Changed the Superfund Practice?

Posted on February 5, 2010 by Bradley Marten

It has been nearly nine months since the U.S. Supreme Court decided Burlington Northern and Santa Fe Railway Company v. United States (BNSF),[1] a case some called a landmark decision that would change the Superfund practice.[2] In some respects that has turned out to be the case, in others it has not. There have been several reported cases citing BNSF, and all of them confirm that the decision requires both the EPA and potentially responsible parties (“PRPs”) to engage in a more fact-intensive inquiry into “arranger” liability. Less clear, however, is how the apportionment of liability among liable parties in private contribution cases will be affected, given the relatively small number of reported decisions.

Readers will recall that the BNSF decision had two elements: (1) it addressed the scope of arranger liability under CERCLA, and (2) it affirmed the view of several circuit courts that PRPs can avoid joint and several liability if a “reasonable basis” to apportion liability exists. This article reviews how lower court decisions issued subsequent to BNSF have applied those two components.

 

A Review of the BNSF Facts

BNSF was issued on May 4, 2009. The 8-1 decision written by Justice Stevens arose out of a fairly common fact pattern for CERCLA cases: a small chemical distributor Brown & Bryant, Inc. (“B&B”) owned and operated a facility that repackaged agricultural chemicals. B&B’s operation was on a 3.8-acre parcel, a portion of which was leased from predecessors to BNSF and the Union Pacific Railroad. Neither railroad played any part in B&B’s operations. The other PRP, Shell Oil, sold a soil fumigant to B&B which was shipped via commercial carrier FOB destination, meaning that the buyer was responsible for the product once it arrived at the facility.

After the State of California ordered B&B to clean up soil and groundwater contamination, B&B went out of business and then EPA listed the site on the National Priorities List. Both railroads and Shell were named as PRPs. The railroads were ordered to clean up the entire site, even though the portion of the site that they owned did not require remediation. Shell was named a PRP for having delivered chemicals to the site which it knew or should have foreseen would be spilled by B&B. In 1996, the United States and the State of California filed a cost recovery action against the railroads and Shell, seeking to recover over $8 million in response costs.

The Supreme Court’s Opinion
1. Arranger Liability

In affirming that “arranger liability” under CERCLA must be determined on a case-by-case basis, the Court set up a continuum. At one end are cases where an entity entered into a transaction “for the sole purpose of discarding a used and no longer useful hazardous substance.”[3] In such cases, there is a clear intent to discard the product, and therefore liability under section 107(a)(3). On the other end are situations where a company sells a useful product and “the purchaser of that product later, and unbeknownst the seller, disposed of the product in a way that led to contamination.”[4] The Court acknowledged that there were “many permutations of ‘arrangements’ that fall between these two extremes.” In these cases, based on a “plain reading” of the CERCLA statute, the Court held that “an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance.[5] Applying this statement of the law to the facts, the Court held that Shell’s mere knowledge of the spills did not amount to an “intent” that they be spilled or otherwise disposed of and that Shell was therefore not liable as an arranger.

2. Apportionment

BNSF highlighted that the CERCLA statute does not contain joint and several liability language. Instead, the notion that PRPs should be held jointly and severally liable is a judicial doctrine grounded in Section 433A of the Restatement (Second) of Torts. Applying the Restatement, the Court held – as had several circuit courts previously– that “apportionment is proper when there is a reasonable basis for determining the contribution of each cause to a single harm.”[6]

Where multiple parties cause a single harm, “CERCLA defendants seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists.”[7] In BNSF, while both the district court and the Ninth Circuit had found that apportionment of the harm was possible, they disagreed on how to allocate responsibility. The district court came up with a nine percent allocation to the railroads. The Ninth Circuit criticized the evidence on which the district court had relied, finding that it was insufficient to establish the “precise proportion” of the Railroads’ responsibility. The Supreme Court affirmed the district court’s approach, holding that the evidence supporting apportionment need not be precise. There must simply be “facts contained in the record reasonably support[ing] the apportionment of liability.”[8]

Lower Court Decisions Applying BNSF
Cases Applying the Court’s Arranger Liability Ruling

Of the four published cases that have substantively applied BNSF in the context of arranger liability, all suggest that lower courts are taking seriously the Supreme Court’s instruction to conduct a factually-intensive review of the parties’ intent. Prior to BNSF, the view prevalent among at least some government attorneys, and even some private party attorneys, was that every party who somehow came into contact with a hazardous substance was liable as having “arranged for disposal.” That view has been shattered.

Two cases, in particular, illustrate this point. The first is Appleton Papers Inc. v. George A. Whiting Paper Co.[9] Plaintiffs in that case were companies who had manufactured and sold carbonless paper. The emulsion used in the paper contained microscopic capsules that burst when pressure was applied, releasing a dye, and allowing the words on a page to be transferred from one sheet to another. The microcapsules were dissolved in a solvent which contained PCBs. The PCBs were released into the Fox River from manufacturing plants which produced the paper. An even greater proportion of PCBs were released by companies that recycled carbonless paper and by municipal wastewater utilities that discharged PCB-contaminated wastewater.

Plaintiff manufacturers filed a contribution action under CERCLA §113 against the recyclers and municipalities (their §107 claim was previously dismissed by the court). The court bifurcated the case into a liability and apportionment phase. In the liability phase, on cross-motions for summary judgment, the court considered whether the defendants knew they were disposing of hazardous chemicals, and concluded that they did not. The analysis – while not explicitly using the word “intent” – focused on what the defendants knew when they recycled the carbonless paper or discharged wastewater from the plants that did. After reviewing a record that included roughly 900 exhibits – including expert reports, government reports, corporate records, laboratory records and deposition transcripts – the court sided with the defendants, finding that they had little or no knowledge that they were disposing of PCBs into the river.[10]

Defendants are recyclers of paper and municipal sewerage entities who simply processed paper and water, and they would have had little reason or ability to inspect or investigate the chemical makeup of anything that came in the door…[t]he recyclers were the ‘innocent victims’ of the circumstances [citation to record omitted]. This is even more true for Defendants who merely received and released wastewater containing invisible PCBs in it.[11]

Similarly, in a case in Washington state, the district court made clear that the issue of arranger liability after BNSF turns squarely on the facts. United States v. Wash. State Department of Transp.[12] In that case, EPA sued the Washington State Department of Transportation (“WSDOT”) to recover cleanup costs at a contaminated site that the state had acquired to build a bridge. During construction of the bridge, a contractor discovered three open-bottom tanks containing tar, which appeared to have been placed there by a coal gasification plant. The State counterclaimed, arguing that the United States was also liable, because the US Army Corps of Engineers (“USACE”) had dredged a portion of the waterway that the coal gassification plant was located on, thereby moving hazardous substances released by others and causing additional releases to the environment. The United States moved for summary judgment. Judge Bryan denied the motion, holding that the United States’ liability, if any, turned on a fact-intensive inquiry that the parties had yet to conduct.

At this point, the facts are insufficiently developed to determine what level of control USACE exerted over the dredging process and what responsibility it may have had regarding disposal of the dredged materials.… As the Supreme Court stated in Burlington Northern, “the determination whether an entity is an arranger requires a fact-intensive inquiry that looks beyond the parties’ characterization of the transaction as a ‘disposal’ or ‘sale’ and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA’s strict-liability provisions.” 129 S. Ct. at 1879. Considering the USACE’s involvement with dredging the contaminated waterways in light of CERCLA’s strict liability standard, the court cannot say as a matter of law that upon further discovery, the facts will fail to show that the USACE “qualif[ies] as an arranger under [§107(a)(3) when taking] intentional steps to dispose of a hazardous substance” through the granting of permits to dredge the waterway.[13]

Meanwhile, across the country in Maine, a district court applied BNSF in the context of a cleanup of the Penobscot River.See Frontier Communications Corp. v. Barrett Paving Materials.[14] We previously reported on this case. See District Court in Maine Applies Supreme Court’s BNSF Decision on “Arranger” Liability, Marten Law Environmental News (July 22, 2009). The court in the Maine case reiterated that the question of arranger liability is “fact-intensive,” but it found that the record contained sufficient facts to conclude that the defendant had intended to dispose of wastes through a sewer into the river.[15]

Finally, in New Hampshire, General Electric asked a judge to reverse a prior ruling holding GE liable as having “arranged for disposal” of PCB-containing “scrap Pyranol” when it sold the material to a paint manufacturing company. GE relied on BNSF to argue that the phrase “arranged for disposal” required “an intentional action toward achieving the purpose: disposal.”[16] The court did not dispute GE’s reading of the law, but held that there was sufficient evidence of intent to hold GE liable as an arranger.

Cases Applying BNSF’s Apportionment Ruling

We have located two reported decisions expressly dealing with the “apportionment” arm of the BNSF decision. In the first case, the court essentially punted, holding that the best way to apportion liability was to let the case go to trial. See Evansville Greenway and Remediation Trust v. Southern IN Gas and Elec. Co., Inc.[17]

In Evansville, the BNSF decision was handed down while cross-motions for summary judgment were being briefed. The defendants claimed that BNSF “effected a dramatic change that will make it easier for PRPs to avoid the burden of joint and several liability,” while the plaintiffs argued that “BNSF amounts to nothing new.”[18] Noting that “the Supreme Court’s new decision has presented what might be called genuine questions of material law,”[19] the court declined to commit to a particular interpretation of the BNSF decision, based on the fact that the timing of the decision meant that the record before the court was sparse. Instead, the court granted the motion as to liability under 107(a), but reserved the question of apportionment for trial, so that “each side [can] present evidence relevant to its own and its opponents’ different interpretations of BNSF.”[20]

More interesting is the court’s decision in Appleton Papers, discussed above. In that case, the court engaged in an extended discussion of whether BNSF was applicable to a §113 contribution action (having previously dismissed the plaintiff’s §107 claims). The court concluded that, while “Burlington Northern changed the applicable standards for ‘arranger liability’ … there is nothing within Burlington Northern that requires courts to make some sort of threshold determination regarding joint and several liability or allow plaintiffs in a contribution action to make an apportionment argument.”[21]

One question not answered by BNSF is the quantum of proof necessary to establish a reasonable basis for apportionment. Judge Shira A. Scheindlin addressed that question in a non-CERCLA case involving environmental torts, holding that: (1) a fact finder may rely on the “available evidence” in apportioning liability among joint tortfeasors; and (2) the burden of production necessary to support a showing of divisibility is “low.” In re MTBE, S.D.N.Y. Case No. 00 MDL 1898, Docket No. 352 (July 14, 2009). See Applying BNSF, District Court in New York Finds “Best Available Evidence” Is Sufficient to Apportion Liability, Marten Law Environmental News (July 22, 2009). It remains to be seen whether this approach will be extended in a CERCLA context.

Conclusion

It is still too early to get a good sense of whether BNSF will be the watershed case some had predicted. The first few cases have reinforced the Supreme Court’s holding that the inquiry into arranger liability is “fact-intensive.” Only two reported cases have addressed the apportionment arm of the decision, and neither reached the question of how apportionment is to be conducted.

[1] 129 S. Ct. 1870 (2009).

[2] See, e.g., J. Barkett, The Burlington Northern Decision, American College of Environmental Lawyers Blog (May 19, 2009).

[3] 129 S. Ct. at 1878.

[4] Id.

[5] Id. at 1879.

[6] Id. at 1881.

[7] Id.

[8] Id. at 1882.

[9] Slip Op., 2009 WL 5064049 (E.D. Wis., December 16, 2009).

[10] Id. at *15.

[11] Id. at *17.

[12] , ___ F. Supp.2d ___, 2009 WL 2985474 (W.D. Wa., September 15, 2009).

[13] Id. at *8.

[14] District of Maine, Case No. 07-00133.

[15] 2009 WL 1941920, *3

[16] General Electric Company’s Supplemental Memorandum on the Evidence of Intent or Knowledge Required to Prove that a CERCLA Defendant has “Arranged for” Disposal or Treatment of Hazardous Waste at 2, United States v. General Electric Co., 06-354, Doc. No. 89 (D.N.H. Nov. 5, 2008).

[17] ___ F.Supp.2d ___, 2009 WL 3163180 (S.D. Ind., September 29, 2009),

[18] Id. at * 21.

[19] Id.

[20] Id.

[21] Appleton Papers, Inc. v. George A. Whiting Paper Co., Slip Op., 2009 WL 3921036 (E.D. Wis. 2009), **4, 5.

Practical Impacts of Burlington Northern on Multi-Party Superfund Sites

Posted on January 29, 2010 by William Hyatt

To many Superfund practitioners, United States v. Burlington Northern & Sante Fe Railway Company, __ U.S. __, 129, S. Ct. 1870 (2009) represents the latest in a series of surprises from the Supreme Court. The decision follows Cooper Industries, Inc. v. Aviall Services, Inc, 543 U.S. 157 (2004), from which we learned that the statutory words “during or following” really mean just what they say and contribution claims under the Comprehensive Response Compensation and Liability Act (also referred to as CERCLA or the Superfund statute) are only available in those limited circumstances. A few years later, in United States v. Atlantic Research Corp., 551 U.S. 128 (2007), we learned that “covered persons” (also referred to as potentially responsible parties or PRPs) under the statute may, in certain procedural circumstances, have cost recovery claims in the event they do not meet the criteria for contribution claims.   In Burlington Northern, we learned that “arranger” liability may not be as broad as we had thought it was, and that joint and several liability may not be the automatic we thought it was. It is probably fair to say that the outcome in Burlington Northern, like the outcomes in Aviall and Atlantic Research, was not intuitive to Superfund practitioners.

 

            A Superfund practitioner might have expected the Supreme Court decision in Burlington Northern to look more like the Ninth Circuit opinion it reversed (found at 502 F.3d 781), endorsing a broad reading of “arranger” liability under the statute and applying joint and several liability to all the defendants, the latter being the norm for more than 25 years since the seminal decision in United States v. ChemDyne, 572 F. Supp. 802 (S.D. Ohio 1983).

 

As with Aviall and Atlantic Research, it will probably take many years, and many decisions by the lower courts, before we fully appreciate the implications of Burlington Northern, but one thing is already clear. Defendants in multi-party Superfund sites will be contending for apportionment as the alternative to joint and several liability, if for no other reason than to avoid funding the orphan share represented by “covered persons” who can’t be found, no longer exist, or, as is more recently the case, are bankrupt. On the other hand, governments asserting cost recovery claims can be expected to continue to advocate aggressively for joint and several liability, so as to avoid having to absorb the orphan share themselves. The question is what practical impacts this battleground will have on Superfund practice at multi-party sites.

 

            Burlington Northern raises several practical questions which will have to resolved as the law and practice develop. Here are some of them.

 

Whether a defendant is entitled to apportioned liability is a fact-intensive inquiry, resolved in Burlington Northern only after a six week bench trial, and only after the district judge took four years to render a decision. Will governments be able to obtain liability judgments at the beginning of cost recovery actions, as they have typically tried to do in the past? Will Burlington Northern force more cases to go to trial? 

 

Whether liability is subject to apportionment is not likely to be decided until the end of a case, as it was in Burlington Northern. How will cost recovery defendants evaluate their chances of success in the early stages of a case? Will they feel compelled to develop a detailed record to support arguments that liability for a single harm is subject to apportionment, unlike the defendants in Burlington Northern, who limited their arguments to general denials of liability?

 

Governmental plaintiffs can be expected to insist that liability at multi-party sites is still joint and several, even after Burlington Northern. Will those governmental plaintiffs be willing to consider the litigation risk that liability may be subject to apportionment in negotiating settlements? If so, how will that litigation risk be taken into consideration?

If liability is apportioned, how will any resulting orphan shares be funded? Will EPA’s historic limitations on orphan share funding be adequate? If not, where will the funding come from? Is the Superfund tax more likely to be reinstated because of Burlington Northern?

 Will the organization of multiple “covered persons” into PRP groups be more difficult if the defendants believe they can escape liability through apportionment? How will defendants balance that possibility against the potential benefit in the form of reduced costs that might be gained by performing cleanup work themselves?

 

Will ADR emerge as the norm for dividing responsibility among defendants who believe their liability is subject to apportionment, as it has in allocating joint and several liability? What evidence will be used to apportion liability? Burlington Northern endorsed many of the same causation-related considerations as the equitable factors historically used to allocate joint and several liability; will some or all of the Gore factors still be relevant? Burlington Northern also endorsed estimations and compromises, considerations not normally found in legal determinations; how will the lower courts react to imprecise calculations of apportioned liability?

 

How will defendants argue for an orphan share? Will they seek to establish an orphan share from the bottom up (by quantifying the share of missing PRPs), or from the top down (by quantifying their own individual shares)? Whichever way defendants decide to approach the issue, they can be expected to develop the record the district judge found lacking in Burlington Northern.

 

Finally, in states whose statutes make joint and several liability explicit (e.g, the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11g(c)(1)), how will apportionment decisions be made? Will the scope of liability be different to EPA and to such states?   Under such statutes, is there no instance in which liability will be subject to apportionment, even for distinct harms?

Like Aviall and Atlantic Research before it, Burlington Northern promises to be a fertile source of future litigation. 

Ninth Circuit Rejects CERCLA UAO Due Process Challenge

Posted on January 6, 2010 by Theodore Garrett

The 9th Circuit affirmed the dismissal, for lack of jurisdiction, over a “pattern and practice” claim by a company that complied with an Environmental Protection Agency (EPA) unilateral administrative order (UAO) to conduct a remedial investigation. City of Rialto v. W. Coast Loading Corp., 581 F.3d 865 (9th Cir. 2009).  While acknowledging that CERCLA's judicial review provisions contain "some pitfalls and difficult decisions for a PRP that faces a UAO," the court stated that the pattern and practice claim was not an “automatic shortcut” to federal court jurisdiction. 

 

The case arose as a result of a unilateral administrative order (UAO) issued by EPA in July 2003 directing Goodrich to conduct a remedial investigation at a 160-acre site in Rialto, California. Goodrich elected to comply with the order. However, in late 2006 Goodrich filed a complaint against EPA alleging, inter alia, that the CERCLA review provisions on their face constitute a coercive regime violating due process. The district court held that it lacked jurisdiction over Goodrich’s “as-applied” challenge to the UAO because such pre-enforcement judicial review is foreclosed by §9613(h) of CERCLA. Goodrich then filed an amended “pattern and practice” claim alleging that EPA issues orders where no emergency exists, obstructs judicial review by delaying its discretionary certificates of completion, and controls and manipulates the record of decision. The district court granted EPA’s motion to dismiss, and Goodrich appealed to the Ninth Circuit.

 

The Ninth Circuit affirmed. The court of appeals concluded that Goodrich’s allegation that EPA routinely issues orders beyond its statutory authority was substantive because it necessarily depended on the facts of the particular UAO, and that meaningful judicial review of Goodrich’s substantive challenge is available under §9613(h). A claim that a UAO is unlawful can be addressed, the court stated, either by not complying with the UAO and defending an enforcement action, or by complying with a UAO and seeking reimbursement from the government. With respect to Goodrich’s claim that EPA routinely delays certifications of completion in order to thwart judicial review, the Ninth Circuit held that Goodrich’s claim is not ripe because the work required by the UAO has not been completed. Once Goodrich completes the work, it may bring a claim for reimbursement under §9606(b)(2). Finally, with respect to Goodrich’s allegation that EPA controls and manipulates the administrative record supporting the selected cleanup plan, the Ninth Circuit concluded that Goodrich allegations were not a “pattern and practice” claim , but rather were a challenge to the judicial review provisions of the statute itself, which were rejected by the District Court and not appealed by Goodrich. 

 

The Ninth Circuit noted that in General Electric v. Whitman, 360 F.3d 188, 191 (D.C. Cir. 2004), the D.C. Circuit remanded GE’s suit to the district court to address the merits of GE’s facial due process claim, and on remand the district court ruled on merits and rejected GE’s pattern and practice claim. General Electric v. Jackson, 595 F.Supp.2d 8 (D.D.C. 2009). This ruling on the merits contrasts with the Ninth Circuit’s ruling that the district court lacked jurisdiction. The Ninth Circuit, however, commented that its decision was “consistent” with the District Court’s decision in GE, noting that the District Court there held that it had jurisdiction not because of any independent analysis but because of its interpretation of the D.C. Circuit’s decision remanding the case for further proceedings. 

Companies receiving a UAO and facing the statutory pitfalls and difficult decisions will likely not find much solace in the Ninth Circuit’s opinion. The district court’s opinion in the GE case is being appealed.

Judge Dismisses Contribution Claims re: Fox River PCB Contamination

Posted on December 23, 2009 by Linda Bochert

“Thus, the Plaintiffs’ present claim that they never knew about the dangers of PCBs until after 1971 rings roughly as hollow as Captain Renault’s feigned outrage upon being ‘shocked, shocked’ to discover gambling at Rick’s Casablanca café.” 

Appleton Papers Inc. and NCR Corp. v. George A. Whiting Paper Co., et al. (slip op. at 25, US District Court, Eastern District of WI, Case No. 08-C-16)

 

With those words, on December 16, 2009 Judge William C. Griesbach, United States District Judge for the Eastern District of Wisconsin dismissed CERCLA §107 contribution claims brought by Plaintiffs Appleton Papers, Inc. (API) and NCR Corp. against all Defendants.   NCR and API sought contribution from 23 other paper mills, cities, utilities, and sewerage districts, and industrial dischargers to allocate the multi-million dollar costs of remediating the polychlorinated byphenyl (PCB) contamination in the Lower Fox River in northeastern Wisconsin. Defendants’ Summary Judgment motions asserted that Plaintiffs were not entitled to contribution because the Defendants are “essentially innocent parties who had no knowledge that recycling NCR paper or processing wastewater could lead to environmental damage.” Slip op. at 4. The Judge agreed.

 

Beginning in 1954, NCR developed a carbonless copy paper that relied on an emulsion based on Aroclor 1242, a PCB solvent manufactured by Monsanto Corporation. NCR created the emulsion and developed and sold the carbonless paper product. API’s predecessor manufactured the paper and coated it with the NCR emulsion. API’s wastewater was discharged to the Fox River, taking the PCBs with it. API also sold its waste paper to other mills to be recycled into paper products, resulting in PCB-containing wastewater discharges from those facilities. The result: significant PCB-contamination in the sediments of the Lower Fox River from the mouth at Green Bay to Lake Winnebago and what has been called the largest contaminated sediment cleanup in the world..

 

The decision turns on what the Plaintiffs knew about the potential harm of the PCBs in their carbonless copy paper and when they knew it. It includes an instructive recital of internal communications within and among NCR and API, Monsanto, and Wiggins Teape, NCR’s exclusive European-licensee, leading to the Court’s conclusion that “I am satisfied that by the late 1960’s Plaintiffs had access to the vanguard of data suggesting an appreciable risk of serious and long-lasting environmental damage resulting from the production and recycling of NCR paper.” (emphasis in original) Slip op. at 26.

 

Readers will find the case of interest on both the legal analysis -- application of the “Gore factors” in determining equitable allocation, consideration of successor liability, and the Court’s evaluation and weighing of the overall equities – and the factual history. On this latter point, the case may well serve as a primer on how a business’ historical records and risk management decisions can come back to haunt it with respect to future determinations of knowledge and liability: 

 

“In the face of increasing red flags, Plaintiffs’ approach in the late 1960s was to worry about publicity and wait for the ‘second shoe’ to drop. At its essence, Plaintiffs’ approach was a risk management strategy to accept the risk of potential environmental harm in exchange for the financial benefits of continued (and increasing) sales of carbonless paper containing Aroclor 1242.” Slip op. at 26.

 

Appeal decisions are still pending. For those who want to know more about the Fox River, PCB-contamination, and the clean-up, both the Wisconsin Department of Natural Resources and the United States Environmental Protection Agency maintain extensive websites:

 

Click here for WDNR’s Fox River website

 

 

Click here for EPA Region 5’s website

Tenant Liability Under CERCLA: Is It time To Move Beyond Enforcement Discretion Guidance?

Posted on December 18, 2009 by Charles Efflandt

Arguably the most significant moderation of CERCLA’s harsh “owner” liability scheme occurred in 2002 through the enactment of the “Brownfields Amendments.” Included in those amendments was the creation of new liability protection for “Bona Fide Prospective Purchasers” (“BFPP”) who acquire ownership of a facility after January 11, 2002.

 

A relatively straightforward roadmap for prospective purchasers to achieve BFPP status is set out in the Brownfields Amendments and the subsequently-promulgated All Appropriate Inquiry rule. The extent to which tenants might obtain protection from possible “owner” liability has, however, always been far less certain.

 

The potential applicability of this liability defense to tenants is currently limited to a short parenthetical in CERCLA §101(40). Specifically, a “tenant of a person” that achieves BFPP status shares the liability protections of the property purchaser. Although this “derivative” BFPP status established by the Brownfields Amendments helped clarify the reach of the liability defense with respect to tenants, a number of questions remained unanswered. For example, what happens if the property owner loses its BFPP status through non-compliance with the statutory requirements? Also, does the language of the amendment as it relates to tenants preclude a tenant from independently achieving BFPP status?

 

Earlier this year, EPA’s Office of Enforcement and Compliance Assurance issued an Enforcement Discretion Guidance (“Guidance”) that addresses the applicability of the BFPP definition to tenants. That Guidance clarifies how EPA intends to exercise its enforcement discretion with respect to tenants “on a site-by-site” basis. In essence, the Guidance provides:

 

 

  • Tenants with “derivative” BFPP status will lose that status if the property owner ceases to be a BFPP for non-compliance with one or more of the statutory requirements. Nevertheless, EPA may exercise its enforcement discretion and not pursue the tenant under an owner liability theory if the tenant satisfies certain conditions, including not having disposed of hazardous substances on the property and fully cooperating with EPA in its response actions.
  • Tenants whose lease documents establish sufficient “indicia of ownership” and who satisfy all requirements of CERCLA §101(40)(A)-(H) and 107(r) may be deemed to have independently achieved BFPP status and thus possibly avoid an enforcement action under CERCLA’s owner liability provisions. Indicia of ownership include the term of the lease, the range of permitted property uses by the tenant, reserved rights on the property by the owner, etc.

 

EPA’s Guidance is a welcome clarification of how the agency intends to enforce CERCLA’s owner liability provisions in these situations. However, the Guidance goes beyond the derivative status language in the Brownfields Amendments in its discussion of potential limitations on tenant “owner” liability. The problem is that a guidance is just that. It offers none of the statutory certainty that prospective purchasers now enjoy under CERCLA.

 

Because of the importance of tenant-operated properties to the economy in general and to the development of Brownfields property in particular, I would submit that tenants should be afforded the same clarity and certainty with respect to potential liability under CERCLA as those who acquire title to the property. As the Brownfield Amendments are largely self-implementing, that clarity and certainty is likely to be achieved only through further amendments to the liability provisions of CERCLA.

EPA Issues a New Policy on Superfund Negotiations: Time For Another Rant?

Posted on October 19, 2009 by Seth Jaffe

Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

Statute of Limitations: Don't Miss Your CERCLA Deadline

Posted on September 14, 2009 by Earl Phillips

Overview       

There are three avenues of recovery under CERCLA - a contribution action and two types of cost recovery actions. These cost recovery actions are based on either the plaintiff’s “removal” of the hazardous substances or “remediation” efforts at the site. Each of these avenues has an independent statute of limitations provision.  Thus, whether the statute of limitations period has been triggered will depend on how an action is characterized, i.e. whether the action constitutes a contribution action, a cost recovery removal action, or a cost recovery remedial action. While there are various state-specific causes of action related to environmental contamination in Connecticut, this article is confined to the statute of limitations for CERCLA cost recovery and contribution claims. 

 

Analysis         

            Contribution Claim

           

            The statute of limitations analysis related to contribution claims is thankfully quite straight forward. Under CERCLA Section 113, these claims must be brought within three years of a civil action under Section 106 or 107, a CERCLA administrative order, or a judicially approved settlement with respect to costs or damages.  42 U.S.C. § 9613(g)(3). While questions may arise as to what may constitute a CERCLA “administrative order” or whether a “judicially approved settlement” must reference Section 106 or 107, we leave those discussions for another article.

 

            Cost Recovery Claim

 

 

            The analysis of what constitutes a viable cost recovery claim, whether it is removal or remedial, and when the statute of limitations is first triggered is more intricate. First, it is important to note that certain actions performed on a site may not trigger the statute of limitations period.   “[T]here are some cases in which work on a site is neither a remedial nor a removal action, but rather constitutes ‘preliminary’ or ‘interim’ measures that do not trigger the statute of limitations . . ..” Yankee Gas Servs. Co. v. UGI Utils., Inc., 2009 U.S. Dist. LEXIS 44282, *117 (D. Conn. May 22, 2009). While caselaw on what constitutes a preliminary remedy, as opposed to a permanent remedy, is limited, at least one court has determined that “evaluation, sampling, surveying and measuring” do not constitute the initiation of physical on-site construction because “these activities [do] not constitute ‘construction.’” Schaefer v. Town of Victor, 457 F.3d 188, 204 (2d Cir. 2006)(quoting United States v. Findett Corp., 220 F.3d 842, 848 (8th Cir. 2000)).

 

            Beyond this, the characterization of a cost recovery action as either removal or remedial is crucial to determining whether an action to recover response costs is time-barred because there are different statute of limitations periods for a removal action and a remedial action. The statute of limitations for recovery of costs related to removal actions is three years after the completion of the removal action, whereas the limitations period for recovery of costs related to remedial actions is six years after the initiation of physical on-site construction of the remediationAlthough there is a lack of clarity as to what constitutes a removal verses a remedial action, removal actions have generally been construed as “time-sensitive responses to public health threats . . ..”[1] Remedial actions, in contrast, are often described as “permanent remedies to threats for which an urgent response is not warranted.”[2]

 

             Assuming for this discussion that the efforts undertaken at a site are beyond preliminary, there is inconsistency as to whether the statute of limitations for remedial actions would only run after a final Remedial Action Plan (RAP) has been approved for the site. One court in the Ninth Circuit, for example, concluded that initiation of physical on-site construction of the remedial action “can only occur after the final remedial action plan is adopted, and that . . . the statute of limitations, therefore, could not have begun to run until the final remedial action was approved . . ..” Cal. v. Neville Chem. Co., 358 F.3d 661, 671 (9th Cir. 2004).  The Second Circuit, however, has rejected such a bright line rule and determined that the statute of limitations can be triggered without a final RAP, if the action is “consistent with a permanent remedy.” Schaefer v. Town of Victor, 457 F.3d 188, 205 (2d Cir. 2006). 

 

            Compounding the important distinction between removal and remedial actions is variability within the courts in determining the initial trigger for the statute of limitations period. Some courts apply a statute of limitations to an entire site after remediation commences on one portion of the site, while others look to multiple statute of limitations at a single property. See Colorado v. Sunoco, 337 F.3d 1233 (10th Cir. 2003) contra U.S. v. Manzo, 2006 U.S. Dist. LEXIS 70860 (D.N.J. Sept. 29, 2006). While the Second Circuit has not spoken on this issue, a recent District of Connecticut case has adopted the opinion that “there can be only one removal and one remedial action per facility, regardless of the number of phases in which the clean-up occurs.” Yankee Gas Servs. Co. v. UGI Utils., Inc., 2009 U.S. Dist. LEXIS 44282 (D. Conn. May 22, 2009)(emphasis added).  Should a court adopt a one site, one action approach, the statute of limitations would be triggered by the first removal or remedial action at the site.  Id.; see also Colorado v. Sunoco   Thus, it is important to evaluate what actions have occurred at your facility and whether those actions would be considered “removal” or “remedial” to ensure the statute of limitations for a cost recovery action does not run., 337 F.3d 1233 (10th Cir. 2003).

 

At Robinson & Cole, we have environmental attorneys who have broad experience representing clients in CERCLA actions and the prosecution or defense of other environmental claims. We stand ready to apply this experience and insight to your specific needs. If you would like to discuss statute of limitations concerns, or broader environmental issues, please contact any of the attorneys in our Environmental and Utilities Practice Group. 

 

Earl Phillips                                           W. Richard Smith                                 Lauren Vinokur

(860) 275-8220                                   (860) 275- 8218                                  (860) 275-8341

ephillips@rc.com                                  wrsmith@rc.com                                  lvinokur@rc.com



[1] United States v. W.R. Grace & Co., 429 F.3d 1224, 1228 (9th Cir. 2005); see also OBG Tech. Servs. v. Northrop Grumman Space & Mission Sys. Corp., 503 F. Supp. 2d 490, 524 (D. Conn. 2007)(“[w]hether . . .actions are properly characterized as remedial or removal actions is a question of law for the Court to decide”); Geraghty & Miller, Inc. v. Conoco Inc., 234 F.3d 917, 926 (5th Cir. 2000)(“the CERCLA definitions [of removal and remedial action] are expansive enough that certain activities may well be covered by both…[and] the cases on this issue tend to be highly fact-specific . . ..”)

[2] United States v. W.R. Grace & Co., 429 F.3d 1224, 1228 (9th Cir. 2005); see also W.R. Grace & Co. v. Zotos Int'l, Inc., 559 F.3d 85, 92 (2d Cir. 2009). Under 42 U.S.C. § 9601(24) a remedial action “includes, but is not limited to, such actions at the location of the release as storage, confinement, perimeter protection using dikes, trenches, or ditches, clay cover, neutralization, cleanup of released hazardous substances and associated contaminated materials, recycling or reuse, diversion, destruction, segregation of reactive wastes, dredging or excavations, repair or replacement of leaking containers, collection of leachate and runoff, on-site treatment or incineration, provision of alternative water supplies, and any monitoring reasonably required to assure that such actions protect the public health and welfare and the environment.”

Stormwater Discharges From Construction Activity: What Next From EPA?

Posted on August 10, 2009 by Seth Jaffe

Construction and development companies praying for an economic recovery next year have something else to worry about: pending new EPA regulations regarding stormwater discharges from construction activities – and claims from environmental groups that EPA’s proposal isn’t stringent enough.

EPA issued a proposal on November 28, 2008. That proposal is complex, but the aspect of it that has received the most attention is the requirement that certain construction sites greater than 30 acres meet numerical turbidity limits (specifically, 13 nephelometric turbidity units (NTUs), which I had to include in this post just because it sounds so cool). Developers have opposed the numeric limits; the National Association of Home Builders estimates that the cost to comply would be $15,000 to $45,000 per acre.

On the other hand, the NRDC and Waterkeeper Alliance have threatened to sue EPA if EPA does not revise the propose rule to include post-construction controls as part of the rule. EPA has stated that it is not planning to do so. It’s not obvious that NRDC and Waterkeeper Alliance have the better of this specific debate, but the argument regarding post-construction controls is similar to the ongoing discussion in Massachusetts and elsewhere regarding the need for ongoing stormwater controls at properties other than industrial facilities that are already regulated.

The issue is not going to go away.  EPA is under a deadline to issue the rule by December 1, 2009.

Eleventh Circuit Wades into the Everglades on ESA Issues, Miccosukee Tribe v. United States, No. 08-10799

Posted on May 21, 2009 by Patricia Barmeyer

The Eleventh Circuit has waded, again, into the ongoing debates over restoration of the Everglades. In addressing yet another lawsuit filed by the Miccosukee Tribe, the Court largely upheld the Fish & Wildlife Service’s delicate balance between the competing and inconsistent habitat needs of the Cape Sable seaside sparrow and the Everglade Snail kite, both endangered species. The seaside sparrow needs stable low water levels below a certain water control structure; the kite’s habitat is destroyed by the resulting rising water levels in the impoundment. The FWS issued a biological opinion allowing the Corps of Engineers to operate the structure to avoid extinction of the sparrow and to conduct an incidental take of the kite. While largely affirming the agency, the Eleventh Circuit reversed on the issue of the trigger that would require initiation of consultation under Section 7 and, along the way, made new law in this circuit on several important issues.

First, the court rejected the tribe’s argument, often advanced by conservation groups in ESA litigation, that the ESA requires that FWS “give the benefit of the doubt to the species.” The court held that this language, taken from a conference committee report, does not mean that the FWS is required to issue a jeopardy opinion if the evidence is evenly balanced between likely jeopardy and likely no jeopardy. Rather, the Eleventh Circuit explained, the language was intended to prevent FWS from shirking its consultation duties by relying on scientific uncertainty, but did not require any substantive result. The court held that “the need to give a species the benefit of the doubt cannot stand alone as a challenge to a biological opinion.”

 

Second, the court held that the FWS Consultation Handbook, which is not a formal rule, is nevertheless entitled to Chevron deference because it was adopted after notice and comment, citing Nw. Ecosystem Alliance v. United States Fish & Wildlife Service, 475 F.3d 1136, 1142-43 (9th Cir. 2007).

Third, the court rejected the argument that negative impacts on a species’ critical habitat must be permanent to amount to “adverse modification” under the ESA. Writing for the court, Judge Carnes noted: “It is not enough that the habitat will recover in the future if there is a serious risk that when that future arrives the species will be history.”

Finally, the Eleventh Circuit invalidated the incidental take statement because it used a habitat indicator -- specific water levels-- as a proxy to establish the trigger that would require the agency to reinitiate the Section 7 consultation process. The court held that the FWS’ use of a habitat indicator as a proxy, as provided for in the Consultation Handbook, fails Chevron step one, based on its conclusion that the legislative history of the ESA clearly indicates Congressional intent that actual population data must be used as the trigger for re-consultation, unless the agency demonstrates that it is impracticable to do so. Further, even if the agency can demonstrate the need to use a habitat proxy, the habitat proxy trigger must be addressed to the specific habitat needs of the species.

This decision, reviewing the FWS’ attempt to manage challenging species protection problems and breaking new ground on ESA legal issues, is sure to be much-cited and widely debated.

The Burlington Northern Decision

Posted on May 19, 2009 by John Barkett

The Supreme Court’s decision in Burlington Northern was not unexpected from my vantage point especially given the literal interpretation of CERCLA by the Court in Aviall and Atlantic Research and the flow of the oral argument. 

I was a little surprised that Justice Stevens was assigned the task of writing the opinion since Justice Thomas wrote Aviall and Atlantic Research.  But with 7-2 (Justices Ginsburg and Stevens dissented in Aviall because the Court would not decide the issue of entitlement to sue under Section 107), 9-0 (Atlantic Research decided the Section 107 private of action question left unresolved in Aviall), and 8-1 (Justice Ginsburg was the lone dissenter in Burlington Northern) votes in these three opinions, the Court is not going out of its way to fix CERCLA’s language. Section 113(f)(1) means what it says. Section 107 means what it says. An arranger must have an intent to dispose. And joint and several…

 

Wait a second. The statute says nothing about “joint and several liability.” It does not set a liability standard at all. In fact in 2007, in note 7 of Atlantic Research, the Court wrote, “We assume without deciding that §107(a) provides for joint and several liability.”

Two years later, the Court appears to have deftly answered this question, albeit indirectly. It called the holding in Chem-Dyne the “seminal opinion on the subject of apportionment in CERCLA actions …written in 1983 by Chief Judge Carl Rubin of the United States District Court for the Southern District of Ohio.” Quoting Judge Rubin, the Court said that joint and several liability is not mandated in every CERCLA cost recovery action and that Congress intended the scope of liability to “’be determined from traditional and evolving principles of common law[.]’”

As the entire environmental world now knows, the Court held that the district court’s findings should not be disturbed: “The District Court’s detailed findings make it abundantly clear that the primary pollution at the Arvin facility was contained in an unlined sump and an unlined pond in the southeastern portion of the facility most distant from the Railroads’ parcel and that the spills of hazardous chemicals that occurred on the Railroad parcel contributed to no more than 10% of the total site contamination, some of which did not require remediation.”

Going forward, the facts will dictate the outcome. The Court blessed the use of basic allocation or apportionment principles that have been applied in numerous CERCLA cases and numerous consent decree approval orders over the past 25 years. Indeed, it was mildly critical of the Ninth Circuit for talking out of both sides of its mouth: “Although the Court of Appeals faulted the District Court for relying on the ‘simplest of considerations: percentages of land area, time of ownership, and types of hazardous products,’ 520 F. 3d, at 943, these were the same factors the court had earlier acknowledged were relevant to the apportionment analysis. See id., at 936, n.18 (‘We of course agree with our sister circuits that, if adequate information is available, divisibility may be established by ‘volumetric, chronological, or other types of evidence,’ including appropriate geographic considerations’ (citations omitted)).”

In cases where there is no orphan share and multiple parties, it will behoove EPA and the parties to work on apportionment issues up front to save litigation costs. Yes, I relate “apportionment” to “allocation” in saying this, but after Burlington Northern, it will be the rare case that will lack the facts to make a reasonable basis for apportionment. Volumetric waste-in information may be controlling. Or varying toxicities of released hazardous substances may be. Or geography or time of ownership or operation. There may be equitable factors as between or among jointly and severally liable parties, e.g., cooperation, that may not relate to apportionment, but not that many cases have utilized this allocation factor, and most judges engage in an allocation exercise that is indistinguishable from an apportionment exercise, as was the case in Burlington Northern. Cf. Restatement of the Law (Third) Torts, §1, cmt. a., §26 cmt. a. (focusing on the role that comparative responsibility now plays in tort law).

Where there is an orphan share, the stakes are much higher after Burlington NorthernCf. United States v. Newmont USA Limited, 2008 WL 4612566 (E.D. Wash. Oct. 17, 2008) (after a six day trial, submission of dozen depositions or deposition excerpts and 1,600 exhibits, finding the two defendants—one of which was alleged to be an orphan--jointly and severally liable but then finding for the defendants on their counterclaim in contribution against the United States, and then equitably allocating response costs 1/3 to the United States and 1/3 each to the two defendants).

It will still behoove the regulator and the regulated to work things out. If EPA becomes the “bank” (funds the work) at a site, post Burlington Northern, it may find itself absorbing the orphan share or at least not knowing whether it will until after a trial on the merits. (Time will tell but presumably summary judgments will become rare on apportionment issues given the fact-intensive nature of the exercise.) A PRP may be reluctant to become the bank where there is a large orphan share if it does not receive assurance that the orphan share will be addressed fairly, and that may mean more than what EPA is currently offering in its orphan share policy. See, generally, Barkett, Orphan Shares, 23 N.R.E. 46  (2008). Consent order and decree negotiations should become less one-sided in the future. But budget constraints may result in more contention (trials), especially in cases where the orphan share potentially is quite large.

Arrangers of used but useful products can take comfort in Burlington Northern. The entity that recycles solvents or used oil, for example, will embrace the decision especially if reclamation wastes are disposed of at a location other than the recycler’s facility. Sellers of used but useful products will as well. Again, the facts will dictate the outcome.

A Rant Against Superfund

Posted on April 15, 2009 by Seth Jaffe

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

 

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.