Posted on November 2, 2016
Superfund practitioners have long known that unilateral orders issued by EPA under Section 106(a) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), commonly known as the Superfund statute, can be very potent enforcement tools. Recipients of such orders who “willfully” choose to defy them, “without sufficient cause,” face the prospect of potentially ruinous civil penalties under Section 106(b) and treble damages under Section 107(c)(3). The term “sufficient cause” is not defined in CERCLA and has been subjected to very limited judicial interpretation. Making matters worse, by virtue of Section 113(h), Section 106 order recipients cannot obtain pre-enforcement review of such orders. Instead, they must wait until EPA brings an enforcement action, or one of the other triggers listed in Section 113(h) occurs (while the penalties and treble damages continue to accumulate, for a period which could last for years), before they can obtain a judicial determination of whether or not their defiance was “without sufficient cause.” This enforcement scheme has thus far withstood due process challenges on the ground that no penalties or treble damages can be imposed until there is a court hearing. Waiting for that court hearing can produce extreme apprehension on the part of defiant order recipients.
In United States v. Glatfelter, one of the prodigious number of reported decisions relating to the Lower Fox River Superfund Site, the Court of Appeals for the Seventh Circuit, after concluding that permanent injunctions will not be available to enforce Section 106 unilateral orders, suggested how that apprehension might be relieved:
“Nothing we have said prevents the government from seeking declaratory relief to establish that a PRP lacks sufficient cause for noncompliance, such as the arbitrariness of the selected remedy or a defense to liability.”
This suggestion may trigger a whole new round of litigation regarding Section 106 orders. For instance, does a private litigant enjoy the same right to seek declaratory relief?
Posted on September 2, 2016
Do air emissions of pollutants constitute a “disposal” under the federal hazardous waste laws? The Ninth Circuit said “no” in Pakootas, et al. v. Teck Cominco Metals, Ltd. based upon its reading of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund). The decision both sets important precedent and showcases the judicial process to discern legislative intent when a statute’s plain language is stressed by an unusual fact pattern. If air pollutants can create CERCLA disposals, then emissions from any stationary or mobile source, including animal emissions of methane (which is considered a pollutant subject to CERCLA by EPA), may be the basis of cleanup liability.
The decision involves a smelter located just north of the border with British Columbia. An earlier decision in that case held that a foreign-based facility can be liable under CERCLA for slag discharges into a river running to the United States. Plaintiffs then alleged the facility arranged for disposal by emitting hazardous air contaminants which were carried by the wind and deposited in Washington State. The district court denied a motion to dismiss and certified the matter for immediate appellate review.
Reading the plain language of CERCLA, the Ninth Circuit found that “a reasonable enough construction” of the law would be that the facility “arranged for disposal” of its air pollutants. No legislative history or EPA rules shed light on this subject. However, the Court concluded it was not writing on a blank slate. Noting that CERCLA incorporates the definition of “disposal” from the Resource Conservation and Recovery Act (RCRA), the Court cited its prior decision in Ctr. for Cmty. Action and Envtl. Justice v. BNSF Rwy. Co., which held that diesel particulate emissions “transported by wind and air currents onto the land and water” did not constitute “disposal” of waste within the meaning of RCRA. To be a disposal, the solid or hazardous waste must first be placed into or on any land or water and thereafter be emitted into the air. The Court also cited its en banc decision in Carson Harbor Vill., Ltd. v. Unocal Corp., holding that passive migration was not a disposal under CERCLA.
The Court thereby found that arranging for “disposal” did not include arranging for air “emissions.” This interpretation of “disposal” was largely consistent with CERCLA’s overall statutory scheme. The Court expressed concern that plaintiffs’ more expansive reading would stretch CERCLA liability beyond the bounds of reason. “[I]f ‘aerial depositions’ are accepted as ‘disposals,’” the Court said, “‘disposal’ would be a never-ending process, essentially eliminating the innocent landowner defense.”
The Court did not discuss in detail the statutory interplay with the Clean Air Act, which regulates air emissions under a complex regulatory and permit scheme. Under CERCLA, federally permitted releases are excluded from liability. But because air permits often specify the control equipment parameters rather than an emission limit, a CERCLA plaintiff may allege that the mere existence of a permit does not provide a blanket immunity from liability and the facility would remain liable for any releases that were not expressly permitted, exceeded the limitations of the permit, or occurred at a time when there was no permit. The Court in passing did note its skepticism that the federally permitted “release” exception evidenced any Congressional intent regarding the meaning of “disposal.”
The Ninth Circuit is the highest court to exclude air emissions from the reach of CERCLA and RCRA. The Court’s citation to Carson Harbor does not provide an exact analogy since a passive landowner has not “arranged” for the initial release of hazardous substances, as compared to the smelter operations which result in air emissions. But the Court’s unwillingness to create potentially unlimited CERCLA liability for air emissions is compelling. Under CERCLA, liability is strict, joint and several and retroactive. Air emissions are widely transported and dispersed in relatively small concentrations by large numbers of potential sources, making CERCLA liability findings and allocations difficult if not impossible.
The Court thereby divined Congress’ intent to make CERCLA’s scheme workable, apart from a literal reading of its text. For judges to “repair” statutory language in this way is controversial. The decision is reminiscent of the U.S. Supreme Court holding that the Obama health care plan provides tax credits to millions of people who purchase insurance from a federal marketplace, even though the statute only provides credits for those who purchase from marketplaces “established by the state.” According to Justice Roberts, that was the only way the law would work, and despite the plain wording in the statute, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.” CERCLA also is not a model of clarity, and the Ninth Circuit similarly incorporated practicality as a factor in discerning Congress’ intent to avoid overreaching in assigning liability for the cleanup of toxic chemical releases.
Posted on February 22, 2016
In my last blog entry, I advocated for the amendment of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to eliminate the bar on pre-enforcement review as one step toward improving the investigation and cleanup of sediment sites. In this entry, I propose that the U.S. Environmental Protection Agency (EPA) and potentially responsible parties (PRPs) significantly revise the dispute resolution process for EPA Administrative Settlement Agreements and Orders on Consent (“ASAOCs”) to require the resolution of disputes by neutral third parties unaffiliated with EPA or an affected PRP.
The goal of sediment remediation is to protect public health and the environment through prompt and cost-effective remedial action. Unfortunately, this goal has not been met at many sediment sites. At some sites, neither the public nor the PRPs have been served by investigations that have unnecessarily taken decades and wastefed hundreds of millions of dollars to undertake. EPA’s selection of remedies at many sites has been delayed and has not resulted in the selection of protective and cost-effective remedies.
Most sediment cleanups are performed in accordance with consent decrees, which appropriately vest dispute resolution authority in federal district court judges. In contrast, most sediment investigations are conducted under ASAOCs, which vest dispute resolution authority in EPA personnel. While many at EPA with responsibility for dispute resolution have the best of intentions and seek to be objective, the fact that they work for EPA, often supervise the EPA staff who made the decision leading to the dispute, and are often steeped in EPA practices renders most of them unable to serve in a truly independent role. To ensure fairer dispute resolution, ASAOCs should instead vest dispute resolution authority in neutral third parties with no affiliation with either EPA or the PRPs subject to the ASAOC. This would require the amendment of existing ASAOCs and the insertion of new dispute resolution language, which differs from EPA’s model language, in ASAOCs that have not yet been signed.
Additionally, while the dispute resolution official should be deferential to EPA, he or she should not rubber-stamp agency decisions, as currently is often the case. Where investigations have been mired in years of inaction, an independent dispute resolver with a fresh perspective may determine that EPA has sufficient data to make informed cleanup decisions and could compel agency action. At other sites where EPA is requiring PRPs to prepare feasibility studies advocating for remedies that almost certainly will fail, it is essential that a neutral decision-maker act independently to ensure that feasible remedies are selected.
EPA will resist any effort to revise its approach to dispute resolution, and it may require the intervention of elected officials or others to compel such a change. The public, EPA, and affected PRPs would all benefit from it.
Posted on February 22, 2016
As a private practitioner and former trial attorney at the U.S. Department of Justice, I have advocated for timely and cost-effective cleanups that protect public health and the environment. Unfortunately, only a minority of cleanups under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) have met these criteria. Of the many impediments to the thorough, prompt and cost-effective remediation of contaminated sites, and sediment sites in particular, one of the most significant is CERCLA’s bar on pre-enforcement review of the U.S. Environmental Protection Agency’s (EPA) remedial decisions. To promote more effective and timely cleanups of sediment sites, I suggest that CERCLA be amended to eliminate the current bar on pre-enforcement review. By allowing potentially responsible parties (PRPs) to seek and obtain judicial review of EPA decisions or failures to make decisions, more progress would likely be made on more sites.
CERCLA Section 113(h) states that, with limited exceptions, “No Federal court shall have jurisdiction … to review any challenges to removal or remedial action selected under section 9604 of this title, or to review any order issued under section 9606(a) of this title ….” 42 U.S.C. § 9613(h). Despite many challenges, courts have generally upheld the validity of this provision. As a result, PRPs typically cannot challenge EPA's decisions unless EPA has sought to compel performance under an enforcement order or if EPA is acting under a consent decree. As the “opportunity” for challenge may not come until years after EPA has made its cleanup decision, most PRPs are not willing to face the risk of losing a remedy challenge and the potential imposition of treble damages.
CERCLA should be amended to allow parties to challenge agency action or inaction at other times in the process, such as during the preparation of remedial investigations and feasibility studies. At many sediment sites, EPA has delayed remediation and required parties to incur hundreds of millions of dollars during investigations. If PRPs had the opportunity to obtain judicial review of agency action and inaction earlier in the process, they could seek to compel the agency to act in a way that is consistent with CERCLA’s requirements.
Having worked at the Department of Justice when CERCLA Section 113(h) was drafted, I recall my colleagues stating at the time that a bar on pre-enforcement review was necessary to avoid the challenges of having a non-expert federal judge address complex scientific questions and to prevent PRPs from tying up EPA in litigation. I offer three suggestions in response to these concerns. First, if a federal judge were confronted with a particularly complex issue, the court could appoint a special master to handle the proceedings. Second, to encourage PRPs to seek prompt resolutions, a CERCLA amendment could require PRPs to fully comply with an agency’s directives pending resolution of the judicial dispute and impose a penalty on those parties whose challenge of agency action was unsuccessful. Third, agencies could seek an expedited hearing of disputed issues.
While it is very unlikely that Congress would consider a CERCLA amendment to address only this issue, PRPs should raise this issue the next time amendments are being considered. It will succeed only through the concerted efforts of advocates who seek more and better cleanups and those who seek prompt and reasonable government decision-making.
Posted on November 2, 2015
According to the Daily Environment Report (subscription required), EPA is going to change the name of the Office of Solid Waste and Emergency Response to the Office of Land and Emergency Management. What a grand name; surely it is an improvement.
I don’t think that this quite rises to the level of rearranging deck chairs on the Titanic (though I certainly have clients who would not object if OSWER sank without a trace), but one does get the sense of a bureaucracy beginning the long, hard, slog of trying to figure out how to perpetuate its existence as Superfund – mercifully – begins to fade away.
It’s probably a vain hope, but mightn’t EPA determine instead how to reallocate those functions of OSWER that need to continue, but actually try to figure out a way to shrink this element of the bureaucracy, instead of repurposing it?
Posted on April 28, 2015
On April 15 of this year, I thought about the following quote:
"Taxes are what we pay for civilized society."
--Oliver Wendell Holmes Jr.
U.S. Supreme Court Justice
And then I reminisced a bit.
My career as a federal tax lawyer was very brief. About 25-30 years ago, I represented a client which thought it was paying too much in "Superfund" taxes. These taxes are levied on companies which manufacture and produce chemicals. The money is then used by U.S. EPA and others to fund hazardous waste disposal site clean-ups.
I certainly was not a tax lawyer. But one of our senior partners who was in charge of managing work for a chemical company client needed help. He was an excellent tax lawyer, but he said he knew nothing about Superfund taxation. Since I was doing a lot of Superfund clean-up work at the time, I drew the short straw for arguing the merits of this matter before the IRS.
I can't remember now whether the company had a good legal basis for contesting the tax. It might have had something to do with the fact that the client company recycled some amount of used chemicals into making new product. Thus, the Company believed, some of the same chemicals were taxed twice -- once when they were originally manufactured and then again when they were recycled into new product. I do remember that the client's top management thought that the Superfund tax on chemical production in general was very "unfair." [The client never got to the point of considering the "fairness" of the strict, retroactive, joint and several liability regime for generators under the Superfund Law.]
The Company President and I went out to Washington to discuss the merits of our case with officials of the IRS and the Treasury Department. We got out of our cab in front of the Internal Revenue Service Building on Constitution Avenue one bright sunny morning in April. I looked up at the imposing building. Emblazoned in granite across the top of the building was the above quote from Justice Holmes.
I turned to my client and asked him to look up and read the quote. Then I said, "Jon, this is why we are not probably going to win our case here today." And we didn't.
The Company was not interested in pursuing a judicial appeal. So ended my career as a tax lawyer.
Posted on January 26, 2015
The Fifth Circuit has just weighed in with a significant interpretation of the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). In a case involving “arranger” liability under CERCLA (the Comprehensive Environmental Response, Compensation and Liability Act), the Fifth Circuit on January 14 overturned a district court judgment that had held BorgWarner liable for leaks of perchloroethylene (PERC) from equipment sold by an affiliate of BorgWarner’s corporate predecessor. Vine Street LLC v. Borg Warner Corp., No. 07-40440 (Jan. 14, 2015).
The Fifth Circuit held there was no “intent” to dispose of PERC even though the dry cleaning equipment was designed with the knowledge that some PERC would inevitably be mixed in with the water that the system was designed to discharge. Because PERC was a useful product and the intent was to reclaim it rather than dispose of it, the Fifth Circuit strictly applied Burlington Northern’s holding that arranger liability requires an intent to dispose and remanded the case to the district court with instructions to enter judgment in favor of BorgWarner.
Vine Street usurps the Fifth Circuit’s earlier “nexus” test (the test in effect when the District Court issued its ruling), which was based on a totality of the circumstances, and gives further ammunition to those defending against CERCLA liability for releases incidental to the sale of a useful product.
Posted on December 11, 2014
A thought occurred to me recently, and not for the first time, about the decisions of the New Jersey state judiciary, including our Supreme Court, in the area of environmental law generally and site remediation particularly. My realization was that those decisions are driven as much by a desire to facilitate the remediation of contaminated sites as they are by principled interpretation of statutes, regulations, canons of construction and the like.
Such an approach, of course, is understandable on one level, as New Jersey environmental statutes are ameliorative in nature, a cleaner environment is in the interest of everyone, and our fair state has suffered environmentally from its industrial legacy more than most jurisdictions. But on a deeper level, courts are supposed to decide cases in accordance with law, and deciding cases with a particular goal in mind may result in an injustice to the litigants. Moreover, fuzzy reasoning could provide inaccurate guidance to the bar and public.
In one recent case, for example, the Supreme Court of New Jersey was called upon to determine the degree of causation that the New Jersey Department of Environmental Protection (“NJDEP”) needed to establish in order to impose liability on a discharger of hazardous materials. Rather than simply requiring proximate cause, the court hemmed and hawed its way along, formulating the appropriate standard at various points as a “real, not hypothetical” connection, and as a “reasonable nexus or connection” between the alleged discharger and the discharge.
The Court ultimately held that the standard of causation needed to establish liability varies with the form of relief requested. Unfortunately, the Court provided no support for this approach, which conflates the proof needed to establish liability with what is necessary to impose damages. This leads to the conclusion that the Court was reluctant to impose a difficult burden of proof on the state and, presumably, private litigants which could result in judgments for defendants and hence, in the Court’s view, deter remediation of contaminated sites.
In another recent case, the Supreme Court had to determine the interplay between the jurisdiction of a state agency and state trial courts in adjudicating liability for site remediation. The Court reversed the trial and appellate courts and held that a litigant could seek relief in court before the contours of the remediation had been firmly established.
Undergirding the Court’s reasoning was pragmatism – the earlier we allow a contribution plaintiff to pursue other responsible parties, the more the defendants will be encouraged to participate in the remediation process, thereby facilitating more and faster cleanups. While the result was correct as a matter of existing law, the reasoning was weighted far too heavily with an eye towards the result.
Finally, in a case that recently was argued and awaits adjudication, the Supreme Court was asked to determine whether a statute of limitations exists under the New Jersey Spill Compensation and Control Act, our state’s CERCLA analog, and, if so, how long it is and when it begins to run. Implicit in many of the questions the Court asked the advocates was which resolution would facilitate the faster remediation of more sites – no statute of limitations at all, which would allow remedial claims to be brought at any time and not foreclose an action, or a limitations period which would incentivize the plaintiff and defendants to move forward more quickly to clean up sites.
Remediating the environment, and making sure responsible parties are held to their obligations, are plainly laudable goals. But a little less focus on the ultimate environmental outcome and greater adherence to the principles of adjudication, statutory interpretation and the like would improve the quality of justice without sacrificing environmental protection.
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on June 19, 2014
On June 9th, the Supreme Court ruled, in CTS Corp. v. Waldburger, that § 309 of CERCLA does not preempt state statutes of repose. Section 309 requires state statutes of limitations for injuries from hazardous substances releases to run from the date the plaintiff knew or should have known of the injury caused by the release. But in CTS, the Court held that state statutes of repose are not statutes of limitations, and are not governed by section 309.
That conclusion was hardly self-evident. While section 309 explicitly applies to statutes of limitation, and does not specifically mention statutes of repose, the later have often been understood as a species of the former. When section 309 was enacted, Black’s Law Dictionary explained that “Statutes of limitations are statutes of repose.” Congress itself often referred to statutes of repose as “statutes of limitation.” And the very year after Congress enacted section 309, the Supreme Court itself described application of a two-year state statute of limitations as “wholly consistent with . . . the general purposes of statutes of repose.” The meaning of these terms has diverged in more recent years, but that divergence was not well-established when Congress enacted section 309.
The Court’s conclusion that Congress recognized a clear distinction between statutes of limitation and statutes of repose thus required the Court to assume that Congress used these terms with more precision in section 309 than Congress had done on other occasions, with more precision than (and in conflict with) the then-current edition of Black’s, and with more precision then the Supreme Court itself used the terms a year later. It is not often that this Court holds Congress’s legal acumen in such high regard.
The Court’s lead argument for why Congress did understand this distinction was that page 256 of the Section 301(e) Study Group Report—an expert report submitted to Congress and referenced in the Conference Committee Report—distinguished between these terms. This is surprising analysis. The CTS majority includes avowed skeptics of relying on traditional legislative history. Those justices might previously have been expected to be even more skeptical of attempts to discern congressional intent from statements buried in expert reports referenced by traditional legislative history. Not so, it seems—or at least, not so for this one opinion.
But does the Study Group Report even make the same distinction as the Court? The report recommends that:
"states . . . remove unreasonable procedural and other barriers to recovery in court action for personal injuries resulting from exposure to hazardous waste, including rules relating to the time of accrual of actions."
The Report then recommends that “all states that have not already done so, clearly adopt the rule that an action accrues when the plaintiff discovers or should have discovered the injury or disease and its cause.” That is what Congress effectively did—albeit for the states—in section 309. The Report then states: “This Recommendation is intended also to cover the repeal of statutes of repose which, in a number of states have the same effect as some statutes of limitation.”
This sentence, the Court concludes, shows that Congress must have known that a law that preempts state statutes of limitation would not also preempt state statutes of repose. But is it not at least as likely that any Member of Congress who actually read page 256 of the Study Group Report would have thought that adopting the discovery rule for all states would “also … cover the repeal of statutes of repose”?
Justice Scalia once wrote that “Congress can enact foolish statutes as well as wise ones, and it is not for the courts to decide which is which and rewrite the former.” Reading CTS Corp., one cannot escape the notion that the Court was willing to stretch its usual interpretive rules in order to apply what it considered a wise result to an arguably ambiguous statute. It did so in the apparent service of the policy of repose. But the holding will bring little peace in a state with a statute of repose to individuals who learn, years too late, that they or their children have been sickened by contaminants that a government agency or business released long ago.
Posted on February 25, 2014
In an article earlier this week, the Boston Globe reported on concerns that the Massachusetts Department of Environmental Protection is planning to weaken cleanup standards for hazardous waste sites in Massachusetts, seemingly in response to pressure from developers. The article is so wrong and the concerns are so misplaced that some response is necessary.
First, we expect MassDEP to regulate in the face of uncertainty. That means that MassDEP must set cleanup standards without perfect knowledge. As a result, most people – and certainly the environmentalists complaining about the regulatory changes – would expect MassDEP to err on the side of conservatism, making the cleanup standards more stringent than may be necessary.
At the same time, science evolves and we’d expect MassDEP to alter cleanup standards periodically in response to changed science. Moreover, if MassDEP originally erred on the side of being overly conservative, one would expect that, as science improves, many standards could be relaxed – and that that would be a good thing.
What’s most troubling about the article and the NGO position here is the idea that environmental protection is still a black hat / white hat arena and that if something is good for economic development, then it must be bad for the environment. I thought we’d gotten past that in Massachusetts. Indeed, brownfields redevelopment is the prototypical example given of environmental protection being used to advance economic goals. That’s why it’s both stunning and deeply depressing to see lines such as this in the article:
"Critics worry the rules will spur developers to build on contaminated land, known as brownfields."
Better instead that we should plow under the greenfields and leave the brownfields vacant and without any cleanup, I suppose. I thought we already tried that strategy and concluded it didn’t work.
Posted on January 23, 2014
As 2013 drew to a close, USEPA amended its All Appropriate Inquiries Rule (AAI Rule) and anticipates that purchasers and environmental professionals will “embrace” the recently published ASTM International E1527–13 "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process," commonly referred to as the “ASTM Phase I Standard.” Although the Agency had initially indicated the old flame of the ASTM E1527-05 standard was just as attractive, the final AAI Rule makes clear that USEPA considers the 2013 standard to have many new charms and recommends its use. Further, the Agency has indicated that the old standard is absolutely replaceable -- and plans a rulemaking to remove the 2005 standard, perhaps as early as this spring.
USEPA warns that the regulated community should not be naughty. The Agency will keep an eye on the new relationship and threatens that if the regulated community doesn’t get sweet on the new standard (if it is not being “widely adopted”), then USEPA may further modify the AAI rule to explicitly require activities under the updated standard.
The Agency believes the ASTM E1527–13 improves upon the E1527–05 standard and reflects evolving best practices and the level of rigor that will afford prospective property owners necessary information when making property transaction decisions and meeting continuing obligations under the CERCLA liability protections. In particular, the new ASTM E1527–13 standard enhances the previous standard with regard to the delineation of historical releases or recognized environmental conditions at a property. It also makes important revisions to the standard practice to clarify that all appropriate inquires and Phase I environmental site assessments must include, within the scope of the investigation, an assessment of the real or potential occurrence of vapor migration and vapor releases on, at, in or to the subject property.
USEPA, perhaps inadvertently, couldn’t let go without complimenting “the ex” – and may have created some litigation issues. The Agency went out of its way to opine that the prior standard already called for identification of vapor release issues and vapor migration issues. There has been some legitimate debate on whether the ASTM E1527-05 standard was clear on that point. Some attorneys anticipate additional malpractice litigation against environmental professionals where vapor issues weren’t adequately addressed in Phase I assessments issued between 2005 and 2014 that claimed to comply with the standard.
Apologies to the Gershwins and Nat King Cole, but I expect the ASTM E1527-13 is entirely embraceable – to the extent that environmental professionals are able to follow detailed consensus standards written by a team of engineers and lawyers. Many environmental lawyers have concluded that even in late 2013, most ASTM Phase I Standard site assessments that purported to meet the ASTM standards failed to measure up.
Posted on December 17, 2013
Purchasers and lessees of commercial or industrial properties know to obtain Phase I environmental site assessments to identify the presence of contamination - so-called recognized environmental conditions (RECs) - because of the very substantial liabilities these conditions may create. And their lenders generally require them. The industry standard for Phase I’s is based on EPA regulations that flesh out Superfund’s “all appropriate inquiry (AAI)” standard. In those regulations, EPA expressly approved use of a standard developed by ASTM, i.e., E1527-05. ASTM recently issued a new standard, E1527-13, that EPA initially approved in a final rule in August, but, as a result of unfavorable comment, withdrew in October. Pending the agency’s promulgation of that rule’s companion proposal, expected by the end of this year, the question is which standard purchasers and lessees should use - and which standard should their lenders require - in the meantime.
In addition to providing information pertinent to managing environmental risks associated with contamination, the performance of a Phase I that satisfies AAI also may help establish a defense for the purchaser/lessee under Superfund should contamination be found. Superfund provides three transaction-related defenses that each require AAI, the most pertinent of which is the so-called bona fide prospective purchaser defense. Congress required that EPA promulgate standards establishing AAI and it is those regulations - and the approved ASTM standard - that have become the industry standard for Phase I’s.
As EPA notes, the new ASTM standard includes a number of differences from the prior version, which arguably only makes the standard more rigorous. Among other things, the new standard distinguishes between historical RECS that have been regulatorily resolved or that allow for unrestricted residential use, which are no longer RECs, and those that though regulatorily resolved, require either institutional or engineering controls because contaminants remain in place and that are now referred to as “controlled” RECs. It also clarifies that vapor intrusion - the potential for vapors from contaminants in soils and groundwater to migrate into buildings where they may concentrate at levels that pose threats to human health - is to be considered a REC, like groundwater migration, and not excluded from consideration because it may affect indoor air quality, which itself is generally not within the scope of AAI. The fact the two standards are different creates some regulatory uncertainty.
The response to this temporary dilemma is that purchasers, lessees and lenders should be able to have their cake and eat it too by having environmental professionals indicate that they have satisfied both standards. Environmental professionals that perform Phase I’s and satisfy ASTM E1527-13 presumably will be satisfying ASTM E1527-05 as well. EPA informally has suggested that environmental professionals use the new standard and, in their reports, conclude that they have satisfied both. Presumably, the environmental professional’s certification should reference both as well.
Posted on December 9, 2013
EPA is seeking stakeholder input on its draft Groundwater Remedy Completion Strategy. Released on October 29, 2013, the strategy is advertised as a guide for evaluating remedy performance and improving decision-making to more effectively and expeditiously move groundwater sites to completion. Having experienced the problems associated with the “set it and forget it” approach to groundwater remedial action, my interest was piqued by the prospect of a new EPA strategy incorporating more flexibility in evaluating remedial action objectives, remedy performance and systematic risk assessment.
The potential impact of EPA’s remedy completion strategy is arguably diminished, however, by a lack of clarity as to its scope and purpose. The stated objective of documenting a uniform approach to efficiently completing groundwater remedial actions is qualified by an ambiguous disclaimer that the strategy does not change other guidance or policy, is not intended to alter the way the agency develops remedial objectives and cleanup goals and is not intended to interfere with the federal or state site decision-making process. So, what exactly does EPA hope to accomplish in proposing this new strategy?
The elements of the strategy consist of understanding site conditions, designing a site-specific remedy evaluation process, developing performance metrics, conducting remedy evaluations and making appropriate site management decisions. The focus of EPA’s strategy as presented is largely procedural. The strategy does not address common site impediments to achieving an effective and expeditious groundwater exit strategy. To that extent, it is primarily a restatement of a remedy evaluation process that has been the subject of numerous articles and that, in fact, has historically been implemented at many sites.
But perhaps my initial reading is too narrow. The strategy hints at more substantive remedy completion issues, such as addressing site remedial action objectives that become impracticable and unnecessary for the protection of health and the environment, as well as the need to more consistently evaluate remedy change at mature groundwater sites.
From the perspective of focusing on site groundwater scenarios that often delay remedy completion, I suggest that the draft strategy falls short of the goal line. Rather than simply allude to the remedy completion obstacles that presumably inspired the agency’s effort, EPA might better achieve its stated purpose if it revises its strategy to include more discussion of how the strategy may apply to common groundwater completion impediments. For example, it would be useful for the strategy to address the cost and inefficiencies of continuing to operate and maintain asymptotic pump and treat systems at low-threat sites, how to better incorporate plume stability trend information in the evaluation of remedy change, changes in exposure pathway risks and the impact of natural attenuation mechanisms, institutional controls and land use on remedy modification and remedy completion decision-making.
What I had hoped to see in the draft strategy was EPA’s blessing of a more flexible and common sense approach to specific groundwater remedy completion obstacles. My first reading of the draft strategy suggested to me that it was essentially a redundant procedural roadmap for remedy evaluation. But upon reflection, I think it could be more. Indeed, it could also be – and I hope, after consideration of stakeholder comments, will be – a tool for encouraging more consistent regulatory acceptance of remedy change and evolving risk assessments to overcome the inertia of inflexible remedial action objectives and remedy selection impacting many groundwater sites.
Posted on July 30, 2013
Earlier this month the FDA proposed an “action level” of 10 ppb for inorganic arsenic in apple juice (down from 23 ppb), bringing it to the same level as EPA’s drinking water MCL. One may view this action as the culmination of a campaign of sorts initiated by a 2011 Consumer Reports article whose cause was taken up by Dr. Oz. Yet, the FDA has been monitoring arsenic levels for many years and has never viewed the data as any cause for concern. Should we now believe that the FDA has made us completely safe by adopting a drinking water standard for juice? In a practical sense, yes, but in EPA-Superfund speak, not really; and that is the point of this post.
The poisonous propensities of arsenic have been the stuff of history and literature for centuries; the Poison of Kings and the King of Poisons. Remember elderberry wine from Arsenic and Old Lace? But, arsenic is, after all, not only naturally occurring but rather ubiquitous. The human race has managed to live with some level of arsenic for a few millennia now without evident consequence. Indeed, because of naturally occurring arsenic in groundwater in the western United States, the MCL is actually set “considering cost, benefits and the ability of public water systems to detect and remove contaminants using suitable treatment technologies.” If, in contrast, one turns to the gold-standard of “safe,” the one in a million excess cancer risk level, the drinking water standard required is .02 ppb; that’s right folks, 500 times lower than the current MCL and FDA’s proposed new juice level.
What does it mean? I think it points out that the ultra-conservatism of the “10 to the minus six” environmental risk standard leads to absurd results and hugely unnecessary costs. I still recall with a smile a quite notorious Superfund site (which shall remain nameless to protect a client) that had literally dozens and dozens of polysyllabic chemicals at high levels in soils, groundwater and waste disposal units throughout several hundred acres. In the baseline risk assessment, the only risk to exceed the 10-6 level was that from naturally occurring arsenic in the soil!
The more we know about the genetic basis and causes of cancer, the more we realize how poorly both our animal models and in vitro experiments perform in predicting cancerous effects. (See E. Topol, The Creative Destruction of Medicine (Basic Books 2011) for a good discussion of the limitations and frustrations of our current methods and models for finding cancer fighting drugs.) While we are a long way from tossing EPA’s current approach to carcinogenic risk, we should perhaps take into account far more than we do now the inherent limits of our understanding and incorporate more the practical necessity for “cost, benefits and the ability” to “remove contaminants using suitable treatment technologies.” And yes, my grandchildren will continue to drink their apple juice.
Posted on July 22, 2013
On July 10, 2013, a divided Fourth Circuit Court of Appeals held the Comprehensive Environmental Response, Compensation and Liability Act’s (“CERCLA’s”) federally-mandated commencement date preempts not only state statutes of limitations but also statutes of repose, an issue that has split federal courts and left considerable uncertainty about the timeliness of claims arising under CERCLA and environmental common law.
One of the unique aspects of CERCLA is that it imposes a universal statute of limitations on toxic torts and other state law claims for damages “caused or contributed to by exposure to any hazardous substance or pollutant or contaminant.” 42 U.S.C. § 9658(b)(4). This statute of limitations runs from the time the plaintiff discovers, or reasonably should have discovered, the cause of the injury or damages. CERCLA expressly preempts state statutes of limitations that set an earlier commencement date, such as the date of the tortious conduct or the date of the injury.
CERCLA’s “federally required commencement date” has generated considerable commentary and confusion, with federal courts split over the scope of CERCLA’s preemptive effect. One particularly divisive issue involves whether CERCLA preempts state statutes of repose, which are separate from statutes of limitations. Statutes of repose generally provide a longer period in which to file a claim, but they cannot be tolled and often begin to run earlier as well. Noting that the federally required commencement date under CERCLA refers only to “statutes of limitations,” the Fifth Circuit has held “the plain language of [CERCLA] does not extend to statutes of repose.” Burlington N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355, 362 (5th Cir. 2005).
In Waldburger v. CTS Corporation, 2013 WL 3455775 (4th Cir. July 10, 2013), the Fourth Circuit adopted the contrary position, finding the relevant text of CERCLA to be ambiguous and interpreting it to preempt a North Carolina statute of repose. Reversing the United States District Court for the Western District of North Carolina, the Fourth Circuit held that courts and lawmakers have often used the terms “statute of repose” and “statute of limitations” interchangeably, and that the application of CERCLA’s federal discovery rule was more consistent with the statute’s remedial purpose. It therefore held a state repose period that required real property claims to be filed within 10 years of the tortious action did not apply to a nuisance claim alleging the discovery of groundwater contamination several years after the final alleged discharge. In dissent, Judge Stephanie Thacker argued that, “the plain and unambiguous language of § 9658 indicates only statutes of limitations were intended to be preempted.”
The Waldburger ruling will benefit plaintiffs harmed by the latent effects of environmental contamination, who may not become aware of their injuries until after a state statute of repose has run. Such plaintiffs must exercise reasonable diligence, however, to establish they did not have reason to know of the harm at an earlier date.
Posted on June 10, 2013
I believe in governmental environmental regulation. We have a complicated world and it is not surprising that many activities, including those generating greenhouse gases, cause negative externalities. At the same time, however, I have spent more than 25 years representing regulated entities in negotiations with government regulators and it is impossible to do such work without obtaining an appreciation for the very significant costs that bureaucracies impose.
With all due respect – cue the upcoming diss – to my many friends in government, the absence of market discipline or the ability to fire nonpolitical bureaucrats often leads to street level bureaucrats operating under a law of their own devising. Moreover, if a complex economy causes externalities requiring regulation, that same complexity should cause regulators to pause before imposing or revising complicated regulatory regimes. Unintended consequences abound.
The genesis of these musings was the confluence of a number of otherwise unrelated recent regulatory developments. The most significant was headline in the Daily Environment Report earlier this week noting that “EPA [is] Still Unable to Provide Time Frame For Revising Definition of Solid Waste Rule.” RCRA is the perfect example. No one can really quarrel with the need for hazardous waste regulation, in order to prevent the creation of more Superfund sites. However, if we’re still fighting over the definition of something as basic as solid waste more than 30 years after the inception of the program and EPA’s most recent efforts to update the definition remain fruitless after about five years of effort, then we have to acknowledge some serious implementation problems where the rubber is trying to hit the road.
I’ll also provide two recent examples from my home state of Massachusetts. MassDEP has been engaged in a serious regulatory reform effort, which has earned deserved praise. However, as NAIOP has recently noted in comments on the draft proposal to revise the Massachusetts Contingency Plan, MassDEP’s proposed Active Existing Pathway Elimination Measure Permit is “so cumbersome that it is not clear that a PRP or redeveloper would want to seek such a permit.” This calls to mind MassDEP’s reclaimed water regulations, which were intended to encourage water reuse, but are so cumbersome that no one is applying for the permits.
Thus, the final caution. The MassDEP example is extremely common – and extremely troubling. Regulator gets great idea for innovative program. Prior to implementation, concerns are raised about what happens if…. More effort is put into avoiding the perceived downsides than in actually making the program work. Program ends up being worse than nothing.
I believe in environmental regulation, but…
Posted on June 6, 2013
On May 1, 2013, the United States District Court, Eastern District of North Carolina, entered final judgment on a January 31, 2013 ruling on summary judgment in favor of Defendant Georgia Power holding that the sale of used transformers did not constitute an arrangement for disposal under CERCLA Section 107. The May 1 order afforded the opportunity to appeal, which plaintiffs Consolidation Coal Co. (“Consol”) and PCS Phosphate Co. (“PCS”) promptly filed earlier this month.
In 2005, Carolina Power & Light Company (now Duke Energy Progress, Inc.) (“CP&L”) and Consol entered into an administrative settlement with EPA to perform a time-critical removal action of PCB contamination at the Ward Transformer Company Superfund Site (“Site”) in Raleigh, North Carolina, and to reimburse EPA for its removal costs at the Site. PCS entered into a trust agreement with CP&L and Consol to contribute to the funding of the removal action required under the Administrative Settlement with EPA. The plaintiffs and PCS are seeking recovery of costs incurred by the companies at the Site, which to date exceed $60,000,000.
In its January 31, 2013 ruling, the district court found that Georgia Power’s sale of used transformers to Ward Transformer Company did not constitute an arrangement for disposal under the United States Supreme Court ruling in United States v. Burlington Northern & Santa Fe Railway Co. In Burlington Northern, the Court held that a finding of arranger liability requires a showing that the defendant took “intentional steps to dispose of hazardous substance.” The Court further held that a determination of whether arranger liability attaches is a “fact intensive and case specific” inquiry.
In ruling that Georgia Power did not have the requisite intent to dispose of PCBs when it sold used transformers to Ward Transformer, the district court made the following findings: (1) the transformers were sold in arms-length transactions; (2) they had “marketable value” (between $150 and $3200) when sold; (3) they continued to be “useful materials” after the sale, as demonstrated by the fact that they were refurbished and resold by Ward Transformer for a profit; and (4) Georgia Power drained and disposed of PCB-laden oil in the transformers before selling them. The court thus held: “Georgia Power’s purpose for these transactions was to sell transformers to Ward and not dispose of the oil containing hazardous waste. . . . Therefore, Georgia Power had met its burden on summary judgment by showing it did not have the necessary intent to create arranger liability under CERCLA.”
In Burlington Northern, the Supreme defined the “two extremes” in which intent to dispose required for arranger liability is clear. At one end of the spectrum, arranger liability clearly attaches when a party enters into a transaction “for the sole purpose of discarding a used and no longer useful hazardous substance.” At the other end, no arranger liability attaches when a party sells “a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination.” The Supreme Court left open the determination of liability based on a “fact intensive inquiry” in “cases in which the seller has some knowledge of the buyers’ planned disposal or whose motives for the ‘sale’ of a hazardous substance are less than clear.” The Fourth Circuit will now have the opportunity to shuffle the “sales” category deck in the Ward Transformer case and provide further guidance on those factual determinations which fall between the two extremes identified by the Burlington Northern Court.
Posted on May 20, 2013
When the Supreme Court issued its 2009 decision in Burlington N. & Santa Fe RR. Co. v. United States (Burlington Northern), Superfund practitioners were encouraged to think that CERCLA joint and several liability could be avoided by arguing that the harm is divisible and therefore capable of being apportioned. Subsequent decisions in the lower courts have dampened that encouragement. The most recent case in point is the May 1, 2013 decision by the U.S. District Court for the Eastern District of Wisconsin in United States v. NCR Corp. (NCR Corp.), the latest in a long line of decisions involving the Fox River Superfund Site.. After an eleven day trial, the District Court permanently enjoined NCR and the other defendants to comply with a unilateral administrative order requiring them to clean up PCB-contaminated sediments in the Fox River.
The court had previously issued a preliminary injunction to the same effect, which was affirmed by the Court of Appeals for the Seventh Circuit on interlocutory appeal. The District Court had also held that EPA’s remedy selection was not arbitrary, capricious or otherwise unlawful and that NCR was not entitled to contribution, decisions not yet reviewed by the Court of Appeals, leaving NCR with apportionment as its best argument in the District Court to avoid having to bear the entire burden of the cleanup.
In the latest decision, the District Court rejected attempts by NCR (and the other defendants) to prove that the “harm” in one of the operable units of the Fox River was divisible and could therefore be apportioned. The Seventh Circuit had ruled that “harm,” for this purpose, “was best defined with reference to the contamination, as set forth in the government’s remediation rules.” The District Court began its analysis of apportionment by pointing out that exceptions to joint and several liability will be “rare.” According to the District Court, to demonstrate that the harm is divisible, a defendant bears the burden of proving two things: first, that the harm is theoretically capable of being divided, a question of law, and second, that there is a reasonable basis for an apportionment, a question of fact. Burlington Northern, the District Court observed, involved only the second of these elements (“Yet, even though it is undeniable that Burlington Northern loosened the rules governing how a given harm might be apportioned, it did not address the key issue here, which is whether the harm is theoretically divisible in the first place” [emphasis in original]).
Applying the analysis of Sections 433A and 875 of the Restatement (Second) of Torts, both Burlington Northern and the Seventh Circuit concluded that some harms will not be theoretically capable of apportionment. Thus, if one of the causes is “sufficient” in and of itself to bring about the result, the harm will not be divisible and apportionment will not be appropriate. The question is “whether one polluter should be considered such a significant cause of the harm that the harm attributable to that cause is incapable of being divided.” Further, some kinds of harms will simply be unsuitable for divisibility by their very nature, as when a chemical is deemed to be harmful when it “surpasses a certain amount” or when a chemical becomes harmful only when mixed with other chemicals.
It is interesting that the courts continue to follow the Second Restatement even though there is a more recent Third Restatement of Torts (2000). While the courts have not provided any basis for their continued reliance on the Second Restatement, some commentators have opined that the Third Restatement can be read as trending away from joint liability and encouraging apportionment.
The District Court observed that whether a harm is theoretically capable of apportionment, although a question of law, is heavily dependent upon the underlying facts. In this case, after an exhaustive review of the evidence, the District Court concluded that NCR had not met its burden of rebutting the government’s contention that the NCR discharges were a “sufficient cause” of the harm. The District Court defined the “harm” as contamination in the sediments above 1 ppm of PCBs. The Court found that NCR had not meaningfully disputed that the remedy for the sediments would have been the same even if NCR had been the only contributor. In other words, because of NCR’s discharges, the same remedial measures would have been required regardless of whether or not discharges from others had occurred. Since NCR’s discharges would, on their own, “require roughly the same remedial measures that are now being undertaken, [NCR] could be deemed a sufficient cause of the harm.” Under those circumstances, the District Court concluded, the harm could not be deemed divisible and apportionment would be inappropriate.
The District Court then went on to conclude that joint and several liability should attach even if NCR had not been a “sufficient cause” of the harm, “so long as the party is necessary to the harm.” Thus, for example, if one party’s discharge produces a concentration below action levels, such that it is not a “sufficient cause” of the harm, when that discharge is combined with other discharges that cause the concentration to exceed the action level, the first discharge is a “necessary” cause and joint and several liability should attach.
The District Court concluded that the “harm” was not theoretically capable of apportionment, thereby avoiding the necessity of determining how apportionment might be accomplished. This decision suggests that the battleground in the apportionment arena is likely to shift from how apportionment is conducted (the issue addressed by Burlington Northern) to the question of whether apportionment is appropriate in the first place. This decision provides a useful guide for practitioners regarding how courts may evaluate this threshold question, and highlights the importance of how courts define the “harm” at issue.
Posted on March 29, 2013
At the time when Superfund was flexing its muscle and impacting the ability of successful completion of property transfers, most states developed some form of voluntary cleanup program or “VCP”. Those programs were supposed to allow for rapid and effective assessment and remediation, and furnish liability releases or covenants with liability protection. Sounded good huh?
And how many of our clients have a small collection of such sites that they volunteered to assess and address with the sweet promise of walking away, and quickly? Some used the voluntary cleanup program as a risk allocation tool in property transfers. Others wanted the promised release or covenant in order to obtain an environmentally worry-free, and thus more valuable, property that was theirs to sell.
Some states have had the fortitude to reform their voluntary cleanup programs by privatizing the process. In those states licensed professionals determine whether property investigations and remediation are necessary and when they are complete. They then issue some form of certification that leads to a covenant not to sue or a release. [See "New Jersey Follows Massachusetts into the World of Licensed Environmental Consultants and Privatized Cleanup Oversight", David Farer ,July 9, 2009].
In other states the agencies have not overcome their dependence on the fees generated by voluntary cleanup programs, utilizing those fees to pay the salaries of agency personnel engaged in the oversight of voluntary cleanup activities. In these states "voluntary" really means "hooked and can't get out." Let's look at a familiar ballad - best read while listening to Eric Clapton's Voodoo Chile (Live from Madison Square Garden):
Well on the day I signed up
For the Voluntary Cleanup Plan
Well I was promised fast and efficient
Get you out of a jam
It gives you certainty and freedom
And you'll be able to transfer worry free
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
Well I had a grain elevator
With a little dab of carbon tet
Oh Yeah, just a little dab
In the shallow soil
VCP had me test it
Oh, just a little dab at low levels
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
And I said I am finished
But VCP said not so fast
So I started on the groundwater
Even though it was 200 feet down
Yeah I started drilling
And haven't hit bottom yet
Now it's 10 years later
From the time I began
Yeah, it's 10 years later
And I haven't found that carbon tet yet
But I 'm gonna keep goin
Cause I'm in the money so deep
My heirs and assigns ask me
Say – what's goin on?
I have to tell them
My sad, sad song
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
So, most ballads eventually come to an end. How can we continue VCP reform in states where the VCP Bluesy Ballad still is being sung?
Posted on March 14, 2013
In December 2012, EPA issued revised enforcement guidance to assist agency personnel in exercising enforcement discretion regarding the treatment of tenants under Superfund’s bona fide prospective purchaser (BFPP) defense. This guidance expands some of the protections provided by the prior, 2009 guidance. Though recognizing that “[l]easehold interests play an important role in facilitating the cleanup and reuse of contaminated properties,” the agency chose a relatively ineffectual tool for addressing prospective tenant liability and encouraging re-use of Brownfield properties. The agency could have better encouraged Brownfield development by providing tenants with guidance on how to avoid Superfund liability in the first place.
Under Superfund, a tenant's status and activities may give rise to "owner or operator" liability -- for the costs of investigating and remediating a contaminated site and for natural resource damages. The guidance does not flesh out the contours of tenant liability as an owner or operator, but instead assumes that tenant liability exists and explains how the BFPP defense under section 107(r) of Superfund might then be available.
To take advantage of the BFPP defense, an owner or operator of contaminated property must satisfy three statutory prerequisites. It must show: (1) it conducted all appropriate inquiry or AAI, e.g., by having conducted a phase I environmental assessment; (2) it has no affiliation with a potentially responsible party or PRP; and (3) it is satisfying specified continuing obligations, including, among other things, complying with applicable regulatory requirements and not impeding remedial actions.
In brief, the December 2012 guidance confirms that a tenant may receive protection as a BFPP derivatively from its landlord if the landlord conducted AAI, provided that all disposal occurred prior to the landlord’s acquisition of the property and the tenant satisfies the continuing obligations requirement. It also expands EPA's use of enforcement discretion for a tenant who relied upon its landlord for the BFPP defense to include situations in which the landlord loses the BFPP defense, provided the tenant meets the requirements of the BFPP defense other than having performed AAI. In addition, it makes clear that a lease will not disqualify a tenant from the BFPP defense for failure to have satisfied the "no affiliation" prerequisite. Furthermore, it confirms that EPA will use its enforcement discretion for a tenant who independently meets the BFPP prerequisites, including having performed AAI prior to execution of the lease.
The new guidance notes the obvious: all bets are off if the tenant itself engages in an activity that independently creates liability, e.g., by creating or exacerbating contamination. It also notes that, except as otherwise provided, the tenant itself must satisfy the BFPP prerequisites.
The agency explains that it generally will not proactively make determinations as to the availability of the BFPP defense in connection with any particular transaction, e.g., by issuing a comfort letter, though there may be limited circumstances where it might do so. And, of course, the agency’s exercise of prosecutorial discretion provides no comfort where the Superfund claim is brought by a third party, though the agency’s guidance may be persuasive to the court in which the claim is brought.
The problem with the BFPP defense is that it’s a defense, which must be asserted in response to a Superfund claim, and the tenant has burden of proof. Moreover, as far as defenses go, it’s not even the best. The third party defense, which doesn’t require AAI, generally should be available as long as the lease does not relate to the act or omission giving rise to the contamination. See “The Third Party and Transaction-Related Defenses,” J. Civins, M. Mendoza, and C. Fernandez, ABA-SEER Environmental Litigation and Toxic Torts Committee Newsletter, July 2005.
More significantly, as EPA recognizes, “the mere execution of a lease does not necessarily make a tenant liable as an owner or operator,” and the agency and the regulated community would have been better served had the agency issued guidance establishing safe harbors for tenants. A tenant’s first line of defense to Superfund liability should not be a defense, BFPP or other, but rather should be an assertion that it is not a Superfund owner or operator, placing the burden of proof on the plaintiff rather than on the tenant. And case law provides a good basis for EPA issuance of such guidance.
Arguably, a tenant should not be liable and have need of a defense as an owner unless it virtually stands in the shoes of its owner, e.g., by entering into a 99-year lease or by subleasing the property to one who contaminates it. Similarly, a tenant should not be liable as an operator, unless its action caused or exacerbated contamination. Regardless of whether case law adequately fleshes out the contours of a tenant’s owner or operator liability under Superfund, it would have been more useful for the agency to have issued guidance with respect to such liability rather than on the BFPP defense.
Posted on December 7, 2012
Since the early days of the Superfund program, EPA has required settling parties to provide financial assurance of the PRPs’ (potentially responsible parties) ability to perform the cleanup work. EPA regulations afford PRPs a choice of financial assurance mechanisms to fulfill this requirement including: a self-funded trust, bonds, letters of credit, insurance or the satisfaction of the “financial test” provided in 40 CFR §264.143(f).
As originally promulgated, the financial test applied to owners and operators of hazardous waste facilities permitted under RCRA. EPA has adopted this test for Superfund financial assurance requirements and state agencies have likewise borrowed it for their own programs. For many years, the “financial test” was the least cumbersome method for PRPs to satisfy their long-term financial assurance obligations. It was also attractive to PRPs because as long as at least one large company met the test, the other PRPs could save the cost of employing alternative financial assurance mechanisms such as prefunding their entire obligation or purchasing letters of credit. Further, while the financial test in 40 CFR §264.143(f) does include very specific and complex financial criteria, in practice EPA often found submission of financial statements or other public financial reports by large companies to be sufficient.
In recent years, perhaps in recognition of the new economic order where major airlines, automobile manufacturers and even manufacturers of famous brands such as Twinkies have filed for bankruptcy, EPA has made strict compliance with the financial means test a settlement priority. All of the forms for financial assurance are now prescribed via EPA’s website. Perhaps the most challenging form for a financial means proponent is the sworn letter from the company’s CFO or accountant certifying that the company satisfies the different elements of the financial test. The letter must be updated and resubmitted every year. The form letter may be found here.
In an era where CFOs and accountants are already burdened with a host of new Sarbanes-Oxley requirements and other regulatory controls, companies are less than enthusiastic about preparing another set of certifications to EPA concerning their company’s financial status. A further challenge presented by the letter is that it must be submitted on behalf of the specific entity participating in the settlement or its parent. Often, a parent corporation cannot or does not want to guaranty a subsidiary’s obligations, and its subsidiary’s financials may not be maintained in a format which makes compliance with the EPA letter practical or feasible.
EPA’s renewed emphasis on financial assurance requirements is understandable in today’s economic climate and even has some benefit for performing parties interested in ensuring that other settling PRPs likewise perform. Indeed, PRP Groups, with the self-interest of protecting themselves from each others’ business failures, often require their group members to provide letters of credit for the benefit of the Group or prefund their Superfund settlement shares into a Group- controlled trust, even if other financial assurance mechanisms have been selected to satisfy EPA.
Whether PRPs like it or not, what is clear is that the era of less than strict compliance with EPA’s financial assurance requirements for Superfund settlements is over.
Posted on November 21, 2012
On October 9, 2012, the Supreme Court denied a petition for certiorari in Solutia, Inc v. McWane, Inc., declining to further clarify the question raised and expressly left unanswered in footnote six of the Court’s opinion in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). The issue is what section of CERCLA provides private parties with the authority to recover their costs at Superfund sites from other “covered persons” liable under the statute — Section 107(a) or Section 113(f). The choice is important because different rules of liability and different statutes of limitation apply to contribution and cost recovery claims. In Solutia, the Eleventh Circuit ruled that a party subject to a consent decree is limited to a claim for contribution under Section 113(f) and does not also have a claim for cost recovery under Section 107(a).
In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that contribution under Section 113(f) is available to a private party only “during or following” a suit under Sections 106 or 107. In Atlantic Research, the question was whether a “covered person” under CERCLA could obtain cost recovery under Section 107(a)(4) in circumstances in which contribution was not available under the holding in Cooper Industries. In Atlantic Research, the Court explained that Sections 107(a) and 113(f) provide “clearly distinct” remedies available in different circumstances. Contribution under Section 113(f) is available “when a party pays to satisfy a settlement agreement or a court judgment,” because, then, the party “does not incur its own costs of response. Rather, it reimburses other parties for costs that those parties incurred.” “By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under § 107(a) without any establishment of liability to a third party. Moreover, § 107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site.”
That explanation left unanswered the question of what section of the statute applies in the common situation in which parties enter into settlements or sign consent decrees, agreeing to perform work. Those parties have a right to contribution under Section 113(f), but they also incur their own cost in cleaning up a site. In footnote 6 in the Atlantic Research opinion, the Court expressly declined to decide that question (“We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both.”).
Litigation of that unanswered question followed in the lower courts. The Eleventh Circuit in Solutia referenced decisions in the Second (Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010)), Third (Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204 (3d Cir. 2010)) and Eighth (Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594 (8th Cir. 2011)) Circuit Courts of Appeals to decide that parties settling their CERCLA liability with government agencies are limited to Section 113(f) contribution claims, even though they incur their own costs of response in complying with the settlement (“[w]e agree with our sister circuits that we must deny the availability of a §107(a) remedy under these circumstances in order [ ] ‘[t]o ensure the continued vitality of the precise and limited right to contribution”).
The Supreme Court’s denial of petition for certiorari in Solutia is not necessarily the final word on the long running saga of the interplay between Sections 107(a) and 113(f). For example, it may be appropriate to limit a potentially responsible party to Section 113(f) contribution claims when it is subject to a consent decree, because a consent decree would generally be filed with the court accompanied by a complaint, be subject to public comment, resolve a party’s CERCLA liability to the government, and provide the party with contribution protection. The Third Circuit in Agere found that the contribution protection granted to plaintiffs under a consent decree would allow plaintiffs complete recovery under §107(a), while at the same time shielding those plaintiffs from a contribution counterclaim. This would be a “perverse result,” as the plaintiffs had stipulated that they were responsible for a significant portion of contamination at the site. However, a different conclusion may be warranted under different facts. Indeed, the Court in Agere noted that it “need not decide the contours of the overlap postulated in Atlantic Research because, regardless of whether §107(a) and §113(f) remedies overlap at all, they cannot properly be seen to overlap here.” Thus, “the contours of the overlap” may be an issue to be decided another day.
Posted on August 10, 2012
“Let me be clear: EPA has never designated manure as a hazardous substance nor has the agency ever designated a farm a Superfund site and has no plans to do so.” So says Mathy Stanislaus, EPA Assistant Administrator, Office of Solid Waste and Emergency Response in testimony before the House Energy and Commerce Subcommittee on Environment and Economy on June 27, 2012. The subject of the hearing was a bill called the “Superfund Common Sense Act” (H.R. 2997), which seeks to clarify that livestock manure is not a hazardous substance, pollutant or contaminant for purposes of CERCLA response authority and EPCRA emergency reporting.
With such an unequivocal statement of agency intent, is this latest Congressional effort to ensure a “common sense” interpretation of CERCLA and EPCRA with respect to livestock waste simply an attempt by agricultural interests to create an unnecessary and unwarranted regulatory “free pass,” or a prudent effort to provide needed certainty to the regulated community?
EPA’s position appears to be that the proposed codification of Superfund “common sense” is an uncalled-for response to the concerns being voiced. Beyond his broad statement of agency interpretation and intent, Mr. Stanislaus argues that EPA’s 2008 final rule exempting animal waste at certain farms from air emissions reporting under CERCLA section 103 and EPCRA Section 304 further demonstrates that the agency is already exercising common sense in its regulation of livestock waste.
Notwithstanding these assurances, however, Mr. Stanislaus admits that this final rule is currently under EPA review to address various issues being raised by a range of stakeholders. He also references EPA’s ongoing efforts to develop emissions estimating methodologies to better quantify air releases at livestock operations, presumably for future regulatory purposes.
Needless to say, such statements offer little comfort to the bill’s sponsors and regulated community, which are similarly discomforted by other statements of Mr. Stanislaus. For example, Mr. Stanislaus testified that the Act would prevent EPA from responding under its CERCLA authority to “damaging” releases of hazardous substances associated with manure. Also, Mr. Stanislaus voiced the agency’s concern that the bill’s “common sense” provisions would prevent EPA from using CERCLA to issue abatement orders in response to releases presenting a substantial danger to health or the environment.
Proponents of the bill state that the Act is not about whether manure should be regulated, as animal feeding and other farm operations are already adequately regulated under the Clean Water Act, Clean Air Act and state-specific authorities. Rather, the issue is whether CERCLA’s environmental response provisions and requirements were intended to or should apply to manure management. Although recognizing that CERCLA has specifically exempted only the “normal application of fertilizer” from its definition of “release,” proponents argue that such definitional language is not dispositive of congressional intent with respect to the general characterization of manure as a CERCLA hazardous substance. They also point out that EPA has never issued guidance on what constitutes “normal application of fertilizer,” leaving that exemption and broader CERCLA issues to be resolved by the courts and agency.
Opponents argue that because constituents of manure, such as ammonia and hydrogen sulfide, are hazardous substances, there is no legal or scientific basis to totally exempt manure from the regulatory scheme of CERCLA and EPCRA. They also challenge the notion that CERCLA authority is unnecessary or duplicative by identifying gaps in the reach of other federal environmental laws, including authority to deal with natural resource damages and the recovery of response costs.
Whatever side of the fence you may be on, it does seem inevitable that, if the legal and scientific issues being debated are not addressed by Congress, they will almost certainly be considered and resolved in some fashion by EPA, state agencies and the courts. In light of this -- and notwithstanding EPA’s protests that codification of Superfund “common sense” is unnecessary because agency common sense already prevails -- is a legislative approach to clarifying these important issues preferable to the uncertainties of future agency rule making and the inconsistencies inherent in judicial rulings?
Posted on May 14, 2012
The ACOEL blog has devoted several entries over the last two years to the question whether and how a plaintiff could recover, under CERCLA, costs it incurred for a cleanup performed under a consent decree or administrative settlement. One of the more intriguing developments for CERCLA practitioners has been the tension between and radical differences to cost recovery or contribution claims under Sections 107 and 113 of CERCLA. One of the more recent developments is the 11th Circuit decision in Solutia v. McWane (Full disclosure: I am counsel to several defendants in this case).
"Boots" Gale previously blogged about the District Court decision. The District Court dismissed Plaintiffs’ Section 113 claim on the basis that these Defendants had the benefit of CERCLA’s contribution protection obtained via their own administrative settlement with EPA. Initially, the District Court denied summary judgment on Plaintiffs’ Section 107 claim, but then reconsidered and reversed that decision.
The 11th Circuit noted that the Supreme Court's Atlantic Research decision declined to decide the issue of whether a party may bring a 107(a) claim for direct cleanup costs incurred via a consent decree entered as past of CERCLA Section 106/107 litigation. The 11th Circuit confirmed, however, the conclusion of the District Court that numerous federal Circuit Courts had reached that issue since that time, each one concluding Section 113 to be the party’s exclusive remedy, and denying the Section 107 claim. Relying in part on the conclusions reached by these other Circuit Courts, the 11th Circuit rejected Plaintiffs’ statutory interpretation arguments, and concluded that a party who has a CERCLA Section 113(f) claim cannot also maintain a CERCLA Section 107 claim. To find otherwise, the 11th Circuit concluded, would “thwart the contribution protection afforded to parties that settle their liability with the EPA…”, “destroy CERCLA’s statutorily-created settlement initiative…”, would allow a plaintiff to impose joint and several liability on defendants, and would prevent those defendants from asserting any Section 113(f) counterclaim since the plaintiffs would have their own CERCLA contribution protection via their consent decree.
The time has not run yet for the Plaintiffs in this case to seek certiorari from the Supreme Court. In light of the unanimity of the federal Circuit Courts on this issue, it seems unlikely that the Court would accept the case for decision, despite the importance of the issue and the Court’s decision not to reach the issue in its 2007 decision in Atlantic Research.