March 5, 2010
The Court of Appeals for the Second Circuit recently issued a decision in Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., — F.3d —-, 2010 WL 626064 (2d Cir. Feb. 24, 2010), another in a series of cases that attempt to chart the contours of liability of potentially responsible parties (“PRPs”) under CERCLA. Following its cleanup of a contaminated site along the Hudson River under an administrative consent order with the New York State Department of Environmental Conservation (“DEC”), Niagara Mohawk Power Corp. (“Niagara”), itself a PRP, commenced a cost recovery and contribution action against other PRPs.
The District Court ruled that Niagara could not seek contribution costs under Section 113(f)(3)(B) of CERCLA because DEC did not have the authority to resolve CERCLA liability without a specific agreement with the EPA and, thus, the administrative consent order did not resolve Niagara’s CERCLA liability. The Second Circuit reversed this ruling, holding that Niagara could maintain a contribution action against former owners and operators of the site pursuant to §113(f)(3)(B).
Section 113(f)(3)(B) allows a party to seek contribution from other PRPs when the party “has resolved its liability to the United States or a state for some or all of a response action in an administrative or judicially approved settlement.” Because Niagara had administratively settled its CERCLA claims with the DEC, the court concluded that §113(f)(3)(B) provided the proper mechanism for Niagara’s claims; settlement of claims with the federal government or express federal approval of the state administrative settlement was not required. In addition, the court held that because Niagara’s claims fit squarely within the requirements of §113(f)(3)(B), to allow Niagara to proceed with a cost recovery action under §107(a) would be inappropriate. This ruling should clarify that a DEC administrative consent order is sufficient to permit the settling party to bring a CERCLA contribution action.
The District Court granted summary judgment in favor of certain defendants on the grounds that Niagara had failed to raise a genuine issue of material fact as to whether hazardous substances had been released on defendants’ properties. Defendants had argued that Niagara’s failure to identify evidence that they had caused any release of hazardous substances entitled them to summary judgment. The Second Circuit reversed, holding that a party seeking contribution need not establish the precise amount of hazardous material discharged to demonstrate PRP liability and to move its CERCLA claims past the summary judgment stage; application of this standard will make it more difficult for PRPs to exit a litigation by moving for summary judgment. Whether the amount of hazardous waste deposited by a particular PRP is minimal does not erase liability, but presents an issue for appropriation of costs.
Former site owner Chevron, one of the defendants seeking summary judgment, argued that it could not be held liable for Niagara’s costs because it never engaged in any activities that could have produced manufactured gas production waste—the type of waste Niagara was required to remediate under the consent order. The Second Circuit held, however, that because Niagara was required to investigate and identify all hazardous waste, it could seek contribution for Chevron’s share of the investigation costs.
The Second Circuit also overruled the District Court’s finding that a genuine issue of material fact existed as to whether Niagara’s cleanup was consistent with the National Contingency Plan (“NCP”). Noting the presumption that actions undertaken by the government are consistent with the NCP, the court held that a PRP could establish consistence by conducting a response action under the monitoring and ultimate approval of a state environmental agency. Niagara’s adherence to the DEC consent order established the cleanup’s NCP consistency.
March 2, 2010
The US Environmental Protection Agency today announced that it has decided to add the Gowanus Canal in Brooklyn, NY to the National Priorities List, which will render the canal a Superfund site under the federal Superfund statute, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).
February 22, 2010
In a noteworthy ruling, the United States District in the Northern District of Illinois held that an owner of industrial equipment leased to the operator of a plating facility is strictly liable as a current owner of a “facility” under Section 107(a) of Superfund (also known as CERCLA). United States v. Saporito, 2010 WL 489703 (N.D. Ill Feb. 9, 2010) (“Saporito“).
In Saporito, the federal government sought to recover over $1.5 million in cleanup costs at the site of a former plating facility. The government sought summary judgment against Saporito, on the grounds that he was a current owner of a facility within the meaning of CERCLA, “based on his undisputed ownership of equipment used in the plating process.” Saporito opposed the motion on the grounds that there was no evidence that the equipment he owned and leased to the operator was connected to any release or threatened release of hazardous substances causing the cleanup, and because the equipment had been leased to someone who actually operated the plating facility.
The District Court rejected both arguments, holding that CERCLA is a strict liability statute that did not require proof of a connection between the property owned by the defendant and the incurrence of CERCLA cleanup costs. The court, relying on ELF Atochem North American, Inc. v. United States, 868 F. Supp. 707, 709 (E.D. Pa. 1994), held that the plating line owned by Saporito was “no less a facility than the land on which it operated.” The court further observed that just as CERCLA extends liability to a landowner who may not even be aware of pollution-producing activities of its lessee, it similarly extends to owners of equipment “whose lessee is using the equipment in a similar manner.”
Saporito also argued that if he is an owner of a CERCLA “facility” and thus a current owner PRP, he should be entitled to a defense for owners who are protecting a security interest. The District Court rejected that argument as well, finding that Saporito’s ownership interest was not “primarily to protect a security interest,” a necessary element of the defense.
The District Court’s ruling, if upheld on appeal, has the potential to significantly broaden the scope of CERCLA liability. CERCLA’s broad definition of “facility” explicitly encompasses “equipment,” so that aspect of the court’s ruling is not controversial. CERCLA, however, only holds liable the current owner of a facility “from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance . . . . “ 42 U.S.C. 9607(a). Thus, the District Court appeared to err in holding that the government did not have to establish that the equipment owned by Saporito (the plating line) was connected to the release or threatened release of a hazardous substance giving rise to response costs that the government sought to recover. The court confused the fact that, once liability is established, CERCLA holds such parties strictly liable, with the requirement that to establish liability based on ownership of a “facility” the CERCLA plaintiff must show that such facility caused the release or threatened release at issue. Once a party qualifies as a liable party under Section 107(a) liability is strict in the sense that there is no need to prove negligence or fault. However, that does not mean that a CERCLA plaintiff need not link the “facility” to the release or threatened release giving rise to the cleanup costs.
Accordingly, we predict that unless resolved out-of-court this case should be reversed on appeal. The court in this case was likely influenced by the fact that Saporito had been at certain times involved in the operation of the plating operation, and was not merely an owner of equipment leased to an unconnected third-party operation. Nevertheless and despite the flaw in its reasoning, the Saporito decision makes clear that owners of industrial equipment leased to third-parties should consider taking steps to mitigate potential CERCLA liability, especially in instances where a plaintiff can establish that the equipment in question played a role in the release of hazardous substance causing contamination. In such instances the owner of the equipment, even if not involved in the operations of the plant, could be held liable as the current “owner” of a CERCLA “facility” under a proper reading of CERCLA’s strict liability scheme.
September 24, 2009
The U.S. Environmental Protection Agency (“EPA”) is proposing to add New York City’s Newtown Creek to its National Priorities List (“NPL”) of sites with known or threatened releases of hazardous substances throughout the United States and its territories. The NPL is EPA’s list of sites that warrant further investigation and long-term cleanup. This proposed action follows closely on the heels of the well-publicized and hotly-contested proposed listing of the Gowanus Canal as an NPL site.
As it did with the Gowanus Canal, the State of New York referred Newtown Creek to EPA “due to the complex nature of the contamination along the creek.” This complexity apparently stems from the myriad types and potential sources of contamination. As EPA noted in its press release for the proposed listing, contamination found in Creek sediment and surface water samples includes pesticides, metals, PCBs, and volatile organic compounds (“VOCs”), the last category of which are potentially harmful contaminants that can easily evaporate into the air.
From the mid-19th century until World War II, Newtown Creek was a hub of a growing industrial America: more than 50 industrial facilities were located along its banks, including some of the nation’s largest oil refineries, petrochemical plants, copper production and smelting plants, fertilizer and glue factories, sawmills, and lumber and coal yards. Industrial pollution resulted from these activities and from the City’s sewers that for many decades dumped untreated into the Creek. Some factories and facilities still operate along the Creek and its tributaries, and various adjacent contaminated sites have also potentially contributed to its contamination. As a result, Newtown Creek is, according to the EPA, “badly polluted” and its listing on the NPL “will allow EPA to build on the extensive sampling of the creek that has already been done.”
EPA’s press release does not explain the need for an NPL listing, given that in 2007 New York Attorney General Andrew Cuomo commenced litigation against Exxon Mobil Corp., BP, Chevron Corp., Keyspan Corp. and Phelps Dodge Corp. for their respective roles in polluting the Creek. Also it is not clear how an NPL listing would affect any of the other three suits brought by private parties and the environmental group Riverkeeper that seek cleanup of the Creek and at least $58 billion in damages. Whether this proposed listing provokes opposition from the City of New York and others, similar to the proposed Gowanus Canal listing, will probably be known soon. It is worth noting that only several months ago, in June 2009, the City spent $100 million to purchase 30 acres of property at the mouth of Newtown Creek to construct the largest middle-income housing development in New York since the 1970s. Known as “Hunter’s Point South,” that project will include 3,000 affordable housing units, a 1,100-seat high school, 11 acres of parkland, and a network of pedestrian walkways and bike paths along what may soon be a new federal Superfund site.
No one knows yet how wide EPA intends to cast the Superfund liability net. In the event the Creek is listed, property owners along the waterway and in the immediate area may face claims relating to the current and historic uses of their property, and the extent to which these uses may have contributed to Creek contamination. These parties may be well served by making their interests known in EPA’s public comment period which accompanies any NPL listing. The public comment period for Newtown Creek began September 23, 2009, and will remain open for sixty days. Comments may be submitted via EPA’s website here.
August 17, 2009
After initially surprising New York City by proposing that the Gowanus Canal be listed on the federal Superfund list, the New York State Department of Environmental Conservation (DEC) now believes the City’s proposed alternative to listing should be seriously considered by the Environmental Protection Agency (EPA), according to press reports. Specifically, an August 6th letter from DEC to EPA states as follows:
Without expressing a substantive opinion on the proposed alternate plan, we believe that it is appropriate for the Environmental Protection Agency to carefully review and consider the proposal, to determine whether it in fact will reliably result in an investigation and remediation plan fully consistent with what would otherwise be required if the site is listed….
Concerned about environmental stigma and interference with a planned rezoning that would revitalize the Gowanus neighborhood, create jobs, and increase tax revenue, on July 8th the City of New York filed extensive comments urging EPA to pursue alternatives to a Superfund listing. The full text of the City’s comments is available here (PDF). Among other things, the City argued that the proposed listing would:
- Violate a Presidential Executive Order because it would interfere with actions already planned by the Army Corps of Engineers to address contamination in the Gowanus; and
- Conflict with a 2005 Consent Order between the City and DEC under the Clean Water Act.
In its comments, the City put forth an alternative plan for addressing issues at the Gowanus that would include participation by the City and also by National Grid, which supported the City’s comments in a separate letter. As we have previously noted, several developers and landowners in the Gowanus also have voiced concerns about the proposed listing for similar reasons.
The State DEC’s recent letter signals that the politics around a Superfund listing may be shifting in favor of alternatives. EPA is expected to make a decision on the proposed listing sometime in the next few months, although that time frame could always be postponed in favor of additional consideration.
EPA has supported alternatives to Superfund listing elsewhere in the country when a credible alternative to listing is proposed. The City, National Grid, and other parties opposed to listing have made the case for such an alternative to be carefully considered for the Gowanus.
August 11, 2009
Almost thirty years after Congress instructed EPA to require facility owners and operators to set aside funds for the cleanup of property that may be contaminated by hazardous substances, a federal court in California has held EPA may take additional time to draft and issue the regulations. The court held that while Congress required EPA to issue such regulations, it granted EPA some discretion in when to do so. EPA has stated that it intends to require financial assurance for hardrock mining facilities first, and will also assess the need to regulate hazardous waste generators, hazardous waste recyclers, metal finishers, wood treatment facilities, and chemical manufacturers.
The regulations at issue are required under the federal Superfund law, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), passed in 1980. The statute is commonly said to have been motivated by the notorious hazardous waste contamination discovered buried at Love Canal, NY. Section 108 of CERCLA requires EPA to issue financial assurance requirements for certain types of facilities, based on the risk of injury from hazardous substances in operations at those facilities. The regulations, once issued, would require the operator of a covered facility to set aside funds or otherwise make funds available for a possible future cleanup of hazardous substances at the property. Without such funds, costly cleanups may force potentially responsible parties into bankruptcy leaving taxpayers with the bill, or lengthy litigation may ensue over the allocation of costs. EPA was first required to publish a notice of those classes of facilities which presented the “highest level of risk of injury” by December 11, 1980. CERCLA § 108(b)(1).
The December 1980 deadline passed, without EPA publishing the required notice. The statutory requirement languished, until in recent years it received renewed attention. EPA was sued in federal court in 2008, on the theory that EPA had failed to perform a non-discretionary duty under CERCLA. The suit was brought under to CERCLA’s citizen suit provision, which allows a private litigant to force non-discretionary agency action. In February 2009, the Northern District of California held in Sierra Club v. Johnson (N.D. Cal. No. C 08-01409) (“Johnson“), that EPA had a mandatory duty to publish classes of facilities which presented the greatest risk of injury. In July, 2009, EPA published a notice these classes of facilities in the Federal Register, pursuant to the court’s order. In its notice, the agency determined that it would promulgate the first financial assurance requirements for hardrock mining facilities, based on the extent of contamination from such facilities, and the high costs of cleanup.
EPA did not limit its inquiry to hardrock mining; the notice also stated that EPA will examine the need for financial assurance at the following types of facilities: “hazardous waste generators, hazardous waste recyclers, metal finishers, wood treatment facilities, and chemical manufacturers.” 74 Fed. Reg. 37,219. EPA states that it intends to publish a notice of this “second wave” of types of facilities by December, 2009. Id.
However, the Northern District of California held that EPA is under no date-certain deadline to issue the financial assurance requirements. Instead, the court held, “that although Section 108(b) requires EPA to promulgate financial responsibility regulations and incrementally impose such requirements, Section 108(b) provides EPA with discretion as to when to promulgate such regulations. Unlike the duty to publish notice of classes, Section 108(b) does not include a date-certain deadline for the promulgation of financial responsibility regulations …” Johnson, Order, at 4-5 (Aug. 5, 2009). In so doing, the court rejected “a bright line rule that only duties with date-certain deadlines are non-discretionary for the purpose of citizen suits under CERCLA,” and instead looked to legislative history to help determine whether EPA’s duty to promulgate regulations by a particular date was non-discretionary. Id. at 5.
To maintain a claim that EPA has “unreasonably delayed” its duties under CERCLA, the court held that plaintiffs may continue to press their claims under another statute, the Administrative Procedure Act (APA), but must do so in another court. The court stated, “plaintiffs may bring an APA claim in the Court of Appeals for the D.C. Circuit alleging EPA unreasonably delayed in promulgating the financial responsibility regulations required under Section 108(b).” Id. at 6. Unless and until such a litigation is brought and decided, the timeline for financial assurance requirements under CERCLA will remain unclear.
EPA that although Section 108(b) requires EPA to promulgate
financial responsibility regulations and incrementally impose such requirements, Section 108(b)
August 10, 2009
A recent opinion from the U.S. District Court in the Northern District of Oklahoma may limit the recovery of natural resource damages (NRD) under the federal Superfund law.
In addition to the cleanup of Superfund sites, potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) may also be held liable for harm to natural resources caused by the release of hazardous substances, known as natural resource damages (NRD). Natural resources as defined by the statute include “land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States … any State or local government, any foreign government, [or] any Indian [T]ribe.” 42 U.S.C. § 9601(16). These governmental “trustees” are responsible for pursuing NRD claims.
In State of Oklahoma v. Tyson Foods, Inc., the Oklahoma Attorney General sued several Arkansas poultry farms under CERCLA for the contamination of the Illinois River watershed. On July 22, the U.S. District Court for the Northern District of Oklahoma rejected these NRD claims since the state had not joined the Cherokee Tribe, a trustee with jurisdiction over parts of the river. The court held that the Tribe was an indispensable party to the lawsuit, and without the participation of the Tribe or a clear division of the amount of natural resources held by each trustee, it dismissed the NRD claims under Rule 19 of the Federal Rules of Civil Procedure (“Required Joinder of Parties”). 2009 WL 2176337 (N.D. Okla. 2009).
The Tyson Foods decision conflicts with others that have indicated a single trustee may bring CERCLA claims for the full amount of natural resource damages, even in the absence of other affected trustees. See, e.g., United States v. Asarco, Inc., 471 F.Supp.2d 1063 (D. Idaho 2005). If Tyson Foods stands, the decision could render recovery of NRD under CERCLA more difficult, especially where a governmental PRP also happens to be a trustee of the affected resources.
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