Source: http://www.acoel.org/category/Superfund.aspx
Timestamp: 2017-05-25 12:31:32
Document Index: 411267721

Matched Legal Cases: ['§9621', '§ 309', '§ 9658', '§ 9658', '§264', '§264']

Archives Can We Really Expect An Administrator Not To Administrate?
Skeptics fear that Administrator Pruitt has some other secret objective. But no one can seriously argue that this isn’t Administrator Pruitt’s decision to make. The Superfund statute unequivocally says “[t]he President shall select appropriate remedial actions determined to be necessary” in accordance with the statute and the implementing regulations, and “which provide for cost-effective response.” 42 U.S.C. §9621(a). The implementing regulations unequivocally delegate that responsibility to Administrator Pruitt (well, to be precise, it is theoretically possible that another federal agency or a state can be a “lead agency” under the regulations but, in that unlikely case, the Administrator’s May 9th decision presumably wouldn’t apply). After all, it was a perceived need for prompt federal action to clean up the most complex contaminated sites in our country that drove the enactment of the Superfund statute over thirty-five years ago. Because Congress perceived that need, the statute limits the ability of anyone, including state and local governments, to interfere with the selection and implementation of a Superfund remedy.
Comments (0) Scott Pruitt Just Solved All of the Problems with Superfund. Not.
Last week, EPA Administrator Pruitt issued a memorandum requiring that all Superfund remedies estimated to cost at least $50 million be approved by the Administrator. I’m not optimistic that this will cure, or even ameliorate, what ails CERCLA. First, the memorandum gets off on precisely the wrong foot. Administrator Pruitt states that:
Comments (0) Applying EPA Guidance to Improve Sediment Site Cleanups
After years of struggling to implement prompt and cost-effective cleanups of sediment sites under the Superfund program, EPA has adopted a new set of tools. This would be a good time for EPA to conduct an unbiased evaluation of whether recent Records of Decision (“ROD”) issued for sediment sites comply with the Office of the Land and Emergency Management (“OLEM”) Directive 9200.1-130 (Jan. 9, 2017), and direct the regions to revise RODs where necessary. For example, Region 10 recently issued its ROD for the Portland Harbor, a complex, multi-party sediment site, which seems out of sync with the new guidance. In particular, Region 10’s use of unachievable cleanup levels for several contaminants of concern, unwarranted assumptions about current and future land uses in certain areas of the site, and failure to properly assess background levels in some instances conflict with the Directive’s recommendations.
In prior posts, I advocated for actions that could help the agency, potentially responsible parties, and the public achieve success in sediment cleanups. In one post, I recommended that Congress eliminate CERCLA’s bar on pre-enforcement review. In another, I advocated for revision of the dispute resolution provisions in the model Administrative Settlement Agreement and Order on Consent (“ASAOC”) to require the selection of a neutral third party to resolve disputes between EPA and ASAOC respondents. The rationale for these earlier recommendations applies equally to this recommendation; each of them is intended to require EPA compliance with its own guidance and sound legal and scientific principles. In its directive, OLEM identified 11 recommendations “based on current best practices for characterizing sediment sites, evaluating remedial alternatives, and selecting and implementing appropriate response actions.” In particular, OLEM directed the regions to “develop risk reduction expectations that are achievable by the remedial action.” Most sediment RODs fail to comply with this “best practice.” For example, EPA has repeatedly issued RODs that establish action levels that cannot be met using any current or reasonably foreseeable remedial technology, leading to remedies that are unrealistic and unnecessarily costly. This causes potentially responsible parties to resist, resulting in litigation or delays that perhaps could have been avoided. EPA should apply its directive. It should systematically review each sediment ROD issued in the last several years, determine whether and to what extent the ROD deviates from the OLEM directive, and instruct regional personnel to revise RODs to comply with the directive. This would require a second look at the RODs at, among other sites, the Lower Duwamish Waterway, Portland Harbor, and the lower 8 miles of the Passaic River. Review of these and other RODs might lead to more realistic cleanup decisions, reductions of risks, where necessary, and implementation of feasible remedies.
Comments (0) The Enforcement of CERCLA Section 106 Orders; the Seventh Circuit Suggests a New Twist
“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?
Comments (0) EPA To Rename OSWER: How About “The Office That Should Be Eliminated As Soon As Possible”?
Comments (1) My Brief Career as an Environmental Tax Lawyer
On April 15 of this year, I thought about the following quote:
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.
Comments (0) Burlington Northern Continues to PERColate
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. Tags: Fifth Circuit, arranger liability
Comments (0) JERSEY PRAGMATISM
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.
Comments (0) Superfund Rant For a New Congress
Mitch McConnell, are you listening? Tags: Oversight Costs, Brownfields, CERCLA, EPA, Legislation, necessary response costs, Regulation, Superfund
Comments (0) Imposing Repose: The Supreme Court Limits CERCLA § 309
Comments (0) I Thought Redeveloping Brownfields Was a Good Idea: Apparently the Boston Globe Hasn’t Gotten the Message
Comments (0) Arsenic and Apple Juice: Are We Now Safe?
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.
Comments (0) Fourth Circuit Rules CERCLA Preempts State Statute of Repose
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. Tags: CERCLA, Superfund, statute of limitations, statute of repose
Comments (0) I Believe in Environmental Regulation, But….
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…
Comments (0) No Arranger Liability for Used Transformer Sales
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.
Comments (0) Another Blow to the Divisibility of Harm Defense to Joint and Several Liability
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.
Comments (0) Less Lessee Liability – A Critique of EPA’s New Superfund BFPP Guidance
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.
Comments (0) Superfund Financial Assurance Made Easy (Not!)
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. Tags: Superfund, EPA, CERCLA, PRPs, financial assurance, Hazardous Materials