Opinion ID: 6927856
Heading Depth: 1
Heading Rank: 5

Heading: All Costs?

Text: Having determined that the EPA’s decision to implement the AWS was arbitrary and capricious, we must now decide whether the EPA nevertheless is entitled to recover its costs for designing and constructing the AWS. CERCLA § 107 provides for the recovery of the following costs: (A)all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; (B) any other necessary costs incurred by any other person consistent with the national contingency plan; (C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release; and (D) the costs of any health assessment or health effects study carried out under section 9604(i) of this title. 42 U.S.C. § 9607(a)(4) (emphasis added). Sequa contends that the EPA is authorized to recover only reasonable and necessary costs, relying on the statutory language as well as federal procurement laws and regulations. The EPA takes the position that it is entitled to recover all costs — even if unreasonable or unnecessary 22 — unless Sequa proves that such costs are inconsistent with the National Contingency Plan. 23 The district court held that the EPA could recover all, of its response costs, so long as they were not the product of “gross misconduct” by the agency. Athough we approve of the district court’s attempt to impose some restraints on the EPA’s ability to recover costs from private parties, we find no statutory basis for its “gross misconduct” limitation. Nevertheless, we are troubled by the implications of the EPA’s position on this issue. Sequa contends that, under the EPA’s interpretation, defendants will be liable even if the EPA allows a contractor to pay its officers and other employees unjustified millions and allows each of them a Rolls-Royce for transportation. Interestingly, the EPA did not attempt to refute Sequa’s assertion, either in its appellate brief or at oral argument. Instead, the EPA asserts a policy reason to support its interpretation: By refusing to permit defendants to defend against cost recovery actions by engaging in detailed attacks on the “reasonableness” of individual government cost items, Congress provided an incentive to those defendants to conduct the necessary response actions themselves. Where defendants refuse to conduct the appropriate response actions, CERCLA allows the Government to undertake the response actions it deems necessary and appropriate without being constrained by the possibility that each line item of the costs of these actions will be challenged in cost recovery. In addition, the EPA asks us to take comfort in the fact that, through internal agency audits and other forms of self-policing, costs will be controlled. Acceptance of the EPA’s position would effectively prohibit judicial review of the EPA’s expenditures. In short, we wpuld give the EPA a blank check in conducting response actions. 24 We seriously doubt that Congress intended to give the EPA such unrestrained spending discretion. 25 Moreover, such unbridled discretion removes any restraint upon the conduct of the EPA in exercising its awesome powers; if the EPA knows there are no economic consequences to it, its decisions and conduct are likely to be less responsible. We do not have to decide the question in this case, however, because the only costs Sequa challenges as unreasonable and unnecessary are those associated with implementation of the alternate water supply system, a decision that we have already concluded was arbitrary and capricious. The Tenth Circuit recently held that, “[t]o show that the government’s response action is inconsistent with the NCP, a defendant must demonstrate that the EPA acted arbitrarily and capriciously in choosing a particular response action to respond to a hazardous waste site.” Hardage, 982 F.2d at 1442. We find this reasoning persuasive, as well as adequate for resolving the issue before us, and therefore adopt it. 26 Because the decision to implement an AWS was arbitrary and capricious, it is inconsistent with the NCP. Accordingly, the EPA is not entitled to recover the costs of designing and constructing the AWS. We realize that, as a result of our decision disallowing the EPA’s costs for the AWS, those costs will have to be borne by the Superfund. Although regrettable, this is the inevitable result of arbitrary and capricious EPA decisionmaking. Without knowing, or even attempting to learn, whether the AWS would serve to protect the safety and health of anyone, the EPA officiously ignored the comments of Bell and Sequa, and the results of its own remedial investigation, and stubbornly proceeded to spend over $300,000 to furnish a water supply system that was not needed, was not allowed to be used by the commercial establishments whose wells (according to the administrative record) were the only ones with chromium contamination in excess of the SDWA standards, and did very little — indeed, if anything — to reduce any perceived public health threat posed by the chromium-contaminated groundwater. We can only assume that the EPA was not concerned about the cost of the AWS, because it believed that it could recover whatever was spent from Sequa. Although the EPA’s powers under CERCLA are indeed broad, Congress has not provided that private parties must pay for the consequences of arbitrary and capricious agency action.