Canadian Smelter Can Be Held Liable for Cross-Border Contamination

The Ninth Circuit Court of Appeals affirmed earlier this month that the operator of a Canadian smelter can be held liable under the Superfund statute for a release that originated in Canada and continued into the United States. In doing so, however, the Court declined the opportunity to resolve broad issues of the extraterritorial application of Superfund that had been presented to it. Based on the narrow facts of this case, the Court found that there had been “releases” wholly within the United States and that the case therefore involved a domestic application of the statute.

The case, Patookas v. Teck Cominico Metals, Ltd., ___ F.3d ___ (July 3, 2006), 2006 WL 1821197, was brought by Joseph A. Pakootas and Donald R. Michel (collectively the “Pakootas”). The Pakootas filed a citizen’s suit under CERCLA section 9659(a)(1) to enforce a Unilateral Administrative Order (“Order”) issued by the Environmental Protection Agency (“EPA”) against Teck Cominco Metals, Ltd (“Teck Cominco”), a Canadian corporation. The Order required Teck Cominco to conduct a remedial investigation/feasibility study in a portion of the Columbia River that was located entirely within the United States, downstream of a smelter operated by Teck Cominco.

In resolving the case, the Ninth Circuit had to decide two issues: (1) whether the Order was unenforceable as an extraterritorial application of the CERCLA, or was simply a domestic application of the Superfund law to a site within the U.S; and, (2) whether Teck Cominco could be held liable under CERCLA for having “arranged for disposal” of hazardous substances because it disposed of the hazardous substances itself, rather than arranging for disposal “by any other party or entity.” The Court held that, because CERCLA liability is triggered by an actual or threatened release of hazardous substances, and because a release of hazardous substances took place within the United States, the case involved a domestic application of CERCLA. In addition, it rejected Teck Cominco’s contention that it could avoid arranger liability under CERCLA based on the fact that it disposed of the hazardous substances itself.

Background

In August of 1999, the Colville Tribes petitioned the EPA under 42 U.S.C. § 9605 to conduct an assessment of contamination in and along the Columbia River in northeastern Washington state. The EPA began the site assessment in October 1999, and found contamination that included “heavy metals such as arsenic, cadmium, copper, lead, mercury and zinc.”[1] The “EPA also observed the presence of slag, a by-product of Teck Cominco’s smelting furnaces, containing glassy ferrous granules and other metals, at beaches and other … areas at the Assessment Area.”[2] The EPA completed its site assessment in March of 2003 and concluded that the Upper Columbia River Site (the “Site”) was eligible for listing on the National Priorities List (“NPL”).

Teck Cominco owns and operates a lead-zinc smelter (“Trail Smelter”) in Trail, British Columbia.[3] Between 1906 and 1995, Teck Cominco generated and disposed of hazardous materials into the Columbia River in both liquid and solid form. These wastes, known as “slag,” include the heavy metals arsenic, cadmium, copper, mercury, lead and zinc, as well as other unspecified hazardous materials. Before 1995, the Trail Smelter discharged up to 145,000 tons of slag annually into the Columbia River. Even though the discharge took place within Canada, the EPA concluded that Teck Cominco:

has arranged for the disposal of its hazardous substances from the Trail Smelter into the Upper Columbia River by directly discharging up to 145,000 [metric] tons of slag annually prior to mid-1995. Effluent, such as slag, was discharged into the Columbia River through several outfalls at the Trail Smelter … . The slag was carried downstream in the passing river current and settled in slower flowing quiescent areas.[4]

A significant amount of slag accumulated and leached hazardous substances to surface water, ground water, and sediments of the Upper Columbia River and Lake Roosevelt within Washington State. Technical evidence showed that the Trail Smelter was the predominant source of contamination in those areas.

After the EPA determined that the Site was eligible for listing on the NPL, Teck Cominco American, Inc. (“TCAI”) approached the EPA and offered to undertake an independent, limited human health study if the EPA would delay proposing the Site for NPL listing. EPA and TCAI entered into negotiations, which eventually reached a stalemate when the parties could not agree on the scope and extent of the investigation. EPA issued the Order directing Teck Cominco to conduct an RI/FS. To date, Teck Cominco has not complied with the Order, and, because the EPA had not sought to enforce the Order, Patookas brought his citizens suit, seeking to have the district court enforce the Order. Teck Cominco moved to dismiss the case, arguing that the district court could not enforce the Order because it was based on activities carried out by Teck Cominco in Canada. After Teck Cominco filed its motion to dismiss, the State of Washington intervened as a plaintiff in the action.

District Court’s Ruling

In denying Teck Cominco’s motion to dismiss, the district court reached the issue of the extraterritorial application of Superfund, stating that “Congress has the authority to enforce its laws beyond the territorial boundaries of the United States,” but that it is “a longstanding principle of American law ‘that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.’”[5] Notwithstanding this fact, the district court concluded that the presumption against extraterritoriality was overcome, because

there is no doubt that CERCLA affirmatively expresses a clear intent by Congress to remedy “domestic conditions” within the territorial jurisdiction of the U.S. That clear intent, combined with the well-established principle that the presumption [against extraterritoriality] is not applied where failure to extend the scope of the statute to a foreign setting will result in adverse effects within the United States, leads this court to conclude that extraterritorial application of CERCLA is appropriate in this case.[6]

Ninth Circuit’s Ruling

On appeal to the Ninth Circuit, Teck Cominco’s primary argument was that, in the absence of a clear statement by Congress, the presumption against extraterritorial application of United States law precluded CERCLA from applying to Teck Cominco in Canada. The Ninth Circuit construed that argument as requiring it to address whether the presumption against extraterritoriality applies only if this case involves an extraterritorial application of CERCLA.[7]

In analyzing this issue, the Ninth Circuit began by noting that, unlike other environmental laws such as the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act, CERCLA is not a regulatory statute. Rather, CERCLA imposes liability for the cleanup of sites where there is a release or threatened release of hazardous substances into the environment.[8] The district court had found that the Site was a “facility” for CERCLA purposes, and the Ninth Circuit sustained that ruling, noting that Teck Cominco had not disputed the existence of a CERCLA “facility”: “The Order defines the facility as being entirely within the United States, and Teck does not argue that the Site is not a CERCLA facility. Because the CERCLA facility is within the United States, the Court held that “this case does not involve an extraterritorial application of CERCLA to a facility abroad.”[9] However, the real issue on extraterritorial application of CERCLA turned, not on whether the Site was a “facility” for purposes of CERCLA, but instead on whether there was a “release of hazardous substances” within the United States, and whether Teck Cominco was an “arranger,” making it one of the four types of persons who could be held liable under the statute.

With respect to whether a “release” took place within the United States or solely in Canada, the Circuit held that “[o]ur precedents establish that the passive migration of hazardous substances into the environment from where hazardous substances have come to be located is a release under CERCLA. We hold that the leaching of hazardous substances from the slag at the Site is a CERCLA release. That release – a release into the United States from a facility in the United States – is entirely domestic.”[10]

Arranger Liability

The question of extraterritorial application of CERCLA also required the Ninth Circuit to determine whether Teck Cominco was an “arranger” for purposes of CERCLA. There were two issues here: first, because it was undisputed that the initial deposition of slag by Teck Cominco took place in Canada, rather than within the United States, Teck Cominco argued that any “arranging” took place in Canada, and that even though the hazardous substances came to be located in the United States, it could not be held liable under CERCLA without applying CERCLA extraterritorially.

In resolving this question, the Ninth Circuit relied primarily on the United States Supreme Court’s decision in Small v. United States, 544 U.S. 385, 390-91 (2005), which in turn was based in part on United States v. Palmer, 16 U.S. (3 Wheat.) 610, 4 L.Ed. 471 (1818). Palmer involved a statute prohibiting piracy on the high seas and the question of whether the statute was an improper application of extraterritorial legislation. Applying the analysis in Palmer, the Ninth Circuit held that:

The location where a party arranged for disposal or disposed of hazardous substances is not controlling for purposes of assessing whether CERCLA is being applied extraterritorially, because CERCLA imposes liability for releases or threatened releases of hazardous substances, and not merely for disposal or arranging for disposal of such substances. Because the actual or threatened release of hazardous substances triggers CERCLA liability, and because the actual or threatened release here, the leaching of hazardous substances from slag that settled at the Site, took place in the United States, this case involves a domestic application of CERCLA.[11]

In addition, the Ninth Circuit noted that CERCLA is only concerned with imposing liability for cleanup of hazardous waste disposal sites based on an actual or threatened release of hazardous substances into the environment. It does not obligate either foreign or domestic parties to cease the disposal activities such as those that made them liable for cleanup costs; regulating disposal activities is the domain of RCRA or other regulatory statutes. As a result, the Circuit Court held that “applying CERCLA here to the release of hazardous substances at the Site is a domestic, rather than an extraterritorial application of CERCLA, even though the original source of the hazardous substances is located in a foreign country.”[12]

The second issue surrounding arranger liability came from Teck Cominco’s argument that it could not be liable as an “arranger” because it had done all of the disposal itself. Teck Cominco argued that the language “by any other party or entity” in 42 U.S.C. § 9607(a)(3) should be read to modify “or otherwise arranged for disposal or treatment,” and so arranger liability would not attach unless one party arranged with another party to dispose of hazardous substances.[13] The Ninth Circuit rejected this position, holding that accepting Teck Cominco’s argument:

would create a gap in the CERCLA liability regime by allowing a generator of hazardous substances potentially to avoid liability by disposing of wastes without involving a transporter as an intermediary. If the generator disposed of the waste on the property of another, one could argue that the generator would not be liable under § 9607(a)(1) or (a)(2) because both subsections apply to the owner of a facility; as we described above the relevant facility is the site at which hazardous substances are released into the environment, not necessarily where the waste generation and dumping took place.[14]

The Ninth Circuit rejected the reading of CERCLA offered by Teck Cominco, instead relying on its decision in Cadillac Fairview/California, Inc. v. United States, 41 F.3d 562, 565-66 (9th Cir. 1994) (party that sold a product to another party “arranged for disposal” of a hazardous substance), and holding that the phrase “by any other party or entity” refers to ownership of the waste (not the disposal, as Teck Cominco had argued), and that a party may be liable under § 9607(a)(3) if it arranges for disposal of either its own waste or someone else’s waste. “We reject the] argument that [Teck Cominco] it is not liable under § 9607(a)(3) because it did not arrange for disposal of its slag with ‘any other party or entity.’”[15]

Reaction to the Ninth Circuit’s Ruling and Petitions for Rehearing

Some parties expressed frustration with the decision because, by focusing solely on releases within the United States, the Ninth Circuit sidestepped the need to issue a definitive ruling on whether CERCLA applied extraterritorially. A story on the decision appearing in Inside EPA on July 7, 2006, anticipated a request for another hearing at the appellate level or possibly an appeal to the Supreme Court. According to the story, industry sources “would like a definitive ruling on the foreign reach of Superfund.”[16]
Teck Cominco has moved for rehearing and a rehearing en banc. The Ninth Circuit has requested responses to these motions from both the Patookas and the State of Washington by August 11, 2006.

For more information on this case, or on CERCLA issues generally, please contact Steve Jones.