Court Allows Natural Resource Trustees To Recover Assessment Costs As Incurred

Sometimes called the “sleeping giant” of the Superfund law, relatively few Natural Resource Damage (“NRD”) cases have been litigated, in part because of the enormous up-front cost of performing an injury assessment to prove damages. But a ground-breaking decision this week by a federal court in Washington state allows Trustees – in this case the states of Washington and Oregon, and the Yakama, Nez Perce and Umatilla Tribes – to recover in a declaratory judgment action the costs of injury assessment as they are incurred, even before proving up their damages. The September 4, 2007 decision in Confederated Tribes and Bands of the Yakama Nation v. United States[1] allows Trustees – which include federal and state resource agencies and tribes – to recover their reasonable assessment costs as soon as they establish the liability of one or more responsible parties, even well before they establish the amount of natural resource damages owed.

Background

The Confederated Tribes and Bands of the Yakama Nation (“Yakama Tribe”) brought suit against the United States Department of Energy and the Department of Defense in September, 2002, seeking to recover past and future natural resource injury assessment costs, as well as a monetary judgment against the defendants, jointly and severally, for alleged injury, destruction or loss of natural resources resulting from the defendants’ release of radionuclides and other hazardous substances at the Hanford Nuclear Reservation in southeastern Washington (“Hanford Reservation”). The states of Washington and Oregon and the Nez Perce and Umatilla Tribes intervened, solely for the purpose of seeking a declaratory judgment allowing them to recover their injury assessment costs.[2] The Yakama Tribe has estimated that a full assessment of the natural resource damages from the Hanford reservation could cost up to $100 million.[3]

The United States’ Motion to Dismiss

In October, 2006 the United States moved to dismiss both the claim to recover assessment costs and the Yakama Tribe’s claim for damages. The United States argued that the Trustees’ claims were premature because the Environmental Protection Agency (“EPA”) has not selected the final remedy for the Hanford site.

Under CERCLA’s statutory framework, the United States argued, natural resource damage claims are a “residue of the cleanup action,” based on the condition of the natural resource after the cleanup, and therefore cannot properly be assessed until the remedial action has been selected and the likely effects of the remedy on the resource have been taken into account. The United States argued that its position was consistent with CERCLA §§113(g)(2) and 113(g)(1), and that the Trustees’ claims could not be brought before EPA has selected a remedy and issued a Record of Decision.

The relevant statutory provisions provide that in an action for “recovery of costs referred to in §107” of CERCLA:

… the court shall enter a declaratory judgment on liability for response costs or damages that will be binding on any subsequent action or actions to recover further response costs or damages.”

CERCLA §113(g)(2).

However, the statute imposes constraints on bringing such an action. Specifically, CERCLA §113(g)(1) states that:

… In no event may an action for damages under this chapter . . . be commenced (i) prior to 60 days after the Federal or State natural resource trustee provides to the President and the potentially responsible party a notice of intent to file suit, or (ii) before selection of the remedial action if the President is diligently proceeding with a remedial investigation and feasibility study under section 9604(b) of this title or section 9620 of this title (relating to Federal facilities).[4]

This section of the statute establishes a limit on the earliest a natural resource damage claim may be brought – after selection of the remedial action.

The Decision

The Court held, based on a plain reading of the statute, that the section of the statute relied on by the United States applied only to “damages” and not to “costs.”

Simply put, “costs” are intended to reimburse a party for certain expenses incurred by it, whereas “damages” are intended to compensate a party for an injury or a loss. In the context of §9607(a)(4)(C), this means that injury assessment costs reimburse a party for costs incurred in determining the extent of an injury (a damages assessment), whereas damages compensate for the injury (the loss) itself in order to make the party whole. This plain meaning is evident from the plain language of §9607(a)(4)(C), as well as the plain language of (a)(4)(A), (B), (C), and (D), all of which refer to categories of costs.[5]

Actions for the recovery of costs, the court concluded, need not await the selection of a remedial action before they may be commenced.[6] The court went even further, however, finding that the limitations period contained in §113(g)(2) – the section requiring actions for the “recovery of costs referred to in §107” for removal or remedial actions – did not apply to the recovery of natural resource damage assessment costs. Specifically, it held that the prohibition applied only to “response costs” specified in §§107(a)(4)(A) and (B), and not to the costs of assessing natural resource injury under §107(a)(4)(C) or the costs of a health assessment carried out under §107(i).[7] In reaching this result, the court pointed to the last half of §113(g)(2), which provides that:

A subsequent action to recover further response costs … may be maintained at any time during the response action, but must be completed no later than 3 years after the date of completion of all response action. Except as otherwise provided in this paragraph, an action may be commenced under section 9607 of this title for recovery of costs at any time after such costs have been incurred.[8]

Seizing on the difference between “response costs” specified in §§107(a)(4)(A) and (B) and “assessment costs” incurred under §107(a)(4)(C), the court concluded that the three year statute of limitations in §113(g)(2) applied only to response costs, and that “assessment costs” could be recovered “at any time after such costs have been incurred.”[9] Judge Suko’s decision essentially reads any statute of limitations for recovering assessment costs out of the statute.

The court did not have before it the question as to whether the United States is a Potentially Responsible Party (“PRP”) at the Hanford Reservation, and therefore responsible for assessment costs. But, the court noted in dicta, if the Trustees subsequently prove that the United States is a PRP, then the United States will be liable for the costs the Trustees have already incurred, and for their future assessment costs, provided that they are “reasonable.”[10]

Implications

Trustees – especially tribal and state Trustees – often lack the resources to perform a natural resource damage assessment. For that reason, they may not have brought certain claims, and/or may have sought to have the PRPs fund or perform the assessment. If Judge Suko’s decision is followed and/or upheld, the Trustees will have gained a distinct tactical advantage in NRD litigation, by being in a position to obtain a declaratory judgment allowing them to recover their assessment costs “as they go,” putting them in a better financial position to prosecute those claims.

While significant, the decision is unlikely to open the floodgates of NRD litigation. Certainly, there are some sites where Trustees have significant unreimbursed assessment costs, and they may be emboldened by this decision to seek to recover those costs. But the Trustees will still have to prove the liability of the responsible parties, and there remain substantial areas of controversy in this area of law.

Rather than opening the floodgates, this decision will more likely cause parties in NRD litigation to reconsider the way natural resource damage claims are prosecuted and defended. The battle lines will likely be drawn earlier, at the liability phase, because, under this decision, both Trustees and responsible parties benefit from an early liability determination. From the Trustees’ perspective, if the government (federal, state, or tribal) has a limited amount of money to spend, it may want to spend it establishing who is liable for assessment costs, and then shift those costs, and the natural resource damages, to the liable parties. Indeed, where assessment costs are as high as they appear to be at the Hanford Reservation, this is the Trustees’ only choice.

From the PRPs’ perspective, it may make sense for parties who believe they have credible defenses not to volunteer to fund an assessment, but instead to test the strength of those defenses at an early stage. Likewise, it may make sense to bring other PRPs into the litigation to share any costs ultimately assessed.

For more information about this decision, and regarding natural resource damage claims generally, please contact Brad Marten.