Supreme Court Set To Decide Major Cases under Clean Water, Clean Air, CERCLA and Other Environmental Laws

Introduction

Under Chief Justice John Roberts, the Supreme Court has shown a willingness to review environmental disputes, including cases where the government has opposed certiorari.[1] The Court’s new term, which opens today, is no exception, with six different cases raising environmental issues currently set for consideration. The first four were accepted for certiorari during the prior term: Summers v. Earth Island Institute,[2] where the U.S. Forest Service sought certiorari to review the Ninth Circuit’s injunction prohibiting the Service from excluding certain actions from administrative appeals and notice and comment procedures; Winter v. NRDC,[3] which involves the Navy’s use of medium frequency sonar with possible adverse affects on marine mammals and the appropriate standard for preliminary injunctions in environmental cases; Entergy v. EPA,[4] which poses the question of whether EPA may use a cost-benefit analysis for evaluating whether utilities must install new technology to protect fish and other aquatic life; and Couer Alaska v. SEACC,[5] which requires the Court to choose between competing regimes under the Clean Water Act for the regulation of discharges of mining spoils into navigable waters.

On October 1, 2008, in anticipation of the upcoming term, the Court issued orders granting certiorari in two additional cases: Burlington Northern & Santa Fe Railway Co. v. United States[6] and Shell Oil Co. v. United States[7] and United States v. Navajo Nation.[8] The Burlington Northern and Shell Oil cases, which were consolidated by the Court, present the question of whether passive landowners and arrangers may be held jointly and severally liable under CERCLA if there is evidence that would indicate that apportionment of liability was appropriate. The Navajo Nation case involves the government's fiduciary responsibility to Indian tribes relating to mining rights on tribal land and whether a prior decision by the Court forecloses the United States’ liability under the common law of trust and the Indian Tucker Act.

Oral argument in both Summers and Winter (no seasonal pun intended) is set for this fall, on October 8, 2008. The Entergy case is set for oral argument on December 2, 2008. No date for oral argument has yet been set in the other environmental cases before the Court. A short synopsis of each of the cases set for review is presented below.

Summers v. Earth Island Institute[9]

Congress enacted the Appeals Reform Act in 1992, requiring the Forest Service to provide notice and comment and administrative appeals for land and resource management plans. The Forest Service adopted regulations in 2003 (36 C.F.R. §§ 215.12(f) and 215.4(a)) that carved out exceptions to these administrative appeal and notice and comment procedures. The Earth Island Institute challenged the application of these regulations to the Burnt Ridge Project in the Sequoia National Forest, which would have allowed logging of 238 acres of burned forest for sale as timber. Relying on the regulations adopted in 2003, the Forest Service approved the project without providing either formal notice-and-comment procedures or an appeals process.

The district court issued a preliminary injunction, halting the project and striking down five aspects of the regulatory scheme, including 36 C.F.R. § 215.4(a),[10] and then issued a subsequent order applying its injunction nationwide.[11] Reviewing this decision, the Ninth Circuit affirmed in part and reversed in part. After finding that the plaintiffs had standing, the Ninth Circuit held that many of their claims were not yet ripe. It nevertheless sustained the nationwide injunction against the regulations, holding that the “plain language” of the Appeals Reform Act “states that the Forest Service ‘shall’ provide for administrative notice, comment and appeal. … The statute does not provide for any exclusions or exemptions from its requirement that the Forest Service provide notice, comment, and an administrative appeal for decisions implementing Forest Plans.”[12]

A wrinkle in this case came after the district court issued its injunction. In response, the Forest Service withdrew its decision approving the Burnt Ridge Project, and the parties entered into a settlement agreement under which the Forest Service agreed not to restart the sale without first conducting an Environmental Impact Statement and allowing for notice, comment, and administrative appeals. The plaintiffs dismissed their challenges to the legality of the project with prejudice. The plaintiffs nevertheless maintained their facial challenge to the regulations, arguing that the pre-settlement application of the regulations provided sufficient context to let that challenge go forward. The Ninth Circuit agreed, although the United States has strenuously opposed the facial challenge on the basis of mootness, as well as arguing that the only proper challenge would be to the application of the regulations to a specific project.

In seeking certiorari, the United States framed the issues for review as follows:

1. Whether the Forest Service's promulgation of 36 C.F.R. 215.4(a) and 215.12(f), was a proper subject for judicial review, as distinct from the particular site-specific project to which those regulations were applied;
2. Whether respondents established standing to bring this suit;
3. Whether respondents’ challenge to the regulations remained ripe after the Forest Service cancelled the sale and the plaintiffs’ challenges had been voluntarily dismissed with prejudice based on the settlement; and, finally,
4. Whether the court of appeals erred in affirming the nationwide injunction issued by the district court.

The Supreme Court granted certiorari without reframing the issues.[13]

Winter v. NRDC[14]

This case arises from the Navy’s use of sonar equipment and the potential impacts the use of that equipment can have on marine species. One issue presented by this case is the Ninth Circuit’s use of a lower threshold for issuing a preliminary injunction – a standard that required only a showing of a “possibility of harm” instead of the requirement of “irreparable harm.”[15] In addition, in resolving the case, the Supreme Court must also consider what circumstances constitute an “emergency” sufficient to excuse a federal agency from preparing a complete environmental impact statement (EIS) under the National Environmental Policy Act (NEPA).

The case arises from the Ninth Circuit’s decision affirming an injunction prohibiting the Navy’s use of mid-frequency sonar in training exercises along the Southern California coast in order to protect whales and other marine life. The Ninth Circuit upheld a district court order that granted a motion for a preliminary injunction, required the Navy to prepare an EIS, and imposed certain mitigation measures on the remaining eight of fourteen large training exercises scheduled by the Navy’s Third Fleet in the waters off of Southern California between February 2007 and January 2009 (the SOCAL exercises). The Navy maintained that, for continued battle readiness, personnel using mid-frequency active sonar (MFA sonar) must train with it regularly and under realistic conditions. In 2006, the Navy decided that it did not need to prepare an EIS for the SOCAL exercises, relying instead on a lengthy environmental assessment (EA) that acknowledged that MFA sonar may affect both the physiology and behavior of marine mammals, and that at the least it may overtly disrupt the normal behavior of marine mammals.[16]

The Supreme Court’s summary of the facts and the legal questions presented may foreshadow its willingness to overturn the Ninth Circuit. In summarizing the questions presented, the Court described them as follows:

The district court found a likelihood that the Navy failed to comply with the National Environmental Policy Act (NEPA) and preliminarily enjoined the Navy’s use of midfrequency active (MFA) sonar during training exercises that prepare Navy strike groups for worldwide deployment. The Chief of Naval Operations concluded that the injunction unacceptably risks the training of naval forces for deployment to high threat areas overseas, and the President of the United States determined that the use of MFA sonar during these exercises is “essential to national security.” The Council on Environmental Quality (CEQ), applying a longstanding regulation, accordingly found emergency circumstances for complying with NEPA without completing an environmental impact statement. The Ninth Circuit nevertheless sustained the district court’s conclusion that no “emergency circumstances” were present and affirmed the preliminary injunction. The questions presented are:

1. Whether CEQ permissibly construed its own regulation in finding “emergency circumstances.”
2. Whether, in any event, the preliminary injunction, based on a preliminary finding that the Navy had not satisfied NEPA’s procedural requirements, is inconsistent with established equitable principles limiting discretionary injunctive relief.

The Supreme Court’s decision must be made before December 2008, when the Navy conducts its last scheduled SOCAL training exercise, in order for the case to avoid possibly becoming moot. If the Court takes the opportunity to address broad issues related to the standards for injunctive relief when a federal agency has failed to comply with NEPA procedures, the decision could create new standards for both agencies and challengers to meet.

Entergy v. EPA[17]

This case presents the question of whether the Environmental Protection Agency may undertake a cost-benefit analysis in connection with regulations requiring utilities to install new technology to protect fish and other aquatic life when withdrawing water out of rivers and streams to cool turbines. The Second Circuit opinion from which certiorari was granted is the latest in a series of opinions addressing EPA’s attempt to craft regulations applying § 316(b) of the Clean Water Act, which is “intended to protect fish, shellfish, and other aquatic organisms from being harmed or killed by regulating ‘cooling water intake structures’ at large, existing power-producing facilities.”[18]

EPA’s latest rulemaking to implement the command of § 316(b) followed amendments to the Clean Water Act in 1989, when Congress changed the standard for control technology from one allowing EPA to consider “the total cost … in relation to the effluent reduction benefits to be achieved,” with a list of factors the agency could consider, to a standard that allowed EPA to consider only “the cost of achieving such effluent reduction”[19] but without including a list of permissible factors that EPA could examine in determining the cost of the control technology. Petitions from both a number of states[20] and environmental groups challenged EPA’s new cooling water intake regulations.[21]

The Second Circuit concluded that several portions of the rule were not consistent with the statute, were not supported by substantial evidence, or were not properly subject to notice and comment rulemaking. With respect to the use of cost-benefit analysis in assessing control technology, the Second Circuit stated that “[a]lthough the EPA is permitted to consider a technology’s cost in determining whether it is ‘practicable,’ ‘economically achievable,’ or ‘available,’ it should give decreasing weight to expense as facilities have time to plan ahead to meet tougher restrictions.”[22] The Second Circuit concluded that “the language of section 316(b) itself plainly indicates that facilities must adopt the best technology available and that cost-benefit analysis cannot be justified in light of Congress’s directive”[23] and that “the statute does not permit the EPA to choose [a particular control technology] on the basis of cost-benefit analysis.”[24] While some portions of the rule were upheld, other portions were remanded to EPA for further consideration consistent with the Second Circuit’s findings. Several utilities sought certiorari from the Supreme Court, and the Solicitor General also weighed in on the case.

The Supreme Court’s decision to grant certiorari was made over the Solicitor General’s opposition.[25] The Solicitor General had earlier argued that the Second Circuit was wrong in holding that EPA could not undertake a cost-benefit analysis. But, he also pointed to the fact that EPA was conducting a new review that may take some months, and that review might change the shape of the legal dispute. He also pointed out that EPA had already issued a Phase III rule that expressly relied on cost-benefit considerations, and that the new rule was currently under review in the Fifth Circuit.[26] Based on these facts, the Solicitor General urged the Supreme Court to defer consideration of the issue until that appeal had been decided.[27] The Solicitor General conceded, however, that the impact of the existing rule during the pendency of the Fifth Circuit’s review would have “dramatic effects. Nationwide, the costs would exceed $3.5 billion annually … [and would reduce] the amount of energy created by affected plants while forcing others to remain idle during extensive retrofits (or close their doors forever).”[28]

In their petitions for certiorari, the utilities pointed to estimates of much higher costs that compliance with EPA’s rule could entail, arguing that the rule “threaten[ed] to impose billions of dollars in costs on the electric generating sector for no appreciable benefit.”[29] According to the Utility Water Act Group, “[r]etrofitting would saddle the economy with billions of dollars of costs, lose significant energy generating capacity, and increase greenhouse gas emissions. … [T]he nationwide cost of retrofitting would be $40 billion, about 18 percent of the industry’s revenues. … The plants may be forced to shut down and the energy penalties imposed by retrofitting raise serious concerns about electric system reliability.”[30]

As framed by the Court, the issue presented for review is:

Whether Section 316(b) of the Clean Water Act, 33 U.S.C. 1326(b), authorizes the Environmental Protection Agency (EPA) to compare costs with benefits in determining the “best technology available for minimizing adverse environmental impact” at cooling water intake structures.

The decision of the Court will not only affect the utility industry and consumers, but could have even broader ramifications for the use of cost-benefit analysis in agency rulemaking.

Couer Alaska v. SEACC[31]

This case presents the question of which Clean Water Act (CWA) permitting regime will apply to the discharge of mining spoils into navigable waters: § 404 of the CWA, which is primarily administered by the U.S. Army Corps of Engineers (Corps), or § 402 of the CWA, which is administered by EPA or those states where the § 402 permitting program has been delegated.

Under § 404, the Corps may issue permits for discharges of “fill material,” which are subject to the water-quality restrictions imposed by § 404(b)(1). Under § 402, the EPA may issue permits for the discharge of all other pollutants, subject to the effluent limitations prescribed under §§ 301 and 306. The discharges that were the subject of the lawsuit were originally permitted by the Corps under § 404 and allowed Coeur Alaska, Inc. (Coeur Alaska) to dispose of gold mine tailings by discharging them into a lake. While EPA concurred with this permit, it was challenged by environmental groups, who argued that the effluent regulations in §§ 301 and 306 governed the discharge of mine tailings and had precedence over the Corps’ § 404 permit. The Ninth Circuit held that the plain language of the CWA required that the discharges comply with the standards of performance issued by EPA under §§ 301 and § 306 of the CWA (i.e., those standards applicable to § 402 permits). The Ninth Circuit reversed the district court’s decision and remanded the case to the district court to vacate the mine tailings permit issued by the Corps pursuant to § 404.

Coeur Alaska and the State of Alaska sought certiorari, contending that the § 404 and § 402 permitting schemes are mutually exclusive: “[The CWA] entrusts to the Corps of Engineers the authority to issue permits ‘for the discharge of … fill material into the navigable waters,’ while the authority to issue permits for all pollutants other than ‘fill material’ rests with EPA.”[32] The petitioners pointed to the fact that § 404(p) provides that “[c]ompliance with a permit issued pursuant to [§ 404] … shall be deemed compliance … with [Section 301].”[33] Discharges that fall under Section 402 … must meet “all applicable requirements” under Sections 301 and 306 of the Clean Water Act, including compliance with “[e]ffluent limitations” applicable to existing point sources,[34] while § 306 applies more stringent effluent limitations, known as “standards of performance,” to new point sources.[35]

The United States opposed certiorari, even while agreeing with Coeur Alaska and the State of Alaska that the Ninth Circuit’s decision was in error. Notwithstanding that concession, the government argued that there was no division among the courts of appeals on that question and also contended that the issues were not sufficiently important to warrant Supreme Court review. Despite opposing the petition, the United States nonetheless stated that, if the Court were to grant certiorari, it would support the petitioners’ reading of the CWA.[36] The Supreme Court granted Coeur Alaska’s and the State of Alaska’s petition for certiorari in June 2008, over the objection of the Department of Justice.

Burlington Northern and Santa Fe Railway Company v. United States
Shell Oil Company v. United States[37]

The BNSF case is potentially a game-changer for Superfund practitioners and their clients. It squarely presents the issue of whether Superfund liability is joint and several where a “reasonable basis” for apportionment exists. The case also asks the Court to determine the evidentiary standard a defendant must meet in order to establish a right to apportionment.

The case[38] arises out of a fairly common fact pattern for CERCLA cases – a now defunct company, Brown & Bryant, Inc. (B&B) owned and operated a facility where agricultural chemicals were stored and distributed. Its operation was located on a 4.7 acre parcel, of which about a .9 acre piece was leased from predecessors to BNSF and Union Pacific Railroad (collectively, the Railroads). The Railroads did not have any role in B&B’s operations and all parties agreed that the only basis for imposing liability against them was their status as “owners” under 42 U.S.C. Sec. 9607(a). Shell Oil delivered some of the chemicals that were stored and distributed by B&B. The chemicals were stored in steel tanks, and leaks occurred both in the delivery of the chemicals, and also because the chemicals were corrosive and damaged the storage tanks.[39]

B&B’s sloppy operation caused the soil and groundwater site to become contaminated and, in 1988, California’s Department of Toxics Substances Control ordered B&B to clean it up. Soon thereafter, B&B went out of business. In 1989, EPA listed the site on the NPL. The Railroads were named potentially responsible parties and ordered to clean up the entire site, even though they owned only a small portion of it, a portion that did not require remediation.

In 1996, the United States and the State of California filed a cost recovery action against the Railroads and Shell, seeking to recover over $8 million in response costs. After a lengthy bench trail, in a 185-page opinion, the district court held the Railroads liable as owners and Shell liable as having “arranged” for the disposal of hazardous substances. However, when it came to the issue of damages, the district court found that the trial evidence demonstrated that the harm was capable of apportionment and, based on that evidence, allocated the Railroads a 9% overall share and Shell a 6% overall share of the governments’ cleanup costs,[40] leaving 85% of the governments’ costs unreimbursed.

While it agreed with the governments that the defendants’ burden to show an appropriate basis for apportionment “is heavy,” and that “[t]he evidence supporting divisibility must be concrete and specific,” the district court concluded that defendants had met that burden. The apportionment showing was based on years of ownership, the relative amount of property owned and the estimated maximum contribution of the contaminants released by each party. After reviewing the evidence, the district court apportioned the Railroads’ share of liability by multiplying the percentage of the overall land owned by the Railroads (19.1%), the percentage of time the Railroads leased land to B&B during its operations (45%), and the percentage of overall site contamination attributable to the two chemicals that had contaminated the Railroad’s land (66%), generating an initial allocation of 6% for the Railroads. Then, allowing for “errors in calculation,” the district court applied a 50% premium to that figure, and came up with a 9% overall share for the Railroads. A similar type of analysis was used to come up with Shell’s 6% share.

In its review of the district court’s decision, the Ninth Circuit began by affirming, at least in concept, the validity of the divisibility doctrine, acknowledging that “apportionment is available at the liability stage in CERCLA cases.”[41] Nevertheless, the Ninth Circuit held that, in this case, the evidence was not “sufficiently clear” to justify apportionment.[42] It found the district court’s approach too simplistic, and at one point referred to apportionment based on the percentage of land owned as a “meat axe approach.” The Ninth Circuit found that, by leasing land to B&B, the Railroads enabled the operator to purchase and spill more chemicals, and it faulted the Railroads for failing to produce “records that separate out, with any precision, the amount of toxic chemicals stored” at the facility. The Ninth Circuit similarly rejected the district court’s apportionment based on years of operation, arguing that it assumed a constant rate of spillage. It also found that there was “no evidence” as to which chemicals spilled on the Railroads’ parcel.

In its petition for certiorari, BNSF argued that the facts as found by the district court supported divisibility, and that joint and several liability should not be applied.[43] BNSF pointed to the Ninth Circuit’s concession that the evidence necessary for apportionment “is, as a practical matter, not available for periods long in the past.”[44] BNSF made no bones about arguing that the Ninth Circuit’s motivation was to “ensure that CERCLA liability is essentially always joint and several, so that EPA and the States can always collect the ‘orphan’ shares of any insolvent PRPs from private parties, rather than spreading those costs across society as a whole.”[45]

Shell also filed a cert petition, but addressing a different issue – namely, Shell’s liability as having “arranged for disposal of hazardous substances.” In its petition, Shell argued that the Ninth Circuit’s application of arranger liability was broader than that employed by any other Circuit Court.[46] According to Shell, “no other circuit has found a manufacturer liable under CERCLA as an arranger of hazardous substance disposal where, as here, that manufacturer sells (1) a new useful product manufactured for sale (2) that is shipped by common carrier with delivery FOB destination, so that (3) title, possession and ownership are transferred to the purchaser when the common carrier arrives, and thus (4) the manufacturer lacks ownership or actual control of the product that is spilled or leaked into the environment.”[47]

Navajo Nation v. United States[48]

While this case arises out of coal leases on the Navajo Reservation, the primary issue is not environmental, but concerns the legal basis for an Indian tribe’s claim under 28 U.S.C. 1505, known as the Indian Tucker Act. The decision below was issued by the Federal Circuit, which reversed the Court of Federal Claims’ decision rejecting a claim for damages by the Navajo Nation against the United States under the Indian Mineral Leasing Act.[49]

In United States v. Navajo Nation,[50] the United States Supreme Court held that the Indian Mineral Leasing Act and its regulations did not constitute a substantive source of law required to establish a claim for money damages. However, the Federal Circuit maintained that the Supreme Court’s decision left open the question of whether “the network of other statutes and regulations asserted by the Nation provides the required substantive source of law.”[51]

The Navajo Nation’s asserted a $600 million claim for breach of the United States’ trust duty to the Tribe after the Secretary of Interior failed to impose an appropriate royalty rate for coal that was mined on Navajo lands.[52] The Court of Claims rejected the Navajo’s claim, finding that there was no substantive legal basis for the monetary claim. On appeal, the Federal Court reversed, holding that a network of treaties, statutes and Interior regulations was sufficient to provide a substantive basis for the claim.[53]

The United States sought certiorari of this decision, arguing that the Supreme Court’s prior decision foreclosed the basis for liability adopted by the Federal Circuit,[54] and that implementation of that decision would “threaten serious adverse consequences for the government.”[55] These adverse consequences included not only the $600 million sought by the Navajos, but also the prospect of encouraging damage claims whenever the federal government acts “in a regulatory capacity to oversee third-party activities on Indian lands under environmental or other statutes.”[56]

For more information on these and other environmental law cases, please contact Steven G. Jones or any other member of Marten Law Group’s Environmental Litigation practice group.