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Owner of a Lonely Heart: Federal Government Liable for CERCLA Damages on Public Lands

September 21, 2017

Two federal courts recently ruled that the United States may be liable for the cleanup costs associated with historic mining operations as “owners” of public lands.[1] The courts held that an “owner” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is at bare minimum, the legal title holder and does not need to engage in the operations or oversight of the facility or the release of the hazardous substance at issue to be held liable.

Although these particular courts have yet to address the equitable allocation of response costs to the United States, these decisions are part of a growing trend of decisions finding the federal government liable in its various roles as landlord of the federal estate. With the liability question coming into sharper focus, these cases may provide mining companies more leverage in cleanup negotiations. By contrast, given the federal government’s growing liability profile, it may insist on more conditions or compensatory mitigation in authorizing the use of public land to mining companies, as a hedge against future liability of any cleanup costs. In any event, these decisions have the potential to shape the relationship between the United States and mining companies in the West.

CERCLA Background

CERCLA was designed to promote the “timely cleanup of hazardous waste sites and to ensure that the costs of such cleanup efforts were borne by those responsible for the contamination.”[2] Specifically, CERCLA casts a wide liability net and allows plaintiffs to recover cleanup costs from potentially responsible parties (“PRPs”), so as to ensure hazardous waste cleanup. PRPs include “owners,” “operators,” “arrangers,” and “transporters.”[3] The “owner” and “arranger” classifications are at issue in the cases discussed here.

Chevron Mining v. United States

Background

Chevron Mining and its corporate predecessors mined molybdenum on unpatented mining claims[4] on mostly national forest lands in New Mexico, ultimately incurring cleanup costs likely to exceed $1 billion.[5] Chevron filed suit against the United States, claiming that the federal government was liable under CERCLA as an “owner” of portions of the site and as an “arranger” of hazardous substances disposal.[6] On cross motions for summary judgment, the district court determined that the government’s ownership interest was insufficient to establish “owner” liability. The Tenth Circuit Court of Appeals reversed and held that the United States did qualify as an “owner” but not as “arranger.”[7]

Owner Liability

CERCLA owner liability attaches to any person owning the contaminated facility at the time of disposal of any hazardous substance owned, including past and present owners.[8]

In this case, the Tenth Circuit used the common dictionary definition to verify that “owner” means, at a bare minimum, the “legal title holder.”[9] The court affirmed that this broad interpretation is consistent with CERCLA by discussing various portions of the statute that distinguish between those parties actually involved with hazardous waste handling or disposal and mere owners. For example, in one context, CERCLA distinguishes between owners, operators, and significant contributors of hazardous substances.[10] The court found that these statutory provisions confirm that an “owner” under CERCLA is not required to have participated in the hazardous substance operations or disposal to be held liable but only need be the “legal title holder.”

Although the federal government did not dispute that it held legal title to the relevant portion of the mining lands at the time of hazardous waste disposal, the United States urged the Tenth Circuit to adopt an “indicia of ownership” test.[11] In United States v. Friedland, a Colorado court, as part of determining “owner” liability under CERCLA, “required examining ‘the relationship between the United States, as owner of bare legal title of the unpatented mining claim/property, and those entities utilizing the property subject to the unpatented mining claim,’ to discern ‘whether the United States possessed indicia of ownership sufficient to merit the appellation ‘owner’ for purposes of CERCLA.’”[12] In Chevron Mining, the Tenth Circuit roundly rejected the Friedland test, finding it “neither persuasive in principle nor in application.”[13] The court found that: 1) CERCLA supports broad application of liability; 2) Congress carved out very narrow exceptions based on indicia of ownership for lenders holding security interests on property and could have done the same for all owners if it desired; and 3) the Friedland test runs the risk of collapsing the “owner” and “operator” categories clearly delineated in CERCLA.[14] The Tenth Circuit also pointed out that Friedland is in conflict with Supreme Court precedent, which emphasizes that Congress has plenary power to legislate the use of public lands, i.e., the power to exercise more than an indicia of ownership or act as more than mere regulators.[15] Finally, the court emphasized that an owner liable under CERCLA need not own any of the mining equipment or structures, but that the CERCLA “facility” broadly includes the land where a hazardous substance has been released, and an owner need only own the land on which the release occurs to be held liable.[16] It is also notable that an “owner” need not own the entire facility, as here, mining operations and waste disposal were not entirely conducted on federal ground.

Interestingly, while firmly holding that fee title owners of land are covered as CERCLA “owners” without any additional indicia of ownership, the court went on to opine about how in this case, the United States “engaged in much more than mere passive ownership,” by selling portions of land to the mining company in a land exchange and loaning money to the mining company for mining operations.[17] This may indicate the court’s willingness to eventually allocate meaningful response costs to the United States based on its ownership activities.

Arranger Liability

Chevron also claimed that the United States is as an “arranger” under CERCLA. To be held liable as an arranger, three elements must be satisfied: 1) the party must be a “person” as defined in CERCLA; 2) the party must “own” or “possess” the hazardous substance prior to the disposal; and 3) the party must, “by contract, agreement or otherwise,” arrange for the transport or disposal of such hazardous substances.[18] The court held that, in this case, the United States did not qualify as an “arranger” because it did not satisfy the second element, as the federal government did not own nor possess the hazardous substances disposed of.[19]

The court dispensed with the first requirement easily, as the United States is a “person” as defined in CERCLA.[20] With regard to whether the United States owned or possessed the hazardous substance, Chevron did not develop a factual argument, although it suggested that the United States owned the mining waste rock because it owned the land from which the rock was extracted.[21] Instead, Chevron attempted to convince the Tenth Circuit that ownership or possession is not a requirement at all. The court rejected this argument, stating that other Circuit Courts of Appeals agree with the ownership or possession requirement, the statute supports the requirement, and Chevron ultimately failed to cite persuasive contrary authority.[22]

The most interesting analysis in the arranger liability portion of the decision relates to factor three: whether the United States “by contract, agreement or otherwise” arranged for the transport or disposal of the hazardous substances. The Supreme Court has previously held that not all involvement in the disposal process triggers arranger liability, holding that while it is “plain from the language of the statute that CERCLA liability would attach under § 9607(a)(3) if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance,” it is equally clear that, at the other extreme, “an entity could not be held liable as an arranger merely for selling 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…Less clear is the liability attaching to the many permutations of ‘arrangements' that fall between these two extremes.” [23] In such cases, “whether an entity is an arranger requires a fact-intensive inquiry” that requires more than “knowledge alone”; an arranger must have taken “intentional steps to dispose of a hazardous substance.”[24]

In Chevron Mining, the court cited several actions by the United States that together may constitute intentional steps that qualify as “arranging.” First, the United States sold 246.65 acres in a land exchange to Chevron with the knowledge that the lands were intended to be used as a disposal area and sold an additional 627 acres of land to Chevron with the intent that the lands be used as a tailings pond.[25] In addition, the United States routinely approved special use land authorization permits for pipelines crossing over national forest lands with the specific intent that Chevron would use the pipelines to transport tailings from the mine site to the disposal ponds.[26] The court held that these actions “may well constitute sufficiently ‘intentional steps’ to satisfy the third condition of arranger liability[,]” but ultimately did not base its ruling on this factor, as it held that the United States did not satisfy the ownership or possession requirement.[27]

El Paso Natural Gas Co. LLC v. United States

Background

El Paso Natural Gas mined uranium at 19 mines on the Navajo Reservation in the southwestern United States and has incurred substantial costs remediating these mines.[28] El Paso Natural Gas filed suit against the United States, claiming that the federal government is liable under CERCLA as an “owner,” “operator,” and “arranger.” On El Paso Natural Gas’ motion for summary judgment on the federal government’s “owner” liability, the United States District Court of Arizona held that the United States qualifies as an “owner” under CERCLA.[29]

Owner Liability

As in Chevron Mining, there is no dispute that the United States owned fee title to the mine sites at issue for over six decades; nonetheless, the United States argued that it is not an owner under CERCLA because its ownership is limited, as it holds the reservation land in trust for the benefit of the Navajo Nation.[30]

In deciding this case, the court closely followed the Chevron Mining court’s reasoning, discussing the broad reach and lofty purpose of CERCLA and the ordinary meaning of owner, explicitly holding that “[f]or purposes of CERCLA, then, an owner includes the legal title holder of contaminated land. Because the United States holds legal title to the Mine Sites, it is the owner of the Mine Sites under the ordinary meaning of ‘owner.’”[31]

The court also examined tribal law as it relates to land ownership, concluding that “[w]hile the United States has granted a significant property interest to the Navajo Nation—exclusive use and possession of reservation land, amounting to a compensable interest—the fact remains that the United States holds fee title and substantial power over the land, including the power to enter, control alienation, and take [similar to an unpatented mining claim]. Given CERCLA's broad remedial purposes, its simple declaration that facility owners are liable, and the Court's obligation to construe ‘owner’ liberally, the Court concludes that a fee title holder with such plenary and supervisory powers is an owner for purposes of CERCLA.”[32]

Implications

These courts are not the first to hold the United States liable in the context of CERCLA cleanup suits involving mining sites. For example, in 2011, the United States District Court of Idaho held the United States liable as both an “arranger” and an “operator” based on the government's ability to dictate the terms of the waste disposal decisions through permitting on public lands.[33] This trend toward holding the United States liable for CERCLA cleanup of mining sites in its various roles as landlord has many potential implications.

Because CERCLA’s liability net is cast broadly, “capturing virtually everyone connected with the property or the contamination,” these cases are a win for the mining industry. A finding of liability is the first step in a CERCLA suit, and given the federal government’s long-term role in the mining industry, it would not be surprising if courts began to allocate costs in addition to liability. This expanded liability also has spillover effects in the natural resource damages context that may provide companies with greater leverage in negotiating those costs.[34]

But finding a party liable does not necessarily mean that party will pay cleanup costs. In CERCLA Section 113 suits, courts conduct equitable allocation among the parties in the suit, and in these mining cases, courts may find the federal government’s potentially passive role is not deserving of a large, or any, share of the response costs. Further, given the federal government’s heightened liability profile, it may insist on more conditions in authorizing the use of public land to conduct mining operations, as a hedge against future liability of any cleanup costs.

Whether in the leasing, permitting, or cleanup process, these decisions will have an impact on the relationship between mining companies and the federal government.

For more information, please contact Tom Perry, Sarah Wightman, or one of the other attorneys in the Firm’s Waste Cleanup, Litigation, or Permitting and Environmental Review practice groups.

[1] See Chevron Mining v. United States, 863 F.3d 1261 (2017); El Paso Natural Gas Co. LLC v. United States, 2017 WL 3492993 (D. Ariz. 2017).

[2] Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 602 (2009) (citation omitted).

[3] 42 USC § 9607(a).

[4] “The holder of an unpatented claim has superior rights as against third parties but not as against the United States, which retains paramount title.” Chevron Mining, 863 F.3d at 1272 (citing United States v. Etcheverry, 230 F.2d 193, 195 (10th Cir. 1956)). “Issuance of a patent transfers title in the underlying public land from the United States to the patent holder.” Id. The result of this case may have been different if the mining claim was patented before the release of hazardous substances, as then the title in the underlying public land would have been transferred to the patent holder.

[5] Id. at 1266.

[6] Id.

[7] Id. at 1269.

[8] 42 U.S.C. § 9607(a).

[9] Chevron Mining, 863 F.3d at 1273.

[10] Id. at 1274 (citing 42 U.S.C. § 9605(h)(4)(A)).

[11] See United States v. Friedland, 152 F.Supp.2d 1234 (D. Colo. 2001).

[12] Id. at 1275 (citing United States v. Friedland, 152 F.Supp.2d 1234, 1244 (D. Colo. 2001))

[13] Id. at 1275.

[14] Id.

[15] Id. at 1276.

[16] Id. at 1276-77.

[17] Id. at 1278.

[18] Raytheon Constructors, Inc. v. Asarco Inc., 368 F.3d 1214, 1219 (10th Cir. 2003).

[19] Chevron Mining, 863 F.3d at 1279.

[20] 42 U.S.C. § 9601(21).

[21] Chevron Mining, 863 F.3d at 1283.

[22] Id. at 1282-83.

[23] Id. at 1279 (quoting Burlington N. & Santa Fe Ry., 556 U.S. at 609–10).

[24] Id.

[25] Id. at 1280.

[26] Id. at 1280-81.

[27] Id. at 1281.

[28] El Paso Natural Gas Co. LLC v. United States, 2017 WL at *1.

[29] Id.

[30] Id.

[31] Id. at *2.

[32] Id. at *5 (citation omitted).

[33] Nu-West Mining Inc. v. United States, 768 F.Supp.2d 1082 (D. Id. 2011). For more information on this case, see the previous Marten Law Newsletter US Held Liable for Cleanup Costs at Mining Site Leased to Private Operator.

[34] See 42 USC § 9607(f).

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