November 01, 2017

In Brief

John R. Jacus

Administrative Procedure Act, ripeness (Hydraulic Fracturing Rule)

Wyoming v. Zinke, No. 16-8068, 2017 WL 4173619 (10th Cir. Sept. 21, 2017).
The Tenth Circuit Court of Appeals dismissed litigation challenging a 2015 Obama-era federal rule that strengthened hydraulic fracturing regulations on federal and Native American lands (2015 Rule) based on the Trump administration’s comments and the U.S. Bureau of Land Management’s (BLM) July 2017 proposal to officially rescind the 2015 Rule. Environmental groups and the BLM appealed a Wyoming federal judge’s decision striking down the 2015 Rule, which was initially challenged by states and industry groups. Ultimately, the split three-judge panel dismissed the appeals and the lower court case as “prudentially unripe” because BLM has commenced rescinding the regulation. There is some uncertainty about the current status of the 2015 Rule, because the effective deadlines for implementation have passed.

Clean Air Act

Clean Air Council v. Pruitt, 862 F.3d 1 (D.C. Cir. 2017).
The D.C. Circuit vacated EPA’s administrative stay of portions of the methane regulations in the New Source Performance Standards (NSPS) for the Oil and Natural Gas Sector. EPA sought to stay further judicial review and issued a temporary stay of the prior rule pending the agency’s reconsideration of those methane regulations. The court held, however, that EPA failed to comply with the requirements for reconsideration and stay contained in Clean Air Act § 307(d)(7)(B) and therefore that the agency’s action was invalid. The majority opinion concluded that EPA’s authority to stay the rule was expressly linked to the statutory requirements for administrative reconsideration set forth in § 307(d)(7)(B). EPA claimed broad discretion to reconsider its own rules, but the court disagreed, stating that EPA could not ignore or fail to enforce its own rules. Also, when EPA issued the stay, it relied upon § 307(d)(7)(B), and not a broader inherent authority. A subsequent petition for rehearing en banc was denied.

CERCLA

Asarco, LLC v. Atlantic Richfield Co., 866 F.3d 1108 (9th Cir. 2017).
The Ninth Circuit held that the plaintiff, Asarco, is entitled to a contribution claim against a fellow potentially responsible party (PRP) and defendant Atlantic Richfield under section 113 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) based upon a non-CERCLA settlement agreement. In 1998, the United States sought civil penalties under the Resource Conservation and Recovery Act (RCRA) and the Clean Water Act, resulting in a judicially-approved settlement agreement with Asarco (the 1998 decree). Thereafter, Asarco filed for Chapter 11 bankruptcy protection and ultimately entered into a judicially-approved consent decree with the government under CERCLA in 2009 (the 2009 decree). In 2012, Asarco brought a contribution action against Atlantic Richfield and the district court dismissed Asarco’s claims, holding that the 1998 decree triggered CERCLA’s three-year statute of limitations and the 2009 decree did not create any new cleanup obligations or costs not addressed in the 1998 decree. The Ninth Circuit first determined that the phrase “response actions,” under §113(f)(3)(B), which requires a party seeking contribution to first resolve its liability for “response actions,” is not limited to CERCLA actions and can include costs incurred for “corrective measures” under RCRA. The Ninth Circuit held that Asarco’s obligations under the 1998 decree were “response actions,” but rejected the district court’s ruling that the statute of limitations had expired because it held that Asarco’s claim was timely based on the 2009 decree. This determination turned on the court’s interpretation of what it means for a party to “resolve its liability” to the government in order to trigger a CERCLA contribution claim. Ultimately, the court held that the inquiry depends on a case-by-case analysis of the terms of the settlement agreement to determine if the settlement resolves, with “certainty and finality,” a PRP’s obligations for at least some of its response actions or costs. In this case, the court found that the 1998 decree did not provide “certainty and finality” because it referenced Asarco’s continued legal exposure and preserved all of the government’s enforcement options. As a result, the court of appeals remanded the case to district court to determine whether Asarco is entitled to compensation from Atlantic Richfield and in what amount.

Emhart Industries v. New England Container Co., C.A. No. 06-218 S, 2017 WL 3535003 (D.R.I. Aug. 17, 2017).
The District Court for Rhode Island in a multi-phase case involving the Centredale Manor Restoration Project Superfund Site ruled that several EPA decisions regarding the remedial action at the site were arbitrary, capricious, or otherwise not in accordance with CERCLA and the National Contingency Plan. While the court rejected most of potentially responsible party Emhart’s challenges to EPA’s decisions, the court found that groundwater at the site was far too contaminated to support the EPA’s classification of the groundwater as a potential drinking water source. The court also held that EPA did not sufficiently demonstrate that the remedy specified in the remedial order would likely result in restoring the groundwater to drinking water quality. Due to Emhart’s previous participation in the cleanup process, its good faith belief that the remedial order was arbitrary, and the fact that Emhart raised its objections throughout the process, the court found that Emhart had “sufficient cause” for noncompliance and was not liable for civil penalties. Ultimately, the court stayed EPA’s administrative order, remanded the case for further study, and retained jurisdiction. The court also noted that in the event the final remedies chosen by EPA “fundamentally alter” those previously proposed, EPA must restart the notice and comment process.

Chevron Mining, Inc. v. United States, 863 F.3d 1261 (10th Cir. 2017).
The Tenth Circuit found that “bare legal title” was sufficient to establish owner liability under CERCLA as to the United States, which had legal title to the property that was the subject of mining operations by third parties. The court declined to reverse the trial court’s finding that the United States was not also an “arranger” under CERCLA because it never owned or possessed the hazardous substances which gave rise to CERCLA liability at the site in question. This result highlights the inter-circuit split concerning what level of ownership and owner control triggers owner PRP liability under CERCLA. See Next Millenium Realty, LLC v. Adchem Corp., below.

Next Millenium Realty, LLC v. Adchem Corp., 690 Fed. App’x 710 [not for publication] (2d. Cir. 2017), petition for cert. filed (Sept. 28, 2017).
The Second Circuit affirmed the district court’s dismissal of CERCLA contribution and cost recovery claims against sublessor defendants with respect to a site operated as a textile manufacturing facility. Relying on Second Circuit precedent rejecting potential CERCLA owner liability for lessees and sublessors based upon their de facto ownership or site control, the court reasoned that if mere site control were enough to trigger liability, owner liability would balloon under CERCLA and operator liability would become practically meaningless. The court held that a sublessor/lessee should be considered liable only if it truly “stands in the shoes of an owner,” and that “site control alone is an improper basis for the imposition of owner liability.” The court also affirmed the district court’s dismissal of claims against a certain defendant on a single enterprise theory due to certain lessor defendants having subleased the site to another defendant business entity that they owned. The court noted that management control alone is not enough to pierce the corporate veil and impose CERCLA liability under New York state law.

RCRA

Delaware Riverkeeper Network v. Soil Safe, Inc., Civ. No. 14-1349 (RMB/KMW), 2017 WL 2829603 (D.N.J. June 30, 2017).
This case involved a challenge to the use of recycled petroleum-impacted soils at three sites in New Jersey under RCRA’s citizen suit provision. The soils in question were recycled according to the defendant’s proprietary method of blending and conditioning contaminated soils and adding cement kiln dust to them, and were being used at the sites in question under the provisions of a remedial action work plan. The plaintiff non-governmental organization alleged that use of the recycled soil at remediation sites impacted by contaminated dredged materials presented an imminent and substantial endangerment to human health and the environment. After a trial, the district found that the defendant’s product was not a solid waste under RCRA because the defendant engaged in legitimate recycling and beneficial use of the recycled soil, and that even if it was solid waste, its use at the sites did not present an imminent and substantial endangerment. The fact that defendant derived most of its revenue from the receipt of contaminated soil rather than from the sale of its recycled soils did not alter the court’s analysis.

American Petroleum Institute v. Environmental Protection Agency, 862 F.3d 50 (D.C. Cir. 2017).
The D.C. Circuit in a 2–1 split decision vacated significant portions of EPA’s 2015 RCRA regulations limiting third-party recycling of hazardous secondary materials, but upheld provisions concerning how such materials are handled, and concerning emergency preparedness requirements for generators storing hazardous materials for recycling. The regulations in question are borne of EPA’s long-standing effort to revise the definition of “solid waste” to encourage legitimate recycling. Industry petitioners challenged the rule’s legitimacy test and so-called “verified recycler exclusion” as exceeding EPA’s authority. The court agreed with industry petitioners regarding a fourth factor of the EPA’s legitimacy test with respect to secondary materials for which there were analogous raw materials. The rule required that products made with those recycled materials have a level of hazardous constituents the same or less than levels in products made with analogous raw materials. The D.C. Circuit rejected this factor for such secondary materials, noting that RCRA does not give EPA authority to require the removal or reduction of hazardous constituents when they pose no environmental or health risk.

Sovereign immunity, NEPA, ESA, and APA

Diné Citizens Against Ruining Our Environment v. Bureau of Indian Affairs, No. CV-16-08077-PCT-SPL, 2017 WL 4277133 (D. Ariz. Sept. 11, 2017).
The U.S. District Court for the District of Arizona dismissed an action by plaintiff environmental groups challenging the 25-year extension of an operating lease for the Four Corners Power Plant and the expansion of a mine on the Navajo reservation that provides fuel to the plant. Plaintiffs alleged the federal government had violated provisions of the National Environmental Policy Act, the Endangered Species Act, and the Administrative Procedure Act in so doing. The court dismissed the case because it held that intervenor defendant Navajo Transitional Energy Co. LLC (NTEC) was a necessary party to the dispute with a legally protected interest as mine owner, but had sovereign immunity as an arm of the Navajo Nation. Plaintiffs and the federal agency defendants opposed dismissal, but the court found that NTEC’s interest in the outcome of the case “far exceed federal defendants’ interest…,” and that the interests of NTEC and defendants could diverge over time.

John R. Jacus

John R. Jacus is a partner and the Environmental Practice Group Leader in the law firm of Davis Graham & Stubbs LLP in Denver, Colorado. He is a past Section Council member and committee chair and a contributing editor of Trends.