April 04, 2011 Articles

Idaho District Court Holds Government Liable as an Arranger

It is another in a long line of post-Burlington Northern cases interpreting the scope of arranger liability and may have important implications for cleanup on federal lands.

By Jacy T. Rock – April 4, 2011

On March 4, 2011, the U.S. District Court for the District of Idaho issued a decision holding the U.S. government liable as an arranger under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) based on the government’s authority and control over the disposal of waste on National Forest land it owned and leased for mining. The decision is yet another in a long line of post-Burlington Northern cases interpreting the scope of arranger liability, and may have important implications for cleanup on federal lands.


Background 


In Nu-West Mining, Inc. v. United States, Nu-West sought to impose CERCLA liability on the government related to selenium contamination at four mine sites in the Caribou-Targhee National Forest. 2011 WL 832482, at *1 (D. Idaho, March 4, 2011) (Case No. 4:CV 09-431-BLW). From about 1960 to the 1990s, the government had leased the sites for the mining of phosphate, phosphate rock, and related minerals. Id.at *2. The government retained the right to terminate the leases and issued special-use permits so that lessees could construct waste-rock dumps on National Forest lands adjacent to the leased lands. Id.at *1. It required the lessees to allow mine inspections to ensure proper disposal of mining waste and payment of royalties. Id. From about 1965 to the present, the government had been monitoring environmental conditions at the sites. Id.

In addition, the government also required lessees to obtain the government’s approval of mining-waste disposal and reclamation plans before mining could begin. Id. Lessees had to perform specific reclamation activities at the sites, including covering waste dumps with middle waste shale to promote re-vegetation. Nu-West Mining, 2011 WL 832482, at *1. The middle waste shale contained selenium, a naturally occurring element. Id.at * 2. The selenium leached into the water underneath the waste dumps and contaminated the environment. Id.

When the selenium contamination was discovered in the 1990’s, Nu-West, the lessee of the mines, entered into administrative orders of consent with the government to remediate the sites. Id. Nu-West filed suit against the government to recover the $10 million it allegedly spent on that remediation. Id.

Arranger Liability


The court first stated that, under Burlington Northern and Santa Fe Railway Co. v. United States, an arranger must take “intentional steps to dispose of a hazardous substance.” Id.at * 4. Citing a pre-Burlington Northern Ninth Circuit case, U.S. v. Shell Oil,it went on to explain that “[a]n entity is an arranger if it has ‘direct involvement in arrangements for the disposal of waste.’” (citing U.S. v. Shell Oil Co., 294 F.3d 1045, 1055 (9th Cir. 2002). Nu-West Mining, 2011 WL 832482, at *4. To determine whether the entity had direct involvement in arrangements for disposal, the court explained that it would consider whether the entity: (1) owned the hazardous substance; (2) had the authority to control the hazardous substance; and (3) exercised actual control over the disposal of that substance. Id.

The court found that all three of these elements, and the intent element required byBurlington Northern, were present in Nu-West. The government owned the middle waste shale, which contained the selenium; had the authority to control the disposal of the mining waste (because no mining or waste disposal could occur without the government’s approval); and exercised actual control and showed its intent to dispose by requiring the lessees to cover the waste dumps with the middle waste shale. Id.

The court rejected the government’s contention that it was the lessees, not the government, that wanted to use the middle waste shale to promote vegetation on the waste dumps. Id.The court found that the originator of the disposal method did not matter for purposes of arranger liability, where the government required the disposal as a condition of mining approval. Id.

The court also rejected the government’s argument that it could not be liable as a CERCLA arranger because it was merely regulating the mining activities, and “taking actions aimed only at mitigating the environmental harm caused by private parties’ actions.” Id. at **4–5. The court again cited U.S. v. Shell Oil, explaining that Shell Oil rejected the idea that the government cannot be liable under CERCLA where it acts in a purely regulatory role. Nu-West Mining, 2011 WL 832482, at **4–5. The government’s “regulatory activity” defense was not supported under either the language of CERCLA, which does not contain a regulatory exception to its waiver of sovereign immunity, or case law, which has repeatedly held the government liable under CERCLA for governmental acts. Id.

Other Theories of Liability


The court in Nu-West noted that the government had admitted to liability as a CERCLA owner under sections 107(a)(1) and (2) of CERCLA. Id.at * 3. The court also found the government liable as a CERCLA operator based on the government’s active management in the design and location of the waste dumps, inspections of mining operations, and enforcement of compliance with all rules and plans. Id. at **5–7. The court rejected the government’s argument that it merely provided “suggestions” as opposed to “directions” about mining operations, explaining that suggestions often got instant results. Id.at * 7. Even where there was compromise with lessees, the court explained, the government was still “actively managing the disposal of hazardous waste through the negotiation process.” Id.

Conclusion

Nu-West is yet another decision in a long line of cases continuing to interpret Burlington Northern’s arranger-liability ruling. Nu-West’s interpretation imposing arranger liability on the government based on its inspection and oversight actions may have important implications for CERCLA liability for cleanup on federal lands.

 

Jacy T. Rock practices with Faegre & Benson LLP and is also a current chair of the ELC Young Lawyers Subcommittee.


Copyright © 2011, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).