Superfund and Natural Resource Damages Litigation Committee...

1Superfund and Natural Resource Damages Litigation Committee, May 2017

May 2017Vol. 12, No. 2

Superfund and Natural Resource Damages Litigation Committee Newsletter

MESSAGE FROM THE CHAIRJohn F. Gullace “The only constant is change.” These words, attributed to the Greek philosopher Heraclitus, seem apt in light of recent events in Washington and the ongoing changes at the U.S. Environmental Protection Agency (EPA). The ABA Section of Environment, Energy, and Resources (SEER) and this committee strive to be resources to everyone trying to keep up with the constant change from Washington affecting EPA and our environmental laws. To that end, SEER has developed a webpage dedicated to tracking changes in the Administration in Washington (http://ambar.org/environtransition) as well as a webpage devoted to tracking changes in the Waters of the United States (http://ambar.org/environwotus). We also regularly add content to the Superfund and Natural Resource Damages Litigation Committee webpage (http://apps.americanbar.org/dch/committee.cfm?com=NR351400) that we hope will be of interest to practitioners in our field. SEER and this committee endeavor to provide our members with useful content, so we would love to hear from our members about topics that they would like us to address through articles and programming. We value your input!

John F. Gullace is a partner at Manko, Gold, Katcher & Fox, LLP, in the Bala Cynwyd, Pennsylvania office.

MESSAGE FROM THE VICE CHAIRSKate Campbell, Brian Ferrasci-O'Malley, and Carolyn L. McIntosh, Editors Welcome to the Superfund and Natural Resource Damages Litigation Committee’s second newsletter issue of 2017. This issue provides four excellent articles on a diverse set of topics for our committee members. In the first article, Loren Dunn and Jay Willis explore the concept of “zombie corporations” within the context of how to secure insurance coverage for CERLCA site cleanup efforts. In the second article, Gary Gengel, Kegan Brown, and Thomas Pearce explore how CERCLA’s joint and several liability regime might be affected by changes to the Supreme Court. Next, Michael Ellis from Ramboll Environ provides a primer for our members on the draft CERCLA 108(b) financial assurance rules and their potential effect on the hardrock mining industry. Lastly, we have an article co-authored by Megan McCulloch, Vice Chair Kate Campbell and Claudia V. Colón García-Moliner that presents the Great Lakes Legacy Act as an example of how to successfully address legacy cleanups at large urban sediment sites, while also acknowledging the tenuous future of the program. We offer a hearty thanks to our authors and we hope that you enjoy these articles!

2 Superfund and Natural Resource Damages Litigation Committee, May 2017

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Any opinions expressed are those of the contributors and shall not be construed to represent the policies of the American Bar Association or the Section of Environment, Energy, and Resources.

Superfund and Natural ResourceDamages Litigation Committee NewsletterVol. 12, No. 2, May 2017Kate Campbell, Brian Ferrasci-O’Malley, and Carolyn L. McIntosh, Editors

In this issue:

Message from the ChairJohn F. Gullace ......................................1

Message from the Vice ChairsKate Campbell, Brian Ferrasci-O’Malley, and Carolyn L. McIntosh .......................1

Rise of the Zombies: How Reviving Long-Dead Corporations at CERCLA Sites Can Save Your Client MoneyLoren R. Dunn and Jay Willis .................3

Will Changes to the Supreme Court Mean Changes to CERCLA’s Joint and Several Liability Regime? Gary P. Gengel, Kegan A. Brown, and Thomas C. Pearce..................................6

EPA CERCLA 108(b) Financial Assurance-Superfund Financial Responsibility Michael Ellis ...........................................10

The Great Lakes Legacy Act: A Potential Legislative Model for Legacy Sediment Cleanups Hangs in the BalanceMegan C. McCulloch, Kate Campbell and Claudia V. Colón García-Moliner ......13

June 15, 2017 EBA Energizer: A Legal Review of State Incentives for Nuclear Power Washington, DC Primary Sponsor: Energy Bar Association

October 18-21, 2017 25th Fall ConferenceBaltimore Waterfront MarriottBaltimore, MD

April 16-18, 2018 36th Water Law ConferenceHilton Bonnet CreekOrlando, FL

April 18 - 20, 2018 47th Spring ConferenceHilton Bonnet CreekOrlando, FL October 17- 20, 2018 26th Fall ConferenceMarriott Marquis San Diego MarinaSan Diego, CA

AMERICAN BAR ASSOCIATION

SECTION OF ENVIRONMENT, ENERGY, AND RESOURCES

CALENDAR OF SECTION EVENTS

For full details, please visit www.ambar.org/EnvironCalendar


RISE OF THE ZOMBIES: HOW REVIVING LONG-DEAD CORPORATIONS AT CERCLA SITES CAN SAVE YOUR CLIENT MONEYLoren R. Dunn and Jay Willis

Introduction

The seventh season of AMC’s hit drama The Walking Dead is under way, but the zombies more pertinent to your environmental law practice are ones you may not even know exist. In recent years, attorneys have pioneered the practice of reviving “zombie corporations”—dissolved corporations that possess untapped insurance assets—for the purposes of contributing to site cleanup efforts. A successful “zombie practice” can go a long way to facilitating rapid site cleanups and, just as importantly, minimizing your own client’s potential liability.

What Is a Zombie Corporation?

Even if a corporation is no longer in business, it still may have unexhausted insurance policies. Courts are increasingly allowing claimants to “revive” these “zombie corporations” and make claims against such policies. The seminal opinion is In re Krafft-Murphy, which held that under Delaware law, unexhausted insurance policies constitute “property” accessible to any creditors that become known after dissolution. See 82 A.3d 696, 704 (Del. 2013). This makes good policy sense—if a corporation insures its environmental practices and pays its premiums, there is a good argument for requiring insurers to pay when reimbursement-eligible events occur as a result of activities conducted during the coverage period.

Dissolved corporations take two forms: “dead” corporations, which have dissolved but have not distributed their assets, and “dead and buried” corporations, which have distributed their assets to shareholders. GTE Products, 844 F. Supp. at 1012. If a “dead” corporation has not been “buried”—that is, it retains some assets—those resources may be available to respond to claims under

the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Id. However, some courts have gone even further, allowing claims to proceed against “dead and buried” corporations, provided that certain conditions are met.

In general, CERCLA overlays state corporate law, and does not abrogate or circumvent it. See United States v. Bestfoods, 524 U.S. 51, 63 (1998) (CERCLA’s broad legislative purpose, absent conflict, is insufficient to replace “the entire corpus of state corporate law”). But if the two schemes clash, state law yields to the federal statute, which “defines a ‘person’ liable under the statute to include a ‘corporation’ . . . without regard to its current status.” Allied Corp. v. Acme Solvents Reclaiming, Inc., 1990 WL 322940 (N.D. Ill. July 6, 1990); see also Bestfoods, 524 U.S. at 63 (where conflict of laws exists, “it would be violative of Congressional intent to have to pierce the veil of each and every fictional corporation between a subsidiary and its ultimate controlling parent”); AM Properties Corp. v. GTE Products Corp., 844 F. Supp. 1007, 1012 (D.N.J. 1994) (“it does not appear that Congressional intent was to permit fifty different schemes of liability based on state statutes defining corporate capacity to be sued”). Unless states have specifically enacted corporate statutes to limit the liability of dead and buried corporations—more on that below—a dissolved corporation may still be a viable party.

Key takeaway: If you know or have reason to suspect that defunct potentially responsible parties (PRPs) possess unused insurance assets, don’t let their current status deter you from naming them.

How Can a Zombie Corporation Be Revived?

Leave your bad undead puns at the courthouse door, because there is no special form or procedure for impleading a “zombie corporation”—it is enough to name the corporation as you would any other defendant. The first practical problem that will arise relates to representation of the zombie,


though: how do you serve a zombie? The best practice is to attempt to serve the last known officer or agent. Once that individual rejects service on the grounds of corporate nonexistence, head over to the local newspaper of record. All states have laws that allow plaintiffs to sue unknown or absent defendants by publishing notice of the suit in one or more newspapers, assuming the plaintiff has made reasonable efforts to locate the defendant. The exact parameters vary from state to state, but service by publication is the tool most likely to wake the undead corporation.

Once service of process is complete, a related issue is the identity of the zombie client. The corporation, which no longer exists, cannot be a client. And in CERCLA matters, insurers, who are often defending under a reservation of rights, cannot be the client, either. (In fact, “zombie corporation” practice underscores the importance of insurer-retained independent counsel, since the insurers are probably displeased that they must commit resources to an insured that no longer exists!) Thus, attorneys may ask the court to appoint a third-party trustee to manage the dissolved corporation’s undistributed property—including the insurance assets. In some states, this procedure may be prescribed by law. See Krafft-Murphy, 82 A.3d at 704 (finding that court may appoint receiver to defend allowed claims). Oftentimes, the trustee’s fees are split between the insurer and the site’s solvent PRPs, for whom paying to “revive” a zombie corporation is a sound investment given the chance of recovering potentially substantial insurance assets.

As with solvent corporations in CERCLA litigation, revived zombie corporations may elect to settle their liability. In fact, since zombie practice requires insurers to expend resources on former clients that no longer pay premiums, insurers may be even more eager to settle a zombie corporation’s liability—yet another reason that counsel should diligently investigate and pursue the assets of zombie corporations if the site’s archeological record suggests that such assets may exist. Generally, if a settlement proposal is reached,

PRPs must get the court to approve said proposal in order to ensure fairness to the zombie corporation’s interests and proportionality to the zombie corporation’s contributions to the total liability at the site.

Key takeaway: By preparing a detailed case before asserting a claim against a zombie corporation, you may be able to secure a speedy settlement offer from an insurer who is even more motivated than usual to get litigation off its books.

Trends in Zombie Litigation and Legislation

Before you rush excitedly to your site’s historical records to find defunct PRPs and add them en masse to your CERCLA lawsuit, be aware that there are limitations to the “zombie corporations doctrine.” Many states, eager to rein in the logistical headaches that result from the unfettered liability of long-dead corporations, have enacted statutes that bar claims against dead corporations even if they have the prized untapped insurance assets. Again, this makes some policy sense—lawmakers want to provide incentives for directors to wind up the corporation’s affairs formally, instead of allowing corporations to continue to accrue liability.

Generally, a corporation may file a notice of dissolution with the applicable secretary of state’s office, which starts a windup period for parties to bring forward previously unasserted claims against the corporation. See, e.g., Florida Stat. 607.1407 (barring claims not brought within four years of filing date of dissolution notice). Similarly, Oregon’s public notice statute permits enforcement of claims against a dissolved corporation’s undistributed assets within five years of the date of dissolution. See O.R.S. §§ 60.644.

In practice, however, courts have shown a tendency to permit claims against zombie corporations’ insurance assets. Allowing PRPs to access insurance assets does no harm to corporations that comply with the safe harbor windup periods, but still allows claimants who were unknown at the


time of dissolution to seek relief from a party—the insurers—that had insured the claimed loss. The U.S. District Court for the District of Oregon has concluded that insurance policies constitute “assets” even if the corporation is otherwise “dead and buried.” See Ironwood Homes, Inc. v. Bowen, 2010 WL 2465384 (D. Ore. June 14, 2010). And the Krafft-Murphy opinion goes even further. Delaware law has two windup periods: it requires dissolved corporations to defend against any claims that are “likely to arise or become known” within ten years of dissolution, and provides for a three-year period for the directors to wind up the corporation. The Krafft-Murphy court held that neither period operated as an absolute time bar, instead finding that the policies were contingent assets that vest if and when a third party filed a claim against them. A court may be especially inclined to take this pragmatic approach if it is struggling to allocate liability at a cleanup site with relatively few solvent parties.

Key takeaway: Even if state law looks like it might inhibit your zombie revival efforts, don’t despair. This is an unsettled area of law, and both precedent in other jurisdictions and sound policy considerations may bear in favor of allowing

claims against dead and buried corporations to proceed.

The Future of Zombie Claims For decades, CERCLA attorneys have struggled with how to treat the pesky “orphan shares” of liability that often become the subject of contentious litigation between solvent PRPs, all of whom are diligently trying not to be left holding the bag. In an increasing number of cases, “zombie insurance” practice provides a better way forward, allowing PRPs to spread out cleanup liability and ensure fairer treatment for all parties. All those hours you spent reconstructing your site’s ancient history did not go to waste after all.

Loren R. Dunn is a principal in at Beveridge & Diamond in Seattle. He practices in the environmental law and litigation fields, and represents regional and national companies at locations throughout the country. Jay Willis is an attorney in Seattle. He focuses his practice on federal environmental compliance and litigation, including representation of clients in multiparty allocation and cost recovery actions under CERCLA.

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WILL CHANGES TO THE SUPREME COURT MEAN CHANGES TO CERCLA’S JOINT AND SEVERAL LIABILITY REGIME?Gary P. Gengel, Kegan A. Brown, and Thomas C. Pearce

I. Introduction

On April 7, 2017, the U.S. Senate confirmed Neil Gorsuch to the Supreme Court, filling the vacancy left by Justice Antonin Scalia. Justice Gorsuch is widely considered to be an “ardent textualist.” See Eric Citron, Potential Nominee Profile: Neil Gorsuch, SCOTUSblOg, http://www.scotusblog.com/2017/01/potential-nominee-profile-neil-gorsuch. Some commentators have speculated that President Trump will have the opportunity to nominate at least one additional Justice, likely someone with views similar to Justice Gorsuch, in the next four years. See Peter Baker, Picking One Justice, Trump Has Eye on Choosing a Second, N.Y. TimeS, Jan. 31, 2017, https://www.nytimes.com/2017/01/31/us/politics/trump-supreme-court-neil-gorsuch.html. This article explores how the appointment of Justice Gorsuch and another conservative judge to the Supreme Court may affect joint and several liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

II. Joint and Several Liability Under CERCLA

As a threshold matter, there is no statutory language in CERCLA that expressly imposes joint and several liability. Nevertheless, beginning with United States v. Chem-Dyne Corp., 572 F. Supp. 802 (S.D. Ohio 1983), joint and several liability has been repeatedly imposed in CERCLA cases. While the U.S. Supreme Court has described Chem-Dyne as the “seminal opinion” on whether CERCLA imposes joint and several liability, the Supreme Court has never squarely considered the issue itself. See Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 613–14 (2009).

In Chem-Dyne, the district court found that CERCLA’s definition of “liable,” which incorporates provisions of the Clean Water Act, was ambiguous, and therefore CERCLA’s legislative history should be consulted to discern whether CERCLA liability is several only or joint and several. 572 F. Supp. at 805–08. The Congressional Record showed that the phrase “joint and several liability” was deleted from earlier drafts of CERCLA. Id. at 807. Although the district court acknowledged that “when Congress deletes certain language it ‘strongly militates against a judgment that Congress intended a result that it expressly declined to enact’” (id. at 807–08 (internal citations omitted)), the district court held that the deletion of references to joint and several liability throughout CERCLA meant that defendants may, rather than shall, be held jointly and several liable in accordance with common law.

III. The Supreme Court’s Recent Statutory Interpretations

If the Supreme Court, with Justice Gorsuch and perhaps another appointee similar to Justice Gorsuch serving as Justices, squarely evaluated the issue of whether CERCLA imposes joint and several liability, the Court might be receptive to the argument that CERCLA does not incorporate joint and several liability. Unlike the Chem-Dyne court’s reliance on CERCLA’s legislative history, recent CERCLA and other decisions of the Supreme Court stress the importance of relying on a statute’s text.

A. Supreme Court CERCLA CasesFour recent CERCLA cases before the Supreme Court—Cooper Industries, Inc. v. Aviall Servs., United States v. Atlantic Research Corp., United States v. Burlington N. & Santa Fe Ry. Co., and CTS Corp. v. Waldburger—demonstrate the Court’s preference to resolve cases by relying on CERCLA’s statutory text.

In Cooper, the Court held a party who has not been sued under Sections 106 or 107 of CERCLA cannot assert a contribution claim under Section 113(f)


(1) because that provision of CERCLA “authorizes contribution claims only ‘during or following’ a civil action under § 106 or § 107(a)[.]” 543 U.S. 157, 160, 168 (2004). Though both parties made arguments regarding how their position advanced CERCLA’s purposes, the Court found that “[g]iven the clear meaning of the text, there [was] no need . . . to consult the purpose of CERCLA at all.” Id. at 167. In Atlantic Research, the Court again turned to CERCLA’s text in holding that potentially responsible parties (PRPs) can assert cost recovery claims under Section 107 and are not limited to asserting contribution claims under Section 113. 551 U.S. 128, 136 (2007). As the Court explained, “the plain language . . . authorizes cost-recovery actions by any private party, including PRPs.” Id. In Burlington Northern, the Court interpreted the scope of arranger liability under Section 107. 556 U.S. at 610. Because CERCLA does not specifically define what it means to “arrange for” disposal of a hazardous substance, the Court looked to the term’s “ordinary meaning” in holding that, “under the plain language of the statute, an entity may qualify as an arranger . . . when it takes intentional steps to dispose of a hazardous substance.” Id. at 611. The Court also determined whether the percentage of remediation costs the district court assigned to defendants was reasonably apportioned. Id. at 619. Notably, the particular issue before the Court was not whether the district court properly applied joint and several liability before conducting an apportionment, as “[n]either the parties nor the lower courts dispute[d] the principles that govern apportionment in CERCLA cases.” Id. at 615. Finally, in Waldburger, the Court relied on CERCLA’s text to resolve whether a state statute of repose is preempted by CERCLA. 134 S. Ct. 2175, 2185 (2014). After noting that CERCLA uses the term “statute of limitations” and not “statute of repose” in 42 U.S.C. § 9658, and that statutes of limitations and statutes of repose are distinct concepts, the Court held that “the natural reading of [Section 158’s] text is that statutes of repose are excluded” from CERCLA’s preemption bar. Id. at 2185–86, 2188.

B. Recent Supreme Court Statutory Interpretation CasesSeveral recent Supreme Court cases, though they do not involve CERCLA, further adhere to text-based statutory construction that could lead to changes in the interpretation of CERCLA’s joint and several liability regime. The Court recently reaffirmed its commitment to answering questions by referencing the text of the statute at issue. In Life Techs. Corp. v. Promega Corp., 2017 WL 685531 (U.S. Feb. 22, 2017), the Court “look[ed] first to the text of the statute” to determine the meaning of the term at issue, and based its analysis on the ordinary meaning of the term and the statute’s structure. Id. at *5. The Court employed a similar approach in Nichols v. U.S., 136 S. Ct. 1113 (2016), basing its unanimous decision on the “plain text” of the relevant statute. Id. at 1118. In rejecting the respondent’s arguments, the Court noted that “[w]hat the [respondent] asks is not a construction of a statute, but, in effect, an enlargement of it by the court . . . [t]o supply omissions.” Id. In Coleman v. Tollefson, 135 S. Ct. 1759 (2015), the Court relied on a literal reading of the statutory phrase at issue to reject petitioner’s argument that it should be interpreted more expansively, emphasizing that “the statute itself” did not support petitioner’s position. Id. at 1763. Finally, the Court has held that a statute always must be given “its fairest reading,” and lower courts’ interpretations of statutes are not dispositive. Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct. 1378, 1386 (2015).

IV. A Gorsuch Supreme Court (and Beyond)

Despite widespread acceptance of, or acquiescence to, an interpretation of CERCLA § 107 that imposes joint and several liability, a review of Justice Gorsuch’s opinions from his tenure on the Tenth Circuit Court of Appeals suggests that he would interpret CERCLA § 107 through a more thorough engagement with the statutory text.

Justice Gorsuch’s opinions consistently emphasize that “[w]here the statutory language is plain . . .


that language controls as written, without regard to titles or judicial perceptions (or possible inadvertent misperceptions) of legislative purpose.” United States v. Hernandez, 655 F.3d 1193, 1197 (10th Cir. 2011); see also Lexington Ins. Co. v. Precision Drilling Co., L.P., 830 F.3d 1219, 1220 (10th Cir. 2016) (“‘When a statute is as clear as a glass slipper and fits without strain,’ it is our job merely to put it on the foot where it belongs”) (citation omitted); Genova v. Banner Health, 734 F.3d 1095, 1099 (10th Cir. 2013) (“[I]t is Congress’s plain directions, not our personal policy preferences, that control.”). In order to stay true to legislative intent as expressed by the statutory text, Justice Gorsuch seems to favor the ordinary, dictionary meaning of undefined statutory terms. See In re Dawes, 652 F.3d 1236, 1239 (10th Cir. 2011) (citing Black’s Law Dictionary for the meaning of “incur”); Elwell v. Oklahoma ex rel. Bd. of Regents of Univ. of Oklahoma, 693 F.3d 1303, 1307 (10th Cir. 2012) (citing Webster's Third New International Dictionary and the Oxford English Dictionary).

Justice Gorsuch has shown some willingness to corroborate his interpretation of statutory provisions by referencing legal norms or the common law, but neither trumps statutory text. Hydro Res., Inc. v. U.S. E.P.A., 608 F.3d 1131, 1155 (10th Cir. 2010) (“[W]hen a legal concept like this ‘is obviously transplanted from another legal source, whether the common law or other legislation, it brings the old soil with it.’”) (internal citations omitted); Fletcher v. United States, 730 F.3d 1206, 1210 (10th Cir. 2013) (“Congress has chosen to invoke the concept of an accounting. That concept has a long known and particular meaning in background trust law.”); In re Woolsey, 696 F.3d 1266, 1274 (10th Cir. 2012) (“[W]hen it comes to interpreting statutes the [Supreme] Court itself has repeatedly instructed that pre-enactment practice is relevant only ‘to the interpretation of an ambiguous text’ and holds no sway when the statutory language is clear.”) (quoting RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2073 (2012)).

To the extent Justice Gorsuch turns to legislative history at all, his opinions evidence that this approach is highly disfavored, as it improperly “elevat[es] legislative history above express textual direction.” Iliev v. Holder, 613 F.3d 1019, 1024 (10th Cir. 2010). And, as Justice Gorsuch pointed out in Lexington, legislative history is “a guessing game both sides can almost always play . . . trying to discern the textually unexpressed intentions of (or really attribute such intentions to) a legislative body composed of scores or often hundreds of individuals is a notoriously doubtful business—and precisely never enough to trump the unambiguous text a majority of legislators actually adopted.” Lexington Ins. Co., 830 F.3d at 1221. Consequently, legislative history is used by Justice Gorsuch, if at all, to reinforce his textual interpretation of a statute. See, e.g., Almond v. Unified Sch. Dist. No. 501, 665 F.3d 1174, 1183 (10th Cir. 2011) (“Beyond language of [the statute] itself, beyond its statutory references and history, lies the realm of legislative history. And any effort to venture so far would only serve to corroborate” the interpretation already reached.).

V. Will Joint and Several Liability Under CERCLA Survive a New Supreme Court?

Justice Gorsuch’s approach to statutory interpretation suggests that he would hold that CERCLA does not impose joint and several liability. While CERCLA defines “liable” as the same standard applied under Section 311 of the Clean Water Act, 42 U.S.C. § 9601(32), that section of the Clean Water Act does not reference joint and several liability at all. 33 U.S.C. § 1321. Nor does the dictionary definition of “liability”—“the quality, state, or condition of being legally obligated or accountable; legal responsibility to another or to society, enforceable by civil remedy or criminal punishment”—indicate that the scope of liability should be anything other than several. Black’s Law Dictionary (10th ed. 2014). Further, Justice Gorsuch would likely reject Chem-Dyne’s reliance on CERCLA’s legislative history to support joint and several liability, as doing so would undermine the statute’s text. Given the


absence of any reference to joint and several liability in CERCLA, it seems likely that Justice Gorsuch would conclude that no such requirement exists.

To further support this interpretation, Justice Gorsuch might look to other provisions of CERCLA. For instance, CERCLA’s establishment of the “Superfund” to provide a source of funds for the federal government to finance cleanup efforts is arguably inconsistent with joint and several liability. 26 U.S.C. § 9507; see also Chem-Dyne, 572 F. Supp. at 806 (noting opponents of the bill recognized the unfairness of coupling joint and several liability with the establishment of such a fund). Simply put, if the purpose of the Superfund is to actually use tax revenues to investigate and remediate contaminated sites, that purpose is severely undermined (and the Superfund is significantly underutilized) if liability is joint and several under Section 107. Similarly, interpreting the scope of liability under Section 107 as joint and several is at odds with the provisions of Section 122 that require the U.S. Environmental Protection Agency (EPA) to prepare guidelines for a nonbinding allocation of responsibility and engage in such allocations when it would expedite settlements. 42 U.S.C. § 9622(e)(3). EPA rarely performs nonbinding allocations of responsibility, perhaps due to the expansive reading of Section 107 liability, and as a result Section 122(e)(3) is one of the most underutilized provisions of CERCLA. It is unclear what purpose is served by having EPA engage in allocations if CERCLA liability is joint and several. Moreover, Congress could have made joint and several liability under Section 107 explicit in the 1986 amendments to CERCLA, as it did with the right to contribution, but Congress chose not to do so. See Cooper Indus., Inc., 543 U.S. at 162 (explaining that although CERCLA did not mention the word “contribution,” such a right arose either impliedly from provisions of the statute or as a matter of federal common law until Congress amended CERCLA to provide an express cause of action for contribution).

VI. Conclusion

The appointment of Justice Gorsuch and another similarly minded jurist could provide an opportunity to challenge the imposition of joint and several liability under CERCLA. CERCLA does not expressly provide for joint and several liability and, as Justice Gorsuch and other jurists have repeatedly explained, the language of the statute must control and restrain any exercise of statutory interpretation.

Gary P. Gengel is a partner in the Environment, Land & Resources Department at Latham & Watkins LLP, where his practice focuses on remediation and NRD matters, and transactions. He can be reached by e-mail at [email protected] or by telephone at (212) 906-4690. Kegan A. Brown is a partner in the Environment, Land & Resources and Litigation & Trial Departments at Latham & Watkins LLP, where his practice focuses on environmental and products liability litigation, and environmental regulatory and transactional matters. He can be reached by e-mail at [email protected] or by telephone at (212) 906-1224. Thomas C. Pearce is an associate at Latham & Watkins LLP, where his practice focuses on environmental litigation and regulatory matters. He can be reached by e-mail at [email protected] or by telephone at (212) 906-2956.

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EPA CERCLA 108(B) FINANCIAL ASSURANCE: SUPERFUND FINANCIAL RESPONSIBILITYMichael Ellis

The draft Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Section 108(b) (i.e., CERCLA 108(b)) rules will increase the financial assurance for an average mine by more than $250 million based upon the U.S. Environmental Protection Agency’s (EPA’s) financial assurance estimates for 49 hard rock mining sites (Regulatory Impact Analysis of Financial Responsibility Requirements Under CERCLA 108(b) for Classes of Facilities in the Hardrock Mining Industry Proposed Rule, USEPA, Dec. 1, 2016). The draft CERCLA financial assurance obligations are in addition to existing federal, state, and local bonding and financial assurance obligations required for the hard rock mining industry. This article summarizes the background for the proposed rule, the rule’s applicability, and the significant financial impacts of the proposed rule.

Background

The regulatory obligation of requiring financial assurance for facilities that pose the greatest risks for site contamination impacting future closure of the respective facilities has existed since the creation of CERCLA. Since enactment of CERCLA in 1980, EPA has failed to promulgate rules for Section 108(b) to identify certain classes of facilities to maintain financial responsibility based upon the respective facility’s risk associated with production and management of hazardous substances. In 2008, a suit was filed against EPA requesting identification of the classes of facilities required to maintain financial responsibility under CERCLA 108 (b) (Sierra Club, et al. v. Johnson, No. 08- 01409 (N.D. Cal.)). In early 2009, the court ordered EPA to identify the industries subject to the financial responsibility requirements, and on July 28, 2009, EPA published the 2009 Priority

Notice (74 Fed. Reg. 37,213, July 28, 2009) in the Federal Register identifying hard rock mining as the first industry for which financial responsibility rules would be developed.

A second suit was filed in 2014 with the U.S. District Court of Appeals against EPA requiring the Agency to issue the financial assurance rules for the hard rock mining industry (Idaho Conservation League, et al., Case No. 14-1149 (D.C. Cir.)). Subsequently, the Petitioners and EPA reached an agreement on a rulemaking schedule, and the Court subsequently issued an order directing EPA to issue draft rules on financial assurance requirements for the hard rock mining industry by December 1, 2016, and issue final regulations by December 1, 2017. EPA released the draft “Financial Responsibility Requirements Under CERCLA § 108(b) for Classes of Facilities in the Hardrock Mining Industry” in the Federal Register on January 11, 2017 (82 Fed. Reg. 3388) (the draft rule was signed by EPA on December 1, 2016).

The Court Order also directed EPA to assess and make a determination regarding proposed rulemaking for similar financial responsibility requirements for chemical manufacturing; power generation, transmission, and distribution; and petroleum and coal products.

Applicability

The draft rule is applicable to hard rock mining facilities that extract, beneficiate, or process/refine metals and nonmetallic non-fuel minerals (referred to hereafter collectively as “HMFs”). Although the applicability of the rule is to be determined by the respective HMF owners and operators, EPA has tentatively identified 221 facilities impacted by this proposed rule consisting of 208 active facilities and 13 intermittent or idle facilities. A majority of the HMFs identified by EPA are involved with gold, copper, or iron mining and processing (according to EPA nearly 80 percent of the facilities subject to the draft rule are associated with these three commodities).


The applicability of the draft rule is not certain for the “universe” of HMFs, although certain operations or facilities have been excluded including placer mining operations; exploration activities; mines with less than five acres of disturbed area; and, processing operations with less than five acres of waste pile and surface impoundment features. If the draft rule’s objective is to secure financial assurance for facilities that truly pose a risk regarding site contamination and natural resource damage, then other operations such as metal electrowinning refining operations should be considered for exclusion since the risks with these refining operations are insignificant when compared to the potential for contamination or natural resource damages for other hard rock mining operations.

Financial Impacts of the Proposed Rule

Many details regarding the draft rule will elicit comments from the mining and mineral industries, mine trade associations, state mining regulatory agencies, and the banking and finance industry. Although the draft rule has created significant mining industry concerns, the most significant comments undoubtedly will focus on the economic impacts to mining companies, specifically due to calculation of financial assurance and funding financial assurance instruments (i.e., “setting aside” sufficient assets) as required by the draft rule. Increases to already existing financial assurance obligations for currently permitted hard rock mining operations are estimated to increase by factors ranging from 20 to 30 (the actual cost of the financial instrument is dependent upon the facility’s credit rating and type of financial instrument(s) utilized).

The draft rule indicates that the total calculated value of financial assurance consists of the sum of response costs, a fixed health assessment cost, and natural resource damages based upon a percentage of the calculated response costs. Financial assurance for response costs is based upon cost factors and equations in the draft rule derived by EPA based upon assessment of response

costs at CERLCA National Priority List HMFs (EPA’s assessment of response costs at CERCLA National Priority List HMFs is discussed below). Cost factors and equations were developed by EPA for open pit mines; underground mines; waste rock piles; heap and dump leach; tailing piles; process ponds and reservoirs; slag piles; solid and hazardous waste; drainage; short-term, interim, and long-term operation and maintenance; overhead and oversight cost factors; and state cost adjustment factors. Although the draft rule allows for reductions in response costs for financial assurance if, for example, plans or facilities are in place to address potential releases or manage surface water, the conditions to achieve reductions in the response cost calculation are rigorous (e.g., requirements for containment or capture features designed to achieve a minimum 200-year design life which are suitable for 200-year storm events).

Financial assurance for health assessments has been designated at $550,000 without any further details regarding implications of the size or nature of the HMF which might influence the cost of a health assessment.

Financial assurance for natural resource damages (NRD) is based upon EPA’s cost comparison of 24 HMF sites with NRD settlements (EPA references multiple approaches for cost analysis to derive the cost factors and equations, and these multiple approaches selectively include and exclude various sites from the cost analysis; therefore, different groupings of sites are used for assessment of total, average, and median costs; NRD costs; and, costs for assessment of specific responses for various operable units at hard rock mining sites). The financial assurance for NRD is calculated as a percentage of the calculated response costs for a respective site. EPA’s evaluation of average response costs and average NRD settlements for the 24 HMF sites resulted in EPA’s determination that NRD settlements averaged 13.4 percent of response costs. EPA also performed a similar calculation and identified that the median NRD settlement value was 3.8 percent of the median response costs. A significant difference in the NRD


percentages exists comparing 3.8 percent and 13.4 percent. In the draft rule EPA has selected 13.4 percent as the appropriate value for calculation of NRD for respective HMFs. EPA should consider the median value for financial assurance for NRD for currently permitted HMFs.

The economic basis for EPA’s inflated cost factors and equations for calculation of financial assurance for HMFs is a result of the ongoing financial burden to EPA to facilitate closure of abandoned mines, mills, and smelters in historic mining districts; however, the inflated costs to address historic mining districts are a poor analogy for comparison of future costs to address closure of currently permitted HMFs. The cost data for remediation and restoration of historic mining districts are not appropriate since abandoned mines, mills, and smelters have been unattended for 50 to 150 years, which has greatly exacerbated site conditions and resulted in inflated response and restoration costs; currently permitted HMFs are operated with regulatory oversight and in a manner to preclude or limit potential site contamination issues; and, remediation and restoration activities are performed as operations continue at many HMFs with regulatory oversight as part of permit obligations using HMF labor and equipment at substantially reduced costs to preclude all remediation and restoration activities occurring post-closure by a regulatory agency.

The cost factors and equations in the draft rule are derived from EPA’s review of response costs at 185 HMF NPL sites in which EPA reported the average response costs to be $110M; however, if the database of sites is “reasonably” modified by removing sites not associated with an individual HMF, then the average response costs for HMF decreases to approximately $55M (i.e., a 50 percent reduction in response costs) (CERCLA 108(b) Financial Responsibility Formula for Hardrock Mining Facilities, Background Document, Peer Review Draft, EPA, Sept. 19, 2016). Reasonable modifications include removing the following types of sites that escalate the average cost to $110M: U.S. Department of Energy uranium refining sites

(Fernald, Ohio; Oak Ridge, Tennessee; Savannah River, Georgia; and, Weldon Springs, Missouri); response costs applicable to mining districts versus a single mine (e.g., Tar Creek, Oklahoma, and Cherokee County, Kansas); sites where multiple sources are contributing to respective site impacts (e.g., Commencement Bay, Near Shore/Tide Flats Tacoma and Ruston, Washington, and Onondaga Lake, New York); and, removing quarries later utilized for disposal of industrial wastes (e.g., Big D Campground). At a minimum, the cost factors for calculation of financial assurance should be based upon a modified database of NPL sites that simulate currently permitted HMFs. Since the costs to implement remediation and restoration at NPL sites are greater than the costs to perform the same remediation and restoration activities by an HMF company, conservatism would remain in the costs factors and calculations in the event the HMF company is not capable to implement the required remediation and restoration activities and the financial assurance instrument is ultimately utilized by EPA.

The draft rule also indicates the financial assurance calculations for HMFs must be reviewed and updated every three years, and third-party certification from a professional engineer must be provided for the calculations.

As a result of multiple requests from stakeholders to extend the deadline due to the complexity, legal factors, and the substantial financial implications associated with this draft rule briefly summarized above, the period for submittal of comments on the draft rule has been extended to July 11, 2017 (original deadline was March 11, 2017) .

Michael Ellis is a principal at Ramboll Environ in the St. Louis, Missouri, office. Michael has over 20 years of experience with site characterization, remediation, and restoration within federal and state regulatory frameworks (CERCLA, RCRA, or other state voluntary programs) including evaluation of closure costs and agency negotiations for various mines, and ore processing and refining facilities across the United States.


THE GREAT LAKES LEGACY ACT: A POTENTIAL LEGISLATIVE MODEL FOR LEGACY SEDIMENT CLEANUPS HANGS IN THE BALANCEMegan C. McCulloch, Kate Campbell and Claudia V. Colón García-Moliner

The Great Lakes are the world’s largest surface freshwater system, holding upwards of 90 percent of North America’s fresh surface water supply. Due in large part to the freshwater resources available in the Great Lakes, the Great Lakes Region has a long history of industry, manufacturing, mining, transportation, and agriculture. These activities have left a legacy of environmental impacts on the Great Lakes, which gained attention in 1972 with the signing of the Great Lakes Water Quality Agreement between the United States and Canada. Thus, it should come as no surprise that as environmental practitioners in the coastal regions of our country are looking at large urban sediment sites as the “new frontier” in Superfund remediation, those in the Great Lakes Region have been working on contaminated sediment issues for several decades now.

By many accounts, sediment remediation in the Great Lakes has in large measure been a success story, and many point to the Great Lakes Legacy Act (the “GLLA,” or the “Act”) as the primary reason. Enacted in 2002 in an effort to accelerate the pace of sediment cleanups in Great Lakes Areas of Concern, the Act seeks to resolve the many challenges associated with legacy sediment sites by providing innovative cost-sharing opportunities (including significant federal funding) and by fostering creative solutions to complex technical issues. But with the success comes the specter of potentially significant budget cuts under the new Administration, and concerns about the future of the program. So with contaminated sediment sites and all of the challenges that go along with them now clearly a national issue, does the GLLA provide a good model for sediment cleanups? And if so, what happens if it goes away?

The Basics and Benefits of the GLLA

When Congress enacted the GLLA in 2002, it was based upon a recognition that existing federal laws, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), were inadequate to effectively address the estimated 75 million cubic yards of contaminated sediments in the 31 Areas of Concern (AOCs) then identified in the U.S. portion of the Great Lakes. Like many other urban sediment sites that have been identified throughout the country in more recent years, there were real challenges associated with identifying the parties responsible for the contaminated sediments in these AOCs, which in many cases had accumulated from a multitude of different sources for over a century. Congress also realized that for the majority of the Great Lakes sites, many of the parties who were responsible were likely long gone, resulting in significant orphan shares and a big question as to how the estimated $1.5 billion to $4.5 billion in cleanup costs (estimated as of 2002) would be funded.

It was from these realizations that the concept of cost sharing was born. Under the Act, private entities, state or local governments, nonprofit organizations, and even consortia of parties can obtain federal funding to conduct one or more phases of a sediment investigation and cleanup. The U.S. Environmental Protection Agency’s Great Lakes National Program Office (GLNPO) administers the program, which it implements through binding cost-sharing agreements between itself and a cooperating agency or entity. Under the Act, federal funding can be used to fund up to 65 percent of eligible project costs in cases where no potentially responsible parties (PRPs) are clearly identified, and as much as 50–60 percent of costs in other cases. When the Act was reauthorized in 2008, Congress further authorized 100 percent of the costs of site characterization to be funded by federal dollars.


The benefits of cost sharing under the GLLA are many. Perhaps most obviously, the federal funding component of the Act provides significant incentives to get needed sediment cleanup projects off the ground, particularly at legacy sites with large orphan shares. In addition, the Act fosters collaboration among differently situated stakeholders by encouraging multiple groups of parties to join together to sponsor a project. This framework can create opportunities for parties to identify and obtain other sources of public or private funding that can meaningfully contribute to the project. Further, the Act allows for the value of qualifying “in-kind” contributions to count toward the nonfederal component of the cost share, making room for more creative ways to add value to these projects.

Beyond the cost-sharing aspect of the Act, the GLLA also provides flexibility to allow parties to develop focused scopes of work in their project agreements with GLNPO—an often critical component of a project given that GLLA funding is limited. Thus, a party or group of parties that wishes to pursue GLLA funding does not need to commit to the entire remediation process. Instead, the project may be approached in phases—such as investigation or interim remedial measures—with funding sought for each phase. There is also opportunity for parties to limit the geographic scope of the project in their project agreements, so that they need not address an entire water body at one time.

Important Considerations When Evaluating Potential GLLA Projects

Not all projects are a good fit for the GLLA program. First, to be eligible for GLLA funding, the proposed project must be located in a Great Lakes AOC. Second, GLNPO may not fund a project if it determines that the site is likely to suffer significant further or renewed contamination, or is lacking an evaluation of available remedial alternatives. Third, GLNPO does not provide a covenant-not-to-sue or contribution protection—distinct benefits that EPA provides PRPs who agree

to conduct privately led CERCLA cleanups, for example. Consequently, PRPs need to balance the benefits of additional sources of funding with the potential risks of future litigation or administrative proceedings when evaluating whether to pursue a GLLA project. Evaluating this risk may require conversations with other federal or state cleanup and enforcement programs.

In addition, pursuing GLLA funding can be challenging at sites that are already in the CERCLA enforcement program or where other federal regulatory programs are involved (such as the Resource Conservation and Recovery Act or the Toxic Substances Control Act). The Act itself provides that in these circumstances, GLNPO will coordinate on a case-by-case basis to determine the proper role for the program. However, in practice, there can sometimes be “turf wars” over the proper scope of the GLLA project, and debates over whether the Act will meet the objectives of other federal laws that other EPA programs have used to assert jurisdiction.

Finally, and perhaps most importantly, the success of the GLLA depends heavily on the continued availability of federal funding, which has been tight even under the past Administration. Since 2010, the program receives federal funding on an annual fiscal basis via the broader Great Lakes Restoration Initiative. Certain sites are prioritized for this funding, including those with Remedial Action Plans that are ready to be implemented and those that rely on innovative approaches or technologies. For sites where project sponsors anticipate potential unavoidable delays, funding concerns may make the GLLA likewise unsuitable.

Past Successes and Questions About the Future

Despite the limitations described above, the GLLA has effectively accelerated the pace of complex and costly sediment investigation and cleanup at many sites throughout the Great Lakes region. Indeed, EPA’s website touts the GLLA as a “tremendous success,” noting that since the Act’s


passage, EPA has invested $338 million to address contaminated sediment in the Great Lakes AOCs and has leveraged an additional $227 million from nonfederal sponsors. To date, these dollars have funded cleanups at 19 sites in Great Lakes AOCs, and federal dollars have further been used to conduct critical site characterization work at an additional 23 sites.

With these successes, the GLLA program could serve as a valuable model for the cleanup of other legacy sediment sites across the country where the challenges associated with designing, funding, and implementing cleanups can be staggering. But that presumes, of course, that the GLLA program will remain under the new Administration, and that Congress sees the benefits that federal funding can provide. During his confirmation hearing before the Senate Environment and Public Works Committee earlier this year, now EPA Administrator Scott Pruitt clearly expressed support for the Great Lakes Restoration Initiative, of which the GLLA program is a part. Yet President Trump’s first budget blueprint for fiscal year 2018, released in mid-March, contemplates elimination of the Great Lakes Restoration Initiative altogether. So for now, we are in a bit of waiting game, with the future of the GLLA very much in doubt.

Megan C. McCulloch is senior counsel for Environmental, Health, Safety and Sustainability at The Dow Chemical Company in Midland, Michigan. Kate Campbell is a partner at Manko, Gold, Katcher & Fox (Philadelphia, Pa.), where she represents clients across the country on Superfund matters and environmental litigation. Claudia V. Colón García-Moliner is an associate at Manko, Gold, Katcher & Fox, handling a wide variety of litigation and regulatory compliance work for the firm.

ABA Lifetime Achievement Award in Environmental, Energy, or Resources Law and Policy The ABA Lifetime Achievement Award in Environmental, Energy, or Resources Law and Policy recognizes and celebrates the accomplishments of major practitioners in environmental, energy, or resources law and policy in the United States.

ABA Award for Excellence in Environmental, Energy, and Resources Stewardship The ABA Award for Excellence in Environmental, Energy, and Resources Stewardship recognizes and honors the accomplishments of a person, organization, or group that has distinguished itself in environmental, energy, and resources stewardship. Nominees must be people, entities, or organizations that have made significant accomplishments or demonstrated recognized leadership in the areas of sustainable development, energy, environmental, or resources stewardship.

Nomination deadline: July 17, 2017 These awards will be presented at the 25th Fall Conference in Baltimore in October 2017.

For further details about these awards, please visit the Section website at www.ambar.org/EnvironAwards

2017 Call for Nominations

16 Superfund and Natural Resource Damages Litigation Committee, May 2017Published in Natural Resources & Environment Volume 31, Number 4, Spring 2017. © 2017 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

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