Environmental Remediation Contracting: Summary of a Symposium (1994)

Craig D. Galli

U.S. Department of Justice

1. Overview of CERCLA (Comprehensive Environmental Response, Compensation and Liability Act) Liability Scheme

   CERCLA imposes liability on four categories of responsible parties for the costs of cleaning up contaminated sites:

   1. present and past owners of contaminated facilities;

   2. operators of contaminated facilities;

   3. persons who arranged for disposal of hazardous substances; and

   4. transporters of the hazardous substance to the facility.

2. Developments in CERCLA Liability Relevant To Federal PRPs (Potentially Responsible Parties)

   1. Owner Liability: The Department of Justice (DOJ) has conceded in court papers that the government can be held liable as an “owner” for releases that occur from equipment owned by the government even if the equipment is leased to a contractor which owns and operates the plant itself.

   2. Operator Liability: DOJ has recognized in cases bringing and defending cost recovery actions two alternative bases of “operator” liability under CERCLA § 107(a) (1) or (2). A person can be held liable if:

      • He exercises direct operations control over activities that resulted in the release of hazardous substances (even though he has no overall control over the facility); or

      • He actively participates in the overall, day-to-day management of the facility (even though he may have no responsibility over the activities at the facility which caused the releases).

   3. Generator Liability:

DOJ in cases bringing and defending cost recovery actions has recognized two alternative bases of “arranged for” or “generator” liability under CERCLA § 107(a) (3) outside the context of the normal and literal arrangement for the actual disposal of wastes. A person can be held liable if:

• he has actual authority to control the disposal of the hazardous substances (even though he does not own or possess them);or

• he (1) supplies the raw materials and (2) owns or controls the work in process, and (3) the generation of hazardous substance is inherent in the production process.

• The seller of used or “surplus” material that is or contains hazardous substances can be held liable for arranging for disposal unless the seller can document (1) the item or material was sold at market value, (2) the material is still commercially usable for its intended (originally manufactured) purpose, and (3) there is a reasonable basis to show the purchaser is an entity that uses (or resales) the material for its intended purpose. Therefore, the sale of used, inoperable equipment for recycling or scrap will almost always be considered an arrangement for disposal under CERCLA section 107(a) (3).

3. Possible Grounds For Government Liability Under CERCLA

   1. Owner:

      • Federally owned (fee simple, leased, easement, etc.) and operated installations

      • Go-Co's (Government-owned, contractor-operated facilities)

      • Government-owned equipment leased to the contractor at a Go-Co

   2. Operator:

      • Exercise of operational authority under procurement contracts

      • Regulatory authority under Defense Production Act or Second War Powers Act

        • i.e., authority to order a contractor to perform a rated contract, to impose production requirements and control output and supply of raw materials.

        • We are currently litigating this issue in a number of cases including Love Canal, FMC, and Vertac.

   3. Generator:

   4. • Actual arrangement for disposal of waste

      • Aceto liability from government supply contracts

• Government furnished property provisions

• Cost reimbursement contracts

4. Liability of Individual Employees

   1. Unlikely in civil context

   2. Narrow grounds for “knowing” violations in civil context

   3. Obligations under EPA compliance orders

   4. CERCLA § 103 reporting requirements for spills/releases

5. Liability Arising From Botched Cleanups

   1. How CERCLA liability can be asserted in connection with remedial activities

      • Causing additional releases at site

      • Most common way is from the careless drilling of monitoring wells, careless handling of drums, negligent handling of equipment, etc.

      • Improperly disposing of waste offsite

   2. Scope of CERCLA § 119

      • CERCLA currently immunizes “response action contractor” from CERCLA's strict liability scheme

      • Statutory language — response action contractors can be held liable only for releases “caused by conduct . . . which is negligent, grossly negligent or which constitutes intentional misconduct.” CERCLA § 119(a) (2)

      • “Response Action Contractor” includes anyone who contracts with any federal agency, a state or private PRP to study contamination or to conduct a remedial or response action. CERCLA § 119(e)

      • Rationale = if contractors were held strictly liable for releases caused during a cleanup, they would not be willing to provide their services.

   3. Liability of Private Response Action (“RA”) Contractor — CERCLA limits liability of federal PRP's private RA contractor for botched cleanups

   4. Liability of Government's RA Contractor

      • Probably limits liability if the remediation contractor is the government (i.e., Army Corps of Engineers) and the site is previously owned

      • Unclear whether limits liability if the remediation contractor is also the federal PRP, i.e., the Army Corps of Engineers cleaning up a government owned site

   5. Liability of Federal PRP — CERCLA does not limit liability of federal PRP if liability otherwise arises if:

• Private RA contractor causes releases at a site owned by the federal PRP (federal PRP is liable as owner)

• The remediation contract gives the federal PRP control over the work (federal PRP is liable as operator)

6. CERCLA's Waiver of Sovereign Immunity

   1. Scope of CERCLA § 120(a) (1)

      • Statutory language = CERCLA section 120(a) (1) provides that federal agencies “shall be subject to, and comply with, this chapter in the same manner and to the same extent, both procedurally and substantively, as any nongovernmental entity including liability under section [107, 42 U.S.C.] § 9607 of this title.” 42 U.S.C. § 9620(a) (1).

      • Government's constructions of CERCLA § 120(a) (1). Because the limited waiver of sovereign immunity only subjects the United States to liability “in the same manner and to the same extent” as private parties, the United States cannot be liable for undertaking activities which could not be performed by a private party or for which no private sector analog exists.

   2. Current litigation over meaning of the waiver in government procurement context: FMC, Vertac, Love Canal

   3. Applicability:

      • Liability of EPA (or U.S. Coast Guard) for botching a cleanup under statutory/presidentially delegated authority

      • Case law holds that only President (not private party) may carry out cleanup authorities; therefore, sovereign immunity under CERCLA section 120(a) (1) is not waived:

        • See United States v. Berks Assocs., 1990, WL 68340 (E.D. Pd Apr. 1, 1992) (Holding that EPA's allegedly negligent cleanup activities pursuant to the Clean Water Act did not trigger CERCLA liability because the government's cleanup was regulatory and “unlike that of a private party”);

        • In re Paoli Railyard PCB Litigation, 790 F. Supp. 94 (E.D. Pa. 1992) (holding that CERCLA did not waive the United States' sovereign immunity for claims involving EPA's negligent cleanup because these activities are “regulatory and remedial”); United States v. Western Processing, 761 F. Supp. at 729 (“In carrying out the remedial work necessary at the site, the EPA is not analogous to an agency of the federal government that may have generated its own waste and transported it to the site”)

• Liability of Federal PRP's private contractor with botched cleanups

  • Waiver of sovereign immunity under CERCLA section 120 is inapplicable to non-governmental contractors (but CERCLA § 119 applies).

  • “Government contractor defense” only applies in tort context where government immunity is clear and (1) the United States must have approved reasonably precise specifications; (2) the defective equipment must have conformed to those specifications; and (3) the manufacturer must have warned the United States about dangers known to the manufacturer but not to the United States. Boyle v. United Technologies Corp., 187 U.S. 500, 512 1988.

  • See Amtrack, Inc. v. O. H. Materials, Inc. 802 P. Supp. 443, 445 (M.D. Ga. 1992) (EPA contractor could not invoke government contractor defense because only shields contractor from liability under state law in tort actions).

  • Liability of federal PRP for private contractor's botched cleanup at federal facility.

  • Sovereign immunity is waived because the federal PRP is acting like a non-government entity in contracting for cleanup of site. In addition, CERCLA § 120(e) allows EPA and the federal PRP to agree to have a private PRP, who is liable for contamination at a federal facility, perform the cleanup work by way of a normal settlement under CERCLA § 122. Hence, there is no unique authority for federal PRP to get others to clean up a federal facility.

7. Liability Under State Law

   1. Civil Penalties:

      • Supreme Court held that RCRA did not waive sovereign immunity with respect to the imposition of civil penalties by a state. United States Department of Energy v. Ohio, 112 S. Ct. 1627 (1992).

      • Congress amended RCRA Section 6001 in light of United States Department of Energy v. Ohio to provide that RCRA waived sovereign immunity for the imposition of civil penalties sought by a state. Federal Facility Compliance Act of 1992, P. L. No. 102-386, § 102, 106 Stat. 1505.

   2. State's Right to Exercise Delegated RCRA Authority:

      • The Eighth Circuit recently held that states with approved RCRA programs can bring enforcement actions against federal agencies to compel compliance with state hazardous waste management requirements even though the agency is undertaking a CERCLA action and the site is listed on the NPL. United States v. State of Colorado, No. 91-1360 (10th Cir. Apr. 6, 1993).

• FACTS: Colorado had ordered the Army to submit a RCRA closure plan for an operable unit of the Rocky Mountain Arsenal that was being addressed by a $100 million CERCLA removal action. The state order prohibited any cleanup/closure activities unless the state first approved. The United States sought a declaratory judgement that CERCLA section 113(h) barred the state from enforcing the order.

• HOLDING: “The plain language of both [CERCLA and RCRA] provides for state enforcement of its RCRA responsibilities despite an ongoing CERCLA response action. Thus, enforcement actions under state hazardous waste laws which have been authorized by the EPA to be enforced by the state in lieu of RCRA do not constitute challenges to CERCLA response actions; therefore, [CERCLA § 113(h)] does not jurisdictionally bar Colorado from enforcing the final amended compliance order.” Slip op. at 29.