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Pulp Mill in British Columbia fined $900K for releasing deleterious effluent

The Mackenzie Pulp Mill Corporation recently pleaded guilty, in the Provincial Court of British Columbia, to depositing a deleterious substance into water frequented by fish, in violation of the pollution-prevention provisions of the Fisheries Act.  The company was ordered to pay a penalty of $900,000, which will be directed to the federal Environmental Damages Fund.  This funding is to be used for the conservation of fish or fish habitat in the Omineca region of British Columbia. The company was also ordered to complete an independent audit of its operations to prevent future incidents of this kind.

The offence relates to incidents in July 2014 and September 2016, when effluent discharging from the Mackenzie Pulp Mill was found to be deleterious to fish. Environment and Climate Change Canada enforcement officers investigated the incidents, and their investigation revealed that the mill’s treatment system had not properly treated the effluent before discharging it, due in part to improper management of the wastewater entering the treatment system. The effluent was deposited into Williston Lake, which is frequented by fish.

As a result of this conviction, the company’s name will be added to the Environmental Offenders Registry.  The Environmental Offenders Registry contains information on convictions of corporations registered for offences committed under certain federal environmental laws.

U.S. Ninth Circuit Rules Military Contractor Liable on CERCLA Clean-up Costs

Written by: By Whitney Jones Roy and Whitney HodgesSheppard Mullin Richter & Hampton LLP

TDY Holdings, LLC brought suit for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) against the U.S. government relating to environmental contamination at TDY’s manufacturing plant. The district court granted judgment in favor of the government after a 12-day bench trial and allocated 100 percent of past and future CERCLA costs to TDY. On appeal, the Ninth Circuit held that the district court sharply deviated from the two most “on point” decisions regarding allocation of cleanup costs between military contractors and the U.S. government when it determined the cases were not comparable, clarified the applicability of those cases, and remanded the case to reconsider the appropriate allocation of cleanup costs between TDY and the U.S. government.

TDY (formerly known as Ryan Aeronautical Company) owned and operated a manufacturing plant near the San Diego airport

From 1939 through 1999, TDY (formerly known as Ryan Aeronautical Company) owned and operated a manufacturing plant near the San Diego airport. TDY’s primary customer was the U.S. government—99 percent of TDY’s work at the plant between 1942 and 1945, and 90 percent of the work thereafter was done pursuant to contracts with the U.S. military. The United States also owned certain equipment at the site from 1939 to 1979. Id. at 1006. Chromium compounds, chlorinated solvents, and polychlorinated biphenyls (PCBs) were released at the site as a result of their use during manufacturing operations. Id. In some cases, the government’s contracts required the use of chromium compounds and chlorinated solvents. Id. After passage of the Clean Water Act and other environmental laws classifying these chemicals as hazardous substances in the 1970s, TDY began environmental remediation and compliance at the site and billed the government for the “indirect costs” of that work, which the government paid. Id. at 1006–07. TDY incurred over $11 million in response costs at the site. Id. at 1007. Until the plant’s closure in 1999, the government reimbursed 90 to 100 percent of TDY’s cleanup costs at the site. Id. at 1007, 1010.

In 2004, the San Diego Unified Port District brought CERCLA claims against TDY. TDY and the Port District entered into a settlement agreement in March 2007 in which TDY agreed to cleanup releases at the site. TDY then brought suit for contribution under 42 U.S.C. § 9613(f)(1) and declaratory relief against the United States. Id. at 1007. The district court granted TDY’s motion for partial summary judgment declaring that the United States was liable as a past owner of the site under CERCLA. Id. After a 12-day bench trial on equitable allocation of costs, the district court held that the contamination caused by the hazardous substances at issue was attributable to TDY’s storage, maintenance, and repair practices, as well as spills and drips that occurred in the manufacturing process, rather than to the government’s directives to use the chemicals. Id. Accordingly, the district court allocated 100 percent of the past and future response costs for remediation of the three hazardous substances to TDY. Id. at 1008.

On appeal, TDY argued that the district court erred (1) when it allocated liability according to “fault”; (2) that the government’s role as owner rather than operator should not have been a dispositive factor in the court’s allocation, and (3) that the government should bear a greater share of response costs because it specifically required use of the chemicals at the site. Id. The court of appeals summarily rejected TDY’s first two arguments, but found that the district court did err in its analysis and application of binding authority on point: United States v. Shell Oil Co., 294 F.3d 1045 (9th Cir. 2002) and Cadillac Fairview/California, Inc. v. Dow Chem. Co., 299 F.3d 1019 (9th Cir. 2002). Id. at 1008–09. Shell Oil and Dow Chemical each produced products to support the U.S. military during World War II and incurred liability for contamination caused by hazardous chemicals that the government required to be used. In both cases, the Ninth Circuit affirmed the district courts’ allocation of 100 percent of cleanup costs to the government because “the contractors’ costs were ‘properly seen as part of the war effort for which the American public as a whole should pay.’” Id. at 1009.

The Ninth Circuit disagreed with the district court’s conclusion that Shell Oil and Cadillac Fairview were not comparable, but agreed that some deviation from their allocations were appropriate. Id. The Ninth Circuit agreed that the government exercised less control over TDY than it did over Shell Oil Co. or Dow Chemical. In support of this determination, the court noted that the government was an operator, rather than an owner, of TDY’s site, that the government-owned equipment was removed from the site 20 years before TDY ceased operations, and that TDY’s own practices at the site caused the contamination. Id. at 1010. Furthermore, the district court properly determined that “industrial operations undertaken for the purpose of national defense, standing alone, did not justify allocating all costs to the government.” Id.

However, the Ninth Circuit held that, in allocating 100 percent of cleanup costs to TDY, the district court failed to consider that the government required TDY to use two of the three chemicals at issue beginning in the 1940s, when the need to take precautions against environmental contamination from these substances was not known. Id. Furthermore, the Ninth Circuit determined that “[t]he court’s acknowledgement of the evolving understanding of environmental contamination caused by these chemicals, and TDY’s prompt adoption of practices to reduce the release of hazardous chemicals into the environment once the hazards became known, further undercuts the decision to allocate 100 percent of the costs to TDY.” Id. The district court also failed to consider the parties’ lengthy course of dealing through 1999, when the government paid between 90 and 100 percent of cleanup costs at the plant. Id. Although “a customer’s willingness to pay disposal costs . . . cannot be equated with a willingness to foot the bill for a company’s unlawful discharge of oil or other pollutants,” the Ninth Circuit nevertheless determined it should have been a relevant factor in the allocation analysis. Id.

This article was originally published on the Sheppard Mullin Real Estate, Land Use & Environment Law Blog

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About the Authors

Whitney Jones Roy is a litigation partner in firm’s Los Angeles office. Ms. Roy was recognized by Law360 as a “Female Powerbroker” and by the Daily Journal as one of the Top 100 Women Lawyers in California in 2014.  Ms. Roy has experience in all aspects of California and federal civil procedure through trial. She also defends her clients on appeal when necessary.  Ms. Roy also specializes in complex environmental litigation and related products liability litigation. Her expertise includes the Clean Air Act, CERCLA, RCRA, design defect, failure to warn, negligence, nuisance, and trespass.

Whitney Hodges is an associate in the Real Estate, Land Use and Natural Resources Practice Group in the firm’s San Diego office. She also serves on the firm’s Diversity and Inclusion Committee, Pro Bono Committee, Recruiting Committee, Energy, Infrastructure and Project Finance Team and Latin Business Team.  Ms. Hodges specializes in the representation of clients involved in real estate development. Her practice focuses on advising and representing major residential, industrial, commercial and mixed-use development projects, as well as Native American Indian tribes and renewable energy developers through all phases of the land use regulatory process and environmental compliance.

 

 

SJC Clarifies Statute of Limitations for Contaminated Property Damage Claims but Raises Questions of Application

by Marc J. GoldsteinBeveridge & Diamond PC

Plaintiffs with property damage claims under the Massachusetts cleanup law have more time to bring their claim than might be expected under the three-year statute of limitations according to a recent ruling by the top Massachusetts court.  The Supreme Judicial Court ruled that the statute of limitations begins running when the plaintiff knows that there is damage to the property that is “permanent” and who is responsible for the damage, pointing to the phases of investigation and remediation in Massachusetts’ regulatory scheme as signposts for when a plaintiff should have that knowledge.  Grand Manor Condominium Assoc. v. City of Lowell, 478 Mass. 682 (2018).  However, the Court left considerable uncertainty about when the statute of limitations might begin for arguably more temporary property damages such as lost rent.

In this Google image, the Grand Manor condominium complex is visible at the center-right.

In this case, the City of Lowell owned property that it used first as a quarry and then as a landfill in the 1940s and 50s before selling the property in the 1980s to a developer.  The developer constructed a condominium project on the site and created a condominium association soon thereafter. As part of work to install a new drainage system in 2008, the contractor discovered discolored soil and debris in the ground.  Subsequent sampling indicated that the soil was contaminated and that a release of hazardous materials had occurred.  The condo association  investigated in early 2009, and MassDEP issued notices of responsibility to both the condo association as well as the city in May 2009.  The city assumed responsibility for the cleanup and worked the site through the state regulatory process known as the Massachusetts Contingency Plan (MCP).  In the city’s MCP Phase II and III reports in June 2012, it concluded that the contamination was from the city’s landfill operations, that it would not be feasible to clean up the contamination, and proposed a pavement cap and a deed restriction.

The condo association and many of its members filed suit in October 2012 for response costs under Chapter 21E, § 4 and damage to their property under G.L. c. 21E, § 5(a)(iii).  At trial, the jury awarded the plaintiffs response costs under Section 4 but found that the plaintiffs had failed to prove that their property damage claim was brought within the three-year statute of limitations for such claims under G.L. c. 21E, § 11A.  The Supreme Judicial Court took the case on direct appellate review.

Section 11A provides that an action to recover damage to real property “be commenced within three years after the date that the person seeking recovery first suffers the damage or within three years after the date the person seeking recovery of such damage discovers or reasonably should have discovered that the person against whom the action is being brought is a person liable…”  Quoting Taygeta Corp. v. Varian Assocs., Inc., 436 Mass. 217, 226 (2002), the Court summarized this as a requirement that the claim must be brought within three years of when plaintiff “discovers or reasonably should have discovered [1] the damage, and [2] the cause of the damage.”

The Court quickly agreed that “the damage” referred to in Section 11A was, for these purposes, the property damages of Section 5 and moved on to the plaintiffs’ contention that the limitations period should not run until they discovered or reasonably should have discovered that the damage was “permanent” or, in other words, not reasonably curable.  Until that time, they argued, they could not know if they had a property damage claim because the site could be fully remediated.

The Court examined the application of the statute of limitations in the context of the statutory scheme for investigating and remediating sites in Massachusetts.  The Court found that the primary purpose of Chapter 21E is to clean up environmental contamination and to ensure responsible parties pay for the costs of that cleanup.  As a result, the statute prioritizes “performance and financing of cleanup efforts, and then considers the calculation of property damage that cannot be cured by remediation and remediation cost recovery.”

In interpreting the statute of limitations, the Court crystalized the question as “whether the word ‘damage’ in § 11A(4) refers specifically to damage under § 5, that is, damage that cannot be cured and compensated by the cleanup and cleanup cost recovery processes defined by the MCP and §§ 4 and 4A, such that the limitations period does not begin to run until the plaintiff knows there is residual damage not subject to remediation and compensation.”  In order to have knowledge that a plaintiff has suffered damage that is not curable by the MCP remediation process, the MCP process must have run sufficiently to know that § 5 damages exist – that there is contamination that will not be addressed through remediation leaving the property at a diminished value.  Since the liable party is required to determine the extent of the damage in Phase II and evaluate available remedies in Phase III of the MCP, as the Court noted, “[i]t would make little sense to require the plaintiff to independently determine whether residual property damage exists prior to the completion of these reports.” As a result, the Court concluded that the statute of limitations did not start to run until the plaintiff became aware that the site would not be fully remediated in the Phase II and III reports in June 2012 months before they filed their lawsuit.  Exactly what constitutes full remediation remains to explored in further cases, as the range of outcomes from achieving background conditions, implementing deed restrictions, reaching temporary solutions, or even leaving just a few molecules of contamination left behind could impact this analysis.

The Court contended that this interpretation of the statute of limitations provides a “prescribed and predictable period of time” within which claims would be time barred, given that there are timetables associated with the production and submission of MCP Phase II and III reports.  Under normal circumstances, the Court expected that a plaintiff will know it has a claim within five years of notifying MassDEP of contamination.

Despite the Court’s pronouncement that it had provided predictability for these types of claims, the statute of limitations for non-permanent property damages, such as lost rental value, or for sites where there is a long-term temporary solution in place, remain uncertain.  Lawyers and clients evaluating how and when to bring claims for temporary and permanent damages will need to carefully evaluate a range of potential options in pursuing a preferred single case for property damage without unacceptable risk that an uncertain statute of limitation may have run.

The article was first published at the Beveridge & Diamond website.

Beveridge & Diamond’s Massachusetts office assists parties at all phases of contaminated sites, guiding clients through the MCP investigation and remediation process and prosecuting and defending claims in court for cost recovery and property damage.  For more information about this practice, contact Marc Goldstein or Jeanine Grachuk.

About the Author

Marc Goldstein helps clients resolve environmental and land use disputes and to develop residential, commercial, and industrial projects. He serves as the Managing Principal of Beveridge & Diamond’s Wellesley, Massachusetts office and the Chair of the firm’s Technology Committee.

Marc provides practical, cost-effective advice to clients with environmental contamination issues, whether those clients are cleaning up hazardous materials and seeking contribution from previous owners or adjacent landowners or facing claims under Chapter 21E or Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for their alleged role in contamination.

When Is a Discharge to Groundwater Subject to the U.S. Clean Water Act? Can You Say “Significant Nexus”?

By Seth Jaffe, Foley Hoag LLP

Whether the United States Clean Water Act regulates discharges to groundwater has been a topic of significant debate.  At this point, there seems to be something of a trend in the cases towards concluding it does, but it remains true that all of the courts of appeal that have addressed the issue have concluded that it does not.  As I have noted, the problem with the “yes” answer is that pretty much all groundwater eventually discharges to surface water, making all such discharges subject to the CWA.  How can that be, given that groundwater is not considered to be “waters of the United States?”

Chief Judge Waverly Crenshaw recently addressed the issue in Tennessee Clean Water Network v. TVA.  Judge Crenshaw’s solution was creative – meaning he pretty much made up out of whole cloth.  That doesn’t necessarily mean that it’s wrong, however.

The case involves coal ash management at the TVA’s Gallatin plant.  Some of the – unlined – ponds directly abut the Cumberland River.  The plaintiff citizen groups brought claims under the CWA, alleging that TVA was discharging pollutants to the River – via groundwater – without an NPDES permit.  They requested an injunction requiring that the TVA remove the coal ash from the ponds, at a cost of $2 billion.

Gallatin power plant, operated by the Tennessee Valley Authority in mid-Tennessee on the north bank of the Cumberland River. Location of the main coal-burning facility is indicated by the icon and label.

Judge Crenshaw was clearly frustrated by an absolutist position on either side.  Clearly, he does not think that any link between groundwater and surface water, no matter how attenuated, can be enough for jurisdiction to attach.  On the other hand, he was also trying to reckon with the specific case in front of him.  As he saw it, the Gallatin ash ponds were a complete environmental mess.  They immediately abut the Cumberland River, clearly a water of the United States.  Can the outcome really be different if the ponds discharge directly to the River than if they discharge to groundwater 10 feet from the River, where that groundwater then discharges to the river?

His solution?

the Court concludes that a cause of action based on an unauthorized point source discharge may be brought under the CWA based on discharges through groundwater, if the hydrologic connection between the source of the pollutants and navigable waters is direct, immediate, and can generally be traced.

I confess I like this solution, because it is practical and will generally yield reasonable results.  It avoids either effectively regulating all groundwater under the CWA or having to conclude that the CWA can’t reach situations such as the Gallatin ash ponds.

The problem?

There’s no textual support for this solution in the CWA.  To me, this test sounds a lot like Justice Kennedy’s “significant nexus in Rapanos.  There too, his position received a lot of support at a practical level, while many commentators noticed that the CWA says nothing about a “significant nexus.”

We all know how well that’s worked out.

This article was first published in Law and the Environment, a blog from Foley Hoag LLP.

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About the Authors

Seth D. Jaffe

A partner at Foley Hoag, Seth Jaffe is recognized by Chambers USA, The Best Lawyers in America and Massachusetts SuperLawyers as a leading… MORE

Kathleen Brill

Kathleen Brill is an Associate practicing in the Administrative Department of Foley Hoag’s Boston office. Before joining Foley Hoag, Kathleen had considerable experience…MORE

 

CERCLA Trumps As-Is Sales

By Steven L. Hoch, Attorney, Clark Hill

A federal court in Alaska assessed responsibility against the City of Fairbanks (City) for remediation costs found necessary to clean up property it previously owned.  The court concluded that the City should have mitigated the problem or at least warned the purchaser about the contamination, even though the property was sold “As-Is”.  Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) liability is assessed without reference to cause.  Further, the court said that numerous courts have held that CERCLA liability cannot be defeated by contract, unless specifically and clearly addressed in the contract language.

In Gavora, Inc. v. City of Fairbanks , Case No. 4:15–cv-00015-SLG, BL 256894 (D. Alaska July 25, 2017), the City owned two parcels of land and Gavora held leasehold on one of the parcels. For a considerable length of time, a dry cleaning business operated in the shopping center located on their parcel.  Eventually, the contamination drew the attention of the State of Alaska, who told the City about the contamination and that they suspected the contamination migrated from that parcel to the other.  While the State did not verify the findings, the district court found it clear that the City knew or should have known that the first parcel was also contaminated.

Fairbanks Mall – Satellite Image showing borehole and monitoring well locations as well as PCE contamination levels

The City sold the first parcel to Gavora on an “As-Is, Where-Is” basis.  This sale occurred 10 years after the City first learned of the contamination on the second parcel.  When the purchase took place, Gavora did not perform its own environmental assessment.  Five years later, contamination was discovered on the first parcel owned by Gavora.  Lacking options, Gavora remediated the parcel and sued the City of Fairbanks for contribution.

Even though the sale was “As-Is”, the court nevertheless held the seller liable. Further, the court allocated 55% of the costs to the City and 45% of the costs to the current owner. The court rationalized that this allocation was appropriate because (1) the city knew or should have known of the contamination, yet failed to inform the purchaser; (2) the current owner made substantial corrective action efforts upon learning of the problem whereas the City took no action, and (3) it would be inequitable to hold the current owner responsible for contamination occurring prior to its master lease, but the court could not “effectively apportion the contamination”, but (4) the current owner would obtain a greater benefit than the prior owner from the remediation.

In the final analysis this case affirms that “As-Is” does not exculpate a seller from CERCLA liability, and that not disclosing contamination even when it did not make any representation to the contrary. As this was a district court opinion, it does not have significant legal value, but should not be dismissed out of hand when confronting similar issues.

 

This article was first published on the Clark Hill website.

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About the author

Steven Hoch has over 40 years of experience with both federal and state environmental laws and regulations in the context of permitting, regulatory proceedings, litigation, enforcement actions, water supply, public policy formation, and advice.  His work includes contamination of land and ground and surface water.  Steven has critical experience in the areas of environmental law and the federal and state Safe Drinking Water Acts, Title 23, water supply, and the mechanics of water distribution.  His experience also extends to groundwater modeling and water quality testing.  He also has significant experience in hazardous substances and waste handling practices, remediation, soil erosion, and claims of toxic exposures

Steven has in-depth experience working with numerous public water systems throughout the state.  He has also established a sterling reputation for his work with the Regional Water Quality Control Boards, the Department of Toxic Substance Control, and the United States Environmental Protection Agency both in the administrative and litigation.  His clients range from the country’s largest municipal water agency to individuals selling or buying contaminated sites.

Steven often takes primary roles in many environmental trials, and has served as liaison counsel for groups or parties at the request of fellow counsel.  He has been involved in several landmark cases, including acting as PG&E’s counsel in the case made famous by the movie Erin Brockovich.

 

The Ninth Circuit Reiterates That “Knowingly” Handling Hazardous Waste Without a Permit Is a General Intent Crime Under RCRA

By Richard E. Stultz

Max Spatig was convicted of knowingly storing and disposing of hazardous waste without a permit and sentenced by the U.S. District Court for the District of Idaho to 46 months in prison under 42 U.S.C. § 6928(d)(2)(A). See U.S. v Spatig (2017) 2017 WL 4018398.  At trial, Spatig had sought to introduce evidence on his diminished capacity arguing that he did not have the required state of mind for the offense.  The district court, however, granted the government’s motion in limine to exclude all such evidence because § 6928(d)(2)(A) under the Resource Conservation and Recovery Act (RCRA) only required general intent and diminished capacity was not a defense to a general intent crime.

For years, Spatig had operated a business which used paint and paint-related materials.  Over time Spatig had accumulated several used containers of this material, some of which ended up on his residential property in Idaho.  In 2005, the county discovered the several containers and reported it to the Idaho Department of Environmental Quality (DEQ). Working with Spatig, DEQ collected and destroyed most of the containers.  In 2010, Spatig was again found to be storing used containers of paint and paint related materials on another of his properties.  This time the job was too big for local or state authorities so the U.S. Environmental Protection Agency (EPA) was notified.  The U.S. EPA determined that the waste was hazardous and that a cleanup was necessary. The U.S. EPA removed approximately 3400 containers and spent $498,562 on the cleanup.  The EPA charged Spatig with violation of § 6928(d)(2)(A) for knowingly storing and disposing of a hazardous waste without a permit from either DEQ or the U.S. EPA.

Paint cans at a property off the Archer-Lyman Highway near Rexburg, Idaho

Spatig appealed his trial conviction and argued on appeal that § 6928(d)(2)(A) required specific intent.  He also took issue with the district court’s enhancement of his base sentence arguing that the cleanup did not result in a “substantial expenditure.”  The Ninth Circuit Court of Appeals, however, disagreed with Spatig and affirmed the district court.

Under § 6928(d)(2)(A), a person may not “knowingly” treat, store or dispose of a hazardous waste without a permit.  According to the U.S. Supreme Court, “‘knowingly’ merely requires proof of knowledge of the facts that constitute the offense.”  The Ninth Circuit had also held that “knowingly” generally does not require specific intent.  In other words, a defendant’s particular purpose or objective is not required.  The Ninth Circuit previously rejected the argument that § 6928(d)(2)(A) required that a defendant know there was no permit for disposal.  The court held there that “knowingly” only required “that a defendant be aware that he is treating, storing, or disposing of something that he knows is hazardous.”  The court found that RCRA was a public-welfare statute and that “§6928(d)(2)(A) fits within a class of general-intent crimes that protect public health, safety, and welfare.”  Because § 6928(d)(2)(A) only requires general intent, the Ninth Circuit upheld the district court’s exclusion of evidence at trial of Spatig’s state of mind.

Spatig argued that his sentence enhancement was error because the cleanup did not constitute a “substantial expenditure” required under the federal sentencing guidelines (U.S.S.G. § 2Q1.2(b)(3)).  The Ninth Circuit refused to establish a bright-line rule but noted that sister circuits had found that expenditures under $200,000 were “substantial.”  In upholding the district court, the Ninth Circuit noted that in the instant case the $498,562 underestimated the total cost because it did not include the local agencies’ expenditures.

This holding underscores the long-standing general purpose of environmental laws to protect the public welfare. These statutes do not generally require specific intent—only knowing of the act is required.

This article was first published on the Clark Hill website.

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About the author

Richard E. Stultz brings over eighteen years of experience in the environmental, land development and petroleum industries to bear in his practice of law. In addition to his law degree, he also earned a Bachelor of Science in Petroleum Engineering. Richard’s practice is currently focused on environmental litigation.

Richard is experienced in law and motion filings and hearings. He is practiced in written discovery and legal research. Richard has even co-written a First Amendment argument submitted before the California Court of Appeal. He is familiar with California’s environmental laws and regulations.

While in law school, Richard interned at the Los Angeles City Attorney’s Office in the Real Property/Environment division. He researched and prepared a key memorandum regarding good will compensation in eminent domain.