On August 19, 2020, the United States District Court for the Southern District of Texas issued what it hoped was “the third, and should be the last, opinion in these environmental pollution cases arising from World War II and the Korean War.” Exxon Mobil Corp. v. United States, Nos. H-10-2386 & H-11-1814, slip op. at 1 (S.D. Tex. Aug. 19, 2020). The court’s decision provides a unique window into an allocation for recovery under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), a process more often conducted in private alternative dispute arrangements among potentially liable parties.

A decade ago, Exxon sued the Untied States government to recover past and future cleanup costs incurred under CERCLA to remediate contamination caused by the production of war materials at two of Exxon’s refineries and chemical plants. The refineries operated under wartime contracts with the United States and were converted into aviation gas and synthetic rubber production sites central to the country’s World War II efforts. The case was litigated in three phases. In 2015, the court determined that both Exxon and the government were liable under CERCLA. Then in 2018, the court ruled on the parties’ cross-motions for summary judgment on, among other issues, what allocation method the court should apply. The last phase involved a bench trial to “resolve factual disputes and conflicting inferences, and to determine the relative shares of responsibility as well as the amounts of past costs and shares of future costs that each party must pay.” Id. at 7.  

Accordingly, a fourteen-day bench trial commenced in-person in March 2020, before proceeding virtually due to the COVID-19 pandemic. Both sides offered testimony from forensic historians on topics including the wastes produced, when, by whom, and who should pay the remediation costs. The court followed the “production-based” allocation method that was designed by Exxon’s allocation expert, which it found to be more accurate and precise than the government’s proposed “time-on-the-risk” approach. The production-based method used the crude-processing rate of the refineries as a way to measure the amount of hazardous waste generated. The court then applied the oft-cited Gore factors, Torres factors, and five additional factors of the court’s choosing which included the following: the knowledge and acquiescence of the parties in the contamination-causing activities; the value of the activities to the national defense efforts; the parties’ roles at the refineries and chemical plants; the parties’ intent to allocate liability; and postwar waste-handling improvements. Applying the allocation method and aforementioned factors, the court determined that the United States government was liable for $20.3 million in past cleanup costs for the two refineries. Moreover, the court found that the amount was not subject to an offset for insurance recovery because the court concluded there was no double recovery.

The Exxon decision has caught the attention of litigants and practitioners across the country for the unique opportunity to peer into an otherwise confidential process. Because allocations rarely proceed to trial, allocation decisions are few and far between. Thus, the 113 page order and opinion provides litigants, and particularly potentially responsible third parties litigating against the government, with the unique opportunity to see a neutral third party walk through the allocation analysis and weigh various factors. The Exxon decision is evidence of the critical role that forensic experts play in these extremely fact intensive cases and highlights the importance of creating an expansive evidentiary record for allocation. Accordingly, the Exxon decision will likely serve as an important resource for parties developing their litigation and allocation strategies in similar CERCLA cases.

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