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Sixth Circuit Holds Government Was Not An “Operator” of Refineries Under CERCLA

On June 23, 2023, in MRP Properties Company LLC v. United States, No. 22-1789, 2023 WL 4141227 (6th Cir. June 15, 2023), the Sixth Circuit decided that despite having directed production at refineries during World War II, the United States government did not qualify as an “operator” of those facilities under CERCLA, providing additional guidance for courts evaluating what kinds of activities subject a party to operator liability. 

During World War II, the federal government often directed production at refineries, telling refiners what to make and for whom to make it.  Refineries then burned, buried or maintained the waste products, sometimes resulting in releases into the environment.  Valero Energy Corporation (“Valero”) owned twelve refinery sites which were operated during World War II, and post-war investigations at each site revealed environmental contamination.  Valero began cleaning up the sites but sought contribution from the United States, arguing the government’s war time directives of its refineries rendered it an “operator” of the sites under CERCLA.  The District Court for the Eastern District of Michigan granted Valero partial summary judgment, finding “any reasonable juror would find that the United States operated each site during the war, emphasizing that it controlled what and how much the refineries would produce during wartime.”  The United States took an interlocutory appeal, arguing the judge misconstrued what qualifies as an operator and calling the order "unprecedented in the liability it assigns to the government for its wartime conduct."

On appeal, the Sixth Circuit examined the definition of the term “operator” under CERCLA.  The Court relied on United States v. Bestfoods, 524 U.S. 51 (1993), in which the United States Supreme Court held that “an operator directs the workings of, manages, or conducts a facility’s affairs.  Honing the definition further, an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations.” As to what constitutes conducting or managing operations related to pollution, the court held there are two categories of operators: 1) “those who perform day to day work with hazardous waste,” and 2) “those who make strategic decisions about waste management[.]” 

Applying these standards, the Sixth Circuit reversed the District Court and held that the United States was not an “operator” of the refineries.  As to the first category of operators, the Court stated, “the refineries, not the government, made the key decisions related to waste and implemented those decisions,” “worked day-to-day with petroleum’s hazardous byproducts,” “burned and buried the toxic waste,” and “maintained the refineries and monitored them for leaks and spills.”   Meanwhile, the government had “little to do with” the “waste disposal processes.”  As to the second category of operators, the Court similarly held that refineries “made broad[], strategic decisions about waste disposal” while the government did not tell them how to handle their waste.  Rather, while “the government influenced refineries’ business decisions during the war, [] that influence did not extend to refinery facilities’ waste-related features.” 

The Court further explained that by wielding emergency war time powers, regulators do not become “operators” of the industries they regulate.  The fact that refineries had to reorganize production to meet the needs of its end-user, i.e. the government, did not make the government an ”operator.”

The Court went on to discuss similar holdings in other circuits, including PPG Indus. Inc. v. United States, 957 F.3d 395, 403 (3d Cir. 2020) in which the Third Circuit found that the government’s World War II demands did not render it an “operator” of chemical manufacturing facilities.  The court differentiated FMC Corp. v. U.S. Department of Commerce, 29 F.3d 833 (3d Cir. 1994), in which the Third Circuit found that the United States was an operator of a rayon manufacturing facility where the wastes were generated and disposed of by government-owned equipment and a government representative monitored the facility.  While the Third Circuit held in FMC that control over production was the “leading indicia” of operator status, the Sixth Circuit noted that FMC was decided before Bestfoods, at which point the Supreme Court clarified that CERCLA “requires control over activities specifically related to pollution rather than control over general pricing and product-related decisions.”

Accordingly, similar to other courts which have addressed the issue since Bestfoods, the Sixth Circuit has decided that the government’s war time directives are typically insufficient to render it liable as an “operator” of refineries under CERCLA.  Rather, when seeking to impose liability on the government as an “operator,” a party must demonstrate that the government exercised some degree of control over the waste disposal specifically related to the contamination.