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Federal Court Tells WWII Waste Generators, “You'd Better Not Pout,” Awards Government $50 Million in Cleanup Costs

On December 10, 2020, Christmas came early for the federal government. In United States v. Shell Oil Company (CV 91-00589-CJC), the Central District of California awarded it nearly $50 million in costs to remediate waste generated by oil companies that produced World War II aviation fuel at the McColl Superfund Site in Fullerton, California. Though their liability had already been established in a 1993 Second Circuit decision, the companies sought to raise triable issues of fact on damages, and they also contended that the government’s statutory basis under CERCLA was improper. But the Court rejected these arguments and granted the government’s motion for summary judgment.

The first statutory issue was whether the government could bring a “cost recovery” claim under CERCLA Section 107(a) instead of a “contribution” claim under Section 113(f). The former is reserved for a party that has itself incurred cleanup costs, whereas the latter can be raised by a private Potentially Responsible Party (PRP) that has paid more than its fair share of liability another Section 107(a) settlement or judgment. The companies argued that the government’s claim sounded in contribution because (a) the 1993 Second Circuit decision, in addition to establishing their liability for most wastes, allocated 100% of the cleanup for benzol wastes to the government, (b) the Court of Federal Claims required the government to reimburse the oil companies for certain remediation contractor costs, and (c) the government entered into partial consent decrees with the State of California regarding the same contamination. Thus, the oil companies argued that the government’s damages stemmed from overpayment of its own liability. The Court disagreed, observing first that it was unclear whether the strict rule that private parties resort to 113(f) for reimbursement claims for settlements or judgments applied to the government. Assuming it did, though, the Court held that the government was not seeking to “recover some payment made to satisfy a settlement or judgment” but, rather, directly “to recover costs it incurred removing or remediating contamination.”

The second statutory issue was which subsection of Section 107(a) applied to the government’s claim. Section 107(a)(4)(A) makes PRPs liable for costs incurred by “the United States Government or a State or Indian Tribe not inconsistent with the national contingency plan.” Section 107(a)(4)(B) makes PRPs liable for “any other necessary costs of response incurred by any other person consistent with the national contingency plan.” This distinction matters because subsection (A) gives the government a rebuttable presumption that its costs are consistent with the national contingency plan and thus are not arbitrary or capricious. Seeking to avoid this presumption, the companies argued the government lost its status as a government entity when it became a PRP, and thus its claim fell under subsection (B). The Court explained that a statutory reading of Section 107 does not support the companies’ argument. The statute plainly lists four entities: the United States Government, a State, an Indian Tribe, and “any other person.” Textually, the last phrase means any person other than the first three. PRP status is irrelevant.

The companies finally tried to raise genuine issues of material fact regarding whether the government appropriately (and not arbitrarily or capriciously) accounted for its $50 million in damages and thus acted consistently with the national contingency plan. Given the government’s presumption of consistency, combined with its extensive and detailed cost-accounting, the companies had little hope of success on this front, and found none. First, the Court summarily rejected their argument that the government’s “direct costs”—actual cleanup costs on the site—were yet unresolved, as they did not “describe the information the EPA purportedly failed to provide.” Next, the Court considered EPA’s “indirect costs,” or costs to administer the agency itself (e.g., employee payroll), which the companies asserted improperly accounted for contractor payments. The Court noted that there was “not a single piece of evidence” to support this charge. Finally, the companies tried to discredit EPA’s “annual allocations,” which are costs that do not relate to one site but benefit all sites (e.g., maintaining equipment). The Court again pointed out that the companies failed to present evidence showing that the calculation was flawed, observing that “the United States thoroughly documented and explained how EPA accounts for the annual allocation of non-site-specific costs.”

This case highlights the deference the government receives in certain cleanup actions that can make legal challenges difficult. Most significantly, accompanying a Section 107(a) claim is the rebuttable presumption that the government’s cleanup actions were not arbitrary or capricious. And, courts will not entertain unsubstantiated challenges to EPA’s cost-accounting methodology. Liable PRPs seeking to avoid summary judgment on damages must present the Court with concrete evidence casting doubt on the government’s numbers, otherwise they are unlikely to make it to trial, let alone prevail.