On April 26, 2023, the United States Court of Federal Claims ordered the federal government to reimburse Shell U.S.A. and several other oil companies for all cleanup costs, including interest, associated with the cleanup of aviation gas (“avgas”) at a site polluted during World War II efforts. Shell U.S.A., Inc. et al. v. United States, 2023 WL 3090659 at *10 (Fed. Cl. 2023). This was the third such case in which the oil companies were seeking contractual indemnification for costs pursuant to the Contract Settlement Act and the only issue of significance addressed by the Court was whether the Plaintiffs were entitled to recover statutory interest that they previously paid under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Ultimately, the Court held that the plain reading of CERCLA includes interest as a “charge,” and the government was not immune from paying those costs.  Id. at *8.

This opinion is the latest in a series of disputes related to the government’s early 1940s contracts with Shell U.S.A., Atlantic Richfield Co., Texaco Inc., and Union Oil of California (“oil companies”) to provide large quantities of avgas needed to fuel planes during World War II. Id. at *2. The contract with the government included a “new-or-additional charges provision.” Id. at *7. In the provision the government promised to pay any new or “additional taxes, fees, or charges” to the oil companies as required by any municipal, state or federal law due to the production, manufacture, sale or delivery of avgas. Id. To perform the contract, the oil companies increased avgas production, which resulted in substantial amounts of acid waste without adequate storage capacity. Id. at *2. After the federal government refused to construct new storage facilities for the excess waste, the oil companies were forced to contract with a third party to dispose of the waste at site in Fullerton, California. Id. The oil companies disposed of the waste at the California site until the war ended and cleanup efforts began. Id.

In 1991, the United States and California sued the oil companies to recover cleanup costs for the avgas waste. Id. The California court ultimately allocated all the cleanup costs to the government. Id. On appeal, the Ninth Circuit court reversed part of the holding finding the government responsible for the entire cost related to benzol waste but not non-benzol waste. Id. Following remand, the California district court transferred the oil companies claims for indemnification to the Court of Federal Claims. Id. at *3. After a series of procedural hurdles, the federal circuit court held that the plain language of the new-or-additional charges provision required the government to indemnify the oil companies for CERCLA costs due to the avgas contracts. Id. After a damages trial, the Federal Claims court affirmed a nearly 100-million-dollar award, which included interest, to the oil companies for cleanup actions through 2015. Id.

In this round of litigation, the oil companies sought over 60 million dollars, which included interest paid to the United States and California, for costs accrued after 2019. Id. Because a “waiver for sovereign immunity for interest must be distinct from a general waiver of immunity,” the parties disputed whether the new-or-additional charges provision waived the Federal Government’s sovereign immunity for interest due under CERCLA. Id. at *6. The plaintiffs argued that the new-or-additional charges provision authorized reimbursement of interest even though that word was not used and supported their interpretation with Federal Circuit case law that held that “charges” include all CERCLA costs including CERCLA statutory interest. Id. at *7.  In response, the government contended that that the new-or-additional charges provision could not constitute a waiver of sovereign immunity because the provision does not explicitly mention interest. Id.

In finding in favor of the plaintiffs, the court distinguished CERCLA’s statutory interest with ordinary prejudgment interest and reasoned that the liability provision of CERCLA explicitly includes interest as a CERCLA “charge” within the meaning of the new-or-additional charges provision. Id. at *8. Specifically, section 9607 of CERCLA states that “amounts recoverable in an action . . . shall include interest . . . .” Id. With regards, to the sovereign immunity argument, the court further read that section 9620 requires the government to comply with CERCLA, including the liability provisions under section 9607. Id. Based on this reading, courts have subsequently held that waiver of immunity for liability under section 9607 includes interest charges. Id.; see also Santa Fe Pac. Realty Corp. v. United States, 780 F. Supp. 687, 696-97 (E.D. Cal. 1991) (holding that CERCLA sections 9607 and 9620, read together, constitute an “explicit and unambiguous” waiver of sovereign immunity for claims of CERCLA interest). Thus, the new-or-additional charges provision waives sovereign immunity and establishes the government’s liability for all CERCLA charges paid by the gas companies, including interest paid under CERCLA. Shell U.S.A., Inc. et al., 2023 WL 3090659 at *10. This holding reaffirms that no legally responsible party, not even the federal government, may escape liability for cleanup costs associated with the abatement of hazardous waste disposal sites. See id. at 3.

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