On July 19, 2017, the Tenth Circuit Court of Appeals held that the United States, as the title owner of a former mine, was a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), despite the fact that it did not have a possessory interest in the property at the time of the disposal of hazardous substances.  The opinion in Chevron Mining Inc. v. United States, No. 15-2209, 2017 U.S. App. LEXIS 12959, at *1 (10th Cir. July 19, 2017) thus appears to put to rest a defense often asserted, primarily by governmental entities, that “bare legal title” is insufficient for CERCLA liability to attach and instead that some other and additional “indicia of ownership” is required.

Beginning in 1919 and through the early 1950s, a predecessor-in-interest of Molybdenum Corporation of America (“Molycorp”) conducted limited underground mining at what became the Questa Mine Superfund Site in New Mexico pursuant to unpatented mining claims which conveyed a possessory right for the extraction and development of underlying mineral deposits but left title to the land in the United States. In 1950, the United States passed the Defense Production Act (DPA) to “ensure the vitality of the domestic industrial base” and to supply necessary materials for the national defense, and in 1957, through the DPA, Molycorp acquired a loan from the federal government to finance further mineral exploration.  That exploration lead to discovery of additional mineral deposits which in turn resulted in extensive open pit mining through 1983, with Molycorp repaying its government loan through production royalties.  Beginning in 1984, Molycorp and its successor Chevron Mining, Inc. (“CMI”) conducted further underground mining at the Site, finally ceasing all such activity in 2014.

Because the mining activity generated significant amounts of hazardous substances that were released into the environment, the Site, which includes lands owned and formerly owned by the United States, was listed on the National Priorities List in 2000. Remediation of the Site is ongoing and projected to cost over $1 billion.  In 2013, CMI filed suit against the United States seeking financial contribution for the cleanup costs, alleging that the government should be liable because it held legal title to a portion of the Site, encouraged the mining activity that was the cause of the contamination, and was fully aware of the extent of the contamination during its ownership of the mined land.  In order to determine whether the United State could be held liable as a PRP, the Tenth Circuit Court of Appeals focused primarily on whether the United States was either an owner or an arranger under CERCLA. 

As to ownership, the government argued that bare legal title was insufficient to trigger owner liability, relying on a District Court of Colorado case, United States v. Friedland, 152 F. Supp. 2d 1234 (D. Colo. 2001), where the court held that a legal title holder to unpatented mining claims did not qualify as an owner for purposes of CERCLA liability. The court in Friedland adopted an “indicia of ownership” test, where to determine liability the court was required to examine the relationship between the United States and those entities utilizing the property subject to the claim to discern whether the government exercised its ownership rights sufficient to trigger liability under CERCLA.  Thus, in CMI, the United States contended that because CMI and its predecessors had exclusive control over the land for mining purposes and the United States did not interfere with that use, and there was no “indicia of ownership” sufficient for liability.

In holding that the United States was liable under CERCLA, the CMI Court flatly rejected the “indicia of ownership” test. Looking at the plain statutory language, wherein liability attaches to “any person owning” the contaminated facility, as well as to dictionary definitions of “owner” and the lack of any indication that Congress intended any other meaning, the Court concluded that “at a minimum, the term ‘owner’ covers fee title holders for purposes of CERCLA liability, irrespective of any additional indicia of ownership. To find otherwise would be inconsistent with CERCLA’s statutory scheme and an ordinary application of its terms.” 

While the Court held that the United States was a PRP because it was an owner, it did not find that it was an arranger.  Here, the Court looked at the factors enumerated in CERCLA to determine liability: (1) whether the party is a person as defined under CERCLA, (2) whether the party owns or possesses the hazardous substance prior to disposal, and (3) whether the party by agreement arranges for the transport or disposal of the hazardous waste. § 9607(a)(3).  Although finding that the first and third elements were satisfied because the United States  participated in the transport or disposal of the hazardous materials by selling land to be used as disposal sites and approving a pipeline permit so that Molycorp could transport waste, because the United States it neither owned nor possessed the hazardous waste from the mining activities, the second element was absent. 

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