CERCLA and Oil & Gas Operations Professor Tracy Hester Environmental Law in Oil & Gas Oct. 18, 2017

Review CERCLA – complements RCRA by assigning liability for releases of historical contamination Section 107 – a release of a hazardous substance from a facility that causes the incurral of response costs consistent with the National Contingency Plan The four potentially responsible parties: owners and operators; past owners and operators when disposal occurred; transporters who select site; arrangers for treatment or disposal EPA-lead vs PRP-lead; removal vs remedial Section 106 orders

A few more pieces of the CERCLA framework Liability To United States and state governments To any person who incurs costs Degree of liability Strict Joint & Several Defenses: Acts of God, War, or Third Parties Innocent Owners and Bona Fide Prospective Purchasers

So How Does It Actually Work Joint & Several Liability The Witches’ Brew – Restatement 433A What litigation and settlement strategy does that suggest? BNSF v. United States (2009) Who bears the risk of sweetheart deals? By the United States? By private parties? How to split the pie? Allocation vs Apportionment Gore factors

Striking a Deal CERCLA 107(e) No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from . . . any person who maybe liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section. So what on earth does it mean?

The Exemption that Swallowed the Statute – the Petroleum Exclusion CERCLA’s definition of “hazardous substance” expressly excludes: Petroleum, including crude oil or any fraction thereof which is not otherwise specifically listed or designated as a hazardous substance under subparagraphs (A) through (F) of this paragraph, and the term does not include natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas. 42 U.S.C. 9601(14) How does this exclusion differ from the RCRA E&P exemption?

So What Counts as “Petroleum”? Benzene? Additives such as lead? MTBE? Detergents? Wilshire Westwood Associates v ARCO Used oil? Crude oil tank bottoms? Cose v. Getty Oil Manufactured gas plants?

EPA’s Interpretation EPA General Counsel memorandum, Scope of the Petroleum Exclusion Under CERCLA Section 101(14) (1987) If it’s naturally found or included with gasoline or other refined products, still within the exclusion If contaminated through use or commingling, then exclusion does not apply to the contaminant Remember our friend the pipeline pig? In re Texas Eastern Corp.

CERCLA’s Overlooked Side: Reporting Obligations Under CERCLA 104(a), must report immediately 1. a release 2. of a hazardous substance 3. into the environment 4. in an amount that exceeds a reportable quantity 5. within a 24-hour period Civil and criminal consequences for failing to report.

Professor Tracy Hester University of Houston Law Center tdheste2@central.uh.edu 713-743-1152 (office)