1 WHO WILL PAY FOR THE PORTLAND HARBOR CLEANUP? Presented by Joan P. Snyder 900 SW Fifth Avenue, Suite 2600 Portland, Oregon (503)

2 “ Although the Portland Harbor was designated a federal Superfund site so that polluting businesses would be forced to pay for decades of environmental neglect, evidence increasingly suggests that taxpayers could foot most of the bill. ” --The Business Journal, 2/8/02

3 “ ***[The federal Superfund process] will get to the bottom of who is responsible for damage to the harbor and who will have to pay for its cleanup. ” --Letter to the editor of The Oregonian, 2/1/02

4 Who IS responsible for damage to the harbor and, therefore, who SHOULD have to pay for its cleanup?

5 The Question is for: Federal and state regulators Potentially liable parties (performing and non-performing) Federal and state legislators The public Or it is ultimately for Judges and/or arbitrators of Portland Harbor CERCLA claims

6 General CERCLA Principles “Liable Parties” under CERCLA section 107(a) include: Current owners and operators; Owners and operators of any vessel or facility at the time of the disposal of hazardous substances; Any person who arranged for the disposal or treatment of the hazardous substances; and Transporters who selected the waste disposal location from which there has been a release

— City of Portland chartered 1868 — Dredging of Willamette to accommodate shipping begins (and continues through present day) 1911 — Oregon Board of Health declares lower reaches of Willamette River an “ open sewer ” and fish from those areas unsuitable to eat — 176 WWI ships built in Portland Harbor Portland Harbor History

— Oregon State Sanitary Authority declares the Willamette a “ menace to health ” 1936 — Oregon State Sanitary Authority bans swimming in the lower Willamette 1940 — 67 separate wharves or port terminals operated in Portland Harbor, including lumber, oil, grain, iron & steel, cement and municipal terminals — Over 600 WWII ships built in Portland Harbor Portland Harbor History

— first sewage treatment plant built on Willamette River 1972 — Clean Water Act goes into effect 1972 — DDT production banned 1977 — PCB production banned in U.S. Portland Harbor History

— Willamette River Basin Water Quality Study releases its report card: ●Upper Reach (above Corvallis): Good health ●Salem Reach: Marginal health ●Newberg Pool: Marginal to poor health ●Tidal Pool (Willamette Falls to Columbia): Marginal to poor health Portland Harbor History

— EPA sponsored sediment study in Portland Harbor (Weston Study) finds broad range of contamination, including polycyclic aromatic hydrocarbons ( “ PAHs ”, which are constituents of bunker fuel, diesel, oils and other petroleum products), metals, PCBs and pesticides 12/1/2000 — Portland Harbor listed as federal Superfund Site. Portland Harbor History

12

13 Trends 1870-present: Port capabilities crucial to Portland’s (and Oregon’s) economic health; Portland the foremost port for grain exports on the west coast : 300,000+ cubic yards per year dredged from Portland Harbor navigation channel and placed primarily upland in Portland Harbor vicinity. During same time, 32 berthing areas require annual maintenance dredging, estimated at over 100,000 cubic yards per year (data not found pre or post-1977).

14 Trends 1972-present: Consistent with Clean Water Act, level of contamination in all discharges to Willamette reduced, probably exponentially as compared to prior decades Future: Willamette Basin’s population is expected to double in next 50 years, “with most growth occurring in cities.”

15 Ownership of Portland Harbor (bed, banks and beyond) Oregon Division of State Lands owns the bed of the Willamette River to the ordinary low water mark DSL has asserted ownership by requiring lease payments for all overwater structures Ownership of adjacent lands (and operations thereon) are currently, and have been historically, in hundreds of separate entities and individuals

16 “Pool” of Potentially Liable Parties State of Oregon United States 10 entities that have signed the Administrative Order on Consent with EPA 59 entities identified by EPA and DEQ who did not sign the AOC ??? individuals and entities that have operated on the waterfront over the years

17 ??? individuals and entities that have operated back from waterfront, but whose contamination has run into the Willamette River Everyone who has “released” contaminants in sanitary or storm sewage to the Willamette River, except under conditions where the release was subject to (and not in violation of) a “federal permit” “Pool” of Potentially Liable Parties

18 Costs to be Allocated Governed by terms of Administrative Order on Consent (“AOC”) AOC Statement of Work: “EPA will consider issuing orders to obtain participation of additional PRPs as the RI/FS proceeds.” AOC signatories will likely sue in contribution under CERCLA section 113 to recover these costs from other liable parties (and advocate for a “recalcitrance” premium) RI/FS: Costs of Remedial Investigation/Feasibility Study Being Performed by Lower Willamette Group (“LWG”) for EPA

19 Costs to be Allocated EPA will “invite” parties to sign Consent Decree to perform RD/RA If parties sign, they will perform and likely sue non- performers If parties don’t sign, EPA will either: (1) sue to require parties to perform or (2) perform and sue to recover Under any scenario, if not resolved otherwise, costs will be equitably allocated by judge pursuant to CERCLA and state law. RD/RA: Costs of Remedial Design/Remedial Action to be performed after EPA issues Record of Decision selecting remedy

20 Costs to be Allocated NRD Trustees responsible for performing NRD Assessment NRD Trustees have obligation to secure NRD restoration or replacement to compensate for NRD, either by settlement or by suit. Under any scenario, ultimate allocation of liability will be pursuant to CERCLA and state law. NRD: Costs of Restoration/Replacement of Natural Resource Damages (“NRD”)

21 Legal Issues Legal effect of action by EPA under CERCLA section 106 or 107, but not directly applicable in a contribution claim under CERCLA section 113. Defines parties whom EPA can compel to perform RI/FS and/or RD/RA (irrespective of their “share” of liability) or sue for reimbursement if EPA undertakes the remedy. “Joint and Several” Liability

22 Legal Issues Caselaw summary: Parties have begun to challenge the application of “joint and several” liability for large, complex sites. Courts thus far have upheld EPA’s discretionary designation of “facility,” and concluded that PRPs are jointly and severally liable to perform remedy for entire facility. Courts may refuse to apply joint and several liability on entities releasing “miniscule” amounts of contaminants (e.g. if, alone, that contamination would not have required remediation—Kalamazoo River Study Group). “Joint and Several” Liability

23 Divisibility Mechanism to divide portion of remedy for which parties are liable Two primary bases for divisibility: Geographic Type of contaminant/type of remedy/type of harm In either case, need reasonable basis for determining contribution of each divisible harm

24 Divisibility Chem-Nuclear Systems, Inc.: Government must make prima facie case to show PRP caused harm in geographic area of site and then burden shifts back to PRP to disprove that inference.

25 Orphan Share Two types of Orphan Share: Insolvent Orphans Orphans who are solvent, but not at table

26 Orphan Share Legal framework: Gould Electronics v.NL Industries, (USDC Or 1995): A party who is “liable” under CERCLA section 107 cannot bring a “pure” section 107 claim, but must bring a “hybrid” claim for contribution under CERCLA section 113(f). Consequence: If EPA performs, it will have direct section 107 claim with presumption of “joint and several” liability, which would then be subject to allocation under section 113. If PRPs perform and sue, likely to be limited to 113(f) claim for contribution, where allocation is “equitable” and “joint and several” may not apply.

27 Orphan Share Caselaw Summary: Courts have thus far still “equitably” distributed insolvent orphan share among liable solvent PRPs (e.g. Pinal Creek) “Equitable apportionment” will include decision on appropriate method of allocation of the insolvent orphan share (e.g. Pinal Creek, Centerior Service Co.) It may be appropriate to allocate insolvent orphan share to only certain (i.e. similarly situated) PRPs (e.g. US v. Consolidation Coal Co.)

28 NRD Damages and Trustee’s Burden of Proof 42 U.S.C. § 9607(a)(4)(C): For any party otherwise liable for a “release” under 42 USC 9607, creates liability for “damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction or loss resulting from such a release ***.”

29 NRD Damages and Trustee’s Burden of Proof United States v. Montrose Chemical Corp. of California: To prevail on any claim for recovery for injury to natural resources under § 107(a)(4)(C), the plaintiff must establish that the defendant’s release was the “sole or substantially contributing cause of each alleged injury to natural resources.” But see, In re National Gypsum Co.

30 NRD Damages and Trustee’s Burden of Proof 42 U.S.C. § 9607(f)(1): “There shall be no recovery under the authority of subparagraph (C) of subsection (a) where such damages and the release of a hazardous substance from which such damages resulted have occurred wholly before the enactment of this Act [Dec. 11, 1980].” United States v. Montrose Chem. Corp. of Cal.: Section 9607(f)(1) bars recovery for natural resource damages only when both the release causing the damage and the accrual of damages ended before CERCLA was enacted.

What May Need to be Remedied 3.Depositional area 1.Navigation channel 4.Upland source soil 5.Surface water discharge 2.Near Shore contamination 6.Damaged natural resources