Allocation of Liability at a Sediment Cleanup Site by Joan P. Snyder, Esq. Stoel Rives LLP (503)

2 Types of Costs to Recover EPA and DEQ site assessment and oversight Remedial investigation/feasibility study (RI/FS) Remedial design/remedial action (RD/RA) Natural resource damage assessment (NRDA) Natural resource damages (NRD) Consequence of no timely allocation: EPA (or DEQ) can issue a unilateral administrative order to compel remedial action to multiple PRPs

3 Parties Who Might Sue to Recover Sunk Costs, Future Costs EPA DEQ PRPs who have incurred costs Natural Resource Damage Trustees

4 Primary Legal Grounds for Recovery Federal Superfund Oregon Environmental Cleanup Law

5 Other Grounds for Recovery Oil Pollution Act of 1990 ORS , (Spill Response and Cleanup of Hazardous Materials) ORS 468B.300 et seq. (Oil or Hazardous Material Spillage) ORS 468B.060 (Liability for damage to fish or wildlife or habitat) Other: trespass, nuisance, waste, contractual

6 Oregon Environmental Cleanup Law ORS creates strict liability and cost recovery action for –Remedial action costs –Natural resource damages ORS (6)(a) and ORS create right of contribution

7 Oregon Environmental Cleanup Law (cont.) 5 categories of liable parties –Owner/operator at time of release –Owner/operator after the release who knew or reasonably should have known of the release at time of becoming owner/operator –Owner or operator who obtained actual knowledge of the release and then subsequently transferred ownership without disclosure –Person who, by any acts or omissions, caused, contributed to or exacerbated the release, unless the acts or omissions were in material compliance with applicable laws, standards, regulations, licenses or permits –Person who unlawfully hinders or delays entry to, investigation of or removal or remedial action at a facility

8 Oregon Statutory Defenses/Exemptions/ Exclusions Act of God, ORS (2)(b)(A) Act of war, ORS (2)(b)(B) Acts or omissions of a third party [other than employee, agent or one in contractual relationship], ORS (2)(b)(C) Others (definitions, exclusions)

9 Federal Superfund Liable Parties 42 USC §9607 defines liable parties: –Current owners and operators; –Owners and operators at the time of the disposal –Arrangers; and –Transporters.

10 Federal Statutory Defenses/ Exemptions/ Exclusions Act of God, 42 USC §9607(b)(1) Act of war, 42 USC §9607(b)(2) Act or omission of third party [other than employee, agent or one in contractual relationship], 42 USC §9607(b)(2)

11 Statutory Defenses/Exemptions/ Exclusions (cont.) Others –Small Business Liability Relief and Brownfields Revitalization Act of 2002 –Definitions –Exemptions

12 Pure Cost Recovery Claim Under CERCLA §107(a) “Cost recovery” cause of action, on a joint and several liability basis, clearly available to government, state or tribes, §107(a)(4)(A) Most circuits have decided “cost recovery” cause of action, on a joint and several liability basis, also available to an "innocent" private party, §107(a)(4)(B)

13 Implied Contribution Claim Under CERCLA §107(a) Prior to 1986 Superfund Amendments and Reauthorization Act (SARA), which added §113, many courts had recognized an implied right of contribution for both innocent private parties and non- innocent private parties under §107

14 Contribution Action Under CERCLA §113(f) Added by SARA in 1986 Under §113(f)(1), “any person” may seek contribution during or following a civil enforcement action brought against it under §106 or §107(a) Under §113(f)(3)(B), “a person” who has resolved its liability to the US or a state in an administrative or judicially approved settlement may seek contribution from any other liable party Several circuits have limited non-innocent parties to a §113 contribution claim

15 9th Circuit and District of Oregon Hybrid Claim for Non-innocent PRP A non-innocent PRP’s cause of action is “ limited to a contribution claim governed by the joint operation of §§ 107 and 113.” Pinal Creek Group v. Newmont Mining, 118 F3d 1298 (9th Cir 1997)

16 Cooper Industries Inc. v. Aviall Services Inc., 543 US __, 125 S Ct 577 (12/13/04) Holding: §113(f) does not allow a non-innocent PRP to recover contribution from another PRP where the claimant voluntarily completed a cleanup under threat of state enforcement but without either a civil enforcement action brought against it under §106 or §107(a) or a settlement that resolved its liability to the US or a state

17 Questions Raised by the Aviall Court for Consideration on Remand Whether Aviall had a valid cost recovery claim under §107(a) Whether Aviall had an implied contribution claim under §107(a)

18 Post Aviall Status Federal and State government, tribes or innocent private party Pre-Aviall – §107(a) cost recovery claim (joint and several) – ORS Ch claim Post-Aviall –No change

19 Post Aviall Status Non-innocent PRP performing work under CERCLA judicial order or under federal or state settlement Pre-Aviall – § 113(f) contribution claim –ORS Ch. 465 claim –§107(a) implied contribution claim (in some circuits) Post-Aviall –No change

20 Post Aviall Status Non-innocent PRP performing work without enforcement action or settlement Pre-Aviall – § 113(f) contribution claim –ORS Ch. 465 claim –§107(a) implied contribution claim (in some circuits) Post-Aviall –Does not have § 113(f) claim –ORS Ch. 465 claim –§107(a) implied contribution claim (in some circuits)

21 Post Aviall Status Non-innocent PRP performing work under CERCLA administrative order that is not a settlement Pre-Aviall –§ 113(f) contribution claim –ORS Ch. 465 claim –§107(a) implied contribution claim (in some circuits) Post-Aviall –Unclear whether have § 113(f) claim (hinges on meaning of “”civil action”) –ORS Ch. 465 claim –§107(a) implied contribution claim (in some circuits)

22 Allocation Factors Federal –“Gore Factors” –Other equitable factors State –ORS : “using such equitable factors as the court deems appropriate, including but not limited to the following”

23 Summary of Factors Amount Toxicity Fault Involvement Care Cooperation Knowledge Finances Benefit Timing Equitable Defenses Quality of Evidence.

24 Divisibility Basis –Geographic –Type of contaminant/type of remedy/type of harm Requires reasonable basis for determining contribution of each divisible harm. 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 to show divisible

25 Orphan Share Two types: –Insolvent Orphans and –Orphans who are solvent, but not at table Procedural aspect of dealing with Orphan Share depends on who has incurred costs: If EPA, joint and several; if private party seeking contribution, several only Courts make equitable decision on appropriate method of allocation of orphan share May be appropriate to allocate insolvent orphan share to only certain (i.e. similarly situated) PRPs

26 Orphan Share (cont.) ORS (2): “the court may, in its discretion, allocate [any orphan share] to the other liable persons in proportion to their equitable shares or on any other equitable basis taking into consideration any relationship between the orphan share’s liable person and each other liable person.”

27 Application of Factors to River/Sediment Sites in Case Law Paucity of case law regarding allocation of liability in urban river systems –Many sites are in the pipeline, but most are at the beginning of the process –Complexity encourages private, arbitrated resolution –Reported cases that do exist are, for the most part, not multi- contaminant sites

28 Port of Portland v. Union Pacific Railroad Co., USDC Oregon, (1999) Port had 90% of liability and Union Pacific had 10%, based on relative toxicity of contaminants

29 Lower Fox River Seven PRPs River divided into 5 “segments” Cleanup costs estimated by DNR at $400 M (DNR estimate) NRD damages originally estimated between $176M- $333M by US Fish & Wildlife Service (and the Wisconsin DNR valued the damages at $55 million)

30 Lower Fox River (cont.) USFWS settlement with one PRP, Fort James, for $12M –Approved by court over challenge –Settlement apparently based on a preliminary estimate of the amount of PCBs discharged into the Lower Fox by each PRP

31 Kalamazoo River Study Group v. Rockwell Int’l “Liable” PRP allocated 0% damages –Inconsequential contribution Other PRP allocated 10% –Based on credibility of conflicting expert testimony on type and amount of PCBs contributed

32 Hylebos Natural Resource Trustee Settlement Proposal Report on Allocation Proposed by the NRD Trustees Not binding on any party Allocated liability between sites, not between entities Based on a habitat equivalency analysis –Allocation of contaminant footprint to a single site –Allocation of liability by mass loading analysis within waterway systems –Allocation of contaminated footprint adjacent to multiple sites by mass loading analysis

33 Difficulty of Applying Factors to River/Sediment Sites Investigation/assessment costs not function of amount or toxicity Fate and transport affects significance of contamination to ultimate remedy –To river –Once in sediment –Upstream vs. downstream sources Receptors present in area of site may result in different risk drivers in different locations of site

34 Complexity of Applying Factors to River/Sediment Sites “But for” contaminants—secondary risk drivers Effect of designation of Sediment Management Units –New/different assessment risk drivers –Additional opportunities for cooperation Orphan sources

35 Complexity of Applying Factors to River/Sediment Sites Pollutant load would have decreased as regulations increased, so length of time of operations may not be an appropriately predictive factor Quality of evidence varies over time Economic benefit to state (owner of harbor) measured in different terms than economic benefit to private owner/operators of riparian sites

36 Complexity of Applying Factors to River/Sediment Sites Overarching Principles in Allocation –Principle for allocation between owner/operator/arranger/transporter liability –Follow the money (remedial action costs) –Contribution of PRP’s contaminants to cost (not necessarily volume or toxicity) –Recalcitrance/Cooperation v1