In a case decided earlier this month from the U.S. District for Idaho, the Court imposed arranger and operator liability on the United States based on its permitting procedures and requirements at mining operations on federal lands. Nu-West Mining Inc. v. United States, Case No.: 4:09-CV-431 (D. Idaho March 4, 2011). The subject site is located in the Caribou National Forest in Idaho where there are four phosphate mines. The facts were that, in 1949, the U.S. leased out the right to mine to private companies, and, as part of the lease, the lessees had to obtain approval of plans for mining, waste disposal and reclamation. After the lessee received that approval, the U.S. performed inspections to ensure the lessee was properly disposing of mining waste and paying full royalties to the U.S., and also monitored environmental conditions at the mining sites, including water quality sampling.
Nu-West, the lessee of the four mines at issue in this case, spent approximately $10 million under an Administrative Order on Consent to clean up selenium contamination (a byproduct of the phosphate mining) when it was discovered in the late 1990s that the selenium-containing “middle waste shale”, which was deposited on top of the “waste rock dumps” (essentially, the place where all the mining waste was deposited), was leaching into water beneath the waste rock dumps. Nu-West sued the U.S. as owner of the site to recover its cleanup costs.
The U.S. conceded that it is the owner of the mining sites, but the issue on Nu-West’s motion for summary judgment (the subject of the District Court’s decision) was whether the U.S. was an “arranger” and an “operator” based on the U.S.’s involvement in disposal through the permitting process. CERCLA, § 107(a). The U.S.’s status as a potentially responsible party (PRP) due to its “arranger” and “operator” activities was the only issue on this motion.
To counter the plaintiff’s argument that it was an arranger, the U.S. argued that the government’s regulatory role (i.e., the permitting process) is an exception to the CERCLA waiver of sovereign immunity. In other words, even though there is no sovereign immunity under CERCLA, the government cannot be liable for its regulatory actions. Though the Court cited the Supreme Court’s 2009 decision on “arranger” liability in Burlington Northern and Santa Fe Ry. Co. v. U.S., 129 S.Ct. 1870 (2009) (“BNSF“), it really relied on a Ninth Circuit pre-BNSF decision, U.S. v. Shell Oil Co., 294 F.3d 1045 (9th Cir. 2002).
In Shell Oil, the Ninth Circuit found no support for the regulatory role exception, noting that the government has repeatedly been held liable under CERCLA “for acts that ‘cannot possibly be characterized as nongovernmental'” Nu-West, at 9 (quoting Shell Oil, 294 F.3d, at 1052). The Ninth Circuit further offered that “private parties do not operate military bases and yet the Government has been found liable for the cleanup of hazardous wastes at military facilities.” Nu-West, at 9 (citing Shell Oil, 294 F.3d, at 1052). Query whether it is the government’s use of the military base (as operator) that is the basis for liability in those cases and whether that operation is distinguishable from the case here (that is, where the basis for the government’s liability is its permitting authority).
Turning to operator liability (which seems far fetched if you think that the only basis for liability is the government’s permitting authority), the District Court reveals a record showing that the Forest Service and Geological Survey had a deeper level of involvement, designing the waste rock dumps and issuing directives to mining contractors in stalling the french drain the waste rock dumps.
When juxtaposed with the Supreme Court’s definition of operator (that is, one who manages or directs “‘operations having to do with leakage or disposal of hazardous waste, or decisions about compliance with environmental regulation'”, Nu-West, at 13 (quoting U.S. v. Bestfoods, 524 U.S. 31, 66-67 (1998)), it appears that the government’s more active role in managing the disposal of the waste here could be the basis for liability. In finding that the U.S. was an operator, the Court opined that “as to the Government’s claim that it was merely making ‘suggestions’ rather than orders, the difference is irrelevant.” Nu-West, at 13.
This case suggests that, under certain circumstances, the U.S. may be held liable as an “arranger” and “operator” based on its role in the permitting process. Whether a party falls within these PRP classes remains a fact-intensive inquiry.