By Jeryl L. Olson and Craig B. Simonsen

Power Lines and Pulp Mill PollutionIn a busy day for vapor intrusion, last week the U. S. Environmental Protection Agency made several announcements about vapor intrusion.

First, it announced it had submitted a draft rule to the White House OMB seeking to add vapor intrusion to the pathways evaluated under the Hazard Ranking Scoring (HRS) System for National Priority List (NPL) Superfund sites.   Additionally, EPA published two new sets of technical guidance on assessing vapor intrusion. One guidance document has been prepared for assessing vapor intrusion from leaking petroleum underground storage tank sites, and the other guidance document is aimed at assessing vapor intrusion for sites with non-petroleum contamination.

Draft Rule on Assessing Vapor Intrusion as Part of Site Hazard Ranking

With respect to EPA’s draft rule adding assessment of vapor intrusion to the Hazard Ranking Scoring process, this is the Agency’s second effort at adding the vapor intrusion pathway to the other types of pathways which are already considered in evaluating and then listing a site on the National Priorities List. The same version of the rule was previously submitted to, but then withdrawn from, OMB consideration.

EPA believes now that it is necessary to evaluate vapor intrusion in scoring of sites for the NPL in order to ensure that health risks associated with vapor intrusion are addressed and cleaned up as part of Superfund remediations. Opponents to the process, however, believe that adding assessment of the vapor intrusion pathway to the NPL HRS scoring system will lead to more sites being listed on the NPL, despite the belief that EPA’s Superfund program is already taxed. If the draft rule receives OMB approval, the rule will be published as a Notice of Proposed Rulemaking in the Fall of 2015.

New Vapor Intrusion Guidance

With respect to new vapor intrusion guidance, EPA published guidance both on performing vapor intrusion assessments where the source is petroleum vapor from leaking underground storage tanks (“Technical Guide for Addressing Petroleum Vapor Intrusion at Leaking Underground Storage Tank Sites,” EPA 510-R-15-001, June, 2015) (hereinafter “PVI Guidance”) and for vapor intrusion risks associated with all other types of sites and non-petroleum chemicals (“OSWER Technical Guidance for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Vapor Sources to Indoor Air,” OSWER Publication 9200.2-154, June, 2015) (hereinafter “OSWER VI Guidance”).

According to EPA, the existing 2002 (“OSWER Draft Guidance for Evaluating the Vapor Intrusion to Indoor Air Pathway from Groundwater and Soils,” EPA530-D-02-004) guidance on vapor intrusion assessment is replaced by the two new PVI, and OSWER VI Guidance documents. In promoting the two new sets of guidance, EPA indicates that the mitigation measures advocated in the new guidance are “more cost-effective” than mitigation measures considered in the previous draft guidance, and EPA is also advising its new approach to testing for vapor intrusion is more “flexible,” including sampling indoor air or sampling the external sub-slab area.

While comprehensive, and containing certain “user-friendly” features, the new draft guidance for vapor intrusion is not without controversy. EPA has acknowledged that its 2002 draft guidance indicated that OSHA, and not EPA, would take the lead in looking at occupational exposure to vapor intrusion. In the new guidance, EPA seems to back off its previous acquiescence to OSHA’s primary jurisdiction where there is occupational exposure, and merely mentions that there are Memoranda of Understanding (MOUs) between OSHA and EPA dated November 23, 1990, and February 1991, which govern the Agencies’ relative responsibilities (but of course those MOUs pre-date vapor intrusion as a current focus of concern). Tellingly, in Section 7.4.3 of the OSWER VI Guidance, EPA specifically states its reasons for its recommendation that EPA standards, as opposed to OSHA PELs or TLVs, should be used for evaluating VI human health risks for workers in non-residential buildings. EPA bases its conclusions on what it characterizes as OSHA’s own recognition that its PELs are “outdated and inadequate for ensuring protection of worker health.”

LUST PVI GUIDANCE

The LUST PVI Guidance is less substantial, both in terms of technical information and volume, than the OSWER VI Guidance, and is on its face aimed at EPA regulatory personnel investigating and assessing petroleum vapor intrusion (PVI). Nevertheless, the guidance indicates it is intended for all “UST regulators and practitioners.” The PVI Guidance looks at petroleum hydrocarbons (PHCs) in diesel, gasoline, and jet fuel related volatile organic chemicals (VOCs) such as BTEX, methane generated from anaerobic biodegradertory of petroleum products, and is focused on providing screening criteria based on the distance between PVI sources and potential receptors.

It is interesting to note the PVI Guidance states it is applicable to “…new and existing releases of PHCs and non-PHC fuel additives from leaking USTs and to previously closed sites where the implementing agency has reason to suspect that there may be a potential for PVI.” [Emphasis added]. Despite that statement, the PVI Guidance does acknowledge that it “…does not impose legally binding requirements on implementing agencies or the regulated community”; and, thus, the guidance should not be read as triggering a need for VI assessments at closed LUST sites.

Other features of the PVI Guidance are two “user-friendly” features: a Table, and separate Flowchart, each summarizing EPA’s recommended actions for addressing PVI at LUST sites, and an entire section discussing computer modeling of PVI.

OSWER VI GUIDANCE

Of the two VI policies published June 11, the OSWER document on non-petroleum VI is the more robust of the documents published, with 245 pages of technical guidance. One of the stated purposes of the OSWER Guidance is to “…promote national consistency in assessing the vapor intrusion pathway …” while providing a “…flexible screening based approach to assessment…”. As with the PVI Guidance, the OSWER VI Guidance is ostensibly aimed at any CERCLA , RCRA or Brownfield sites being evaluated by EPA, or for authorized state RCRA corrective action programs or state-led CERCLA sites, however, it is expected that particularly in states with fledgling VI policies, the OSWER Guidance will become the standard for VI assessments and mitigating measures.

Features of the OSWER VI Guidance include a comprehensive guide to preliminary and detailed VI sampling and assessment technologies in myriad settings (VI in inclusion zones, settings with multiple buildings evaluating concurrent indoor and ambient air sources, etc.). The guidance also discusses strategies for risk assessment under numerous exposure scenarios. Finally, there is a lot of attention focused on mitigation systems in buildings, and subsurface remediation.

By Andrew H. Perellis, Patrick D. Joyce, and Craig B. Simonsen

The Fifth Circuit recently held that a seller of dry cleaning chemicals did not assume Superfund “arranger” liability by merely selling a useful but hazardous chemical with the intent that it be used by a dry cleaning business that then subsequently discharged the contaminant into ground water. Vine Street, LLC v. Borg Warner Corp., No. 07-40440 (5th Cir., January 14, 2015).

Vine Street is one of the first Court of Appeals to consider “arranger” liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9607(a)(3), in light of the Supreme Court’s decision in Burlington N. & Santa Fe Ry. Co. v. U.S., 556 U.S. 599 (2009), holding that arranger liability attaches only if there is an intent to dispose of a hazardous substance..

A Borg Warner Corp. subsidiary, Norge, designed and sold dry cleaning equipment to Vine Street LLC in the early 1960s.  Despite efforts to prevent discharge through an engineered reclamation system, some of the perchloroethylene (PERC) used in the dry cleaning process was discharged into the sewer.  In 2006, the District Court held a bench trial and ruled that Norge was liable to Vine Street for 75% of the costs associated with cleaning up PERC plume because Norge knew its reclamation system was not 100% effective and some of the PERC might end up in the sewer.

Borg Warner appealed the judgment to the 5th Circuit, but it was stayed due to ongoing bankruptcy proceedings.  By the time the stay was lifted, the Supreme Court had published its ruling in Burlington Northern that “knowledge alone is insufficient to prove an entity planned for the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.”

In Vine Street, Borg Warner argued that Norge (and therefore Borg Warner) was not liable to Vine Street under CERCLA because it did not intend to dispose of the PERC when it sold the dry cleaning equipment and an initial supply of PERC to the cleaners in the 1960s.  The Fifth Circuit Court reversed the District Court judgment against the seller, finding that the “purported arranger [must take] intentional steps to dispose of a hazardous substance.”  The District Court had applied an outdated Fifth Circuit standard that only required a “nexus” between a purported arranger and the disposal of waste (Geraghty & Miller, Inc. v. Conoco, Inc., 234 F.3d 917 (5th Cir. 2000).

Vine Street presents us with another reminder that CERCLA’s arranger liability depends upon a fact-specific inquiry as to whether the entity had the necessary intent to dispose of a hazardous substance.

By Andrew H. Perellis and William R. Schubert

A recent Government Accountability Office report (GAO-13-252) called on EPA to improve its management of alternatives to National Priorities List placement.

The report found that at most sites that EPA deems eligible for NPL placement, EPA uses an alternative approach so that the site can be remediated without being placed on the National Priorities List.

The “Other Cleanup Activity” (OCA) deferral, under which EPA defers cleanup oversight to a separate entity outside the Superfund program, is an alternative approach that EPA frequently employs at NPL-eligible sites, the report stated.  Most OCA deferrals involve state agency oversight (although OCA deferrals may also defer cleanup oversight to federal agencies, Indian tribes, and private parties).

According to the report, EPA’s lack of a coherent playbook for executing and tracking OCA deferrals creates the risk of inconsistency.  The report included examples of apparent inconsistencies in EPA’s policies and practices.  For example, EPA’s regional offices appeared to hold different views on how to define the different types of OCA deferrals and the circumstances warranting each type.  (Notably, differences in the States’ environmental policies can also bear on these variations.  The report made some note of this factor.)

By Andrew H. Perellis, Philip L. Comella, and Craig B. Simonsen

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The Court found that the only issue for resolution was whether there was any evidence that the defendant, an “innocent purchaser,” was liable for the alleged re-contamination of a former Superfund site.

U.S. District Judge Ron Clark recently adopted Magistrate Judge Keith F. Giblin’s Report and Recommendations and granted summary judgment to the NBR Parties (NBR). US v. Slay, Jr., et al., No. 11-CV-263 (E.D. Texas, March 28, 2013).

NBR had contended in its summary judgment filings that the evidence showed that other defendants could not establish that during NBR’s ownership of the property it did anything to re-contaminate the property which would make NBR liable for a contribution claim under CERCLA. NBR argued that there was no evidence that it conducted dredging on the Superfund Site and maintained that an independent report showed that the dredged soils were not contaminated. Finally, NBR argued that the other defendants could not establish CERCLA liability as a matter of law because NBR was not a “covered person” from whom they could claim contribution.

Additionally, NBR submitted uncontroverted summary judgment evidence that the other defendants had presented no evidence explaining how NBR, “in light of the fact that the Site was deemed safe by the EPA prior to NBR’s ownership, could expose [the other defendants] to further liability.”

The Court found that the other defendants had not presented any verified summary judgment evidence disputing the facts “that the EPA issued its notice that no further remedial action was required for the Site prior to NBR’s ownership; that NBR was never identified as a PRP; and cleanup activities were completed prior to NBR’s ownership. Through these facts, NRB has established as matter of law that it does not fall into any of the categories of ‘covered persons’ subject to CERCLA liability.” R&R, p. 16.

This case highlights how very important it is to work to establish and to maintain an entity’s status as an innocent purchaser.

By Andrew H. Perellis and Ilana Morady

If you sell products that you no longer need that contain residual hazardous substances, and the buyer mishandles them so as to create the need for remediation, are you liable under CERCLA for having arranged for disposal of the hazardous substance?

A federal District Court recently granted summary judgment to a CERCLA defendant concluding that because the company did not take intentional steps to dispose of a hazardous substance, it was not subject to CERCLA liability. In Carolina Power & Light Company (CP&L) v. Georgia Power Company et al., No. 08-CV-460 (E.D. NC February 1, 2013), CP&L filed a contribution complaint alleging that Georgia Power arranged for the disposal of hazardous waste when it sent electrical transformers containing PCB-laden oil to the Ward Superfund Site.

Yet Georgia Power only sent transformers to the site that were capped to prevent oil spillage or that had been drained of oil and contained only a residual oil sheen. The transformers also had resale value: the Ward Transformer Company repaired and reconditioned the transformers and sold them for a profit. 

The Court granted Georgia Power’s summary judgment motion based on its consideration of several factors:

  • Value and usefulness of materials sold. Because Ward was able to resell the transformers for a profit, and because the transformers were, by extension, useful materials, the Court found that Georgia Power had not arranged for the disposal of a hazardous waste. 
  • State of the product. Because the transformers were either capped or drained of oil save for a residual sheen, the Court found that Georgia Power’s purpose was not to dispose of the PCB-laden oil.
  • Knowledge. Although Georgia Power had general knowledge about transformer repair and PCBs in transformer oil, it did not have knowledge that the oil would be spilled or leaked at the Site.

This case is a reminder that simply sending a hazardous material to a Superfund site is not enough to establish arranger liability under CERCLA. Courts will undertake a fact-specific inquiry on whether a CERCLA defendant had the necessary intent to qualify as an arranger.

By Andrew H. Perellis and Ilana Morady

If you incur response costs under CERCLA can you assert a claim under Section 107 of CERCLA, or are you limited to a contribution claim under Section 113?

By way of background, Section 107 and Section 113 provide distinct rights under CERCLA. Under Section 107, a potential responsible party (PRP) is strictly liable for all necessary costs of remediation or removal incurred at a Superfund site. Liability under Section 107 can be joint and several but it need not be if a PRP demonstrates that the harm is divisible. Under Section 113, a PRP can seek contribution from another PRP to the extent it has paid more than its equitable share of response costs. Also, the statute of limitations under Section 107 and Section 113 are different: Section 107 has a 3 or 6-year statute of limitations depending on the circumstance; Section 113 is 3 years.

Parties performing remediation under a settlement with the Government, either by way of a Consent Decree or an Administrative Order, typically press for a claim under Section 107 when suing other PRPs who have not participated in the remediation funding. As noted above, the advantages of doing so include presenting a claim for which the defendants could be held jointly and severally liable, and benefiting from a six-year statute of limitation period rather than the three-year statute of limitation period governing Section 113 claims.

In U.S. v. Atlantic Research Corp., 551 U.S. 128 (2007), the Supreme Court held that the mere fact that a party was itself liable under CERCLA did not foreclose it from asserting a claim under Section 107. Atlantic Research left unanswered, however, the question of whether a Section 107 claim could exist for a liable party itself performing remediation under a settlement where it had resolved its liability to the Government.

With its ruling in Bernstein, et al. v. Bankert, et al., and Auto Owners Mutual Insurance Company, ___ F.3d ___ (Dec. 19, 2012), the Seventh Circuit has now joined the Second, Third, Fifth, Sixth, Eight, and the Eleventh Circuits in holding that a cost recovery action under Section 107 is not available under that circumstance because a contribution claim under Section 113 is.

The Seventh Circuit’s ruling is helpful in clarifying the overlap between the two CERCLA provisions. After Atlantic Research, some courts had concluded that the key trigger for allowing a claim under Section 107 was whether the remediation was performed “voluntarily,” as opposed to being compelled by a governmental demand or order. The Seventh Circuit refused to follow this approach, noting that CERCLA does not address whether an action is or is not voluntarily. According to the Seventh Circuit, however, the statute does address permissible claims where a party has resolved its liability to the Government as part of a settlement. Where liability has been resolved, it is relegated to a Section 113 claim for contribution to obtain an allocation of liability. To allow both a Section 107 and Section 113 claim, the Seventh Circuit held, would be nonsensical because it would have the effect of nullifying the CERCLA amendment that created Section 113.

Now for the facts of Bernstein v. Bankert: Plaintiffs were trustees of a fund created to finance and oversee a cleanup project at the Third Site, a VOC-contaminated Superfund site in Indiana.  Defendants were the former owners of the Third Site — the Bankert family — and their corporate entities. In 1999, the trustees entered into an Administrative Order of Consent (AOC) with the EPA. They met their obligations under the 1999 AOC and obtained EPA approval. In 2002, they entered into another AOC. When Plaintiffs filed their case in the District Court, the work under the 2002 AOC was still ongoing.

Under both the 1999 and 2002 AOCs, the trustees could hold and manage funds, obtain additional funds as needed from the settlors, and file suit against those who did not meet their obligations to the trust. Plaintiffs filed their six-count complaint against the Bankerts because the Bankerts did not pay into the trust or meet their other obligations under the trust. Count 1 of the complaint was brought as a CERCLA Section 107 cost recovery action. The District Court dismissed Count 1 because it construed that count as a Section 113 contribution claim that was barred by the statute of limitations. Plaintiffs appealed to the Seventh Circuit.

In reviewing Plaintiffs’ appeal, the Seventh Circuit first looked at whether Plaintiffs’ claim, asserted as a claim for cost recovery, was truly a Section 107 or Section 113 claim. It did so by looking at the claim from two perspectives: the 1999 AOC and the 2002 AOC. As for the 1999 AOC, the Court held that Plaintiffs’ claim was for contribution under Section 113 because the trust had resolved its liability to the U.S. when it brought the claim. Even though the trust also incurred necessary response costs consistent with the National Contingency Plan, the Court found that a Section 107 clam was unavailable. Because the three-year statute of limitations on a contribution claim had passed, the Court’s decision meant it was too late for the trustees to recover costs they incurred in carrying out the 1999 AOC.

As for the 2002 AOC, however, the Court held differently. Because the trustees had not been subject to a civil action under Section 106 or Section 107 or resolved its liability to the government, the Plaintiffs fell in the cost recovery bucket. The statute of limitations had not yet been triggered (because the removal action under the 2002 AOC was still ongoing), so the claim survived.

It remains to be seen how other Circuit Courts of Appeals will address the issues underlying this case. The clear trend, however, is that cost recovery actions under Section 107 are not available when contribution claims under Section 113 are!

By Andrew H. Perellis, Jeryl L. Olson, and Eric E. Boyd

To promote brownfield development, in 2002, the Congress provided the Bona Fide Prospective Purchaser defense under the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund), Section 101(40)(A)-(H). In a nutshell, that provision provides that a person (or a tenant of a person) that acquires contaminated property qualifies for a defense from Superfund liability provided the contamination occurred prior to the acquisition, and the person conducted “all appropriate inquiry” prior to the purchase, and maintains the defense by accepting certain post-purchase obligations such as cooperating with the U.S. Environmental Protection Agency (EPA), abiding by land use restrictions, and taking “reasonable steps” with respect to the known contamination.

Recent EPA Guidance, Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision, dated December 5, 2012, describes the EPAs enforcement policy towards tenants occupying contaminated property. According to EPA, a tenant who itself undertakes all appropriate inquiry prior to leasing the property and meets the required obligations for maintaining the defense is entitled to Bona Fide Prospective Purchaser protection. In addition, if its landlord conducted all appropriate inquiry prior to the lease, but fails to meet the required obligations for maintaining the defense, EPA will decline enforcement against the tenant (who itself did not conduct all appropriate inquiry) where the tenant steps in to perform the appropriate obligations for maintaining the defense. In short, the tenant can rely on its landlord’s all appropriate inquiry and receive derivative Bona Fide Prospective Purchaser protection so long as the landlord meets the obligations for maintaining the defense, or the tenant does so itself.

In summary, the Guidance applies in two circumstances: (1) where the tenant has derivative bona fide prospective purchaser status through the owner and the owner loses its status through no fault of the tenant; and (2) where the tenant leased property after January 11, 2002 and itself meets all of the bona fide prospective purchaser provisions, including the requirement to conduct all appropriate inquiry prior to execution of the lease.

The Guidance is further indication that leases involving contaminated property should expressly address the respective obligations of each party as to pre- and post-occupancy obligations respecting contamination on the property. The important take away is that regardless of whether a tenant itself conducts all appropriate inquiry before executing the lease, for a Bona Fide Prospective Purchaser defense, either the tenant or the landlord must undertake the required activity to maintain the defense.