The Supremes Weigh in on Superfund and the Clean Water Act

Margaret Anne Hill, Frank L. Tamulonis III, and Stephen C. Zumbrun

Notwithstanding that the Comprehensive Environmental Response, Compensation, and Liability Act (more commonly known as “Superfund”) has been around for 40 years, and the fact that numerous cases have made their way to the U.S. Supreme Court analyzing liability under the Act, debates continue as to who can be a Superfund “potentially responsible party” or a “PRP.” For those who still do not get the scope and reach of Superfund liability, the Supreme Court has, once again, provided a clear response with respect to liability under the Act in an April 20, 2020, decision, Atlantic Richfield Co. v. Christian et al. In that case, the Court reaffirmed its position set forth in a 2007 case, United States v. Atlantic Research Corp., 551 U. S. 128, 136 (2007), that even parties whose property has been contaminated by others, and who are innocent with respect to the contamination, fall within the broad definition of liable parties under Section 107(a) of Superfund (which uses the term “covered persons”), subject to the third-party defense set forth in Section 107 (b).

Atlantic Richfield involved a group of 98 property owners who filed claims against Atlantic Richfield in Montana state court in connection with the Anaconda Copper Smelter Superfund Site in Butte, Montana, a 300-square-mile site contaminated with arsenic and lead. The property owners’ claims included trespass, nuisance, and strict liability claims under state common law. The landowners sought restoration damages, among other forms of relief, which was the issue before the Court since Atlantic Richfield conceded that Superfund preserves claims for other types of compensatory damages under state law, including loss of use and enjoyment of property, diminution of value, incidental and consequential damages, and annoyance and discomfort. The property owners sought to implement a remedial restoration plan that exceeded the U.S. Environmental Protection Agency’s (“EPA”) selected remedial actions. The question regarding their PRP status was before the Court in the context of determining if they were prohibited from taking further remedial action without EPA’s approval under Section 122(e)(6).

The property owners advanced several arguments to the Court in support of their position that they should not be classified as PRPs, including the fact that: EPA chose not to send them the required Section 122 Notice of Settlement letter (based upon EPA’s policy of not pursuing homeowners) and that Superfund’s six-year limitation for recovery of remedial costs had expired and they therefore could not be sued. The Court was not persuaded, noting that EPA’s enforcement discretion does not change the property owners’ status as liable parties under the Act, and that a party can still be a PRP even if they are no longer subject to a lawsuit. In a more interesting and important analysis, the Court evaluated the property owners’ liability and qualifications as a “contiguous property owner” or “CPO” under Section 107(q) of the Act, which provides that “[a] person that owns real property that is contiguous to or otherwise similarly situated with respect to, and that is or may be contaminated by a release or threatened release of a hazardous substance from, real property that is not owned by that person shall not be considered” an owner of a facility.

In honing in on the eight requirements to determine if the property owners qualified as a CPO, the Court focused on whether they could demonstrate that they “did not know or have reason to know that the property was or could be contaminated by a release or threatened release of one or more hazardous substances.” Since they purchased their property after the Anaconda Company built the smelter, and there was overwhelming evidence of public knowledge of contamination, the Court determined that the property owners could not qualify. In short, the “landowners had reason to know their property ‘could be contaminated by a release or threatened release’ of a hazardous substance.” The evaluation by the Court as to the applicability of the Superfund liability limitation for Contiguous Property Owners is significant given the lack of case law on this topic.

In addition to evaluating liability under Superfund for property owners, Atlantic Richfield is also significant in that it affirms the Court’s position that the Act permits federal courts and state courts alike to entertain state law claims, such as common law claims, including challenges to cleanups. In this case, the Court held that Montana state court maintains jurisdiction over the state law common law claims notwithstanding that the Superfund claims proceeded to federal court.

In another significant environmental case, the Supreme Court clarified the jurisdictional reach of the Clean Water Act (“CWA”). In a 6-3 decision, the Court’s four liberal justices, joined by Justices Roberts and Kavanaugh, ruled that the CWA could be used to regulate contamination that travels to a jurisdictional waterway via groundwater. The decision resolved a circuit split between the Ninth and Fourth Circuits (holding the CWA applies to groundwater discharges) and the Sixth Circuit (holding groundwater discharges do not trigger CWA jurisdiction).

The case, County of Maui, Hawaii v. Hawaii Wildlife Fund, et al., Docket No. 18-260, involved a lawsuit by the Sierra Club and other environmental groups alleging that Maui County violated the CWA by not requiring a National Pollution Discharge Elimination System (“NPDES”) permit for sewage wastewater injection wells. NPDES permits are required for “point sources” of pollution, which are defined as a “discernible, confined and discrete” sources of pollution (i.e., a pipe). NPDES permits are generally not required for nonpoint sources which are not well defined and discernable (i.e., runoff). Here, contaminants escaped from the injection wells (a point source) and traveled first through groundwater before reaching the Pacific Ocean. At issue was whether the indirect discharge from the injection wells into the ocean via groundwater constitutes a point source thus requiring a permit. Although the pollution did not directly travel from the well to the ocean, both the district court and the Ninth Circuit held that an NPDES permit was required. The Ninth Circuit announced a “fairly traceable” test, holding that because the contamination was “fairly traceable” to a point source, an NPDES permit was required.

On appeal, the Supreme Court vacated and remanded, and announced a new test in the process. The Supreme Court adopted a “functional equivalent” test, holding that a permit is required not only for direct discharges from point sources, but also where there is a “functional equivalent” of a direct discharge. In so doing, the Court rejected the government’s bright-line position that a discharge to groundwater never triggers NPDES permitting requirements. However, the Court also rejected the Ninth Circuit’s test which would require a permit for any discharge that is “fairly traceable” to a point source.

The new “functional equivalent” test requires a case-by-case analysis where (1) distance (i.e., from the point source to the waterway), and (2) time (i.e., for the pollutant to reach the waterway) must be considered. Application of the rule to extreme examples is straightforward. For instance, a permit would be required where a pipe discharges contamination into groundwater mere inches from a waterway and contaminates the waterway seconds or minutes later. However, a permit would likely not be required where a discharge enters groundwater and travels 50 miles reaching a waterway years later.

Although many headlines decry this decision as a significant expansion of CWA jurisdiction, the reality is that the decision represents a “middle ground” that does not significantly impact the status quo. Courts will need to determine whether an NPDES permit is required considering factors like distance and timing. Such an analysis is not a significant departure from the approach courts have taken for years in determining whether an NPDES permit is required.

It is important to note that this case did not rule that that County is required to obtain a permit, but rather remanded so that the new test could be applied for a determination on the merits. Moving forward, EPA may issue new guidance to address the opinion and invalidate previous guidance that instructed that NPDES permits were not required if a discharge touched groundwater.

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