Patrick G. Rowe

Liability as Regulator under CERCLA

August 2011

Patrick G. Rowe
Published in the Natural Resources & Environment - ABA Section of Environment, Energy & Resources

Parties involved with hazardous waste cleanups arising from activities that were permitted and overseen by a governmental entity should pay close attention to a March 2011 decision out of the District of Idaho, Nu-West Mining Inc. v. United States, No. 09-431 (D. Idaho Mar. 4, 2011).   Although a district court decision, the court's logic may be of use to potentially responsible parties in other jurisdictions and serve as a word of caution to the federal government, as well as state and local governments. In Nu-West, the court held that the federal government's permitting, inspection, and directions regarding waste disposal activities at mines on federal lands were sufficient to render it liable as an arranger and as an operator under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).  The court rejected the government's argument that it could not be liable as an arranger or operator because it was acting in a merely "regulatory" capacity.  As a result, governmental entities face potentially expanded CERCLA liability at sites throughout the country where they permitted and oversaw activities that resulted in contamination, while potentially responsible parties at such sites may be able to shift some of the costs to the government.

The Nu-West litigation involved selenium contamination at four mine sites at a national forest in Idaho owned by the federal government.  In 1950 the government began to lease the sites to various mining companies for the purpose of mining phosphate ore.   Selenium, which is a naturally-occurring substance that is toxic at high concentrations, is found in a layer between phosphate ore zones known as the "middle waste shale."  Before mining could begin, the government required the lessees to obtain its approval of plans for mining, waste disposal, and reclamation.  As a condition of approval, the government required that the mines, when reclaimed, be covered with a layer of middle waste shale.  In addition to the lands covered by the mining leases, the federal government issued to the lessees a number of Special Use Permits ("SUPs") so that waste rock dumps could be constructed on National Forest land adjacent to the leased lands.

The four mines operated from the 1960's to the 1990's.  The government provided suggestions/directions regarding the design and location of dumps for the disposal of mining waste and regularly inspected the mines to monitor environmental conditions, including ensuring proper disposal of mining waste and placement of middle waste shale on top of every waste rock dump at the four mines.   The middle waste shale was intended to promote revegetation on the dumps, but selenium leached from the middle waste shale cover into water sources beneath the waste dumps.

When the selenium contamination was discovered, the plaintiffs, Nu-West Mining Inc. and Nu-West Industries Inc. (Nu-West), held the government leases under which the four mines were operated. After the contamination was discovered, Nu-West entered into consent orders with the United States to remediate the sites.  Nu-West subsequently brought a lawsuit against the United States seeking to recoup $10 million it claimed to have spent cleaning up the sites. 

There are four categories of potentially liable parties under CERCLA – 1) current owners or operators of a facility where hazardous wastes were disposed, 2) those who owned or operated such a facility at the time of disposal, 3) those who arranged for disposal of hazardous substances at the facility, and 4) those who accepted any hazardous substances for transport to the facility. 42 U.S.C. § 9607(a)(1)-(4). In Nu-West, the government admitted that it was an owner of the sites.  Nu-West sought partial summary judgment that the federal government was also an "arranger" and an "operator" under CERCLA.

In assessing arranger liability, the court looked to the U.S. Supreme Court's decision in Burlington Northern and Santa Fe Railway Co. v. United States ("BNSF"), 129 S. Ct. 1870 (2009). In BNSF, the Supreme Court held that an entity may qualify as an arranger "when it takes intentional steps to dispose of a hazardous substance."   The Supreme Court held that mere knowledge that spills would occur is not sufficient to prove that a party planned for disposal. The party must have entered into the transaction with the intention that at least a portion of the product be disposed.

Applying BNSF and also U.S. v. Shell Oil Co., 294 F.3d 1045, 1055 (9th Cir. 2002), the court in Nu-West  noted that an entity is an arranger if it has direct involvement in arrangements for the disposal of waste, and stated that elements to consider in determining arranger liability include whether the entity: 1) owned the hazardous substance; 2) had the authority to control the disposal of that substance; and 3) exercised some actual control over the disposal of that substance.  The court concluded that the government satisfied all three elements for arranger liability because the government: 1) owned the source of the selenium, the middle waste shale; 2) had the authority to control the disposal of the mining waste on the land it owned - no mining or waste disposal could occur without its approval; and 3) exercised actual control over the disposal – and showed its intent that the disposal take place – by requiring its lessees to cover the outer surface of the waste dumps with a layer of middle waste shale. 

The government argued that it could not be held liable as an arranger because it had acted in a purely regulatory role, taking actions only to mitigate environmental harm caused by private parties' actions.  The court did not accept this argument, noting that a similar position already been rejected in the Ninth Circuit in U.S. v. Shell Oil Co., 294 F.3d 1045 at 1052-1054 (9th Cir. 2002).  The court further explained that Congress could have easily included a regulatory exception to the broad waiver of governmental sovereign immunity contained in CERCLA, but it did not do so.

The Nu-West court noted that to be an "operator" under CERCLA, the party must manage, direct, or conduct operations having to do with leakage or disposal of hazardous waste, i.e., the defendant must have exercised control over the cause of the contamination at the time the hazardous substances were released into the environment.

The government argued that it had only made "suggestions" with regard to the waste dump designs and locations and could not be held liable as an operator because it was acting only as a regulator and seeking to ensure compliance with permit conditions.  The court rejected this argument, noting that whether the government had made suggestions or orders, it had been actively involved in designing and locating the waste dumps for the four mines, in inspecting the mines, and in ensuring compliance with mining plans and waste disposal guidelines.  The court held that such involvement was sufficient for operator liability.  Unlike "arranger" liability, the Nu-West court did not state that ownership of the hazardous substance is an element to consider in assessing possible liability as an "operator."  Therefore, Nu-West could be applied to argue that governmental entities face operator liability for their actions in permitting and overseeing activities that result in contamination, regardless of whether they owned the hazardous substances at issue.

As a result of the Nu-West decision, the federal government and other governmental entities face potentially expanded CERCLA liability throughout the country at properties at which they have exercised permitting authority and overseen activities that resulted in contamination.  Parties confronted with liability for activities that had been permitted or overseen by the government may be able to shift some of the costs to the government, where the government's permitting and oversight meets the criteria for arranger or operator liability.

Related Practice Areas


Return to Articles