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Burlington Northern, Union Pacific Seek Court Help on Cleanup

Bloomberg

 

 

By Greg Stohr

Feb. 23 (Bloomberg) — Burlington Northern Santa Fe Corp. and Union Pacific Corp. say they played only a minor role in the contamination of a California site that once housed a company that sold agricultural chemicals.

So why, units of the two railroads are asking the U.S. Supreme Court, should they be responsible for the full $42 million cleanup cost?

The court will hear arguments from the companies tomorrow in a case that might save businesses hundreds of millions of dollars under the federal Superfund law. Companies want to give judges more power to divide up cleanup costs. In the California case, a U.S. appeals court instead held each business accountable for the full expense, including the share of the now-insolvent company that ran the facility.

“You have a lot of sites like this one where the party that’s principally responsible for the contamination is no longer around,” said Thomas C. Jackson, a Washington environmental lawyer with Baker Botts LLP. In a court filing on behalf of corporate trade groups, Jackson called the appeals court ruling “fundamentally unfair.”

The U.S. government is trying to recoup the money it is spending to clean up the Arvin, California, site, where Brown & Bryant Inc. stored and sold chemicals until an environmental investigation drove it out of business in 1988.

In settlements last year with the Environmental Protection Agency alone, private parties last year paid more than $2 billion under the Superfund law.

Apportionment Question

The so-called apportionment question is one of two issues in the Supreme Court case. In a connected appeal, Shell Oil Co. says it shouldn’t be held responsible for selling Brown & Bryant a pesticide known as D-D, which leaked into the ground and threatened water supplies. Shell, an affiliate of Royal Dutch Shell Plc, is also pressing the court to apportion any costs the company must pay.

The high court is due to rule by July.

The railroads’ involvement in the case stems from their ownership of some of the contaminated land. The railroads owned 19 percent of the 4.7 acres that Brown & Bryant used for the last 13 of its 28 years on the site.

U.S. District Judge Oliver Wanger relied on those figures in determining that the railroads should pay 9 percent of the cleanup costs. Wanger also concluded that Shell was responsible for only 6 percent, saying most of the D-D spillage occurred after the chemical was under Brown & Bryant’s control.

The San Francisco-based 9th U.S. Circuit Court of Appeals overturned that aspect of Wanger’s order. The appeals court said Wanger should have imposed “joint and several” liability on the companies, making each responsible for the full cleanup cost.

Joint Liability

In a court filing submitted in December, the Bush administration said that the Superfund law generally requires joint-and-several liability and that Wanger relied on “unsubstantiated assumptions and gross approximations” in dividing the costs. The Obama administration has now inherited the case and will press the government’s argument in court tomorrow.

A Supreme Court decision backing apportionment would force the government to cover more of the costs of cleanups and would give companies new leverage in negotiating environmental settlements.

Easing the threat of joint-and-several liability would also reduce a powerful incentive for private cleanups, said Martha Judy, a Vermont Law School professor who specializes in Superfund issues.

“It is the liability scheme that motivates people to want to clean up these sites before they develop them and to check out these sites before they buy them,” Judy said.

Superfund Law

The Superfund law is formally known as the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA.

The other issue in the case is one of particular interest to the chemical industry. It concerns a provision in the Superfund law imposing liability on companies that “arranged for disposal” of hazardous substances.

In court papers, Shell said that provision doesn’t cover “the mere sale and transport of useful products” and requires intentional disposal of hazardous waste.

Shell says that Brown & Bryant assumed responsibility for the D-D once it arrived at the facility in tank trucks and that the smaller company was sloppy in its handling of the pesticide.

“Certainly it was not Shell’s intent that the product be spilled,” Jackson of Baker Botts said. “That was really the purchaser’s doing.”

‘Deeply Involved’

The Bush administration said Shell was “deeply involved” in the delivery. Wanger found that Shell required Brown & Bryant to follow a manual with detailed unloading procedures and to store the corrosive chemical in bulk tanks. The judge also concluded that Shell reduced the price of the D-D to account for leakage.

Judy said a ruling favoring Shell on that issue would be a “fairly shocking departure” from the current law.

“There are a lot of sites all over where there are a lot of spills that are part of the normal commercial transfer of products,” she said. “I don’t think CERCLA intends to let all those sites languish because they didn’t mean to spill it.”

The cases are Burlington Northern v. United States, 07-1601, and Shell Oil v. United States, 07-1607.

To contact the reporter on this story: Greg Stohr in Washington at[email protected].

Last Updated: February 23, 2009 00:01 EST

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