Letter from Chair Being a Star Trek fan, I always like the beginning sequence of each episode, when Captain James T. Kirk explains that the U.S.S Enterprise is on its five year mission “to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.” What a great way to begin a show! Not claiming to have the stature of James T. Kirk (or even William Shatner or his Denny Crane character on Boston Legal), I think it is a good idea to set out the mission, as I see it, of the TBA Environmental Section. Firstly, the Environmental Section works to provide continuing legal education opportunities of interest to its members. By providing pertinent continuing legal education opportunities, the Environmental Section enables practitioners in the field to attend meaningful continuing legal education courses as opposed to having to just sit through courses that have no relation to their field of practice. Secondly, the Environmental Section endeavors to keep its members up to date on new developments and trends in the area of environmental law through the publication of its quarterly newsletter. The newsletters on many occasions have articles developed by sponsors on remediation issues. Finally, the Environmental Section exists to provide its members with an opportunity to share information and to get to know each other in a non-litigious and non-contentious setting. Members can take advantage of opportunities to get to know each other and share information by serving on continuing legal education panels, by writing articles for publication in the quarterly newsletter and by assisting the Section’s Executive Committee in planning and participating in the various activities of the Section. It’s important to note that if members of the Section desire to participate in planning activities, there are currently various committees on which you could serve: the continuing legal education program committee, the Jon B. Hasting Writing Competition committee, the newsletter committee, and the membership committee. If members are interested in serving on these committees, please let me know. I look forward to working with Environmental Section members during my term of office to enable the section to provide its members with continuing legal education opportunities, updates on existing issues in environmental law through its quarterly newsletter and opportunities to get to know each other. The “mission” of the Section will best be served through the increased participation of its members. I hope that, like most episodes of Star Trek, this year will prove to be an exciting and rewarding experience for members of the Environmental Section. Max Fleischer, Chair max.fleischer@state.tn.us

Max Fleischer, Chair

Railroaded by Superfund?  Supreme Court to Review CERCLA Liability Cases in 2008 Term

By Gary Shockley

As the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) reaches its twenty-eighth anniversary, it continues to generate both controversy and litigation. After recent decisions articulating the CERCLA contribution and cost-recovery remedies, the United States Supreme Court has once again undertaken review of two related cases raising important issues regarding the scope of potentially responsible party (PRP) liability under section 107, 42 U.S.C. §9607. Those cases, Burlington Northern and Santa Fe Railway v. United States and Shell Oil Company v. United States, have the potential to clarify some of the more knotty questions remaining under the Act.

The Ninth Circuit’s decision in United States v. Burlington Northern & Santa Fe Ry. Co., 520 F.3d 918 (9th Cir. 2008), arose out of the operation of an agricultural chemical facility in Arvin, California. The operator, Brown & Bryant (B&B), ran a warehouse and tank-storage facility on a 3.8 acre, eastern parcel from 1960 to 1975. In 1975, B&B leased an adjacent 0.9 acre, western parcel from the predecessors to Burlington Northern & Santa Fe (BNSF) and Union Pacific. B&B used the railroad parcel for storage of trailers, pesticide application “rigs,” and empty drums and cans until it left the site in 1988. Among the chemicals stored at the B&B Arvin site were two nematocides manufactured by Shell Oil Company. These nematocides were originally stored in large tanks on the B&B eastern parcel but were later managed in mobile tankers stored on both properties. B&B’s operations resulted in regular leaks and spills of these Shell chemicals, as well as some manufactured by Dow. After B&B left the site, the EPA and California Department of Toxic Substances Control (DTSC) began investigation and cleanup work on both parcels, including ordering the railroads to install groundwater monitoring wells on the railroad parcel. In 1992, the railroads filed an action for CERCLA contribution against B&B. In 1996, the DTSC and EPA brought cost recovery actions under CERCLA against the railroads, Shell, and B&B. The cases were consolidated for trial in the U.S. District Court for the Eastern District of California.

The district court conducted a 27-day bench trial on the various contribution and cost-recovery claims, at the conclusion of which it found the railroads to be liable as owners under CERCLA § 107(a)(2) and Shell liable as an arranger for disposal under § 107(a)(3). 42 U.S.C. §9607(a)(2), (3). The trial court went on to hold that apportionment was appropriate at the liability stage and found the railroads liable for 9% of the agencies’ response costs and Shell liable for 6%. Both Shell and the agencies appealed to the Ninth Circuit. United States v. Atchison, Topeka & Santa Fe Ry. Co., Nos. CV-F-92-5068 OWW, CV-F-96-6226 OWW, CV-F-96-6228 OWW, 2003 WL 25518047 (E.D. Cal. July 15, 2003)

In its final, corrected March 25, 2008, opinion, the Ninth Circuit addressed several issues. First, it held that, while CERCLA provided for a strict liability scheme, it is appropriate to apportion damages in the liability phase of proceedings when there is a reasonable basis for division under Restatement (Second) of Torts (Second) § 433A (1965). Relying heavily on United States v. Chem-Dyne Corp., 572 F.Supp. 802 (S.D. Ohio 1983), the Court of Appeals reasoned that district courts should look strictly to objective factors in making this divisibility analysis and leave any consideration of equities, such as the “Gore factors,” to the distinct contribution phase. 520 F.3d at 935-41. It also stressed that traditional causation was not required under CERCLA, merely some nexus between a party’s section 103 PRP status and the contamination at issue. Id. Before applying these “fairly straightforward principles” to the facts found by the district court, the Ninth Circuit held that it would review whether there was a reasonable basis for apportionment (or “conceptual divisibility”) on a de novo basis as a question of law, with the district court’s actual allocation subject to a deferential clearly-erroneous standard for factual findings. Id. at 941-42. Because the contamination was theoretically subject to allocation by date of release, by location, or by contaminant, it was conceptually divisible. On the issue of the actual allocation, however, the court held that the three bases relied on by the district court to allocate liability to the railroads—the proportion of the railroad’s land ownership to the entire Arvin facility, length of the lease term to the total period of B&B’s operations, and the number of contaminants originating on the railroad parcel—were insufficient on the factual record to support the 9% shares allocated to them. In the Court of Appeals’ view, the evidence was insufficient to answer “the pertinent question: What part of the contaminants found on the Arvin parcel were attributable to the presence of toxic substances or to activities on the Railroad parcel?” Id. at 946. While acknowledging the practical difficulties for an absentee landlord in of proving this level of detail, the court concluded that, in its absence, the railroads remained jointly and severally liable for the entire Arvin site.

Shell’s divisibility case suffered a similar fate. Lacking evidence of the volume of contamination attributable to releases of its products, Shell also failed to prove a reasonable basis for allocation of the contamination under Restatement (Second) § 433A. The court noted that, while Shell might have established a reasonable basis for apportionment based on evidence of the volume of its sales to B&B and of the amounts lost during transfer operations or spills, it had failed to so. Thus, Shell was likewise subject to joint and several liability. Id. at 946-47.

Finally, the Ninth Circuit also rejected Shell’s defenses to CERCLA section 103(a)(3) arranger liability. Determining that CERCLA required a “broader” arranger rule encompassing transactions in which disposal of hazardous substances was necessary, as well as those “direct arranger” transactions where it was the parties’ purpose, it held that Shell’s delivery of chemicals which were necessarily spilled and leaked during transfer and storage was sufficient. Id. at 948-49. The court also rejected Shell’s “useful product” defense on the ground that its chemicals were not useful products disposed only after their intended use, but were “necessarily and immediately” leaked prior to use as part of the normal delivery and storage process. Id. at 949-51. Refusing to delve into whether Shell held title to its products at the time of the spills, the court rejected the idea that ownership or control was essential to “broad arranger” liability. Id. at 950-51.

Thus, the Ninth Circuit affirmed the district court’s finding that the railroads and Shell were liable parties under CERCLA, reversed its divisibility and allocation findings, held all four PRPs jointly and severally liable, and remanded for further proceedings. Following a petition for rehearing, the panel amended its original opinion to make some corrections and to delete references to “super-strict liability” but did not alter its analysis or holdings. United States v. Burlington Northern & Santa Fe Ry. Co., 530 F.3d 918 (9th Cir. 2008). Eight members of the court dissented from the denial of rehearing en banc, suggesting that the panel opinion went well beyond the statute or common law to set virtually impossible standards for proof of divisibility. Id. at 952-63 (Bea, J., dissenting from denial of rehearing en banc). Both the railroads and Shell filed petitions for certiorari to the United States Supreme Court.

In the raiilroads’ petition, BNSF and Union Pacific argued that the Ninth Circuit’s reversal of the divisibility and allocation rulings was inconsistent with the statutory language and legislative history of CERCLA, was contrary to common law apportionment principles, and created a circuit conflict on both apportionment standards and the appropriate standard of appellate review. Petition for Certiorari, The Burlington Northern and Santa Fe Railway Co. v. United States, No. 07-1601 (June 23, 2008). In a separate petition, Shell sought review of its arranger liability status, as well as the apportionment decision challenged by the railroads. With respect to the former, Shell argued that the Ninth Circuit’s “broad arranger” rule would extend CERCLA liability beyond that envisioned by Congress and create a circuit conflict on the liability of sellers of useful products. Petition for Certiorari, Shell Oil Company v. United States, No. 07-1607 (June 23, 2008). The Solicitor General’s office filed a brief in opposition to the petitions and several trade groups filed amici briefs supporting grant of the writ. On October 1, 2008, the Court granted both petitions and consolidated them for consideration.

Thus, it appears that the Supreme Court may soon offer some guidance on two of the most vexing and controversial issues in CERCLA: the standards for divisibility in governmental cost-recovery actions and the scope of arranger liability. Given the spirited dissent from the Ninth Circuit, as well as that court’s recent reversal rate at the Supreme Court (12 reversals, 7 vacations, and 2 affirmances in the October 2006 term, as determined by the Harvard Law Review), it seems likely that some significant revision to the panel’s rulings will be forthcoming. Whether those revisions will help clarify these important issues, or simply raise yet more questions about ever-enigmatic CERCLA, is a topic environmental lawyers and their clients will debate anxiously over the next several months.

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Gary Shockley is shareholder in the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC and is also a former Chair of the TBA Environmental Law Section.

2008 Jon E. Hastings Memorial Writing Competition Winning Article

Congratulations to 2008 Vanderbilt Law School Graduate Justin Leck for his award-winning article in the TBA Environmental Law Section's 2008 Jon E. Hastings Memorial Writing Competition.  Justin's article - "The Kyoto-Continuum:  Expanding Annex Classifications of the Kyoto Protocol under the Doctrine of Common but Differentiated Responsibilities” is available on the TBA Environmental Law Section's website at: 

http://www.tba.org/sections/EnvironmentalLaw/hastings_winner_2008.pdf

The 2009 Jon Hastings Memorial Writing Competition Announcement and Rules are also available on the TBA Environmental Law Section's website at:

http://www.tba.org/sections/EnvironmentalLaw/index.html

Amendments to Tennessee's Ground Water Rules

by Bry Roberson

In March 2008, the Tennessee Department of Environment and Conservation filed amendments to the rules on classification of ground water as originally published in 1999. These amendments, which became effective on June 7, 2008, are codified in Tennessee Rules 1200-4-3-.07 through 1200-4-3-.12.
There are a number of notable differences between the original version of the ground water rules and the recently-amended version. Among the more significant differences is the default classification of ground water in the state as General Use Ground Water under 1200-4-3-.07(4)(b). Previously, ground water that had not specifically been classified by the Department or the Water Quality Control Board was considered to be unclassified. The amended version also omits the “Limited Use Ground Water” classification that was provided for in the original version of the rules, but which the Department had difficulty implementing.

The amended version of the rules retains the Special Source Waters, General Use Ground Water, Site Specific Impaired Ground Water and Unusable Ground Water classifications, although the criteria for some of the classifications have been changed; for example, the total dissolved solids criterion for Unusable Ground Water has been raised from 3,000 parts per million (ppm) to 10,000 ppm. Also notable is that the Site Specific Impaired classification petition process – for ground water that has been contaminated by human activity, and that has been determined to be impractical to remediate to the criteria required by other classifications - is more involved than what was required prior to the amendments. Additionally, Site Specific Impaired classification now requires the approval of the Water Quality Control Board, whereas the Commissioner could previously approve petitions for Site Specific Impaired classification.

Another significant feature of the amended rules is the provision for establishment of an “Area of Control” by the Commissioner when contamination has caused water to exceed applicable standards. In accordance with the amended rules, in establishing an Area of Control, the Commissioner is to “use the authorities of the remediation statues and rules to describe the extent of the Area of Control and protect the public from exposure to water in the Area of Control.” The Area of Control provisions of the rule would appear to harmonize the ground water classification rules with the ground water investigation and cleanup programs administered by the various Divisions within the Department, and provide for a means of managing contaminated ground water within the framework of the ground water classification rules.

Finally, the amended rules contain a reporting requirement, set forth in 1200-4-3-.12. This provision of the revised rules requires that owners or prospective purchasers of property used for commercial or industrial purposes who test the ground water or perched water on the property to notify the Commissioner of any contamination of such water if it is currently used as a source of potable water and it exceeds General Use criteria, or if an environmental professional engaged by such owner or prospective purchaser “reasonably concludes” that it poses some other substantial risk to health and safety. Examples of such “substantial risk” situations given in the rule include situations in which vapors released from the water are causing an explosion hazard, or an inhalation hazard. The rule goes on to clarify that routine sampling and reporting of ground water data required by an agency of the Department as part of a regulatory program obligation satisfies this requirement. However, it is less clear how data generated via performance of independent investigations (e.g., pre-acquisition due diligence investigations) should be evaluated for purposes of compliance with this new reporting requirement.

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Bry Roberson is an Associate Principal with the consulting firm of EnSafe Inc.  

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Ensafe Headquarters: Memphis
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Memphis, Tennessee 38134
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Fx. (901) 372-2454

Knoxville
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Knoxville, TN 37922
Ph. (865) 693-3623
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Nashville
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Ph. (615) 255-9300
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David Higney
Vice-Chair
Grant, Konvalinka & Harrison, PC (Chattanooga)
dhigney@gkhpc.com

LeAnn Mynatt
Immediate Past Chair
Baker, Donelson, Bearman, Caldwell & Berkowitz PC (Knoxville)
lmynatt@bakerdonelson.com

Devin Wells
Secretary/Treasurer & Associate Newsletter Editor
TN Dept. Environment & Conservation (Nashville)
devin.wells@state.tn.us

Rebecca Chunn Tolene
Newsletter Editor
Tennessee Valley Authority (Knoxville)
rctolene@tva.gov

East TN Delegates:

Rick Hitchcock
Chambliss Bahner & Stophel P.C. (Chattanooga)
rhitchcock@cbslawfirm.com

Ashley Lowe
Baker, Donelson, Bearman, Caldwell & Berkowitz (Knoxville)
alowe@bakerdonelson.com

Middle TN Delegates:

Jason Holleman
City Attorney (Mt. Juliet)
jholleman@cityofmtjuliet.org

Justin Wilson
Waller Lansden Dortch & Davis, LLP (Nashville)
jwilson@wallerlaw.com

David L. Henry
TN Dept. Environment & Conservation (Nashville)
david.henry@state.tn.us

West TN Delegates:

Joe Murphy
U.S. Attorney’s Office Western District (Memphis)
joe.murphy@usdoj.gov

Charmiane Claxton
Apperson Crump & Maxwell (Memphis)
cclaxton@appersoncrump.com

Allen Malone
Burch, Porter & Johnson, PLLC (Memphis)
amalone@bpjlaw.com