Dykema
  June 16, 2006 - Michigan

Third Circuit Reverses U.S. v. Rohm & Haas Co., Holds All EPA Oversight Costs Recoverable Unless Arbitrary and Capricious

In its 1993 decision in U.S. v. Rohm & Haas, the Third Circuit held that EPA could not recover CERCLA oversight costs for supervising a private party removal action. The Court reasoned that the U.S. Supreme Court’s decision in National Cable Television Ass’n, Inc. v. U.S. barred recovery of such costs “unless the statutory language clearly and explicitly requires that result.” Emphasizing the lack of any “explicit reference to oversight of activities conducted and [to be] paid for by a private party” and “the dramatic and unusual effect of requiring regulated parties to pay a large share of the administrative costs required by the overseeing agency,” the Third Circuit originally held that CERCLA lacked the requisite “clear statement” under National Cable Television. In U.S. v. E.I. Dupont de Nemours & Co., the Third Circuit recently reversed this position, relying on opinions from the Fifth, Eighth, Ninth and Tenth Circuits which soundly rejected the holding in Rohm & Haas. In reconsidering its position, the Third Circuit found that, “because of significant distinctions between the statutory framework at issue in National Cable and [those in CERCLA], we no longer believe National Cable governs our analysis of CERCLA.” The Court found that National Cable addressed the imposition of user fees by the FCC on parties it regulated. However, CERCLA does not impose “user fees or taxes,” nor does it impose costs on a regulated industry, but rather on “responsible parties” for a Superfund cleanup. The Court reasoned that, “CERCLA response costs [oversight costs] are restitutionary payments, imposed on those responsible for contamination to cover costs of the contamination’s cleanup.” The Court also found that the government’s right under § 107 to recover “all costs of removal or remedial action incurred by the United States government not inconsistent with the [NCP],” although broad, was defined enough to provide the right to recover EPA oversight costs. Moreover, the definitions of “removal” and “remedial action” could easily be interpreted to include EPA oversight costs. The Court reasoned that PRPs can challenge EPA oversight costs to the extent they are inconsistent with the NCP (an admittedly difficult burden), or they can prove they are not liable as responsible parties. Another reason to permit recovery of EPA’s oversight costs, the Court reasoned, was that the statutory scheme of CERCLA requires the EPA to oversee the assessment and remedial process to assure that private party actions “protect the public health and welfare in the environment.” The Court found that government oversight ensures that private parties’ cleanups are effective and are completed to comply with necessary standards, recognizing that CERCLA § 122(f)(3) and (5) require review and certification of private party cleanups by the EPA. In emphasizing private parties’ abilities to limit what the government may recover for oversight costs, the Third Circuit held that the arbitrary and capricious standard is well established as the appropriate standard for most agency action. The Court found that the costs that are “unnecessary and excessive” in light of the NCP are arbitrary and capricious and should be disallowed. The Dupont dissent focused on the lack of an express provision providing for oversight recovery under the National Cable standard, and EPA’s practice of including payroll and indirect administrative costs into its oversight bills: “Query whether we should construe a [broad] statutory provision [such as § 107] to allow a wholesale transfer of the expenses of operating government to private parties where no intent to do so – and certainly no clear statement – appears on the face of the statute.” With reversal of Rohm & Haas, it appears that the only hope of limiting EPA oversight costs is a challenge on unreasonableness grounds under the extremely difficult arbitrary and capricious standard. Hopefully courts will temper this with an understanding that arbitrary and capricious is closer to “unreasonable” than it is to “outrageous” when it comes to EPA oversight costs. If you have questions regarding CERCLA oversight costs or other issues under Superfund or site remediation, call Dykema’s Scott Broekstra at 616-776-7556 or e-mail [email protected].