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Not So Super Superfund

Even though it's an American regulatory device, the Comprehensive Environmental Response, Compensation, and Liability Act, 1980 (CERCLA, commonly called "Superfund") is often discussed in Canad...


Even though it’s an American regulatory device, the Comprehensive Environmental Response, Compensation, and Liability Act, 1980 (CERCLA, commonly called “Superfund”) is often discussed in Canada when comparisons are made between our rules for cleanup of contaminated sites versus those south of the border. Superfund is a statutory tool created by the US Government to fund the cleanup of abandoned contaminated sites and, where possible, to apportion liability for contamination among “potentially responsible parties” (PRPs).

The fund has certainly been “super” for lawyers and consultants. A huge amount of litigation followed Superfund’s promulgation between governments, PRPs (where they can be found) and their insurance companies. While Canadian environmental lawyers may be envious, Canadian business has benefited from the absence of Superfund-type legislation and its associated costs.

In Canada, most provinces — and to a limited degree the federal government — address contaminated sites (often referred to as “brownfields”) differently. While both countries follow the “polluter pays” principle, the absence of Superfund-style legislation in Canada means contaminated land often sits idle for decades. Many US sites sit idle too, but at least there’s an incentive (and money) to clean up the worst of them.

Cooper Industries, Inc. vs. Aviall Services, Inc.

A recent decision of the United States Supreme Court in the matter of Cooper Industries Inc. vs. Aviall Services Inc. (“Cooper v. Aviall”) should be of interest to people in the waste management sector who have operations in the US or who have been involved with American companies via trans-boundary shipments or investments.

In brief, as a result of a US Supreme Court decision issued in December of last year, private entities undertaking voluntary cleanup of contaminated sites may be precluded from seeking contributions from other PRPs under the Superfund legislation. The significance of this decision cannot be overstated; it alters the universal understanding of how Superfund operates with respect to private parties and cost-recovery litigation.

Prior to the Cooper v. Aviall decision, most US federal courts operated with the understanding that private parties voluntarily remediated contaminated sites could then sue other PRPs to cover some of the costs. (In such cases, PRPs are assumed to be people or companies entities who have contributed to the contamination of a particular site.) While the recent Supreme Court case still allows parties to initiate litigation for voluntary remediation pursuant to state legislation, the Supreme Court decision potentially discourages or may delay voluntary cleanups under Superfund.

In its decision, the court ruled that a private party may only initiate litigation for contribution against other PRPs after the government has already initiated or completed an action against the private party. As such, where private entities have undertaken “voluntary” remediation without being ordered to do so by some government department or agency, the private party will no longer be able to initiate actions against other PRPs in order to obtain contribution for its cost of the voluntary cleanup.

The facts in the Cooper v. Aviall case are fairly straightforward. During the course of undertaking its aircraft engine maintenance business, Cooper contaminated several properties in Texas with hazardous substances, including petroleum hydrocarbons. Aviall purchased Coopers maintenance business in 1981 along with the properties in question. Aviall continued to operate this business and discovered that both it and Cooper had contributed contamination to both the soil and groundwater at the facilities. Aviall reported this to the Texas Natural Resources Conservation Commission (TNRCC), which was replaced by the Texas Commission on Environmental Quality. Aviall was never directed to clean up the properties. Neither the TNRCC nor the US EPA took any judicial or administered action pursuant to Superfund to compel a cleanup by Aviall.

Aviall was nevertheless under the threat of eventual enforcement action by either the US EPA or the TNRCC. In 1994 it initiated a cleanup of the contaminated properties. Eventually Aviall sold the properties but retained contractual responsibility for the remediation, with an eventual cost estimated at US $21 million.

Until this recent Supreme Court ruling, the accepted wisdom was that Aviall could seek cost contribution from Cooper under the Superfund legislation. However, the Supreme Court ruled that Aviall could not seek such contribution because it was not subject to prior or pending action brought by the government.

Implications for industry

There are circumstances in which Canadians need to be concerned about this important change. There have been cases (described in this column in past years) where US courts have compelled Canadian entities to respond to Superfund claims. In addition, Canadian companies doing business in the US or transporting waste or hazardous materials to historic Superfund sites may be subject to changes in their liability.

The most obvious implication is that parties involved in contaminated sites that are (or may be) subject to Superfund regulation will need to carefully consider whether or not they should undertake voluntary site cleanups. The right to sue other PRPs no longer exists in many circumstances. Companies will need to be sure that cleanup is justified without contribution from other PRPs.

In the past, voluntary brownfield redevelopment was paid for in part by contributions from various PRPs via the Superfund regulatory regime. It remains to be seen whether the same level of brownfield redevelopment will continue, and how the contaminated site cleanup business will respond to this situation.

Adam Chamberlain is a certified specialist in environmental law with Aird & Berlis in Toronto, Ontario. Contact Adam at achamberlain@airdberlis.com


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