A noteworthy federal district court decision will force a state agency to reimburse the United States for almost $9.36 million in clean-up and related costs because the state’s highways discharged hazardous substances to the environment. This landmark decision opens the door for “Superfund” (officially the Comprehensive Environmental Response, Compensation, and Liability Act or CERCLA) liability to both public and private parties that design and operate stormwater drainage systems. AGC has been monitoring the impact of this court case on contractors engaged in design-build roadway projects. The U.S. District Court for the Western District of Washington handed down a decision in United States v. Washington State Department of Transportation (WSDOT) that threatens to expand CERCLA (or Superfund) liability for those in the design-build industry. CERCLA imposes liability on parties responsible for, in whole or in part, the presence of hazardous substances at a site. In this case, a federal judge in Washington held that WSDOT was liable as an “arranger” of hazardous substances due to its design, construction, ownership and operation of highways and their stormwater drainage system that emptied untreated, polluted stormwater into Tacoma’s Thea Foss Waterway/Commencement Bay – which is now a listed Superfund site. (CERCLA defines an “arranger” as “any person who by contract, agreement, or otherwise arranged for disposal or treatment … of hazardous substances owned or possessed by such person, by any party or entity, at any facility … owned or operated by another party or entity and containing such hazardous substances.” 42 U.S.C. § 9607(a)(3).) The United States alleged that the highway drainage structures conveyed runoff containing hazardous substances, including phthalates, heavy metals and petroleum hydrocarbons, into the contaminated waterways. The court agreed. In addition, the court found that the “intent to dispose” standard established by the U.S. Supreme Court’s 2009 Burlington Northern decision (Burlington Northern and Santa Fe Railway Company v. United States, 129 S. Ct. 1870 (2009)) was met here because designing the stormwater drainage system was “an action directed to a specific purpose” of discharging “the highway runoff into the environment.” As further support for its conclusion, the court determined it was undisputed that the WSDOT had control over how the runoff was collected, treated and disposed of and knew the runoff contained hazardous substances.
Federally-Permitted Release Exemption CERCLA § 107(j) exempts from CERCLA liability any “response costs or damages resulting from a federally permitted release,” and CERCLA § 101(10)(A) defines a “federally permitted release” as including discharges “in compliance with” a permit issued under the National Pollutant Discharge Elimination System (NPDES) program in Clean Water Act (CWA) Section 402. WSDOT argued that it had operated the stormwater drainage system under a state-issued NPDES permit since 1995, in addition to a municipal stormwater permit, and that any discharges from the stormwater system complied with the CWA. In a follow-up decision on the same case from spring 2011, the court decided that WSDOT was only liable for the discharges made before the NPDES permit was issued; however, the impossibility of dividing which discharges were made pre-permit and post-permit ultimately resulted in liability for all of it. The second phase of the trial also adjudicated WSDOT’s counterclaims against the U.S. Army Corps of Engineers (Corps) for its dredging activities. The court concluded that the Army Corps was an “arranger” but that the dredging activities were on balance environmentally positive and thus, allocated 0% liability to the Corps.
Potential Impact on Design-Build Work This is the decision of one federal district court, and it will not be appealed. However, AGC expects that other federal courts will look to it for precedent in their own decisions. In consultation with legal counsel and the Governor’s office, WSDOT decided not to pursue an appeal – stating that the district court decision is a concern, but if a 9th Circuit appellate court opinion affirmed the trial court’s ruling, it would have a greater legal effect on other projects in Washington and other states. (An appellate court decision would be binding on courts in other states in the 9th Circuit.) The most important impact is that state DOTs, local government agencies and presumably design-build contractors may be found liable under CERCLA for any hazardous substances that are released from roadways to a Superfund site. (CERCLA is retroactive and it could be applied to an existing site or one yet to be identified.) There is now chance that anyone who designs, builds or operates stormwater drainage systems is at a risk for liability, even if they did not personally release any hazardous substance.
Policy Issues Construction professionals that design and build stormwater systems in the vicinity of aquatic Superfund sites must be vigilant in their efforts to avoid potential liability by ensuring that their activities are in compliance with federal permitting schemes and take steps designed to prevent and/or limit hazardous substances from entering their stormwater systems. CERCLA is a strict liability statute that holds potentially responsible parties (PRPs) jointly and severally liable, without regard to fault, for cleanup costs incurred in response to the release or threatened release of hazardous substances. Contractual indemnity clauses or insurance will not act as a defense to liability. However, this will not keep parties from seeking contribution costs through contract language or lawsuits. Working within NPDES discharge permits may limit liability, but only for actions taken under the permit. By not being able to reasonably divide pre- and post-permit discharges, any discharge that occurs before or in violation of an NPDES discharge permit will render the “federally-permitted release” exemption to CERCLA nearly useless. Construction companies that design and build stormwater systems should be sure that they follow their discharge permits to the letter, and retain documentation of this compliance, particularly if the receiving water or its sediments are already contaminated. AGC will continue to monitor this situation very carefully and engage in discussion with the states. Whether this case marks the start of similar cases to come remains to be seen.
Superfund Sites There have been 1,652 sites listed on Superfund's National Priorities List (NPL) since 1980; cleanups have been completed on 350 properties. When a site is placed on the NPL, EPA tries to identify the party responsible for the contamination and require it to pay for or conduct the cleanup. If a responsible party cannot be found, EPA assesses the extent of the contamination before beginning its cleanup. Consequently, the cleanups at some of the new sites may not begin for several years. There are currently 62 sites that EPA has proposed for the NPL. Click here for a full listing of the new and proposed Superfund sites.
For more information, please contact Leah Pilconis at pilconisl@agc.org.