Emergency Response: Cleanup Financing, Cost Recovery and "No-Fault"
Kenneth R. Myers, Esq.
High Swartz LLP
40 East Airy Street
Norristown, PA 19404
Disaster happens. Athos I, floods, fires, UST leaks and AST ruptures, Bhopal, TMI, even terrorism will occur. The priorities for persons who are caught up in any of these emergencies are, first, to preserve life, second, to protect health, and third, to minimize loss of property.
A fourth priority (which the federal and state agencies require "immediately"), is to give required notice to public agencies, and also to give notice to affected municipalities and some private parties in interest. Notice opens a new front line: accommodating to government control, and dealing with the press and public.
A. Authority to Impose Cleanup Costs and Penalties
If at least one federal agency is involved, the unified command structure specified by regulations of the Environmental Protection Agency takes hold. National Oil and Hazardous Substance Contingency Plan, 40 CFR Part 300. This provides a system to reach rapid decisions and resolve issues that may arise.
If only state and local governments are involved, the outcome is less clear. Major statutes authorize DEP to protect the public from air, water, solid or hazardous waste, mines, quarries and dams, but do not explicitly preempt the authority of county or local bodies, including health departments, fire departments and police departments. In fact, they preserve local authority in several instances.
-- See, for example, the provision of the Clean Streams Law applicable to mines, stating inter alia:: "Compliance with the provisions of this subsection and with the provisions of this act and the provisions of the statutes hereinabove enumerated shall not relieve the operator of the responsibility of complying with the provisions of all other applicable statutes ..." 35 P.S. §691.315.
-- The Pennsylvania's Storage Tank & Spill Prevention Act states: "Notwithstanding any Federal law to the contrary, the [Department of Environmental Protection] is hereby designated as the State agency empowered to direct emergency cleanup efforts onsite at a release site upon the occurrence of a release." 35 P.S. §6021.904
-- The Pennsylvania Hazardous Materials Emergency Planning & Response Act states: "It is the purpose of this act to: ...(2) Designate the Pennsylvania Emergency Management Council as the Commonwealth's emergency response commission and establish an emergency planning district and a local emergency planning committee in each county of this Commonwealth to act in accordance with the provisions of the Emergency Planning and Community Right-To-Know Act of 1986 ..., also referred to in this act as SARA, Title III." 35 P.S. §6022.102(b).
Notwithstanding the above, Pennsylvania law also specifies that municipalities shall coordinate and direct emergency responses.
-- "Coordination, assistance and mutual aid. (a) Responsibility for direction and coordination.--Direction of disaster emergency management services is the responsibility of the lowest level of government affected. When two or more political subdivisions within a county are affected, the county organization shall exercise responsibility for coordination and support to the area of operations. When two or more counties are involved, coordination shall be provided by the agency or by area organizations established by the agency. ..." 35 P.S. § 7504.
-- 35 P.S. § 7501 provides: "General authority of political subdivisions. (a) Establishing emergency management organization.--Each political subdivision of this Commonwealth is directed and authorized to establish a local emergency management organization in accordance with the plan and program of the Pennsylvania Emergency Management Agency. Each local organization shall have responsibility for emergency management, response and recovery within the territorial limits of the political subdivision within which it is organized and, in addition, shall conduct such services outside of its jurisdictional limits as may be required under this part. ..."
Also note the authority of the Pennsylvania Emergency Management Agency (PEMA), discussed below.
B. Emergency Relief - EPA funds
OPA: When an oil spill occurs that enters or threatens waters of the United States, a federal fund pays for response costs in the first instance, up to $1 billion.[i] The fund was set up under the federal Oil Pollution Act of 1990 ("OPA") and derives from a tax on domestic crude oil and the importation of petroleum products. The balance in the fund has been declining but remains adequate for all but the largest emergencies.
A vessel owner (subject to a limit on liability based on the size of the vessel) and any other responsible party are liable under OPA to reimburse cleanup costs.[ii] Costs recoverable under OPA include the costs of removing the oil, property damage, loss of income, and in the case of governmental entities, loss of taxes and fees. Recoverable damages may also include "passive losses," a concept which has generated major debate.[iii]
CERCLA: The Superfund (Comprehensive Environmental Response, Compensation & Liability Act[iv] or "CERCLA"), at its height, provided $8.5 billion of federal funding for site remediation and program administration, but this has dropped dramatically over the last decade. The Environmental Protection Agency utilizes the funds directly and supports state agency cleanup activity at "state lead" sites. Although the funding has dropped drastically, EPA remains a significant source of funding for both federal and state action.
CERCLA addresses hazardous substance and pollutant spills, but not releases of crude oil or its derivatives. The spill must be outdoors, and cannot be a naturally occurring substance. EPA is empowered to spend up to $2 million at any site on an emergency basis, without initiating the slow and painstaking process of site evaluation, site scoring under the Hazard Ranking System ("HRS"), and Remedial Investigation and Feasibility Study ("RIFS").[v]
There are few defenses to CERCLA or OPA liability. Unless the putatively responsible party can establish that the event was caused solely by an act or omission of an independent third party, an act of war or an act of God, liability is likely to attach.[xi]
Under CERCLA and OPA, EPA has authority to order responsible parties to do studies and take removal or remedial action. EPA can also take the action itself and sue for recovery of its costs (plus penalties and damages). A party incurring cleanup costs can also sue "responsible parties" for recovery of its costs or contribution.
In addition to costs of removal of contaminants, site studies and remedial costs, CERCLA authorizes EPA to pay permanent relocation costs for those affected by Superfund sites.
EPA Region 3 services five "rustbelt" states, including Pennsylvania, and the District of Columbia. Thus there is a great deal of competition for its limited CERCLA funds.
C. Emergency Relief - Pennsylvania DEP Funding
The Hazardous Sites Cleanup Act ("HSCA")[vi] is the Pennsylvania version of CERCLA. It provides authority and some funding for the DEP to address outdoor sites contaminated with hazardous substances (excluding naturally occurring substances, coal mine wastes, electric plant boiler wastes, and, like CERCLA, also excluding crude oil and its derivatives). DEP has authority to order a responsible party to clean up a condition; like CERCLA, the definition of "responsible person" is quite broad, including persons who have owned or operated or controlled activities at a site.
When DEP steps in and removes or remediates contamination, it is authorized to sue responsible parties to recover its costs. Likewise, private parties incurring cleanup costs can sue responsible parties to recover (or secure partial contribution toward) their costs.
Unlike CERCLA, there are a number of exclusions from liability under HSCA: in addition to financial institutions (excluded under both CERCLA and HSCA), exemptions from liability are provided for an innocent purchaser who has taken due care and precautions against acts of third parties, someone who inherits a site, in some cases, service station operators, government entities acquiring by condemnation or escheat, the owner of single or multi-family housing up to four flats, and prior owners of certain scrap material being recycled. The defenses to liability are similar to those in CERCLA (noted above).[vii]
D. Emergency Relief - PEMA Loans, Grants and Assistance
When an emergency or major disaster is declared by the Governor and federal funding is made available, PEMA is empowered to make grants to individuals and families.
Individual and family assistance (a) Grants by Federal Government.--Whenever the President, at the request of the Governor, has declared a major disaster or emergency to exist in this Commonwealth, the Governor is authorized:
(1) Upon determining that assistance under The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Public Law 93-288, 42 U.S.C. § 5121 et seq.), and from other means is insufficient to meet the disaster-related necessary expenses or serious needs of individuals or families adversely affected by a major disaster, to accept a grant from the Federal Government for the purpose of meeting the expenses or needs of disaster victims, subject to any terms and conditions imposed upon the grant. ... 35 P.S. 7305
In a federal or state emergency, PEMA can provide temporary housing:
Temporary housing. (a) Authority of Governor.--Whenever the Governor has proclaimed a disaster emergency under this part, or the President has declared an emergency or a major disaster to exist in this Commonwealth, the Governor is authorized:
(1) To enter into purchase, lease or other arrangements with any Federal agency for temporary housing units to be occupied by disaster victims and to make the units available to any political subdivision of this Commonwealth named as a party to the emergency or disaster declaration. ... 35 P.S. § 7302PEMA can also make loans to municipalities:
Community disaster loans. Whenever, at the request of the Governor, the President has declared a major disaster to exist in this Commonwealth, the Governor is authorized:
(1) Upon determining that a political subdivision of this Commonwealth will suffer a substantial loss of tax and other revenues from a major disaster and has demonstrated a need for financial assistance to perform its governmental functions, to apply to the Federal Government, on behalf of the political subdivision, for a loan and to receive and disburse the proceeds of any approved loan to any applicant political subdivision. ... 35 P.S. § 7304
PEMA can utilize public bodies and facilities to achieve debris removal:
Debris and wreckage removal. (a) Authority of Governor.--Whenever the Governor has declared a disaster emergency to exist under this part, or the President, at the request of the Governor, has declared a major disaster or emergency to exist in this Commonwealth, the Governor is authorized:
(1) Notwithstanding any other provision of law, through the use of Commonwealth agencies or instrumentalities, to clear or remove from publicly or privately owned land or water, debris and wreckage which may threaten public health or safety, or public or private property. ... 35 P.S. § 7303
When federal funds are available, PEMA may make grants to mitigate future hazards:
Grants for hazard mitigation. (a) Commonwealth participation in hazard mitigation funding; agreements.-- Whenever the President authorizes the contribution of up to 75% of the cost of hazard mitigation measures to reduce the risk of future damage, hardship, loss or suffering in any area affected by a major disaster pursuant to The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Public Law 93-288, 88 Stat. 143), the Governor is authorized, subject to the availability of appropriated funds, to enter into an agreement with the Federal Government or any Federal agency or officer pledging the Commonwealth to participate in the funding of the mitigation project. ... 35 P.S. § 7305.1
E. Innocent Party, Cooperation with Cleanup
Under the OPA, an innocent vessel owner[xiii] who reports the incident and cooperates with authorities may avoid paying for the cleanup.[xiv] In fact, the vessel owner may be able to claim reimbursement from the federal fund for damage to the vessel and its lost earnings.[xv] Vessels are required to carry insurance or post financial responsibility in substantial amounts based on vessel size. When a spill occurs from a vessel or onshore facility with the benefits of insurance, these provisions strongly encourage the private parties to perform cleanup actions even if there is a likely ultimate defense to liability. Consequently the Coast Guard and EPA are often able to manage a spill with private funds.
Under CERCLA, a party with a defense may also legally decline to perform a cleanup. However, if the defense fails, the law provides for penalties of up to $25,000 per day and punitive damages of treble the amount EPA spends to perform the cleanup.[xvi] Thus in all but the clearest cases, there are strong reasons for any potentially responsible party to provide cleanup services. If the party has a valid defense, the prospect is held out of recovery of the cost from the Superfund.[xvii]
HSCA has generally parallel provisions for funding cleanups and for cost recovery. (See, e.g. 35 P.S. § 6020.505.)
F. Immunity and Good Samaritan provisions:
CERCLA, OPA and HSCA have limited provisions to extend immunity to those who respond to an emergency, and even more limited relief for those who provide non-emergency cleanup assistance. CERCLA provides:
(d) Rendering care or advice.
(1) In general. Except as provided in paragraph (2), no person shall be liable under this title for costs or damages as a result of actions taken or omitted in the course of rendering care, assistance, or advice in accordance with the National Contingency Plan ("NCP") or at the direction of an onscene coordinator appointed under such plan, with respect to an incident creating a danger to public health or welfare or the environment as a result of any releases of a hazardous substance or the threat thereof. This paragraph shall not preclude liability for costs or damages as the result of negligence on the part of such person.
(2) State and local governments. No State or local government shall be liable under this title for costs or damages as a result of actions taken in response to an emergency created by the release or threatened release of a hazardous substance generated by or from a facility owned by another person. This paragraph shall not preclude liability for costs or damages as a result of gross negligence or intentional misconduct by the State or local government. For the purpose of the preceding sentence, reckless, willful, or wanton misconduct shall constitute gross negligence.
(3) Savings provision. This subsection shall not alter the liability of any person covered by the provisions of paragraph (1), (2), (3), or (4) of subsection (a) of this section with respect to the release or threatened release concerned. 42 U.S.C. A. Section 9607
PEMA provides protection to public bodies and their agents and employees for liability, except for willful misconduct or gross negligence. PEMA grants a broader immunity to the uncompensated landowner or occupier who permits use of his property during an emergency.
Immunity from civil liability. (a) General rule.--Neither the Commonwealth nor any political subdivision thereof nor other agencies nor, except in cases of willful misconduct, the agents, employees or representatives of any of them engaged in any emergency services activities, nor, except in cases of willful misconduct or gross negligence, any individual or other person under contract with them to provide equipment or work on a cost basis to be used in disaster relief, nor, except in cases of willful misconduct or gross negligence, any person, firm, corporation or an agent or employee of any of them engaged in disaster services activities, while complying with or attempting to comply with this part or any rule or regulation promulgated pursuant to the provisions of this part, shall be liable for the death of or any injury to persons or loss or damage to property as a result of that activity. 35 P.S. § 7704
(b) Real estate owners.--Any person, organization or authority owning or controlling real estate or other premises, who voluntarily and without compensation, grants a license or privilege or otherwise permits the designation or use of the whole or any part or parts of the real estate or premises for any emergency services purpose, shall, together with his successors in interest, if any, not be civilly liable for negligently causing the death of or injury to or loss or damage to the property of any person who is upon the real estate or other premises for that purpose. 35 P.S. § 7704
But note that the Commonwealth waives its tort immunity in emergencies [viii] only under limited circumstances.[ix]
G. The Cost Recovery Problem:
Under traditional laws and the Restatement of Property, an owner of property is liable to correct a polluting condition that affects neighbors or the environment. Clean Streams Law, 35 P.S. § 691.316. But those who are not owners were not liable without proof of negligence or other failure to meet a statutory obligation. Herzog v. Department of Environmental Resources, 645 A.2d 1381 (Cmwlth. Ct. 1994).
Moreover, the environmental agencies lacked significant funding to correct problems and therefore had to utilize slow procedures to require owners or other responsible parties to take action.
The Federal Water Pollution Control Act Amendments of 1972 included a provision imposing "no fault" liability for civil penalties on the party responsible for a discharge of oil or a hazardous substance to waters of the United States. Penalties may run to $1,000 per barrel of oil released. The United States (the EPA, the Coast Guard or NOAA) may undertake the cleanup and may recover the cost from any one or more responsible parties. In 1990, the Oil Pollution Act increased all the penalties and exposures under the law. Penalties may be up to $25,000 per day. Cleanup costs that may be recovered are subject to a "cap" of $50 million, but if the responsible party has not reported the spill and cooperated with the government, there is no cap on liability.
"Responsible parties" under the FWPCA and OPA include the owner and operator of a ship or onshore facility. These parties are liable for "no fault" civil penalties, are subject to orders directing them to clean up, and if the cleanup is provided by the government, they are liable for the costs of cleanup incurred by the government.
The "no fault" concept imposes liability for a condition upon any person whose conduct contributed to the condition and on persons who are passive owners of the site or source of the contamination. When the courts upheld the imposition of penalties and potentially immense liability without fault,[x] the Congress adopted CERCLA extending the same provisions to problem sites having little or no nexus to waters of the United States (indeed, CERCLA is commonly conceived as a statute to protect groundwater, which it does quite vigorously). Tempted by the provisions of CERCLA authorizing EPA to fund state-led cleanups, most states adopted parallel statutes giving the requisite powers to their environmental agencies.
H. Insurance
Although general liability and property damage insurance policies exclude environmental claims, some enterprises and individuals may have environmental impairment liability policies to help defray their losses. The typical "absolute pollution exclusion" clause in a general liability policy can be interpreted to preclude recovery, even if the driving force behind the loss is not exclusively pollutants. Pennsylvania cases do not favor the insured in theses circumstances. Madison Construction Co. v. Harleysville Mutual Insurance Co., 735 A.2d 100 (Pa. 1999).
A few industrial companies (and all vessels and terminal facilities that are required to do so) may have the advantage of environmental insurance. Note, however, that an EIL policy alone may not cover the direct losses to the insured, but only third party claims. So even those who have insurance may be forced to look for governmental or private party funding sources.
I. Interstate and multi-jurisdictional effects.
In evaluating the remedies and assistance available to recover from a major emergency, interstate impacts and theories of liability should be considered.
Delaware has addressed the question of an oil spill that begins outside the waters of the state. Its oil pollution statute imposes "long arm" jurisdiction, providing inter alia that a nonresident who owns or operates a vessel or facility outside the State, which causes an incident on State lands or waters, is subject to the jurisdiction of Delaware courts.[xxi] Delaware law provides that a person responsible for a pollution incident must provide an immediate cleanup, failing which the Secretary of the Department of Natural Resources and Environmental Control is authorized to arrange contractors to provide the cleanup and to recover the cost from the responsible party.[xxii] In addition to the specific oil pollution act, the Department has expanded on the federal definition of "hazardous substance" to include crude oil and petroleum, thus bringing the powers and funding under the Delaware Hazardous Substances Cleanup Act to bear on oil spill cleanups.[xxiii]
The New Jersey Spill Fund may be available to address an injury. The New Jersey Spill Act specifically provides that it applies to extraterritorial spills that damage lands, waters or natural resources within New Jersey, but says nothing of the converse.
J. The Last Step: Natural Resource Damages
A consideration in addressing a cleanup is the possibility of natural resource damage (NRD) claims for the temporary loss of resources during the emergency and cleanup, and for any permanent or long term loss of resources that may result. NRD is available to public and private parties under both the federal CERCLA and OPA and the state HSCA.
There may be a large number of claimants for Natural Resource Damages. OPA provides liability to the federal government for damage to "natural resources belonging to, managed by, controlled by, or appertaining to the United States" and also for liability to state and local governments and Indian tribes for damage to "natural resources belonging to, managed by, controlled by, or appertaining to such State or political subdivision" or Indian tribe.[xviii]
Different agencies of the federal government are the claimants as to navigable waters and adjoining shorelines and wetlands, which are protected under the Federal Water Pollution Control Act as well as OPA and other laws.[xix] But Delaware, New Jersey, Pennsylvania and various political subdivisions are trustees for their natural resources impacted by the spill. Thus there is a substantial overlap between the state and federal roles in regard to spills that affect the Delaware River and other federal waters.
In addition, specific refuge and wildlife areas within the path of the spill are managed by their own trustees who may wish to assert claims to NRD.
It is the expectation that NRD will be utilized by the trustee(s) to relieve or offset the injury, but the selection of trustees may significantly affect the ultimate utilization of NRD funds. In the ordinary case, the selection is achieved by voluntary interagency agreements. OPA provides for federal, state and other trustees without addressing the possibility of damage to dually managed resources.[xx]
[i] The Oil Spill Liability Trust Fund established under 26 U.S.C.A. §9509.
[ii] OPA § 1002, 33 U.S.C.A. §2702. For most but not all claims, the OPA replaces the stronger limitation on liability in prior law. See Limitation of Shipowner's Liability Act of 1851, 46 U.S.C. App. §§181-96.
[iii] Both the Environmental Protection Agency and National Oceanic and Atmospheric Administration rules concerning liability for oil spills allow recovery of "passive" as well as "active" use values General Elec. Co. v. U. S. Dept. of Commerce, 128 F.3d 767 (D.C. 1997).
[iv] 42 U.S.C.A. §9601 et seq., also commonly referred to as SARA.
[v] CERCLA § 104(c)(1) and (8), 42 U.S.C.A. § 9604(c)(1) and (8).
[vi] 35 P.S. § 6020.101 et seq.
[vii] 35 P.S. §§ 6020.701, 702.
[ix] 35 P.S. § 8522. Exceptions to sovereign immunity.
(a) Liability imposed.--The General Assembly, pursuant to section 11 of Article I of the Constitution of Pennsylvania, does hereby waive, in the instances set forth in subsection (b) only and only to the extent set forth in this subchapter and within the limits set forth in section 8528 (relating to limitations on damages), sovereign immunity as a bar to an action against Commonwealth parties, for damages arising out of a negligent act where the damages would be recoverable under the common law or a statute creating a cause of action if the injury were caused by a person not having available the defense of sovereign immunity.
(b) Acts which may impose liability.--The following acts by a Commonwealth party may result in the imposition of liability on the Commonwealth and the defense of sovereign immunity shall not be raised to claims for damages caused by:
(1) Vehicle liability.--The operation of any motor vehicle in the possession or control of a Commonwealth party. As used in this paragraph, "motor vehicle" means any vehicle which is self-propelled and any attachment thereto, including vehicles operated by rail, through water or in the air.
(2) Medical-professional liability.--Acts of health care employees of Commonwealth agency medical facilities or institutions or by a Commonwealth party who is a doctor, dentist, nurse or related health care personnel.
(3) Care, custody or control of personal property.--The care, custody or control of personal property in the possession or control of Commonwealth parties, including Commonwealth-owned personal property and property of persons held by a Commonwealth agency, except that the sovereign immunity of the Commonwealth is retained as a bar to actions on claims arising out of Commonwealth agency activities involving the use of nuclear and other radioactive equipment, devices and materials.
(4) Commonwealth real estate, highways and sidewalks.--A dangerous condition of Commonwealth agency real estate and sidewalks, including Commonwealth-owned real property, leaseholds in the possession of a Commonwealth agency and Commonwealth-owned real property leased by a Commonwealth agency to private persons, and highways under the jurisdiction of a Commonwealth agency, except conditions described in paragraph (5).
(5) Potholes and other dangerous conditions.--A dangerous condition of highways under the jurisdiction of a Commonwealth agency created by potholes or sinkholes or other similar conditions created by natural elements, except that the claimant to recover must establish that the dangerous condition created a reasonably foreseeable risk of the kind of injury which was incurred and that the Commonwealth agency had actual written notice of the dangerous condition of the highway a sufficient time prior to the event to have taken measures to protect against the dangerous condition. Property damages shall not be recoverable under this paragraph.
(6) Care, custody or control of animals.--The care, custody or control of animals in the possession or control of a Commonwealth party, including but not limited to police dogs and horses and animals incarcerated in Commonwealth agency laboratories. Damages shall not be recoverable under this paragraph on account of any injury caused by wild animals, including but not limited to bears and deer, except as otherwise provided by statute.
(7) Liquor store sales.--The sale of liquor at Pennsylvania liquor stores by employees of the Pennsylvania Liquor Control Board created by and operating under the act of April 12, 1951 (P.L. 90, No. 21), known as the "Liquor Code," > [FN1] if such sale is made to any minor, or to any person visibly intoxicated, or to any insane person, or to any person known as an habitual drunkard, or of known intemperate habit.
(8) National Guard activities.--Acts of a member of the Pennsylvania military forces.
(9) Toxoids and vaccines.--The administration, manufacture and use of a toxoid or vaccine not manufactured in this Commonwealth ...
[x] See, e.g. U. S. v. Atlantic Richfield Co., 573 F.2d 1303 (3 Cir. 1977).
[xi] 33 U.S.C.A. § 1321(f); 42 U.S.C.A. § 9607(b).
[xiii] Apex Oil Company, Inc. v. U. S., 208 F.Supp.2d 642 (E.D.La. 2002). Compare Cooper Industries, Inc. v. Aviall Services, Inc., -- U.S. -- (2004), withholding the right to cost recovery under the more complicated but related Superfund statute, where the plaintiff is itself a "responsible party."
[xiv] OPA § 1004, 33 U.S.C. A. §2704. An otherwise responsible party can be "innocent" through the available defenses of act of God, act of war or act of an unrelated third party. OPA § 1003, 33 U.S.C.A. §2703.
[xv] See Maritrans Operating Partners, LP v. Port of Pascagoula (C.A.5 2003), an unpublished decision available on Westlaw at 73 Fed.Appx. 733, 2003 WL 22002597.
[xvi] 42 U.S.C.A. §§ 9606(b), 9607(c).
[xvii] See 42 U.S.C.A. § 9612.
[xviii] OPA § 1006, 33 U.S.C.A. §2706.
[xix] As to which agency or agencies, see the National Oil and Hazardous Substance Contingency Plan, 40 C.F. R. Part 300, Subpart E.
[xx] 33 U.S.C.A. §2706.
[xxi] Del. Code Title 7, Ch. 62, §6206.
[xxii] Ibid., §§6204, 6205.
[xxiii] See Code Del. Regs. 70.100-103, §2.1, Definitions implementing the Hazardous Substances Cleanup Act, 7 Del.C. §9101 et seq.
