K&LNG
DECEMBER 2005
Alert
Environmental
Third Circuit Allows Recovery of Superfund Oversight Costs
On December 22, 2005, a divided United States
Court of Appeals for the Third Circuit, sitting en
banc, aligned itself with the other circuit courts of
appeals and held that the Environmental Protection
Agency is authorized to recover its oversight costs in
supervising removal and remedial action under the
Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. § 9601 et
seq. (“CERCLA”), commonly known as the
Superfund Act. United States v. E.I. Du Pont De
Nemours and Company, No. 04-4546 (3d Cir. Dec.
22, 2005). Chief Judge Anthony J. Scirica wrote for
the majority. Judge Jane R. Roth wrote a concurring
opinion and Judge Marjorie O. Rendell, joined by
Judge D. Brooks Smith, dissented.
The DuPont case arose out of the Newport Superfund
Site in Delaware. DuPont complied with a unilateral
administrative order issued by EPA under Section
106 of CERCLA, executing a two-stage cleanup
which included both a “removal” and a “remedial
action,” as those terms are defined in Section 101(23)
and (24) of CERCLA. DuPont spent $35 million in
performing these response actions and EPA oversight
cost a total of $1.4 million. The District Court,
concluding that it was bound by Rohm & Haas,
disallowed EPA’s claim for reimbursement of its
oversight costs. The United States appealed and
petitioned for, and was granted, initial hearing en
banc. In reversing the District Court, the Third
Circuit specifically overruled Rohm & Haas.
Before this decision, EPA had been able to recover
its oversight costs in all jurisdictions, except those
located in the Third Circuit (Pennsylvania, New
Jersey, Delaware and the U.S. Virgin Islands). In a
1993 decision, United States v. Rohm & Haas Co., 2
F.3d 1265 (3d Cir. 1993), the Third Circuit had held
that EPA oversight costs were not recoverable except
in limited instances in which CERCLA specifically
authorized their recovery. Subsequent to Rohm &
Haas, the Fifth, Eighth and Tenth Circuit Courts of
Appeals all declined to follow Rohm & Haas and
held that such costs were recoverable. United States
v. Lowe, 118 F.3d 399 (5th Cir. 1997); United States
v. Dico, Inc., 266 F.3d 864 (8th Cir. 2001); Atl.
Richfield Co. v. Am. Airlines, Inc., 98 F.3d 564 (10th
Cir. 1996). Two other circuit courts of appeals have
also permitted the recovery of oversight costs,
without mentioning Rohm & Haas. New York v.
Shore Realty Corp., 759 F.2d 1032 (2d Cir. 1985);
United States v. Hyundai Merch. Marine Co., 172 F.
3d 1187 (9th Cir. 1999). Rohm & Haas thus
appeared to be ripe for overruling and the
Department of Justice was rumored to be looking for
an opportunity to attack the decision.
In Rohm & Haas, a panel of the Third Circuit had
ruled that the United States cannot recover oversight
costs for a “removal action,” concluding that Nat’l
Cable Television Ass’n., Inc. v. United States, 415
U.S. 336 (1974) barred recovery of such costs in the
absence of statutory language that “clearly and
explicitly requires that result.” Rohm & Haas, 2 F.3d
at 1274. Relying on National Cable, the panel had
held that an administrative agency cannot recover a
portion of its overhead from a regulated party in the
absence of a “clear statement” from Congress
authorizing that result, and since CERCLA contained
no such “clear statement,” recovery of oversight costs
for removal actions was not permitted. The panel
reinforced its conclusion by applying principles of
statutory construction to the relevant CERCLA
provisions, including other sections of the statute,
added in 1986, which explicitly authorized the
recovery of oversight costs under limited
circumstances.
The DuPont court, on reconsideration of Rohm &
Haas, concluded that National Cable was
inapplicable to the recovery of oversight costs by
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DECEMBER 2005
EPA and that the text, statutory purpose and
legislative history of CERCLA supported that result.
The Third Circuit pointed out that since National
Cable was decided, later Supreme Court decisions
had narrowed its application to situations where
Congress failed to provide an administrative agency
with “intelligible principles” guiding agency action
so that a reviewing court could determine whether or
not the authority of the agency had been exceeded.
Slip opinion at 15. The Third Circuit concluded that,
unlike the “user fees” imposed upon the regulated
community in National Cable by the Federal
Communications Commission, in which the FCC
shifted some of its cost of doing business to the
parties it was charged with regulating, oversight costs
were “restitutionary payments, imposed on those
responsible for contamination to cover the costs of
the contamination’s cleanup.” Id. at 16-17.
Moreover, the Third Circuit found that, unlike the
fees in National Cable, oversight costs are imposed
judicially and not administratively and are funded
through Congressional appropriations. Id. at 18. But
even if National Cable were implicated, the Third
Circuit found that the statutory language, taken
together with the National Contingency Plan, 40
C.F.R. Part 300 (2005), provided the “intelligible
principle” required by National Cable to authorize
recovery of oversight costs.
To buttress this conclusion, the Third Circuit
majority then conducted an extensive review of the
language, statutory purpose and legislative history of
CERCLA. Id. at 20-45. As the most recent
explication by the Third Circuit on the interpretation
of CERCLA, and the first since the Supreme Court
decided Cooper Industries, Inc. v. Aviall Services,
Inc., 543 U.S. 157 (2004), this portion of the majority
opinion should be studied carefully by Superfund
practitioners. Starting with the admonition of Cooper
Industries that if the meaning of the statute is clear,
there is no need to consult its purpose or legislative
history, the Third Circuit noted, as it often has, most
recently in United States v. General Battery Corp.,
423 F.3d 294 (3d Cir. 2005), that CERCLA is not
artfully drafted. Id. at 21. Nonetheless, the Third
Circuit concluded that EPA oversight costs “fall[]
comfortably within the definitions of ‘removal
action’ and remedial action.” Id. at 24. To reach that
conclusion, the Third Circuit interpreted the term
“monitor,” found in the CERCLA definitions of
“removal” and “remedial action,” as “most naturally
read” to include “oversight,” in the context of “a
statute designed to impose the costs of cleanup on
2
those responsible for contamination . . .” Id. at 28.
That reading was reinforced, in the view of the Third
Circuit, by the fact that both types of response
actions are designed to prevent or minimize public
danger and EPA oversight furthers that purpose, and
by the further fact that both types of response actions
are expressly defined to include related “enforcement
activities,” a term the court found to be sufficiently
broad to include compliance monitoring, or
oversight. Id. at 30-32. In the end, the Third Circuit
concluded that the sweeping cost recovery authority
provided to EPA by CERCLA, was broad enough to
encompass recovery by EPA of its oversight costs, a
result which furthered one of the central purposes of
CERCLA, to assure that polluters are “tagged” with
the costs of cleanup. Id. at 31-32, 45, quoting United
States v. Bestfoods, 524 U.S. 51, 56 (1998).
The Court dismissed contentions that such an
interpretation of the statute would render certain
provisions of CERCLA added in 1986 superfluous.
Id. at 33-40. For example, the Court distinguished
Section 104(a)(1) of CERCLA, which conditions
EPA’s authority to allow PRPs to conduct RI/FSs,
among other things, on the agreement of the PRPs to
reimburse EPA for its oversight costs, as a limitation
on EPA’s settlement authority and not as an
authorization for the recovery by EPA of its
oversight costs. Id. at 36, 39. The Court also
dismissed arguments that authorizing oversight cost
recovery would encourage inefficiency, finding that
the NCP and general principles of administrative law
that foreclose arbitrary and capricious agency action,
provide sufficient protection. Id. at 42-45.
Judge Roth disagreed with the majority interpretation
of the statutory term “monitor” as used in the
CERCLA definitions of “removal” and “remedial
action,” but concurred in the result. Id. at 46-47.
Judge Rendell, joined by Judge Smith, agreed with
the majority that National Cable was not controlling,
but reached the opposite result on the basis of her
interpretation of CERCLA. Id. at 48-78. First, she
reasoned that the term “monitor” cannot be read to
include oversight. Id. at 52. Second, she reasoned
that “oversight” of “removal” or “remedial action”
cannot be included in the definitions of those terms
“while at the same time . . . these costs are
recoverable as ‘oversight of removal or remedial
action.’” Id. (emphasis in original). She pointed out
that even EPA guidance treats the concepts as
separate and distinct. Id. at 53. She agreed with the
conclusion in Rohm & Haas that “overseeing of a
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DECEMBER 2005
private party’s removal activities [is] qualitatively
different from EPA’s actually performing removal
activities,” reading the statute to authorize recovery
of the latter costs, but not the former. Id .at 54. She
dismissed the majority’s conclusion that “oversight”
was enforcement activity and pointed out that
Congress could easily have provided explicitly for
the recovery of oversight costs, but did not do so. Id.
at 60. Instead, she argued, when Congress wanted to
authorize the recovery of oversight costs, as in
Section 104(a)(1), it did so with specific language.
Id. at 61-65.
Finally, Judge Rendell went to considerable lengths
to interpret Cooper Industries, concluding that “[t]he
Court thus left little doubt about where it stands on
the specific issue of implied rights of contribution in
CERCLA, and hinted strongly that it disapproves of
the practice of construing CERCLA broadly to ‘give
effect’ to its remedial purpose.” Id. at 69-74. This
section of the decision should also be required
reading for Superfund practitioners, especially in the
Third Circuit.
With this new decision, the Third Circuit becomes
aligned with courts in the rest of the country and EPA
is authorized to recover its costs of oversight of
removal and remedial actions nationwide. The
DuPont decision may also have unexpected
consequences, if EPA revisits consent decrees in
which the agency reserved its right to seek oversight
costs if Rohm & Haas were ever overruled.
William H. Hyatt
whyatt@klng.com
973.848.4045
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DECEMBER 2005