Environmental Law - Travis M. Trimble

Environmental Lawby Travis M. Trimble^*

In general, 2006 was a good year to be a defendant in environmental cases that reached the Eleventh Circuit. The court placed a narrow construction on operator liability for corporate parents under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")¹ and backed agency interpretations of the Clean Air Act ("CAA")² regulations in the face of challenges to their interpretation³ and use.⁴ In an issue of first impression, the court held that the agency's failure to carry out a nondiscretionary duty under the Endangered Species Act ("ESA")⁵ constituted a one-time, and not a continuing, violation for purposes of applying the statute oflimitation.⁶ Conversely, in a case involving proposed limestone mining in wetlands adjacent to both the Everglades National Park and the urban coast of Florida, the United States District Court for the Southern District of Florida ruled for the plaintiffs, remanding an Environmental Impact Statement ("EIS")some eight years in the making due to inadequacies under both the National Environmental Policy Act ("NEPA")⁷ and the Clean Water Act ("CWA").⁸

I. Comprehensive Environmental Response, Compensation, AND LIABILITY ACT

In Atlanta Gas Light Co. v. UGI Utilities, Inc. ,⁹ a case involving the site of a former manufactured gas plant facility ("MGP"), the Eleventh Circuit applied the United States v. Bestfoods¹⁰ corporate-parent liability standard to determine whether a parent corporation alleged to have acted as an operator of a facility was liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA").¹¹ The court affirmed the district court's grant of summary judgment as to defendants UGI Utilities ("UGI") and CenterPoint Energy Resources Corporation ("CenterPoint"), holding that defendants UGI and CenterPoint were not liable as operators of the MGP because, even though both companies were parents and played active roles in the management of Atlanta Gas Light Company's ("AGL") predecessor-owner of the MGP, neither conducted operations specifically related to the leakage or disposal of hazardous waste.¹² The court also held that defendant Century Indemnity Company ("Century") was not liable for leakage under an insurance policy that provided coverage for "accidents" because leakage from the MGP was routine and expected in the industry, and AGL's predecessor-owner was likely aware that such leakage was occurring.¹³

MGP began operation in the late nineteenth century. The process involved heating products such as coal or oil and producing gas. The process also generated byproducts, including coal tar, which contained hazardous substances and which, AGL contended, routinely leaked from the MGP equipment. The MGP at issue in the case was located in St. Augustine, Florida, and began operation in 1886. AGL's predecessor, St. Augustine Gas and Electric Company ("SAGE"), was incorporated in 1887 and owned the MGP through 1947.¹⁴

From 1887 to 1928, defendant UGI's predecessor was a minority owner of SAGE but also nominated most of the local superintendents for the MGP, provided management and consulting services to SAGE, and placed several of the officers and directors on SAGE's board.¹⁵ In 1928 CenterPoint's predecessor acquired the stock of SAGE and replaced SAGE's board with CenterPoint executives. From 1930 to 1935, CenterPoint provided management and engineering services to SAGE. Finally, from 1940 to 1947, Century's predecessor provided liability insurance to SAGE that covered liability due to "accidents." AGL contended that during all of these time periods, daily leaks occurred from the MGP equipment.¹⁶ AGL, named as a responsible party at the facility, settled with the Environmental Protection Agency ("EPA") and sued the defendants for contribution under Sec. 113 of CERCLA,¹⁷ contending that during the designated times, UGI's and CenterPoint's predecessors had operated the MGP, and Century's had provided insurance coverage.¹⁸ The district court granted the defendants' motion for summary judgment, holding that AGL had not produced enough evidence to create an issue of fact that either UGI or CenterPoint had operated the plant or that any leaks had actually occurred during the time Century's insurance coverage applied.¹⁹

The Eleventh Circuit affirmed.²⁰ First, as to the operator liability of UGI and CenterPoint under CERCLA, the court applied the United States Supreme Court's test for the imposition of CERCLA operator liability on a parent for a facility owned by its subsidiary set out in Bestfoods.²¹ In Bestfoods the Court held that a plaintiff seeking to impose liability must show that the parent "manage[d], direct[ed] or conduct[ed] operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations."²²

Following this standard, the Eleventh Circuit concluded that AGL failed to show that either UGI or CenterPoint made operating decisions regarding the leakage or disposal of hazardous waste, as required under Bestfoods.²³ Although UGI supervised the plant through centralized committees, appointed plant superintendents, and maintained management and consulting contracts with SAGE, the court concluded that none of this involvement included work with hazardous waste leakage or disposal.²⁴ Similarly, CenterPoint placed its senior executives on the board of SAGE and entered into a contract to manage SAGE,²⁵ but the court held that this evidence, without more, was insufficient to establish operator liability.²⁶ The court noted that under Bestfoods, interrelationships between a corporate parent and subsidiary that are within "corporate norms" cannot in and of themselves be the basis for CERCLA operator liability without evidence that the parent actually participated in decisions about hazardous waste at a facility.²⁷ Furthermore, in neither case did the management contracts actually involve the parent in the day-to-day operations of the plant with regard to hazardous waste leakage or disposal.²⁸

Turning to AGL's claim against Century, the liability insurer, the court held that summary judgment in Century's favor was also proper.²⁹ The insurance policies at issue provided coverage for "acci-dents."³⁰ The court noted that by AGL's own assertions, MGPs leaked routinely and consistently.³¹ Further, uncontradicted evidence showed that the MGP industry was aware of the leakage during the time periods in question.³² The court noted that the burden was on AGL to produce evidence tending to show that SAGE's owners were unaware ofongoing leakage that AGL asserted was occurring during this time; however, AGL failed to produce this evidence.³³ For these reasons, the court held that any leaks of byproduct of the MGP process during the time Century's insurance coverage was in place could not have been the result of "accidents."³⁴

II. Clean Air Act

In Sierra Club v. Johnson,³⁵ the Eleventh Circuit decided two consolidated appeals of EPA decisions in failing to object to the Clean Air Act ("CAA")³⁶ Title V operating permits issued by the Georgia Environmental Protection Division ("EPD"), reversing the agency's decision in one appeal and affirming in the other.³⁷ The first challenged permit involved the EPD's failure to notify the public of the permit application via a required mailing list. The second challenge addressed the kind of compliance information made available to the public during both the permitting process and facility operation.³⁸

In the first case, the court reversed the EPA's decision not to object to the issuance of the permit.³⁹ The court held that the EPA abused its discretion in failing to object where the EPD had failed to notify the public via a required mailing list until after the permit application had been approved.⁴⁰ CAA regulations clearly required the EPD to issue notices via the mailing list, and the EPA had a clear statutory duty to object to any permit that did not comply with the Act.⁴¹ Also, in a threshold issue in the first case, the court held that the Sierra Club had standing to challenge the EPA's failure to object where one of its members alleged that the EPD's failure to follow the notice requirement had a concrete, adverse affect on him, even though the member himself had actual notice of the permit application.⁴²

In the second case, the court affirmed the EPA's refusal to object to four permits issued by the EPD, holding that the EPA did not abuse its discretion in failing to object where the permits required the permitted facilities only to report monitoring results showing any deviation from the permit requirements and not results showing permit compliance.⁴³ The court also held that the EPA did not abuse its discretion in failing to object where the EPD did not make available to the public monitoring data and other information that might be relevant to the permitting process and was kept at the facilities themselves, but was not considered by the EPD in the permitting process.⁴⁴ on both these issues, the court concluded that the EPA based its decision on reasonable interpretations of its regulations, and the court deferred to the agency's decisions.⁴⁵

First, the court held that the EPA abused its discretion in failing to object to a CAA operating permit issued to King Finishing Company for its fabric printing and dyeing facility in Dover, Georgia, because the EPD, the state permitting agency acting pursuant to its State Implementation Plan ("SIP"), failed to notify persons on its mailing list of the permit application before approving the permit.⁴⁶ The permitting agency must provide notice and an opportunity to comment to the public before acting on a CAA Title V permit application; notice must be given by newspaper publication and also by notifying persons on a mailing list that the EPA regulations require the agency to maintain.⁴⁷...