El Paso Natural Gas Co. v. United States

390 F.Supp.3d 1025

EL PASO NATURAL GAS COMPANY, LLC, Plaintiff,

v.UNITED STATES of America, et al., Defendants.

No. CV14-8165-PCT-DGC

United States District Court, D. Arizona.

Signed May 16, 2019

Christopher J. Neumann, Gregory R. Tan, John Voorhees, Greenberg Traurig LLP, Denver, CO, Daniel Joshua Schnee, Kinder Morgan Incorporated, Colorado Springs, CO, Pamela M. Overton, Greenberg Traurig LLP, Phoenix, AZ, for Plaintiff.

Dustin J. Maghamfar, Michael Charles Augustini, Paul Cirino, Sydney Alexandra Menees, David Rosskam, Samara Michelle Spence, Michael C. Martinez, Patricia Lyn Hurst, US Dept. of Justice, Washington, DC, for Defendant United States of America.

Dustin J. Maghamfar, Michael Charles Augustini, Paul Cirino, David Rosskam, Samara Michelle Spence, Michael C. Martinez, Patricia Lyn Hurst, US Dept. of Justice, Washington, DC, for Defendants United States Department of the Interior, United States Bureau of Indian Affairs, United States Geological Survey, United States Department of Energy.

AMENDED ORDER

David G. Campbell, Senior United States District Judge

This case concerns environmental liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for 19 uranium mines located near Cameron, Arizona, on the Navajo Nation Reservation (the "Mine Sites"). Plaintiff El Paso Natural Gas Company, LLC, whose predecessors operated the mines in the 1950s and 1960s, brings claims against Defendants United States of America, the Department of the Interior ("DOI"), the Bureau of Indian Affairs ("BIA"), the United States Geological Survey ("USGS"), and the Department of Energy ("DOE") (collectively, the "United States") for cost recovery and contribution. Doc. 55 ¶¶ 1-2.¹ The United States asserts a CERCLA counterclaim against El Paso for contribution. Docs. 53, 66.²

El Paso stipulates that it was an operator of the Mine Sites for purposes of CERCLA liability (Doc. 108), and the Court previously held that the United States is liable as an owner of the land where the mines are located (Doc. 135). The parties assert additional grounds for CERCLA liability against each other and ask the Court to make an equitable allocation of past and future response costs under CERCLA § 113.

The Court held an eight-day bench trial in February and March, 2019. Each side presented many witnesses, live or by deposition, and hundreds of exhibits. The parties also submitted extensive proposed findings of fact and conclusions of law, as well as post-trial briefing on specific issues addressed in this order. For reasons set forth below, the Court will allocate 65% of past and future response costs to El Paso and 35% of such costs to the United States.

I. Findings of Fact.

This order sets forth the Court's findings of fact and conclusions of law under Rule 52 of the Federal Rules of Civil Procedure. The Court provides some citations to the record, but the citations should not be regarded as the sole basis for the Court's ruling. The Court's findings and conclusions are based on all of the testimony and exhibits admitted in evidence.

A. The Parties.

El Paso is the corporate successor of Arrowhead Uranium Company ("Arrowhead"), Rare Metals Corporation of America ("Rare Metals"), and El Paso Natural Gas Company. Doc. 159 at 8.³ Arrowhead and Rare Metals mined uranium at the Mine Sites. Arrowhead was one of the original uranium mining companies in the Cameron region of Northern Arizona, operating from 1952 to 1954. Ex. 28 at 7-8. Rare Metals was formed in 1954 to prospect, explore, and acquire properties containing uranium deposits and other valuable minerals. Rare Metals acquired Arrowhead in December 1954 and took over its uranium mining operations. See Exs. 1040-44. Rare Metals also engaged in uranium exploration and development in Utah, New Mexico, California, and other locations. Exs. 1041 at 7; 1042 at 6, 8; 1043 at 5-7, 9. Rare Metals merged with El Paso in 1962. Ex. 1056. El Paso also takes responsibility for the mining activities of Cameron Mining Company at several of the Mine Sites. Doc. 159 at 8.

The land where the Mine Sites are located is owned by the United States in trust for the Navajo Nation. See 25 U.S.C. § 640d-9(a) ; Doc. 159 at 7. The DOI and the BIA, as part of their tribal trust responsibilities, oversaw some aspects of the mining permits and leases for the Nation. Doc. 159 at 8; Ex. 12 at 2. The USGS, which is part of the DOI, collects, analyzes, monitors, and provides information about natural resources. Docs. 1 ¶ 19; 23 ¶ 19. DOE is the successor agency to the former Atomic Energy Commission ("AEC"). Doc. 23 ¶ 20. After World War II, the AEC was responsible for creating and managing a program to procure uranium for nuclear weapons, known as the Domestic Uranium Procurement Program ("DUPP"). Ex. 74 at 6.

B. The Cold War and the Domestic Uranium Industry.

The United States' use of atomic bombs in Japan both hastened the end of World War II and sparked the Cold War with the Soviet Union. Both nations aggressively developed nuclear weapons. Obtaining uranium, a naturally occurring metal that was an indispensable component of such weapons, became a driving objective of the United States' national defense effort. Doc. 158 ¶ 12.

In 1946, Congress passed the Atomic Energy Act, which formed the AEC. See 60 Stat. 755. The Act also established the DUPP, a program for "the production, ownership, and use of fissionable material to assure the common defense and security and to insure the broadest possible mining of the fields." Ex. 74 at 6. Viewing foreign sources of uranium as unreliable, the United States sought, through the DUPP, to locate and develop domestic sources using a combination of government-led exploration and private enterprise incentives. Tr. at 94-95. At the time, the federal government was the only authorized purchaser of uranium in the United States. Atomic Energy Act of 1946 § 5(2); Ex. 74 at 14.

Between 1948 and 1956, the AEC published nine circulars offering guaranteed minimum prices and bonus payments for uranium ore (the "Circulars"). See Ex. 41. Circulars 3, 4, 5, and 6 applied to uranium mining on the Colorado Plateau, a geographic area encompassing some 140,000 square miles in Arizona, Utah, Colorado, and New Mexico. Ex. 1002; Doc. 159 at 7. Circular 3 guaranteed, for three years, a minimum price and "development allowance" of fifty cents per pound for uranium ore of .15% grade or more. Ex. 41 at 3-4; see also id. at 8-9 (Circular 5 Revised). Circular 4 established a haulage allowance of six cents per mile for the first 100 miles. Id. at 5. Circular 5 also guaranteed a minimum price and expanded the development allowance to ore with uranium concentrations as low as .10%. Id. at 6. Circular 6 created an additional bonus for the production of uranium ore from new domestic mines. Id. at 13-14.

The AEC assisted the young domestic uranium industry by conducting geologic surveys, furnishing free testing and assaying services, and agreeing to purchase uranium ore. Ex. 25 at 13. The AEC established ore-buying stations in uranium-producing areas. Id. The AEC's assistance programs included research and development that led to improvement in milling processes and other mining-related innovations. Id. ; see also Chenoweth Depo. Jan. 15, 2014, at 85.⁴

Beginning in 1948, the AEC, assisted by the USGS, operated a program of uranium exploration on the Colorado Plateau and several other western states. Ex. 25 at 14. The program involved temporary withdrawal of some 700 square miles of public domain land for exploration, geologic studies, drilling, examination of samples, and airborne reconnaissance. Id. The AEC employed a contractor, Walker Lybarger, to use a bulldozer to uncover any uranium outcrops that were discovered. Chenoweth Depo. Jan. 15, 2014, at 103.⁵ Ore found on AEC land was leased to private parties directly through the AEC in return for a royalty on ore production. Ex. 25 at 14; see also Chenoweth Depo. Jan. 15, 2014, at 79-82. The AEC also undertook an access road program under which the AEC, the Bureau of Public Roads, and various state agencies improved over 1,200 miles of roads in Arizona and other states to facilitate uranium exploration and mine development. Ex. 25 at 15.

In July 1952, Charles Steen, an independent prospector, found uranium on the Colorado Plateau south of Moab, Utah. See Tr. at 56-57, 1600. Steen made over a million dollars on the ore deposit, and his success motivated many others to pursue uranium mining, launching a gold-rush-like interest in prospecting for uranium. Tr. at 57.

C. Uranium Mining on the Navajo Reservation.

Because the 19 Mine Sites are all located on the Navajo Reservation, both the Navajo Nation and the federal government were involved in transactions affecting the sites. Generally, four permits or leases are required for uranium mining: (1) prospecting permits, (2) drilling and exploration permits, (3) mining permits, and (4) mining leases. See Ex. 31 at 10. As of 1951, the Navajo Nation did not require a separate drilling and exploration permit (Ex. 1075) and required only non-Navajos to apply for prospecting permits (Ex. 31 at 10). In 1953, the Nation's mining regulations were updated to require drilling and exploration permits. Ex. 1078. The new regulations also required any prospector, Navajo or non-Navajo, to apply for a prospecting permit. Id. at 2. A non-Navajo permit holder could negotiate a mining lease with a tribal advisory committee. Id.

Permits were approved by the Navajo Tribal Council and the area director of the BIA. See Tr. at 160-61; see, e.g. , Ex. 294A. All rents and royalties were paid to the United States Treasury for deposit exclusively in Navajo tribal funds. See Tr. at 203, 523. The permits contained provisions related to the trust oversight responsibilities of the DOI and required permittees to (1) "conform to any and all regulations of the Secretary of the Interior"; (2) receive approval from the Tribal Council...