Environmental Litigation Practice Group
Environmental Litigation Update:
2003 in Review
This special edition highlights the important environmental litigation cases and trends in the Pacific Northwest during the past
year. More detailed consideration of each of these cases is available on our Web site located at: http://www.prestongates.com
ENVIRONMENTAL INSURANCE
Puget Sound Energy, Inc. v. ALBA General Insurance Co.
149 Wn.2d 135, 68 P.3d 1061 (2003)
by John Bjorkman
The Washington Supreme Court (Supreme
Court) added another important decision to
its jurisprudence on insurance coverage for
environmental cleanup costs this year. In
holding that a non-settling insurer has the
burden of proving the amount of an offset
arising from the insured’s prior settlement
with other carriers, the Supreme Court
continued a general pattern of favorable
decisions for insureds seeking coverage for
hazardous substance cleanup costs under historic third-party
liability policies. With its latest decision in the Puget Sound
Energy line of cases, the Supreme Court has kept Washington
one of the leading states in the Nation on environmental
insurance issues.
Puget Sound Energy (PSE), the former Washington Natural
Gas Company, owned or operated a number of contaminated
properties including historic coal gasification plants in Seattle,
Tacoma, Everett, and Chehalis. These facilities left coal tars,
creosote, and polycyclic aromatic hydrocarbon contamination
in soils, sediments, and ground water throughout western
Washington’s industrial areas. PSE sued several of its thirdparty liability carriers for coverage at six of these contaminated
properties. The carriers moved for summary judgment claiming
that PSE had already recovered in excess of $56 million in
insurance and other payments and credits and, therefore, had
been made whole for these six sites. PSE argued that the
payments received included reimbursement for costs at sites
other than the six properties at issue and that it had not
allocated them to any particular site. Further, the future costs
at these sites were unknown and, therefore, PSE could not
fairly allocate any of the past payments to those future costs.
The trial court granted the summary judgment and PSE
appealed.
The Washington Court of Appeals (Court of Appeals) held
that PSE carried an initial burden of proof to demonstrate how
it had allocated its prior recovery to the six sites at issue and
Inside This Issue:
PRIVILEGE: In re Grand Jury Subpoena
(Mark Torf/Torf Environmental Management) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
CERCLA: Coeur d’Alene Tribe v. Asarco Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ENDANGERED SPECIES ACT: County of Okanogan v. NMFS . . . . . . . . . . . . . . . . . . . .4
CLEAN WATER ACT: Airport Communities v. Graves . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
CLEAN AIR ACT: Alaska Department of
Environmental Conservation v. EPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
CLEAN WATER ACT: Environmental Protection
Information Center v. Pacific Lumber Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
how it intended to allocate its recovery to its anticipated future
costs. Once PSE made that showing, the burden of proof
would shift to the insurers to demonstrate that PSE had, in
fact, received adequate compensation for the claims made
against it. Still unsatisfied, PSE sought review in the
Washington Supreme Court.
The Supreme Court first examined its prior decision in
Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d
654, 15 P.3d 115 (2000). In Weyerhaeuser, the Supreme
Court held that an insured’s settlement with its insurance
carrier often includes much more consideration than just a
payment on a claim. The settling insurer typically receives, in
addition to a release of the claim, certainty in avoiding the
risks of an adverse outcome at trial and the cost savings of
avoiding further litigation. Because the settling insurers paid
for a release from an “unquantifiable basket of risks and
considerations,” it was not possible to say simply that the
payment was only for the claim.
The Supreme Court then turned to the facts of the PSE
case and the Court of Appeals’ decision. In PSE, there was
evidence that the prior settlement payments included
complete releases for claims at sites other than the six
cont’d on page 7
Page 2
Environmental Litigation Practice Group
PRIVILEGE
In re Grand Jury Subpoena (Mark Torf/Torf Environmental Management)
350 F. 3d. 1010 (9th Cir. 2003)
by Amit Ranade
The Ninth Circuit recently expanded the
work product privilege for protection of
“multi-purpose documents”in cases
where the litigation purpose of a
document is so pervasive that other
purposes,such as environmental
compliance,cannot be distinctly
separated from the facts surrounding
their creation. In re Grand Jury Subpoena
(Mark Torf/Torf Environmental
Management), 350 F.3d 1010 (9th Cir.
2003)
In May 2000, the Environmental
Protection Agency (EPA) announced an
investigation of Ponderosa Paint
Manufacturing, Inc. (Ponderosa), alleging
violations of federal waste management
and transportation laws. In response,
Ponderosa hired attorney John McCreedy
seeking advice and representation.
McCreedy, in turn, hired Mark Torf, an
environmental consultant, to assist him in
defending Ponderosa. Torf interviewed
numerous witnesses, tested paint
products and properties, and performed
other investigative functions to assist
McCreedy.
During its investigation, the EPA
served Ponderosa with a broad
Information Request under the
Comprehensive Environmental Response,
Compensation, and Liability Act
(CERCLA) requiring it to identify a variety
of materials possibly handled in violation
of federal laws. Hoping to avoid litigation,
Ponderosa complied with the request
based largely on information obtained by
Torf. Ultimately, Ponderosa and the EPA
agreed to an order in which Ponderosa
cleaned up potentially hazardous
materials without admitting liability. Torf
continued to assist McCreedy with
compliance during the cleanup process.
In March 2002, a grand jury
investigating the same events issued a
subpoena to Torf for the production of all
of his work in connection with the May
2000 EPA action. Ponderosa moved to
quash the subpoena on work product
privilege grounds. The magistrate judge
overseeing the grand jury granted the
motion, but the ruling was subsequently
overturned on district court review.
Ponderosa appealed to the Ninth Circuit.
Through its decision, the Ninth Circuit
joins other circuits by adopting the rule
articulated in the Wright & Miller Federal
Practice treatise. Under this standard, a
document merits work product protection
if, in light of its nature and the
surrounding facts, “it can be fairly said to
have been prepared or obtained because
of the prospect of litigation.” In re Grand
Jury Subpoena (Mark Torf/Torf
Environmental Management), 350 F.3d at
1016 citing Charles Alan Wright, Arthur
R. Miller, and Richard L. Marcus, Federal
Practice & Procedure §2024 (2d. ed.
1994).
The Ninth Circuit agreed with the
government that documents with truly
independent, non-litigious purposes are
less likely to merit protection. It ruled,
however, that where a non-litigious
purpose is inseparably entangled with a
litigious one, courts should look to the
total factual circumstances to determine
whether the document merits protection.
If the facts indicate that the document
was created “because of” the prospect of
litigation, it merits protection even if it
has other purposes. According to the
Ninth Circuit, this “because of” standard
applies regardless of whether the
document’s litigation purpose was primary
or secondary.
In re Grand Jury Subpoena (Mark
Torf/Torf Environmental Management)
expands the scope of the work product
privilege in the Ninth Circuit to include
many environmental compliance and
cleanup documents. Under this ruling,
companies, local government and
individuals working to cleanup possibly
hazardous sites and comply with
environmental laws are less likely to have
their own documents used against them.
■
Seattle
amitr@prestongates.com
2004 Legislative Session
Significant Water Resources Proposals
The Washington Legislature is considering several major water
resources proposals this session, including proposals on instream
flow and a radical proposal to do away with statutory
relinquishment (“use it or lose it”). Preston Gates is participating in
the dialogue on these proposals through the Washington Water
Policy Alliance and other channels. Please contact Environmental
and Land Use attorneys,Matt Wells at mattheww@prestongates.com
or Liz Thomas at ethomas@prestongates.com for additional
information.
Page 3
CERCLA
Coeur d’Alene Tribe v. Asarco Inc.
280 F. Supp. 2d. 1094 (D. Id. 2003)
by Denise Lietz
On September 3, 2003,
Judge Edward J. Lodge
issued an important
decision in the on-going
saga of the mining
industry’s liability for
contamination of the
Coeur d’Alene Basin in
Northern Idaho. Judge
Lodge, in Coeur d’Alene
Tribe v. Asarco Inc., 280 F. Supp. 2d.
1094 (D. Id. 2003), held that while the
liability of the defendant mining companies
for natural resource damages in the Basin
was evident, the plaintiffs, the United
States and the Coeur d’Alene Tribe, had
exaggerated the extent of those damages.
This opinion is one of the few written
decisions that provides extensive analysis
of natural resource damage recovery under
the Comprehensive Environmental
Response, Compensation, and Liability Act
(CERCLA). The Court will assess damages
and other issues of liability during the
second phase of the trial set for May 2004.
The Basin was listed in 1983 on the
Superfund National Priority List as the
Bunker Hill Mining and Metallurgical Site,
and the first remedial actions there
concentrated in the twenty-one square mile
area known as the “Bunker Hill Box,” or
simply “the Box.” The contamination,
resulting from 100 years of silver, lead, and
zinc mining, has extended into other areas
of the Coeur d’Alene Basin. To address
these areas of broad contamination, the
Environmental Protection Agency (EPA),
under the regulatory authority provided by
the CERCLA, initiated a remedial
investigation and feasibility study (RI/FS)
for the Basin in 1998.
This action began in 1991, when the
Coeur d’Alene Tribe filed suit in the Idaho
federal district court, attempting to recover
natural resource damages under CERCLA.
In 1996, the federal government filed suit
against several mining companies to
recover cleanup response costs under
CERCLA and natural resource damages
under both CERCLA and the Clean Water
Act (CWA). The Court then consolidated the
two actions. While several of the mining
companies are now bankrupt and others
have settled the claims against them, the
remaining defendants, Asarco, Incorporated
and the Hecla Mining Company, continue
to contest both their liability for and the
extent of natural damages associated with
their mining activities.
In 2001, the Court heard evidence in
the first phase of the trial. “After listening
to approximately 100 witnesses, 78 days of
trial and having reviewed 8,695 exhibits
and over 16,000 pages of testimony,” the
Court characterized this phase of the trial
as one of “battling experts,” where
“witnesses with impeccable qualifications
reached opposite conclusions on almost
every issue.” Id. at 1101. The Court
ultimately determined that the mines in the
Basin released over 60,000,000 tons of
mine tailings, including wastes containing
lead, cadmium, and zinc, before they
began impounding the wastes in the late
1960s. Id. at 1105. The Court also found
that, while mines are not the only source of
metal contamination in the Basin, “comingled mining waste is the primary cause
of damage to the natural resources in the
Basin.” Id. at 1106.
Judge Lodge’s wide-ranging opinion
addressed several issues in addition to
directly analyzing the natural resource
damage claims. The Court found EPA had
not improperly combined its regulatory and
enforcement functions by basing its
decision to proceed with the RI/FS process
for the Basin on the litigation in this case.
Additionally, the Court found that the
passive migration of the mining wastes that
occurred following the enactment of
CERCLA was a “release” that enabled the
plaintiffs to recover costs under CERCLA.1
The Court also extensively analyzed the
federal government’s CERCLA liability for
its own activities in the Basin, primarily for
its involvement in mining activities and
highway construction. During World War II,
the federal government was involved in
many industries it considered critical to the
war effort. In the mining industry, this
involvement was extensive and included
price controls, employee wage control, and
oversight of mill security operations. The
Court held this involvement did not cause
the federal government to incur either
“operator” or “arranger” liability under
CERCLA. The Court also addressed other
federal activities in the Basin, finding that
the government has some CERCLA liability
as an “arranger”, primarily for its
involvement in funding construction of
Interstate 90 through Idaho, which used a
large amount of mine tailings as roadbed
fill and in embankments.
The heart of Judge Lodge’s opinion was
his examination of the federal government
and the Tribe’s claims for natural resource
damages. The Court first addressed the
defendants’ claims that the federal
government and the Tribe were not the
trustees for many of the natural resources
in the Basin; only the trustee of a resource
may recover natural resource damages. The
Court held that statutory authority alone
does not establish trusteeship over a
resource, but that the level of actual “dayto-day” management of the resource was
key. The issue of trusteeship in this case is
complicated by the fact that the State of
Idaho already settled its natural resource
damage claims with the defendants. The
Court addressed this issue by stating that
“the federal government and the Tribe are
not limited or bound by what the State of
Idaho may have chosen to settle for as
damages, but they cannot recover a greater
percentage than what this Court determines
their actual control and management were
in fact. If there is a windfall to the
Defendants, only the State of Idaho can
complain.” Id. at 1116. The Court held
that the federal government was trustee of
100% of federal lands, that the Tribe was
trustee of 100% of the lands within its
reservation boundaries, but neither was
trustee of either state-owned or private
lands. Additionally, the Court will determine
the share of trusteeship for other resources,
“fish, wildlife, biota, water, and
groundwater,” after presentation of
evidence concerning that issue in the next
phase of the trial. Id. at 1117.
The plaintiffs sought to have joint and
several liability imposed on the mining
companies, so each company would be
liable for 100% of the natural resource
damages and cleanup costs in the Basin.
The mining companies asserted their
liability should instead be apportioned
based on the amount of mine tailing waste
that they had discharged. The Court held
cont’d on page 7
Page 4
Environmental Litigation Practice Group
ENDANGERED SPECIES ACT
County of Okanogan v. NMFS
347 F.3d 1081 (9th Cir. 2003)
by Matthew Wells
The Ninth Circuit
recently added a new
chapter to the book on
the interaction of the
ESA and state water
rights. In Okanogan
County v. NMFS, the
Circuit upheld the ability
of federal agencies,
through the ESA Section
7 consultation process, to impose permit
conditions that affect the exercise of state
water rights in order to protect listed fish
species.
The case involves two irrigation
companies that require federal permits
because their facilities are located on
federal land. After engaging in Section 7
consultation with NMFS (now known as
NOAA Fisheries) and US Fish and Wildlife
Service in reissuing the permits, the US
Forest Service imposed conditions deemed
necessary to avoid jeopardizing listed fish
species (salmon, steelhead and bull trout).
The conditions effectively required the
irrigation companies to limit their surface
water diversions in times of low stream flow
in order to protect listed species and
habitat.
Plaintiffs challenged the permit
conditions, arguing that the Forest
Service’s conditions were an
unconstitutional limitation on their property
rights (vested state water rights) and were
without statutory authority. Unfortunately
for plaintiffs, the facts of the case allowed
the Court to make quick work of their
claims, avoid the constitutional issue, and
conclude that the permit conditions were
lawful.
The key facts relied upon by the Circuit
are the terms of the permits that had been
issued to the irrigation companies since the
early 1900s. From the outset, the permits
clearly indicated that the government had
the “unqualified discretion to restrict or
terminate the rights-of-way.” Id. at 1085.
Given the permit terms, the Circuit
characterized the case as one about rightsof-way, not about water rights. Id. at 1086.
While the outcome of the case is not
particularly remarkable based on the facts,
it is surprising that the Circuit refused to
directly address the effects of the permit
conditions on state water rights. We will
have to wait for another case and another
set of facts to determine when regulation of
the exercise of state water rights under the
ESA goes far enough to warrant real
consideration of constitutional takings
issues. ■
Environmental and Land Use Department
Seattle
mattheww@prestongates.com
CLEAN WATER ACT
Airport Communities v. Graves
280 F. Supp. 2d 1207 (W.D. Wash 2003)
by Eric Laschever
On August 18, 2003, Judge Barbara Rothstein
issued a decision upholding the Army Corps of
Engineers’ (Corps) 404 permit for the Sea Tac
Airport third runway. See Airport Communities
Coalition v. Graves, 280 F.Supp.2d 1207 (W.D.
Wash. 2003) (Order Granting Defendants’ Motions
for Summary Judgment and Denying Plaintiff
Motion for Summary Judgment). The Court
rejected arguments that the Corps (1) should have
prepared a supplemental Environmental Impact
Statement, (2) inadequately reviewed the public interest, and (3)
failed to incorporate all of the conditions imposed by the Pollution
Control Hearings Board (PCHB). The Court’s rulings on the first two
issues add to a considerable body of National Environmental Policy
Act (NEPA) and Clean Water Act (CWA) jurisprudence. The Court’s
ruling on the third issue has had an immediate effect on the PCHB,
and is discussed further below.
The Corps issued its 404 permit after opponents challenged
Ecology’s certification of the 404 permit, under Section 401 of the
CWA, in an appeal to the PCHB. The CWA requires states to issue
such a certification within one year of the request. 33 U.S.C. §
1341(a)(1). The PCHB added sixteen new conditions to the 404
permit. The Corps incorporated seven of the PCHB’s sixteen
conditions along with Ecology’s certification in its Record of
Decision.
Opponents argued that the Corps violated the CWA because it
failed to incorporate all of the PCHB’s conditions. Because the
PCHB conditions were added more than one year after the Corps
had published its notice of application by the Port, the Court ruled
that the Corps was not required as a matter of law to incorporate all
of the PCHB’s conditions. The Court concluded under the plain
language of the statute that the Corps is only bound by state
certification conditions issued within one year after the notice of the
application. Airport Communities at 11. See Airport Communities,
28 F. Supp. 2d. at 1215.
Before Airport Communities, Ecology routinely asserted it had up
to a year to issue its certifications. Similarly, PCHB deliberations on
complex projects may take a year or more. Under Judge Rothstein’s
reasoning, any conditions imposed more than one year later would
not automatically apply to 404 permits. The Court suggested the
state may pursue independent avenues for certification, such as
issuing its certification in the form of an independently enforceable
order that would be above and beyond the federal requirements.
Airport Communities at 15. Id. at 1217.
It is unclear how Ecology and the PCHB will modify the process
for 401 certifications to address Airport Communities. The PCHB
already established an expedited hearing schedule in one matter in
an effort to issue a decision within the one year time frame. See
Columbia River Alliance for Nurturing the Environment v. Dept. of
Ecology, 2003 WL 22320974, PCHB No. 03-095 (2003). Airport
Communities may signal a dramatic change in Washington’s 401
certification process. ■
Environmental and Land Use Department
Seattle
ericl@prestongates.com
Page 5
CLEAN AIR ACT
Alaska Department of Environmental Conservation v. EPA
298 F.3d 8814 (9th Cir. 2002)
Kenneth J. Gish, Jr
The Clean Air Act (CAA)
has been described as
an “experiment in
federalism.”1 The CAA
vests the responsibility
to create clean air
standards in the federal
Environmental
Protection Agency
(EPA), but grants the states the
responsibility to implement those
standards. Each state must develop and
submit to the EPA for approval a state
implementation plan (SIP) that provides
for the attainment and maintenance of air
quality. To prevent states from lowering
air quality standards to attract polluting
industry and the associated economic
growth, the EPA retains authority to act
when a state fails to comply with its SIP.
This review authority can create friction
between state agencies and the EPA, as it
did recently in a case that originated in
Northwestern Alaska.
Most of Alaska is considered an
“attainment area” under the CAA.
Because of this designation, new or
modified major sources of air pollution in
Alaska must obtain a Prevention of
Significant Deterioration (PSD) permit
from the Alaska Department of
Environmental Conservation (ADEC) prior
to construction. Under Alaska’s SIP,
ADEC can only issue permits after
determining that the source will utilize
the best available control technology
(BACT) to limit pollution. BACT is
defined, in both the CAA and the Alaska
SIP, as “an emission limitation based on
the maximum degree of reduction of each
pollutant ... which the permitting
authority, on a case-by-case basis, taking
into account energy, environmental, and
economic impacts, and other costs,
determines is available for such facility.”2
ADEC’s grant of a PSD permit to Teck
Cominco Alaska, Inc. (Cominco) for
expansion of the Red Dog Mine provoked
a series of non-compliance orders from
the EPA, claiming that ADEC’s
determination of BACT was improper.
Cominco’s Red Dog Mine, located over
100 miles North of the Arctic Circle, is
the world’s largest producer of zinc
concentrates. Because of the mine’s
remote location, it uses on-site diesel
generators to provide electricity. The mine
is the largest private employer in the
Northwest Arctic Borough of Alaska. In
1996, the mine sought to increase
production. Because the increase in
production would require increased
operation of one of the current generators
(MG-5) and construction of a new one
(MG-17), Cominco applied for a PSD
permit from ADEC.
In its initial application, Cominco
stated that it would use “low NOx”
burners as BACT.3 ADEC made a separate
determination that Selective Catalytic
Reduction (SCR) was BACT for NOx
emissions.4 Cominco responded by
offering to use low NOx burners on all of
its generators, instead of SCR on only
MG-5 and MG-17. ADEC accepted this as
BACT, stating that SCR was not feasible,
and issued the PSD permit. EPA, at the
request of the National Parks Service,
reviewed the permit’s issuance.
EPA determined that SCR, not low
NOx burners, was BACT for diesel
generators and issued a series of findings
of non-compliance and orders prohibiting
construction of the new generator.
Eventually, the orders prohibiting
construction were withdrawn, but the
determinations of non-compliance with
the SIP remained. ADEC appealed the
findings of non-compliance to the Ninth
Circuit claiming that the EPA had
overstepped its bounds in rejecting its
determination of BACT. The Ninth Circuit
disagreed.
In ADEC v. EPA, 298 F.3d 814 (9th
Cir. 2002), the Ninth Circuit Court of
Appeals found that the EPA acted within
its powers, arising out of the language
and legislative history of the CAA, when it
determined that ADEC’s BACT
determination was improper. EPA’s
authority to issue orders for noncompliance with a SIP includes the
authority to determine that a BACT
determination is improper. Id. at 820821. Here, EPA’s determination of noncompliance was proper as there was no
justification of why SCR was costprohibitive for Cominco. Id. at 822-823.
Finally, the Court held that ADEC was
incorrect in incorporating the contribution
of Cominco to the regional economy in its
BACT determination, stating Congress
gave the EPA enforcement authority, “to
protect states from industry pressure to
issue ill-advised permits.” Id. at 823.
The United States Supreme Court granted
review of this decision.
On January 21, 2004, the Supreme
Court issued its decision. ADEC v. EPA,
No. 02-658, slip opinion (Jan. 21,
2004). In a five to four split, the Court
affirmed the decision of the Ninth
Circuit, holding that, under sections
113(a)(5) and 167 of the CAA, the EPA
has the authority to issue stop
construction orders if the state permitting
authority’s BACT determination is
unreasonable. Id. at 36. While the state
permitting authority may be in the best
position to determine, on a case by case
basis, whether a proposed control
technology is feasible, it cannot make
unreasonable BACT determinations, ones
that are not supported by the facts. Id. at
22. The Court found that the EPA did not
act in an arbitrary and capricious manner
in issuing the orders as ADEC failed to
provide a reasoned justification for why it
changed its BACT determination at the
Red Dog Mine Facility. Id. at 31.
The decision in this case reaffirms the
CAA’s reputation as an experiment in
federalism. States are free to make their
own case by case BACT determinations
under the PSD program, provided they
articulate a reasonable justification for
their decision. If the states do not provide
such justifications, this case clearly
demonstrates that the EPA can and will
step in to invalidate the permits. ■
Environmental and Land Use Department,
Seattle
kennethg@prestongates.com
1
2
3
4
See Michigan v. EPA, 268 F.3d 1075,
1078 (D.C. Cir. 2001)
42 U.S.C. § 7479(3)
Low NOx burners control NOx by using
high-combustion air temperatures to
increase atomization of NOx particles and
prevent their release into the atmosphere.
See ADEC v. EPA, 298 F.3d 814, 816-817
(9th Cir. 2002).
SCR is a process that injects ammonia or
urea into the exhaust and then that mixture
is combined with a catalyst to reduce NOx
emissions. Id. at 817.
Page 6
Environmental Litigation Practice Group
CLEAN WATER ACT
Environmental Protection Information Center v. Pacific Lumber Co.
266 F.Supp. 2d 1101 (N.D. Cal. 2003)
by William Chapman & Christopher Varas
The United States
District Court for the
Northern District of
California recently
entered an order that
may expand federal
district court jurisdiction
over citizen suits
challenging EPA
regulations related to the
Clean Water Act (CWA).
This possible expansion
of federal district court
jurisdiction is twofold.
First, the court narrowly
interpreted which types
of challenges must be
heard by federal circuit
courts, versus federal
district courts. Second, the court
concluded that when the EPA proposes
revisions to the regulation and solicits
commentary on the revisions, the statute of
limitations on challenges to EPA
regulations starts over, even if the EPA
ultimately decides not to amend the
original regulation. The following
summarizes the court’s reasoning on both
issues.
The suit centers around the logging
activities of the Pacific Lumber Company
(PALCO) and its subsidiary, the Scotia
Pacific Lumber Company. Plaintiff
Environmental Protection Information
Center (EPIC) has charged that the
companies are illegally polluting Bear
Creek with sediment from sites for which
PALCO has not obtained a permit from the
National Pollutant Discharge Elimination
System (NPDES). PALCO responded that
EPA regulations promulgated in 1976
exempted its logging activities from the
NPDES permitting requirements.
As part of its suit, EPIC challenged the
validity of one part of the 1976 EPA
regulations, on which PALCO relies. The
regulations, though authorized by the CWA,
are not themselves part of the CWA
statute. The regulation EPIC has
challenged excludes certain non-point
source effluents from the NPDES
permitting requirements. Among the
activities exempted from the NPDES
permitting requirements are “surface
drainage [and] road construction and
maintenance from which there is natural
runoff.” See EPIC, 266 F. Supp. 2d at
1108.
The EPA proposed revisions to the
exemption in 1999 and solicited
comments on its proposed revisions.
Ultimately, however, the EPA rejected the
proposed revisions and closed its
consideration without amending the
exemption. While PALCO’s challenged
activity falls within the 1976 exemption,
EPIC has argued that the EPA exceeded its
authority under the CWA when it
promulgated the exemption.
PALCO and the EPA moved to dismiss
for lack of subject matter jurisdiction and
because the statute of limitations lapsed
before EPIC filed its complaint. The court
rejected both arguments.
The CWA gives federal circuit courts
exclusive jurisdiction to hear certain CWA
claims. Among the claims reserved to the
federal circuit courts are challenges to the
EPA’s issuance of limitations on effluents
promulgated under §§ 301, 302, 306, or
405 of the CWA, and actions “issuing or
denying any permit” under § 402. CWA §
509(b). Defendants argued that the 1976
exemption falls within both of these
categories, and so only a federal circuit
court, not the federal district court in
which the plaintiffs brought their
challenge, could consider the suit. The
court rejected both categorizations.
With regard to the first category, the
court concluded that the EPA enacted the
non-point source exemption pursuant to
authority granted it in §§ 304 and 501 of
the CWA, neither of which grants federal
circuit court jurisdiction. The court also
noted that the exemption was not an action
limiting effluents, but rather the opposite:
an action exempting an entire category of
non-point sources from “the opportunity for
regulation . . ..” See EPIC, 266 F. Supp.
2d at 1113. The court concluded that,
even under a broad reading of the statutory
language, a regulation which exempted
effluents could not be termed a
“limitation.” Id. at 1118.
With regard to the second category,
actions issuing or denying permits, the
court drew a distinction between actions
issuing or denying permits on the one
hand, and actions “identifying a class of
silvicultural sources that do not require
NPDES permits” on the other. Id. Here
again, the court concluded that a
categorical rule exempting particular
sources from the NPDES requirement on
the grounds that they are non-point
sources does not relate to the issuance or
denial of an individual permit. Rather, the
exemption simply removes the category of
effluents from the universe of sources to
which the permits apply. Id. at 1114-15.
Thus, by narrowly interpreting the CWA
provisions that grant federal circuit court
jurisdiction, the court potentially expanded
the jurisdiction of federal district courts.
The defendants also asked the court to
dismiss the complaint because it was filed
well after 1982, when the six-year statute
of limitations on the 1976 regulations
expired. The court rejected EPIC’s
argument that the statute of limitations did
not apply because it was challenging the
exemption “as applied” to PALCO’s
activity. Id. at 1120-21. The court agreed
with EPIC, however, that the EPA reset the
statute of limitations when it proposed
revisions to the regulations. The court
rejected the defendants’ argument that the
statute did not reset because the EPA
ultimately left the regulations unchanged.
The key for the court was not whether the
EPA ultimately changed the regulation, but
rather that “the agency explicitly invited
comments on . . . the underlying nonpoint
source provision[.]” Id. at 1123. Based on
this analysis, the court ruled that the
statute of limitations started running in
2000, and that the complaint was timely.
This order does not necessarily indicate
an increased risk of liability for entities
operating within the EPA’s 1976 non-point
source exemption. Indeed, in an order
dated October 14, 2003, the court granted
the defendants’ motions for partial
summary judgment, ruling as a matter of
law that the EPA did not exceed the scope
of its authority in promulgating the 1976
exemption. Nevertheless, the court’s
narrow interpretation of the CWA provisions
granting jurisdiction to the federal circuit
courts may increase the opportunity for
citizen suits challenging EPA CWA
regulations in the federal district courts.
Similarly, this instance of resetting the
statute of limitations could expose other
long-lived regulations to new challenges as
the EPA reconsiders them or solicits
commentary on proposed changes. ■
Environmental and Land Use Department
Seattle
billc@prestongates.com
Seattle
cvaras@prestongates.com
Page 7
ENVIRONMENTAL INSURANCE: Puget Sound Energy, Inc. v. ALBA General Insurance Co. (cont’d from cover)
involved in the litigation. To the extent that
PSE had not previously made its own
allocation of recoveries to these sites, the
Supreme Court was not inclined to make it
do so in order to bring a claim against its
non-settling insurers. The Supreme Court
further held that to the extent PSE’s
settling insurers had received a release for
future costs that PSE had not yet incurred,
PSE was not able to make an allocation.
Thus, the Court of Appeals had asked PSE
to do far more than simply meet a burden
of proof; PSE was asked to produce
information that it did not yet know.
Because this went beyond a simple burden
of proof, the Supreme Court reversed the
Court of Appeals and held that the insured
does not have the initial burden of proof.
Instead, the carrier must prove the fact of
prior payments and their amount in order
to obtain an offset.
As a practical matter, liability insurers
in environmental coverage matters rarely
actually admit coverage and pay claims. If
a defense is provided, it is always under a
reservation of rights. A negotiated
settlement of a disputed coverage claim
can involve, as in PSE, a release of claims
for all of the insured’s other sites whether
known or unknown. In addition, carriers
will often ask for a policy buy-back, seek to
liquidate their separate defense obligation,
or sometimes ask for an indemnity from the
insured as part of the settlement of a
disputed coverage claim. These and other
factors make the allocation of the
settlement payment to the amount of the
principal claim a difficult proposition. The
Supreme Court’s decision fairly allocates
that difficulty to the insurer who is, after
all, seeking the offset to avoid its otherwise
fixed contract obligation.
Further, the Supreme Court’s decision
perhaps minimizes the effect of a collusive
settlement between the insured and the
settling insurer establishing an artificially
CERCLA: Coeur d’Alene Tribe v. Asarco Inc. (Cont’d from page 3)
all of the mining companies in the Basin
had used roughly similar methods in their
mining operations, so that there was an
imperfect, but “reasonable relationship
between the waste volume, the release of
hazardous substances and the harm at the
site.” Id. at 1120. Based on this
relationship, the Court held that the two
remaining mining companies were liable
only in proportion to the percentage of the
volume of mining tailings they produced:
Asarco was therefore liable for the release
of 22% of the tailings and Hecla for 31%.
The Court also made a preliminary
finding that some injury to natural
resources in the Basin had occurred
following the passage of CERCLA. The
Court will quantify the actual amount of
damages during the second phase of the
trial. While the Court held there was
mining-related damage to water, soils and
sediments, riparian resources, fish, birds
(specifically tundra swans), groundwater,
and benthic macorinvertebrates and
phytoplankton, the Court found there was
no damage to other wildlife or bird species.
Additionally, the Court stated, “The liability
of certain responsible parties including
Hecla and Asarco is evident, but the
Defendants are correct when they argue
that there has been an exaggerated
overstatement by the Federal Government
and the Tribe of the conditions that exist
and the source of the alleged injury to
natural resources.” Id. at 1101. This
assessment clearly provides some comfort
to the defendants as they approach the
second phase of the trial.
Both the defendants and the plaintiffs
have pointed to Judge Lodge’s decision as
a victory. The second phase of this trial
and the probable appeals will show the
true effects of this decision. It will be
many years before anyone is able to tell if
the laws at issue here have provided true
compensation for the damage to natural
resources caused by the mining in the
Basin, or if, instead, the true measure of
their impact is lawsuits and legal fees. ■
Environmental and Land Use Department
Seattle
denisel@prestongates.com
low value for the principal claim. While a
court may choose to admit such an
agreement as evidence of the allocated
value of the claim and thus the offset, the
fact the insurer carries the initial burden of
proof allows it to open the trial with its
proof.
The Supreme Court’s PSE decision
continues the Supreme Court’s tradition of
favoring insureds in environmental
insurance coverage disputes. The PSE
decision will, once again, assist Washington
business and industry as they labor to
cleanup historic contamination in our
State. ■
Environmental and Land Use Department
Seattle
johnb@prestongates.com
Environmental
Litigation Tool Kit
Law Seminars International presents
the “Environmental Litigation Tool Kit”
at the Renaissance Seattle Hotel on
February 19. Both environmental and
legal groups will speak on panels as
part of a substantive workshop on
procedural and evidentiary aspects of
environmental litigation, which is
scheduled for 8:30 am-5 pm. Preston
Gates’ attorney Eric Laschever will
participate in a panel discussion
entitled “Resolving Cases Before
Environmental Boards.” Topics include
administrative litigation v. ordinary
civil litigation; rules (both evidentiary
and procedural); mediation/ settlement
strategies, and presenting a case to an
ALJ or Administrative Board. For
registration, tuition and topic details
please visit www.lawseminars.com or
call (206) 621-1938.
1
Tisha Pagalilauan and Holly Harris
addressed this important aspect of the
decision in the November 2003
Environmental and Land Use Department
Update.
Eric Laschever
Environmental and Land Use Department
Seattle
ericl@prestongates.com
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
925 Fourth Avenue
Suite 2900
Seattle, WA 98104-1158
Tel: (206) 623-7580
Fax: (206) 623-7022
www.prestongates.com
HOW TO REACH US
If you would like more information about these or other Environmental and Land Use
issues, or have a suggestion for a future article, please contact the authors, Update
editor Holly Harris at hollyh@prestongates.com and Alina McLauchlan at
alinam@prestongates.com, or Environmental and Land Use Department chair Konrad
Liegel at konradl@prestongates.com or (206) 623-7580.
If you would like to add someone to our e-mail list or update your e-mail information,
please contact our Mailings Coordinator, Brenda McDaniels, at
bmcdaniels@prestongates.com or (206) 623-7580.
Note: Past issues of the Update may be found online at www.prestongates.com.
DISCLAIMER
This newsletter provides general information about Environmental and Land Use laws. It is not a legal opinion or legal advice.
Readers should confer with appropriate legal counsel on the application of the law to their own situations. Entire contents copyright
© 2004 by Preston Gates & Ellis LLP. Reproduction of this newsletter in whole or in part without written permission is prohibited.
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