Supreme Court to Hear Case on Environmental Cleanup Costs

January 26, 2007

The U.S. Supreme Court has agreed to tackle an environmental case that could clarify when companies which have incurred industrial cleanup costs can seek to force the government or other companies to share the costs.

Atlantic Research Corp., a privately held company, is asking the Supreme Court to rule that it can recover cleanup costs from the federal government — potentially millions of dollars. If it prevails, other companies could recover millions of dollars in cleanup costs from the federal or state governments.

For example, chemical giant DuPont Co. and oil and gas producer ConocoPhillips have a suit pending before the Supreme Court, asking that the federal government share the costs of cleaning up 15 sites the companies own but that the government once owned or controlled.

At issue is whether companies can sue other potentially liable parties, including the government, to recover costs under the so-called “Superfund” law before they are found liable under the terms of the law.

Atlantic Research retrofitted rocket motors under contract with the United States from 1981 to 1986 at an industrial park in Camden, Arkansas, according to court filings. The company sued the federal government in 2002, seeking to recover costs for the park’s cleanup due to its rocket propellant contamination.

A district court sided with the government, but the 8th Circuit Court of Appeals ruled that Atlantic could proceed with its suit even though it had not been found liable under Superfund law.

In a 2004 case, Cooper Industries v. Aviall Services, the court found that companies could only seek to recover costs from other parties if they had reached a settlement with federal or state authorities under Superfund.

But the court left open the question whether a company could seek to recover costs from other parties if it did a voluntary cleanup.

Three federal appeals courts have issued split decisions since the Supreme Court’s Cooper ruling. The Bush administration urged the court to accept the DuPont and Atlantic Research cases in order to resolve the split.

While the justices agreed to accept only the Atlantic Research case, that ruling will likely shape the outcome of the DuPont and ConocoPhillips suit.

In that case, DuPont and ConocoPhillips filed suit against the government in 1997 to recover a portion of the cost of cleaning up 15 polluted industrial sites that the government had once owned or controlled during World War II.

At one of those sites, DuPont spent $24 million in cleanup costs by July 2000. But the government argued that since the companies performed the cleanup under other state and federal environmental rules, rather than Superfund, the cleanups were “voluntary” and the companies had no basis for recovering costs.

Unlike the 8th Circuit, the 3rd Circuit U.S. Court of Appeals sided with the federal government.

The Justice Department’s Solicitor General, the federal government’s lawyer, urged the Supreme Court to take the Atlantic case to resolve the lower court conflict.

The case is United States v. Atlantic Research Corp., 06-562.

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