US v. Iron Mountain Mines, Inc., CIV-S-91-768 DFL

• Decision Date: 31 March 1995
• Docket Number: No. CIV-S-91-768 DFL,CIV-S-91-1167 DFL.,CIV-S-91-768 DFL
• Citation: 881 F. Supp. 1432
• Court: U.S. District Court — Eastern District of California
• Parties: UNITED STATES of America, Plaintiff, v. IRON MOUNTAIN MINES, INC., T.W. Arman, and Rhone Poulenc Basic Chemicals Co., Defendants. STATE OF CALIFORNIA, Plaintiff, v. IRON MOUNTAIN MINES, INC., T.W. Arman, and Rhone Poulenc Basic Chemicals Co., Defendants.

881 F. Supp. 1432

UNITED STATES of America, Plaintiff, v. IRON MOUNTAIN MINES, INC., T.W. Arman, and Rhone Poulenc Basic Chemicals Co., Defendants.

STATE OF CALIFORNIA, Plaintiff, v. IRON MOUNTAIN MINES, INC., T.W. Arman, and Rhone Poulenc Basic Chemicals Co., Defendants.

Nos. CIV-S-91-768 DFL, CIV-S-91-1167 DFL.

United States District Court, E.D. California.

March 31, 1995.

COPYRIGHT MATERIAL OMITTED

Paul B. Galvani, Jeffrey B. Storer, Ropes & Gray, Boston, MA, Thomas G. Redmon, Matthew W. Powell, Wilke, Fleury, Hoffelt, Gould & Birney, Sacramento, CA, for Rhone Poulenc Basic Chemicals Co.

Michael Brian Hingerty, U.S. E.P.A., David B. Glazer, U.S. Dept. of Justice, Environmental Enforcement Section, San Francisco, CA, Martin F. McDermott, U.S. Dept. of Justice, Land and Natural Resources Div., Washington, DC, Yoshinori H.T. Himel, Asst. U.S. Atty., Sacramento, CA, for U.S.

Mary Elizabeth Hackenbracht, Margarita Padilla, California State Atty. Gen., Oakland, CA, for State of Cal.

MEMORANDUM OF OPINION AND ORDER

LEVI, District Judge.

This case concerns the allocation of costs for the cleanup of the Iron Mountain Mine ("the mine"). Plaintiffs are the United States and the State of California, who are suing under CERCLA¹ to recover response costs for cleanup activities at the mine. Defendants are Iron Mountain Mines, Inc. and T.W. Arman ("IMMI/Arman"), the current owners of the mine, and Rhone Poulenc Basic Chemicals Co. ("RP"), the corporate successor to Mountain Copper, Co., Ltd., the previous owner of the mine.² RP has filed CERCLA and state law counterclaims and third-party claims against the United States and the State of California.³ The United States and the State of California now move to dismiss these counterclaims and third party claims under Rule 12(b)(1) for lack of subject matter jurisdiction based on various theories of immunity, and under Rule 12(b)(6) for failure to state a claim.

I. Background

Iron Mountain is located nine miles northwest of Redding, California. From the late 1800's until 1962, the mountain was mined for gold, copper, zinc and pyrite. The extensive mining exposed sulfide deposits, which react with rainwater and groundwater to form acid mine drainage ("AMD"), a pollutant harmful to fish. The AMD flows into two creeks, and they in turn flow into Spring Creek. Spring Creek terminates in the Spring Creek reservoir behind the Spring Creek Dam, a project constructed in 1963 by the United States Bureau of Reclamation ("USBR"). The Spring Creek Power Plant was constructed at about the same time by the USBR and is located on Spring Creek just downstream of the dam. The Spring Creek Dam releases AMD-tainted water into the Keswick Reservoir at a point on the Sacramento River between the Shasta Dam (upstream) and the Keswick Dam (downstream).

A. Claims against the United States

1. Ownership and Operation of Dams and Power Plant

RP contends that the United States is liable for response costs associated with the release of AMD from Iron Mountain Mine because of its construction and operation of the Shasta, Keswick and Spring Creek Dams and the Spring Creek Power Plant. (RP Third Am.Countercl. — U.S. ¶ 9.) RP's claim rests on the theory that had the United States not dammed the Sacramento River and Spring Creek, the natural flow of the watershed would have diluted the AMD and there would have been no response costs. (Id. ¶ 10.)⁴ In its counterclaim, RP paints a picture of failure upon failure by the USBR to control the pollution problems stemming from the construction of the Shasta Dam in the 1940s. According to RP, when the Keswick Dam was built in 1950 for the purpose of regulating the flow from the Shasta Dam, it had the effect of catching and impounding hazardous sediments from Spring Creek. (Id. ¶ 12.) The Spring Creek Dam was built in 1963 both to prevent debris from clogging the Spring Creek Power Plant and to remedy the AMD problem created by the mine and the Shasta and Keswick dams. (Id. ¶ 13.) According to RP, the Spring Creek Dam is itself composed partly of sediments containing hazardous substances, and the USBR disposed of hazardous sediments elsewhere in the facility during its construction. (Id. ¶ 14.) RP also alleges that the Spring Creek Dam is too small to sufficiently dilute the AMD runoff without coordinating releases from the Spring Creek Dam with releases from the Shasta Dam, and, according to RP, this coordination has been lacking.⁵ In the language of CERCLA, RP contends that the United States is liable as an owner or operator of the dams, behind which AMD concentrates, or as an arranger since the Spring Creek Dam was built in part to dispose of the AMD. (Id. ¶¶ 21-24.)

2. Activities During and After World War II

As an alternative basis for liability, RP claims that the United States is liable for response costs because of the government's involvement in the mine during and after World War II. According to RP, when the war began, there had been no copper mining at Iron Mountain since 1930, and mining was limited to surface mining for gold and intermittent mining for pyrite. (Id. ¶¶ 27-28.) By directive, the government prohibited gold mining as not essential to the war effort. (Id. ¶ 28.) The government also established the Premium Price Plan as an incentive for the production of copper and zinc; prices were set to encourage maximum production. (Id. ¶ 32.) Having been told to cease gold mining, Mountain Copper (then owner of the mine) contracted to sell its entire copper and zinc output to the government. The government controlled marketing and pricing of the ore produced. (Id. ¶ 29, 32-33.) Under the contract, a new ore body was opened at the mine, a new mill was built, and pyrite ore removal increased. (Id. ¶¶ 29-31, 34.) If Mountain Copper had not increased pyrite production, the government could have seized the mine to assure production. (Id. ¶ 34.) RP alleges additional government involvement with the mine during the war affecting the labor force and shipment of the metals.⁶

After the war, the mining and milling of copper and zinc ore ceased, but RP contends that the government continued its involvement with the mine. According to RP the government paid for equipment and operations in conducting explorations for new ore and participated in decisions as to the best methods to search for new ore. (Id. ¶ 39.)

3. RP's Claims against the United States

Based on these allegations, in Counts I and II of its counterclaim, RP claims response costs under CERCLA § 107(a) and contribution under CERCLA § 113(f) and common law.⁷ RP contends that the United States is liable as owner and operator of the dams and power plant, which are part of the facility or facilities in which response costs have been incurred, and that the United States is further liable as an arranger and transporter. RP also claims that the United States' activities during and after World War II render the United States liable as an operator and arranger. (RP Third Am.Countercl. — U.S. ¶¶ 1-2, 41-47.) In Count III, RP avers that if it is liable to the United States, the award should be reduced in recoupment under CERCLA, common law, and equitable indemnification. In Counts I and II of its Amended Third-Party Complaint Against the United States, RP requests contribution and indemnification under CERCLA and common law with respect to any liability RP might incur to the State of California.⁸

B. Claims against the State of California

RP contends that the State of California is also liable for the response costs associated with the mine. RP claims the State "has actively participated in the operation of the Shasta and Keswick Dams." (RP Am.Countercl. — Cal. ¶ 6.) In particular, RP alleges that officials from the State's Central Valley Regional Water Pollution Control Board and Department of Fish and Game met with USBR officials to agree on operating plans for releases from the dams. RP also asserts that the State operates the Spring Creek Dam along with the USBR, and thereby shares responsibility for the release of polluted water from Spring Creek into the Sacramento River. RP's claim as to the Spring Creek Dam is based upon alleged agreements and contacts between the State and USBR concerning operation of the dam. (Id. ¶¶ 9, 11, 14, and 15.)

RP further asserts that the State has not fulfilled its public trust duty of supervising appropriated water. According to RP, the State has: (1) failed to require the USBR to coordinate the operation of the dams to minimize environmental harm, (id. ¶ 16); (2) failed to repair the louvers on the Spring Creek Dam that would have minimized release of AMD during storms, (id. ¶ 17); and (3) wasted dilution water by diverting it from Spring Creek with the result that in 1992 the Spring Creek Dam overflowed, releasing toxic waters, (id. ¶ 18).

Finally, RP alleges that the State owns the streambed of Spring Creek below the Spring Creek Dam and the streambed of the Sacramento River in the Shasta and Keswick areas. Because hazardous substances are located in the streambeds, RP asserts that the State is an owner of a "facility" from which a release of pollution has occurred. (Id. ¶¶ 22-25.)

Based on these allegations, RP asserts numerous counterclaims against the State. Counts I and II are CERCLA claims based on the State as an owner and operator, respectively, of facilities — the dams and the streambeds — from which hazardous substances have been released. Count III claims that the State is an arranger under CERCLA; Count IV makes a CERCLA contribution claim. RP also asserts state law claims for negligence (Count V), nuisance (Count VI), creation of a dangerous condition on public property (Count VII), breach of public trust (Count VIII), breach of mandatory duty (Count IX), and equitable indemnification (Count XI). Count X is a recoupment counterclaim which incorporates all other claims.

C. Procedural History

The United States' complaint was filed on June...