Chevron Mining Inc. v. United States

• Decision Date: 19 July 2017
• Docket Number: No. 15-2209,15-2209
• Citation: 863 F.3d 1261
• Parties: CHEVRON MINING INC., Plaintiff–Appellant, v. UNITED STATES of America, United States Department of the Interior, and United States Department of Agriculture, Defendants–Appellees. American Exploration & Mining Association, Colorado Mining Association, and State of Montana, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

863 F.3d 1261

CHEVRON MINING INC., Plaintiff–Appellant,

v.UNITED STATES of America, United States Department of the Interior, and United States Department of Agriculture, Defendants–Appellees.

American Exploration & Mining Association, Colorado Mining Association, and State of Montana, Amici Curiae.

No. 15-2209

United States Court of Appeals, Tenth Circuit.

FILED July 19, 2017

Peter D. Keisler, Sidley Austin LLP (Jennifer G. Anderson, Alex C. Walker, and Jeremy K. Harrison, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, New Mexico, R. Timothy McCrum, Kirsten L. Nathanson, and Sherrie A. Armstrong, Crowell & Moring LLP, Washington, D.C., and Quin M. Sorenson and Christopher A. Eiswerth, Sidley Austin LLP, Washington, D.C., with him on the briefs), Washington, D.C., for Appellant.

Katherine J. Barton, Environment & Natural Resources Division, United States Department of Justice (John C. Cruden, Assistant Attorney General, Simi Bhat, Justin D. Heminger, Dustin J. Maghamfar, John E. Sullivan, and Evelyn S. Ying, Environment & Natural Resources Division, United States Department of Justice, and of Counsel: Joan Marsan, Office of the Solicitor, United States Department of the Interior, and Kirk Minckler, Office of the General Counsel, United States Department of Agriculture, with her on the brief), Washington, D.C. for Appellees.

Gina Cannan and Steven J. Lechner, Mountain States Legal Foundation, Lakewood, Colorado, on the brief for Amici Curiae American Exploration & Mining Association and Colorado Mining Association.

Timothy C. Fox, Montana Attorney General, Alan Joscelyn, Chief Deputy Attorney General, and Dale Schowengerdt, Solicitor General, Office of the Montana Attorney General, Helena, Montana, on the brief for Amicus Curiae State of Montana.

Before TYMKOVICH, Chief Judge, BALDOCK, and BRISCOE, Circuit Judges.

TYMKOVICH, Chief Judge.

Under the federal environmental laws, the owner of property contaminated with hazardous substances or a person who arranges for the disposal of hazardous substances may be strictly liable for subsequent clean-up costs. In this case, the United States owned national forest lands in New Mexico that were mined over several generations by Chevron Mining Inc. The question we must resolve is whether the United States is a "potentially responsible party" (PRP), see, e.g. , 42 U.S.C. § 9620(e)(6), for the environmental contamination located on that land.

We conclude that under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601 –75, the United States is an "owner," and, therefore, a PRP, because it is strictly liable for its equitable portion of the costs necessary to remediate the contamination arising from mining activity on federal land. We also conclude in this case that the United States cannot be held liable as an "arranger" of hazardous substance disposal because it did not own or possess the substances in question.

Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we therefore reverse the district court in part and affirm in part, and remand for further proceedings to determine the United States's equitable share, if any,¹ of the clean-up costs.

I. Background

Over the last century, Chevron and its corporate predecessors mined molybdenum at a site near Questa, New Mexico, which we and the parties refer to as the "Questa Site." This extensive mining generated significant amounts of hazardous substances, ultimately triggering costly clean-up requirements. Both before and after the Environmental Protection Agency (EPA)'s 2011 decision to place the Questa Site on the National Priorities List (NPL), see 42 U.S.C. § 9605(a)(8), Chevron acknowledged its status as a PRP strictly liable for the hazardous substances contaminating the site. Chevron began remediation measures² pursuant to three administrative orders between it and the EPA. These measures are ongoing and projected to continue for decades to come, with anticipated costs exceeding $1 billion. Seeking financial contributions for the clean-up, Chevron filed suit against the United States asking for a declaration that the government is also strictly liable as a PRP—both as an "owner" of portions of the Questa Site and as an "arranger" of hazardous substance disposal, see 42 U.S.C. § 9607(a) —for its equitable share of past, present, and future clean-up costs. See 42 U.S.C. § 9613(f)(3)(B).³

The particular mining and disposal activities relevant to this appeal are summarized below.

A. Mining Activities from 1919–2014

Molybdenum is a valuable mineral used in the production of military-grade steel and other materials. Molybdenum mining activities on the Questa mining lands progressed in three stages: (1) initial underground mining and exploration from 1919 to 1964; (2) open-pit mining from 1964 to 1983; and (3) renewed underground mining from 1983 to 2014.

1. Initial Underground Mining and Exploration (1919–1964)

In 1919, the R & S Molybdenum Company of Denver opened an underground mine. The mine covered approximately 400 acres of mostly public land on which R & S Molybdenum held unpatented mining claims.⁴ The underground mine produced relatively small quantities of molybdenum and associated waste for several decades before R & S Molybdenum deemed its reserves exhausted in the 1950s and underground mining operations effectively ceased.

Meanwhile, Congress passed the Defense Production Act of 1950 (DPA) to "ensure the vitality of the domestic industrial base" to supply necessary "materials and services for the national defense." 50 U.S.C. § 4502(a)(1). To facilitate production of such materials, the DPA authorized a new federal agency within the Department of the Interior, the Defense Mineral Exploration Administration (DMEA). As part of its efforts to encourage exploration and development of necessary materials, including molybdenum, the DMEA provided loans to help finance private companies.

In 1957, R & S Molybdenum's successor-in-interest, the Molybdenum Corporation of America (Molycorp), entered into such a loan agreement with the DMEA. Molycorp and the DMEA executed an Exploration Project Contract, under which the federal government agreed to provide a loan covering up to $255,250 (i.e. , half the estimated exploration costs) in exchange for Molycorp's agreement to conduct strategic exploratory mining on the Questa mining lands. Under the contract, all work was subject to government approval. App., Vol. 1, at 100 ("The location, direction, inclination, extent, and methods of sampling the work under the contract are subject to Government approval."). Molycorp also agreed to repay the loan in the form of production royalties, provide monthly progress reports, and consult with and inform the government on all phases of the work as it progressed. At this point, Molycorp held twenty-one mining claims near Questa, all but two of which were unpatented.

Pursuant to the DMEA exploration contract, Molycorp conducted extensive exploration from 1957 to 1960 and eventually discovered a molybdenum ore deposit estimated to be 260 million tons in size. The Department of the Interior certified the discovery in 1960 and Molycorp began mining preparations.

2. Open-Pit Mining (1964–1983)

In 1964, Molycorp opened an open-pit mine to extract molybdenum from the ore deposit. The mine was a success and, at full capacity, produced more than four million tons of molybdenum annually (while simultaneously generating significant amounts of waste). By 1966, Molycorp fully repaid the government's loan under the DMEA contract via royalties from mineral production and sales. Molycorp expanded its mining activities to adjacent lands (not covered by the initial federal contract) on which it held mostly unpatented mining claims.

3. Renewed Underground Mining (1983–2014)

In 1983, Molycorp ceased open-pit mining operations and opened a new underground mine. Union Oil Company of California acquired the mine and, in 2005, Chevron acquired Union Oil. After several years with little or no mineral production, Chevron closed the underground mine in 2014.

B. Waste and Associated Disposal

The mining activities produced corresponding amounts of waste containing hazardous substances, now subject to CERCLA remediation. Approximately 150 thousand tons of waste rock were generated from the early underground mining operations, 328 million tons of waste rock and 75 million tons of "tailings"⁵ from the open-pit mining, and 25 million tons of tailings from the renewed underground mining.

The substantial amount of waste generated by these mining activities was not unexpected. When Molycorp first discovered the molybdenum ore deposit in 1960, for example, government engineers produced a "Final Geological and Engineering Report" estimating over 99% of the material extracted from the 260 million ton ore deposit would need to be discarded as waste. See App., Vol. 3, at 681–84. Nonetheless, the federal government actively encouraged—and, indeed, funded—Molycorp's mining activities at this site.

Hazardous substance disposal from the mines can be divided into two categories: (1) waste rock disposal; and (2) mine tailings disposal.

1. Waste Rock Disposal

Chevron and its corporate predecessors disposed of over 328 million tons of waste rock on land surrounding the open-pit mine. Although Molycorp initially held only unpatented mining claims on the these lands, it eventually acquired fee title to 2,258 acres of national forest land around the perimeter of its open-pit mine (referred to as "the selected lands") from the United States.⁶ In exchange for the selected lands, Molycorp traded to the United States approximately 246 acres of private land usable for public recreation, hunting, or other forest purposes. This land exchange was finalized in 1974.

2. Mine Tailings Disposal

Chevron and its corporate predecessors also disposed of over 100 million tons of mine tailings by transporting the tailings via pipelines to one of two different "tailings...