U.S. v. W.R. Grace & Co., 03-35924.

• Decision Date: 01 December 2005
• Docket Number: No. 03-35924.,03-35924.
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. W.R. GRACE & CO.; Kootenai Development, Corporation; W.R. Grace & Co. Conn., Defendants-Appellants.

Page 1224

429 F.3d 1224

UNITED STATES of America, Plaintiff-Appellee, v. W.R. GRACE & CO.; Kootenai Development, Corporation; W.R. Grace & Co. Conn., Defendants-Appellants.

No. 03-35924.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 7, 2005.

Filed December 1, 2005.

Christopher Landau and John C. O'Quinn, Kirkland & Ellis LLP, Washington, D.C.; Kenneth W. Lund, Linnea Brown and Katheryn Jarvis Coggon, Holme Roberts & Owen LLP, Denver, CO, for the defendants-appellants.

John T. Stahr, Environment and Natural Resources Division, U.S. Department of Justice, Washington, D.C.; James Freeman, Environment and Natural Resources Division, U.S. Department of Justice, Denver, CO, for the plaintiff-appellee.

David L. Mulliken, Esq., Latham & Watkins, LLP, San Diego, CA, for the amicus.

Appeal from the United States District Court for the District of Montana; Donald W. Molloy, District Judge, Presiding. D.C. No. CV-01-00072-DWM.

Before: B. FLETCHER, McKEOWN, and BEA, Circuit Judges.

McKEOWN, Circuit Judge:

Libby, Montana, sits sixty-five miles south of the Canadian border. The seemingly rustic and picturesque environment of this area masks a troubling history — the community has been plagued with asbestos-related contamination. In 1999, the Environmental Protection Agency ("EPA") was called in to address disturbing health reports due to asbestos-related contamination. We must decide whether, in responding to this threat, the EPA exceeded the bounds of its authority to conduct cleanup activities under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. We hold that it did not.

Defendants W.R. Grace & Co.,¹ Kootenai Development Corporation, and W.R. Grace & Co.-Conn. (collectively, "Grace") do not dispute that they are financially obligated under CERCLA to assist with the cleanup of asbestos originating from their former mining and processing operations near Libby.² Instead, Grace contests the EPA's characterization of the cleanup as a removal action rather than a remedial action under CERCLA. If the cleanup is a remedial action, which is often characterized as a permanent cleanup, then Grace argues that the EPA did not fulfill the regulatory requirements for remedial actions. For example, a remedial action requires certain analysis of the costs and effectiveness of the remediation and also requires inclusion on the National Priority List. See 40 C.F.R. §§ 300.425(b)(1), 300.430(e)(7). In contrast, the regulatory requirements for removal actions, which provide the EPA with substantial flexibility to tailor prompt and effective responses to immediate threats to human health and the environment, are considerably relaxed.

Grace argues that the EPA circumvented the regulatory safeguards by conducting a remedial action under the guise of a removal, thereby giving the EPA free rein to conduct what Grace styles as "the quintessential remedial action" under the less-restrictive requirements applied to removals. Grace presents this as a legal question: Is the EPA's characterization of its activities in Libby as a removal action correct as a matter of law?

Grace further contends that even if the action is appropriately classified as a removal action, the district court erred in exempting the action from CERCLA's general 12-month, $2 million cap for removal actions and in granting the EPA over $54 million in reimbursement plus a declaratory judgment for future costs. Finally, Grace disputes the accounting methods used to calculate the EPA's indirect costs.

The situation confronting the EPA in Libby is truly extraordinary. This cleanup site is not a remote, abandoned mine. Rather, the population of Libby and nearby communities, which the EPA estimates at about 12,000, faces ongoing, pervasive exposure to asbestos particles being released through documented exposure pathways. We cannot escape the fact that people are sick and dying as a result of this continuing exposure. Confronted with this information, the EPA determined on the basis of its professional judgment, and in accord with its administrative interpretation of the scope of removal actions, that the situation warranted an immediate, aggressive response to abate the public health threat.

Although we diverge from the district court's reasoning in some respects, we reach the same ultimate conclusion: The EPA's cleanup in Libby was a removal action that was exempt from the temporal and monetary cap. In light of the EPA's expertise in this area, we owe considerable deference, albeit not necessarily full Chevron deference, to its characterization of the cleanup activities as a removal action. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). We therefore affirm the judgment of the district court.

BACKGROUND

The outcome of this case is controlled by our interpretation of key provisions of CERCLA, a comprehensive statutory scheme to respond to environmental threats, obtain compensation from those responsible for the polluting activities, and assign liability to responsible parties. See Pub.L. No. 96-510, 94 Stat. 2767 (1980). Before applying CERCLA to the case at hand, we begin with a brief review of this statute as well as the background on the hazards afflicting Libby.

I. CERCLA

A key component of CERCLA was the establishment of a trust fund, commonly known as "Superfund," for use when responding to the release or threat of release of hazardous substances into the environment. See CERCLA, Subtitle B-Establishment of Hazardous Substance Response Trust Fund § 221, 94 Stat. at 2801-02; see also Superfund Amendments and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat. 1613 (1986). Today, Superfund expenditures are directed by the provisions of CERCLA and the National Oil and Hazardous Substances Pollution Contingency Plan ("National Contingency Plan"), 40 C.F.R. pt. 300.³

CERCLA and the National Contingency Plan divide response actions into two broad categories: removal actions and remedial actions. See 42 U.S.C. § 9601(25). Removal actions⁴ are typically described as time-sensitive responses to public health threats for which the EPA is granted considerable leeway in structuring the cleanup. See, e.g., Minnesota v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019, 1024 (8th Cir.1998) (describing "removal actions" as "those taken to counter imminent and substantial threats to public health and welfare"). Superfund-financed removal actions generally are required to "be terminated after $2 million has been obligated for the action or 12 months have elapsed from the date removal activities begin on-site." 40 C.F.R. § 300.415(b)(5). These limitations are not, however, inviolate. The EPA⁵ may exceed this cap if it determines one of two exemptions applies:

(i) There is an immediate risk to public health or welfare of the United States or the environment; continued response actions are immediately required to prevent, limit, or mitigate an emergency; and such assistance will not otherwise be provided on a timely basis; or

(ii) Continued response action is otherwise appropriate and consistent with the remedial action to be taken.

40 C.F.R. § 300.415(b)(5); see also 42 U.S.C. § 9604(c)(1).

Remedial actions,⁶ on the other hand, are often described as permanent remedies to threats for which an urgent response is not warranted. See, e.g., Pub. Serv. Co. of Colo. v. Gates Rubber Co., 175 F.3d 1177, 1182 (10th Cir.1999) ("In broad contrast, a remedial action seeks to effect a permanent remedy to the release of hazardous substances when there is no immediate threat to the public health.").

The distinction between removal and remedial actions is critical under CERCLA because "[b]oth types of actions have substantial requirements, but the requirements for remedial actions are much more detailed and onerous." Morrison Enters. v. McShares, Inc., 302 F.3d 1127, 1136 (10th Cir.2002). For example, remedial actions are only eligible for Superfund financing when the site is listed on the National Priorities List.⁷ See 40 C.F.R. § 300.425(b)(1). Further, the EPA is required to consider costs when selecting remedial alternatives whereas "CERCLA contains no corresponding mandate for removal actions." United States v. Hardage, 982 F.2d 1436, 1443 (10th Cir.1992); see also 40 C.F.R. § 300.430 (listing requirements for a selection of remedy including consideration of effectiveness, permanence, and cost). Because CERCLA provides that responsible parties shall be liable for "all costs of removal or remedial action incurred by the United States Government ... not inconsistent with the national contingency plan," this distinction is vital to those held liable. 42 U.S.C. § 9607(a)(4).

II. HISTORY OF THE EPA'S CLEANUP ACTIVITIES IN LIBBY

The roots of this case stretch back nearly a century to the beginning of mining operations in the vicinity of Libby. It was not until the late 1990s, however, that the extent of the problem came to light fully, leading to the EPA's cleanup action.

A. ASBESTOS CONTAMINATION IN LIBBY

From the 1920s until 1990, Grace and its predecessors mined and processed vermiculite — a mineral containing a type of asbestos called tremolite — at a mine approximately seven miles northeast of Libby. See Grace I at 1138-41 (describing factual background in an order granting the EPA's motion for summary judgment). Processed ore was trucked to screening plants and expansion/export plants from which the materials were distributed nationwide. Vermiculite was also available for employees to take home for their personal use, and Grace donated vermiculite to the local schools.

Although Grace did not cease mining and processing operations in Libby until 1990, state and federal agencies conducted studies on the health effects of the mining operations as early as the 1940s. These efforts were, however, focused on workplace exposure...