Wednesday, January 18, 2012

Declaratory Judgments an Important Tool for Establishing Liability Early in CERCLA Litigation

Attorneys representing Potentially Responsible Parties (“PRPs”) in CERCLA litigation need to consider the use of a declaratory judgment action to establish liability early in the process in order to save their clients money and, in many cases, avoid the burden of unnecessary litigation altogether.
As one commentator has described, declaratory judgment claims provide "a speedy means of resolving a dispute with a rifle shot, rather than employing the full artillery of a protracted lawsuit, and if the lawyer acts quickly, it can be deployed before a full-blown war has erupted." [1]
Declaratory judgments are particularly useful in CERCLA cases because the broad scope of activity that makes entities potentially responsible parties (PRPs) often leads to the presence of a number of parties in a case that are not actually liable under CERCLA. A declaratory judgment action can provide these parties with a way to get out of the case relatively quickly, before discovery begins regarding the extent and sources of contamination, costs of remediation or removal and other complex technical matters, which can drag on for years and be very expensive.
In addition, a declaratory judgment action can be useful in pursuing insurance coverage in connection with a claim by establishing early in the litigation that a policyholder is liable.
Under CERCLA, §113(g)(2), declaratory judgments are mandatory as to future response costs or damages, but only for §107 actions. Accordingly, some courts have outright rejected claims by PRPs for a declaratory judgment in §113 contribution actions. E.g., Ceramicas Industriales, S.A. v. Metropoloitan Life Ins. Co., 2009 WL 331262 (S.D.N.Y. 2009) (CERCLA does not authorize a declaratory judgment to be brought under § 113(f)(3) action).
However, the U.S. Court of Appeals for the First and Sixth Circuits have held that declaratory judgments are also available in §113 actions seeking contribution. See GenCorp, Inc. v. Olin Corp., 390 F.3d 433, 450 (6th Cir. 2004); United States v. Davis, 261 F.3d 1, 46-47 (1st Cir. 2001). And, in a recent opinion, the Second Circuit agreed, though it didn’t find it necessary to determine whether the authority for the declaratory judgment action derived directly from CERCLA. See New York v. Solvent Chem. Co., Nos. 10-2026 et al., 2011 U.S. App. LEXIS 25141 (2d Cir. N.Y. Dec. 19, 2011) (finding that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), provides sufficient, independent authority for entry of a declaratory judgment in contribution action).
In other words, declaratory judgments are available in CERCLA actions, regardless of whether the authority for them derives from CERCLA itself or from the Declaratory Judgment Act.  PRPs and their attorneys should consider a declaratory judgment claim early in a CERCLA case as a means of minimizing costs or—potentially—avoiding unnecessary litigation altogether.


[1] John W. Amberg, Overview of Declaratory Judgments, NITA Commentary, 28 US NITA prec § 2201 (2011).

Wednesday, January 11, 2012

2010 Toxics Release Inventory

On January 6, 2012, IDEM released its analysis of Indiana's 2010 Toxics Release Inventory ("TRI"). The TRI tracks releases and transfers of regulated chemicals. TRI data is collected annually from industries that manufacture or process more than 25,000 pounds of a listed chemical or use more than 10,000 pounds of a listed chemical during the year.

IDEM's analysis shows an increase in the number of releases from the 2009 reporting year. On-site releases to land, water, and air increased 18% in reporting year 2010. IDEM Commissioner Thomas Easterly says that the 2010 TRI results differ from the "TRI data in recent years [that] indicate[d] that overall releases continue to trend downward, despite economic fluctuations.” Whether this is a sign that local manufacturing is increasing, that industries are not doing enough to limit their environmental releases, or that IDEM and industries are doing a better job tracking releases remains to be seen. One important takeaway is that industries' need for legal representation in complying with IDEM and EPA regulations is not going away.

For more information, please review EPA's TRI dataIDEM's summary information, and IDEM's press release.

Coal Mining, Economics, and Regulation

While I've been on vacation (stay classy, San Diego!) environmental law in Indiana has been making major news and raising interesting issues.  This story and this editorial from recent editions of the Indianapolis Star discuss the Bear Run Coal Mine in Sullivan County.  As production there ramps up, the mine is expected to become the largest coal mine in the eastern U.S.  The Indiana Department of Environmental Management (IDEM) is nonetheless regulating Bear Run under a general permit.  The federal EPA has urged IDEM to regulate Bear Run under a more restrictive individual permit, but IDEM has declined to do so. 

This cases raises several fascinating issues, including the environmental price of economic development, the dangers and benefits posed specifically by coal mining, and a host of others.  I want to focus on the one I found most interesting.

While IDEM claims it is following a less-stringent course at Bear Run for regulatory reasons (it doesn't consider Bear Run unique enough to require an individual permit), Bruce Jaffee, a professor of business economics at IU's Kelley School, points to other factors.  Specifically, he notes that the price of natural gas has plummetted lately.  This is due in large part to hydraulic fracturing, or "fracking," that makes getting at certain forms of natural gas much easier and cheaper than it used to be.  Unfortunately for Indiana, we have bet our energy future in significant part on the new coal gasification plant in Edwardsport.  So instead of making power from cheap natural gas, we're going to buy more expensive coal and create gas out of it for our power.  Jaffee thinks the less-expensive regulation at Bear Run is a way to try to keep utility costs in line by keeping down the price of coal that goes to Edwardsport.  (In a related note, from perhaps an opposite angle, see this NPR story on how the falling price of natural gas has made investments in solar power less attractive.)

Power plants take a long time to build.  What might look like a smart move at one point (betting on coal) may look less attractive when a new technocology, here fracking, comes along to upend the status quo.  But maybe things will change again as fracking comes under greater scrutiny (h/t Jeff Lorenzo at the Indiana Environmental Law Blog). 

I should add that I have no reason to disbelieve IDEM's claims that it is choosing a general permit at Bear Run over an individual permit for regulatory, not economic, reasons.  I just find the economic analysis interesting, and it gives me a reason to discuss energy prices and the different aspects of the market.  Betting on coal may prove to be more costly than it looked when the decision was made, and that cost could not necessarily have been predicted due to the emergence of new technologies.  I think that's fascinating.