ENVIRONMENTAL LAW UPDATE: SIGNIFICANT DECISIONS AND CASES BEFORE

THE UNITED STATES SUPREME COURT

American Association of Port Authorities Port Administration and Legal Issues Seminar

April 15-17, 2009, Baltimore, MD

William J. Jacksonbjackson@jgdpc.com

713-355-5050

Table of Contents

I. Introduction

II. Change Is On The Way

III. Federal Legal Developments Lay Foundation for Obama Administration Priorities

1. Courts recognize EPA’s statutory authority to regulate greenhouse gas emissions.

2. EPA proposed new effluent regulations for construction sites and developers.

IV. Key 2008 Supreme Court Cases on the Environment

1. HELD: The public interest in conducting naval training exercises involving the use of sonar outweighs the interests in protecting marine mammals.

2. HELD: The EPA may weigh costs against benefits in determining the “best technology available for minimizing adverse environmental impact” for cooling water intake structures under the Clean Water Act.

3. PENDING: Is CERLCA Liability Joint and Several?

V. Conclusion

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I. Introduction

This paper will discuss recent developments in the law and current regulatory issues involving the environment that potentially affect port authorities across the nation. Specifically, this paper will address proposed regulations promulgated by the United States Environmental Protection Agency (“EPA”), recent appeals of permits granted by EPA, and three significant environmental cases being addressed by the United States Supreme Court in the current session.

II. Change Is On The Way

The Obama Administration promises to enact significant changes in federal environmental policy, particularly in regard to regulation of greenhouse gases. Obama’s energy team consists of Steven Chu, Secretary of Energy, Carol Browner, newly-created White House counsel for energy policy, and Lisa Jackson, administrator of the Environmental Protection Agency (“EPA”). Dr. Chu is a Nobel-prize winner that formerly headed the Berkeley National Laboratory. Dr. Chu is also a known proponent of technology development for the creation of renewable energy. Ms. Browner is the former EPA administrator under President Clinton, and Ms. Jackson is the former Commissioner of the New Jersey Department of Environmental Protection. Both Ms. Browner and Ms. Jackson have reputations as industry regulators.

With this team in place, the Obama Administration will focus on its campaign goals of addressing climate change, creating new energy technology and regulating greenhouse gas emissions. Commentators have noted that the EPA is expected to reconsider the former administrator’s decision to deny California a waiver from the Clean Air Act that would have allowed the state to regulate greenhouse gas emissions from automobiles. Without doubt, the Obama EPA will undertake a larger role in regulating emissions throughout the economy, from which it refrained under the Bush Administration. Importantly, on March 30, 2009 EPA Administrator Lisa Jackson announced that the United States was asking the International Maritime Organization to create an Emissions Control Area (“ECA”) around the country’s coastline (proposing a 23—mile buffer zone around the coastline). For more information on the ECA proposal, see http://www.epa.gov/otaq/regs/nonroad/marine/ci/420f09015.htm.

Area Proposed for ECA

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In addition to administrative regulation of emissions through EPA, the Obama Administration will have support in Congress to pass legislation addressing broad environmental issues such as global warming and hazardous substance clean up. It is widely expected that Congress will pass legislation enacting a cap-and-trade system for emissions, in which polluters would be able to trade their permitted amount of emissions under EPA supervision. Environmental groups are pressing for the cap-and-trade bill to reduce United States emissions of greenhouse gases to 80% of 1990 levels by 2010. The Obama Administration expects that these additional regulations and environmental cleanup efforts will spur the development of new technology and the creation of new jobs.

III. Federal Developments Compliment Obama Administration Priorities

The Obama Administrations plans to address climate change, and those plans’ anticipated success, builds upon developments that have taken place within the last year in the federal and administrative courts. In 2007, the Supreme Court affirmed the EPA’s authority and mandate to regulate greenhouse gas emissions. Massachusetts v. E.P.A., 549 U.S. 497, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007). Recently, the Environmental Appeals Board embraced the Supreme Court’s holding to require permit applicants to test and comply with emission standards for greenhouse gases. Moreover, the EPA has proposed new regulations for stormwater runoff and effluent discharged from construction sites.

1. Courts recognize the EPA’s authority to regulate greenhouse gas emissions.

In Massachusetts v. E.P.A., 549 U.S. 497, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007), the Supreme Court forced the EPA to consider greenhouse gas emissions from new automobiles under the Clean Air Act. In determining the controversy, the Supreme Court recognized that the increase of carbon dioxide and rise in global temperatures were linked under the concept of global warming. Id. at 1446.

In the case, a handful of states, lead by Massachusetts, local governments and a group of private organizations petitioned the Supreme Court to determine whether the EPA had authority to regulate greenhouse gases, and if it did, whether its stated reasons for refusing to do so were consistent with the Clean Air Act. Id. at 1446. In the proceedings below, the EPA concluded that the Clean Air Act did not authorize it to issue mandatory regulations to address global climate change. Id. at 1450. Without such authorization, EPA believed that greenhouse gases could not be “air pollutants” within the meaning of the Clean Air Act. Id. Thus, in the EPA’s thinking, even if it had authority to regulate greenhouse gas emissions, it was unwise to do so. Id. EPA believed it was unwise to regulate emissions because the causal link between rising air temperatures and increased concentration of greenhouse gases could not be unequivocally established. Id. at 1451. In refusing to regulate emissions, EPA further relied on a number of executive branch programs that purportedly provided effective responses to the threat of global warming. Id. at 1462-63.

After resolving a preliminary question of the States’ standing, the Supreme Court found that the EPA’s decision to not regulate greenhouse gases from new automobiles was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law. Id. at 1464. First, the

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Court had little trouble finding that the Clean Air Act’s definition of “air pollutant” included greenhouse gases. Id. at 1460-62. Second, and regarding EPA’s reasons for not regulating greenhouse gas emissions, the Court pointed out that the terms of the Clean Air Act permit EPA to avoid action only if it provides a reasonable explanation as to why EPA will not or cannot exercise its discretion to determine whether greenhouse gases contribute to climate change. Id. at 1462. Of all excuses EPA offered as to why it could not regulate greenhouse gases, none were relevant to whether greenhouse gas emissions contributed to climate change. Id. at 1463. If the scientific uncertainty was so profound that it precluded EPA from making a reasoned judgment as to whether greenhouse gases contribute to global warming, EPA was required to say so. Id. at 1463. EPA’s mere preference to not regulate greenhouse gases was irrelevant. Id.

Although the Massachusetts holding was limited to regulation of greenhouse gases for new automobiles under the Clean Air Act, the Supreme Court’s embrace of global warming considerations has affected other EPA regulatory matters. In November 2008, the Environmental Appeals Board (“E.A.B.”) within the EPA remanded a permit granted to Deseret Power Electric Cooperative to build a waste-coal-fired electric generating unit at an existing plant near Bonanza, Utah to consider whether the EPA Region office should impose a carbon dioxide limit for the plant. PSD Appeal No. 07-03 (E.A.B. Nov. 17, 2008). Although the E.A.B. recognized that the Supreme Court held that greenhouse gases are “air pollutants” under the Clean Air Act, it distinguished the permit appeal on the grounds that carbon dioxide may not constitute an air pollutant “subject to regulation under this Act.” Without foreclosing the possibility that greenhouse gases are subject to regulation, the E.A.B. held that EPA should reconsider the carbon dioxide limit in its discretion to interpret what constituted a “pollutant subject to regulation of this Act”. This decision marks the beginning of the EPA’s regulation of greenhouse gases through permitting.

2. EPA’s Proposed Effluent Regulations for Construction Sites and Developers

On November 28, 2008, EPA proposed a new regulation under the Clean Water Act that would strengthen the existing regulatory program for discharges from construction sites by establishing technology-based Effluent Limitations Guidelines and New Source Performance Standards for the Construction and Development point source category. The proposed regulations, if implemented, would significantly reduce the amount of sediment and other pollutants discharged from construction sites. The new regulation would apply to construction activities required to obtain NPDES permits, including building construction, general contracting, heavy and civil engineering construction and land subdivision. Permittees would be required to implement specific Best Management Practices, which vary depending upon soil composition and average rainfall at the site.

This proposed regulation results from another instance of litigation over EPA’s decision not to regulate areas within its authority. Nat’l Res. Defense Council v. E.P.A., 437 F. Supp. 2d 1137, 1157 (C.D. Cal. 2006). There, the EPA refused to adopt effluent limitations as mandated by section 1314(b) of the Clean Water Act. The district court found that the Clean Water Act’s mandatory provision requiring EPA to promulgate regulations was unmistakeable. Id. at 1158. Thus, EPA had a nondiscretionary duty to promulgate effluent limitations guidelines and new source performance standards for construction and development sites. Id. at 1166.

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IV. Key 2008 Supreme Court Cases on the Environment

The Supreme Court accepted a number of environmental cases for the 2008-09 term. In one decision handed down, the Court addressed the impact of naval sonar on marine life off the coast of California. Winter v. Natural Res. Defense Council, No. 07-1239, 555 U.S. ---, 129 S.Ct. 365, --- L.Ed.2d --- (2008). A trio of cases involving the EPA’s regulation of cooling-water intake structures at existing power plants were decided by the Court on April 1, 2009. Entergy v. Riverkeeper, Inc., No. 07-588; PSEG Fossil LLC v. Riverkeeper, Inc., No. 07-589; Util. Water Act Group v. Riverkeeper, Inc., No. 07-597 (“Riverkeeper Cases”). Finally, and on a non-regulatory issue that is highly anticipated by business interests, this spring the Supreme Court will determine whether liability under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601 et seq., is joint and several, and if not, what evidence is required to apportion a responsible party’s liability. Burlington No. & Santa Fe R.R. Co. v. U.S., No. 07-1601; Shell Oil Co. v. U.S., No. 07-1607. Winters and the Riverkeeper Cases will be discussed briefly, and the Burlington Northern case will be discussed in greater detail below.

1. The public interest in conducting naval training exercises involving the use of sonar outweighs the interests in protecting marine mammals.

In Winters, the Supreme Court reversed the Ninth Circuit’s affirmation of a preliminary injunction entered against the Navy that prevented it from using “mid-frequency active” (“MFA”) sonar during its training exercises off the coast of southern California. 555 U.S. at 7-10. The Navy deploys forces in “strike groups,” which include surface ships, submarines and aircraft centered around an aircraft carrier or amphibious assault ship. Id. at 2. Coordination between the strike group members is critical, and the Navy requires extensive training in analysis, prioritization of threats, execution of military missions and maintenance of protection. Id.

Several species of marine mammals, including dolphins, whales and sea lions, live in the waters off the coast of southern California. The respondent environmental groups, led by the Natural Resources Defense Council, contended that the MFA sonar causes serious injury to marine mammals, including permanent hearing loss, decompression sickness, and major behavioral disruptions. The environmental groups also contended that mass strandings of marine mammals were associated with the use of MFA sonar.

The Marine Mammal Protection Act of 1972, 86 Stat. 1027, prohibits any individual from taking a marine mammal. Taking is defined to mean harassing, hunting, capturing, or killing. 16 U.S.C. §§1362(13), 1372(a). Actions may be exempted from the Act by the Secretary of Defense if those actions are necessary for national defense. § 1371 (f)(1). The Navy obtained a two year exemption from the Act that was conditioned upon its adoption of several mitigation procedures, including (1) training lookouts and officers to watch for marine mammals; (2) requiring at least five lookout with binoculars on each vessel to watch for anomalies on the water surface; (3) requiring aircraft and sonar operators to report detected marine mammals in the vicinity of the training exercises; (4) requiring reduction of active sonar transmission levels if a

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marine mammal is detected; (5) requiring complete shutdown of active sonar transmission if a marine mammal is detected within 200 yards of a vessel; and (6) requiring active sonar to be operated at the “lowest practicable level”. Id. at 5.

The environmental groups sued the Navy, seeking declaratory and injunctive relief on the grounds that the Navy’s southern California training exercises violated federal law. Id. at 6. The district court granted the environmental groups’ motion for preliminary injunction and prohibited the Navy from using MFA sonar during its remaining training exercises. Id. In so granting, the district court found that the environmental groups had established at least a “possibility” of irreparable harm to the environment. Id. at 7. It concluded that there was a “near certainty” of irreparable injury to the environment, and that this injury outweighed any possible harm to the Navy. Id.

Upon the Navy’s emergency appeal, the Ninth Circuit agreed with the district court that preliminary injunctive relief was appropriate. Id. Yet it determined that a blanket prohibition against the Navy’s use of MFA sonar was overbroad and remanded the case to the district court to narrow the injunction and provide mitigation conditions under which the Navy may conduct its training exercises. Id. On remand, the district court established seven mitigation conditions in addition to those imposed under the Marine Mammal Protection Act. Id. The Navy appealed in order to challenge two of the mitigation conditions. Id. It also sought relief from the Executive Branch, specifically the President and the Council of Environmental Quality. Id. at 8.

The Supreme Court sided with the Navy that the Ninth Circuit erred in finding that the environmental groups needed only to establish the possibility of irreparable harm in order to obtain a preliminary injunction. Id. at 12. Instead, the groups must have demonstrated that irreparable injury was likely to occur. Id. In granting preliminary injunctions, the Supreme Court noted that district courts must “pay particular regard for the public consequences.” Id. at 14. Here, the Court held, the district court and the Ninth Circuit “significantly understated” the consequences the preliminary injunction would impose on the Navy’s ability to conduct realistic training exercises and the ultimate adverse impact on the public interest in national defense. Id. While the Court did not question the seriousness of the interests in protecting marine wildlife, the balance of equities and overall consideration of the public interest strongly favored the Navy. Id. at 16.

2. EPA may weigh costs against benefits in determining the “best technology available for minimizing adverse environmental impact” for cooling water intake structures under the Clean Water Act.

In the Riverkeeper cases, the Supreme Court determined that the EPA is permitted to consider a cost-benefit analysis in establishing the “best technology available” (“BTA”) at existing power plants that use cooling water intake structures to cool steam used in the electric generating process. The structures in question cause the deaths of thousands of fish and aquatic life that get pinned while the plants intake cooler water. This cooling process requires power plants to extract billions of gallons of water per day from the nation’s waters, trapping a huge number of aquatic organisms.

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The plants that employ cooling water intake structures are older generally. Newer plants employ technology that either cools the steam with air or with a different water system that uses small amounts of water and recycles it, known as a closed-cycle cooling system. Under the Bush Administration, EPA permitted older power plants to obtain a variance from certain regulations if they could show that the cost of implementing the best technology available was greater than the environmental benefit. In so doing, EPA rejected closed-cycle cooling systems as BTA because it was not cost-effective. Several environmental groups and a handful of states sued to challenge the EPA rule.

When presented on appeal below, the Second Circuit held that the language of section 316(b) of the Clean Water Act plainly indicated that the plants must adopt the best technology available and that cost-benefit analysis could not be justified in light of Congress’s 1989 amendment of the technology standard. Riverkeeper v. E.P.A., 475 F.3d 83, 98-99 (2d Cir. 2007). Prior to the amendment, plants were required to adopt the best practicable technology, a standard that permitted an EPA consideration of costs and benefits. Id. at 100-02. When Congress changed the standard in 1989, it deleted all reference to cost considerations in determining “best available technology.” Id. at 102. The EPA’s determination of BTA was based on its determination that a national requirement to retrofit existing systems is not the most cost-effective approach and at many existing plants, retrofits may be impossible or not economically practicable. Id.

The case was argued before the Supreme Court on December 2, 2008 and decided on April 1, 2009 (opinion attached). The industry petitioners argued that employing the best technology to these old plants is too expensive. The environmental and state petitioners contended that Congress did not permit EPA to use a cost-benefit analysis in determining the best technology available because Congress itself concluded that the costs were worth the benefit to the environment. They also argued that a case-by-case cost-benefit analysis would be open to manipulation. In an opinion authored by Justice Scalia, the Court held that the Clean Water Act did not prevent EPA from conducting a cost-benefits analysis and reversed the Second Circuit.

3. CERLCA Liability: Joint and Several?

In the Burlington Northern case, petitioners Burlington Northern Santa Fe Railway Company and Union Pacific Railroad Company (collectively, “the Railroads”) appeal the Ninth Circuit’s reversal of the district court’s apportionment of responsibility under CERLCA. In the companion case, petitioner Shell Oil Company additionally appeals the Ninth Circuit’s expansion of “arranger liability” under CERCLA to include manufacturers that merely sold and shipped by common carrier a useful product to a purchaser who acquired ownership and control upon the common carrier’s arrival at the purchaser’s facility.1 This consolidated case will present the significant issue of whether liability under CERCLA may be apportioned between potentially responsible parties, and if so, on what basis.

1 The Shell appeal involves the limits of “arranger” liability under CERCLA. Specifically, CERCLA holds liable “any person who by contract, agreement or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances …” 42 U.S.C. § 9607(a)(3). The details of the Shell appeal and “arranger” liability under CERCLA are not particularly germane to our topic, and therefore will not be discussed in detail.

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A. A small operator of chemical distribution facility, driven out of business by costs of environmental cleanup, leaves costs to be imposed on solvent owners of adjacent property.

The facts of this case are particularly interesting for business owners because it involves a relatively small business owner’s use of rented land over a period of time. For many years, Brown & Bryant (“B&B”) owned and operated a chemical distribution facility known as the Arvin Site. Brief of Petitioners at 7, Burlington Northern & Santa Fe Railway Co. et al v. United States, No. 07-1601, 07-1607 (Consolidated). Shell Oil Company (“Shell”) made some of the chemicals distributed at the Arvin Site, and the Railroads were the passive owners of a small adjacent parcel of land that B&B leased for a period of time and primarily used for a parking lot. Id. at 2.

B&B began its operations in 1960. Id. at 7. At the Arvin Site, B&B stored, mixed, and loaded into application rigs various agricultural chemical products, which it sold to local growers. Id. B&B was a sloppy operator, and its business activities contaminated the soil and groundwater. Id. Two of the chemicals B&B stored and distributed were the pesticides D-D and Nemagon. Id. D-D and Nemagon are designed to kill microscopic worms that attack the roots of crops. United States v. Burlington Northern & Santa Fe Railway Co., 502 F.3d 781 (9th Cir. 2007). D-D and Nemagon are volatile, extremely soluble chemicals that evaporate rapidly and fume when injected into soil. Id.

The B&B parcel was graded toward an unlined pond in the southeast corner of the lot. Brief of Petitioners at 8. B&B installed an unlined sump near a wash rack on its parcel in 1960, which connected directly to the pond. Id. The sump was approximately 35-by-35 feet across, 10 feet deep, and contained several feet of water at any given time. Id. B&B did not line the sump and pond until 1979. Id.

In 1975, B&B began leasing a 0.9 acre parcel of land from the Railroads (“Railroad parcel”). Id. at 9. The Railroad parcel was located to the west of the B&B property, and B&B paid an annual rent of $410. Id. B&B did not construct a pond, sump or wash rack on the Railroad parcel. Id. In fact, the Railroad parcel was separated from the B&B parcel by some warehouses and a rail spur. Id. A “small pipe” under the rail spur allowed surface run-off from the Railroad parcel to drain onto the B&B parcel. Id. The Railroads had no role in B&B’s operations; they merely owned the parcel of land leased to B&B. Petition For A Writ Of Certiorari at 7, Burlington Northern & Santa Fe Railway Co., et al v. United States.

The B&B parcel was the heart of B&B’s operations. Brief of Petitioners at 9. The workers used the wash rack on the B&B parcel to rinse out residual D-D and other chemicals from 2,000 to 2,600 gallon tanks and two-ton trucks. Id. at 9-11. These activities discharged an enormous amount of contaminants mixed with water into the sump and surrounding area. Id. As must as 2,000 to 4,000 gallons of rinse water were dumped into the sump every month. Id. The residual D-D would also run off the ground next to the concrete wash pads. Id. The process of receiving and loading D-D resulted in additional discharges, leaks and spills on a daily basis. Id. The Railroad parcel, by contrast, was used for vehicle and equipment storage, washing, and

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limited loading-unloading of agricultural chemicals. Id. at 11. Spills on the Railroad parcel were accidental and sporadic. Id.

In the 1980s, California’s Department of Toxic Substances Control (“DTSC”) found evidence of soil and groundwater contamination at the Arvin Site. Petition at 8. In 1988, DTSC ordered B&B to correct the violations, and the cost of corrections drove B&B out of business. Id. In 1989, EPA listed the Arvin Site on the CERCLA National Priorities List. Id Although the contamination on the Railroad parcel did not require remediation, EPA ordered the Railroads to take measures to prevent future contamination in 1991. Id. In 1996, EPA and the State of California filed suit under CERCLA against the Railroads and Shell for reimbursement of investigation and cleanup expenses for the entire Arvin Site. Id.

B. The district court apportioned the harm caused by the small operators’ activities according to the adjacent owners’ connection with the site.

After a bench trial, the district court issued an extremely detailed 185-page order finding the Railroads liable under CERCLA as owners and Shell liable as an entity that “arranged” for the disposal of hazardous substances. Id. The court found that EPA had incurred responses costs approximating $8 million dollars, and that California had incurred costs approximating $400,000. Id. The court also declared that the Railroads and Shell were liable for future costs. Id.

The district court apportioned these costs between the Railroads and Shell. Specifically, the district court found that the overwhelming majority of B&B’s chemical disposals occurred on land not owned by the Railroads. Id. at 9. The activities that had caused most of the spills – including mixing, formulating, unloading, and transporting chemicals – were predominantly performed on B&B’s parcel. Id. Moreover, the timing of the spills was important: Id. at 9-10. B&B did not begin leasing the Railroad parcel until fifteen years into its operations at the Arvin Site. Id. The mere fact that a small pipe allowed water on the Railroad parcel to drain onto B&B’s parcel raised the possibility that surface water on the Railroad parcel could have reached the pond on B&B’s parcel. Id. at 10-11. Thus, the district court held that the presence of agricultural chemical spills on the Railroad parcel meant that the Railroads incurred costs under CERCLA. Id. at 11.

But the question remaining for the district court was what amount the Railroads were to incur. Relying on concrete and specific evidence supporting divisibility of the harm, the district court apportioned the harm by multiplying the percentage of the overall land that was owned by the Railroads (19.1%), the percentage of the 29 years of B&B’s operations during which it leased land from the Railroads (45%), and the percentage of overall site contamination attributable to the two chemicals that meaningfully contaminated the Railroads’ land (66%), for an initial allocation of 6%. Id. at 12. The court then reasoned that an allocation based on these assumptions was conservative, in that, if anything, it overstated the Railroads’ responsibility. Id. at 12-13. Allowing for a calculation error of up to 50%, there was no theory of release of contaminants under which the Railroads could have been responsible for more than 9% of the total harm. Id. at 13. Thus, the Railroads were liable for 9% of the total liability, Shell was liable for 6%, and B&B was assigned 100% joint and several liability. Id. In its conclusion, the

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district court remarked that “[t]he concept that a passive owner of a contiguous parcel, not representing more than 19% in area of a CERCLA site, operated less than 44% of the time, where substantially smaller volumes of hazardous substance releases occurred, should be strictly liable for the entire site remediation … takes strict liability beyond any rational limit.” Id.

C. The Ninth Circuit reversed the district court and required extremely precise evidence of businesses’ lack of connection to the site in order to apportion CERCLA liability.

EPA and the State of California appealed. The Ninth Circuit issued an opinion and substantially amended that opinion later in response to a petition for rehearing en banc. Burlington Northern & Santa Fe Railway Co. v. United States, 502 F.3d 781 (9th Cir. 2007). The Ninth Circuit panel reversed the district court’s apportionment and imposed joint and several liability on the Railroads and Shell. Id. In effect, the Railroad and Shell were left to pay all response and cleanup costs caused by the bankrupt B&B operations.

The panel began by noting that the “key purpose of [CERLCA’s] scheme is shifting the costs of cleaning up environmental harm from the taxpayers to the parties who benefitted from the disposal of wastes that caused the harm.” 502 F.3d at 792 (internal quotation omitted). Thus, CERCLA is a “super-strict” liability statute. Id. Yet, as the panel recognized, CERCLA does not specify whether liability between potentially responsible parties (“PRPs”) is joint and several or merely several. Id. at 793. Although the Ninth Circuit generally permits the apportionment of liability when the harm is divisible, no cases had directly presented the question of apportionment between PRPs. Id.

The panel agreed with the other circuits that apportionment is available at the liability stage. Id. However, the panel diverged from other circuits’ adoption of the principles of Section 433A of the Second Restatement of Torts. Id. at 795. In the panel’s view, the Second Restatement’s approach was a poor fit with CERCLA in that distinctions existed between causation under CERCLA and general negligence and in that the Second Restatement’s concept of harm did not correspond with CERCLA’s priorities. Id. In instances where several PRPs are polluters themselves, the Second Restatement’s principles would make sense. Id. at 796-97. But the panel reasoned that this situation was different: each PRP had an entirely different role in the contamination process. Id. Thus, the panel “adjusted” the application of the Second Restatement’s causation and harm principles to the present situation. Id. at 797. Where a landowner is a PRP, the landowner can only establish divisibility by demonstrating that portions of the contamination were in no way traceable to the portion of the facility the landowner owned at the time of disposal. Id. With regard to harm, the panel concluded that “harm” under CERCLA meant the contamination traceable to each defendant. Id. at 798.

The panel further concluded that apportionment of harm under CERCLA is only allowed when there is a reasonable basis for determining the contribution of each PRP to the harm. Id. In reviewing the district court’s decisions, the Ninth Circuit panel adopted the approach of the Fifth and Eighth Circuits with an additional “refinement” taken from a dissenting Fifth Circuit judge. Id. at 800-01. Specifically, the panel reviewed whether the harm was apportionable under the de novo standard, and it reviewed whether the evidence submitted was sufficient to

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establish a reasonable basis for apportionment for clear error. Id. at 800-01. The basis for apportionment was not reasonable according to the panel because the district court impermissibly looked to equitable considerations such as relative fault in determining apportionment. Id. at 800. The panel agreed that the district court’s factfinding, specifically its numbers, were correct. Id. at 802. Yet, the panel found that there was insufficient evidence of records estimating the amount of leakage attributable to activities on the Railroad parcel. Id. at 802-04. Although it noted that the failure to keep these records was “quite understandable,” the panel held:

[T]hese practical considerations cannot justify a “meat-axe” approach to the divisibility issue, premised on percentages of land ownership, as a means of justifying for the difficulties in proving divisibility with precision when PRP status is based on land ownership alone. Such an approach would be tantamount to a disagreement with the imposition of no-fault land ownership liability. Congress, however, created precisely such liability, placing the responsibility to pay for environmental cleanup on parties, such as the Railroads, that profited from the circumstances giving rise to the contamination so that the taxpayers are not left holding the tab. The risk of inadequate information for meaningful division of harm therefore must rest on the responsible parties, even when that information is extremely hard to come by.

Id. at 803. The panel concluded as follows:

It will often be the case that a landowner PRP will not be able to prove in any detail the degree of contamination traceable to activities on its land. A landowner PRP need not be involved at all in the disposal of hazardous chemicals and so will often have no information concerning that disposal or its impact. The net result of our approach to apportionment of liability, consequently, may be that landowner PRPs, who typically have the least direct involvement in generating the contamination, will be the least able to prove divisibility. And contribution is not a complete panacaea since it frequently will be difficult for defendants to locate a sufficient number of additional, solvent parties. [citation omitted]

While the result may appear to fault a landowner PRP for failing to keep records proving the minor connection of its land to the contamination on the facility as a whole, CERCLA is not a statute concerned with allocation of fault. Instead, CERCLA seeks to distribute economic burdens. Joint and several liability, even for PRPs with a minor connection to the contaminated facility, is the norm, designed to assure, as far as possible, that some entity with connection to the contamination picks up the tab. Apportionment is the exception, available only in those circumstances in which adequate records were kept and the harm is meaningfully divisible.

In sum, although most of the numbers the district court used were sufficiently exact, they bore insufficient logical connection to the pertinent question: What part of the contaminants found on the Arvin parcel were attributable to the presence of toxic substances or to activities on the Railroad parcel? We therefore

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reject the district court’s apportionment calculation and hold that the Railroads have failed to prove any reasonable basis for apportioning liability for the costs of remediation.

Id. at 804.

Despite the district court’s detailed fact-findings, and despite the fact means of disproving responsibility for any contamination may not exist, the Ninth Circuit held the Railroads liable for the entire Arvin Site. The broader effects of this holding are chilling. While the panel acknowledged that CERCLA may permit apportionment of liability, it is practically impossibile for the majority of PRPs facing CERCLA actions to come forward with proof that would satisfy the burden of reasonability imposed by the Ninth Circuit. The Ninth Circuit’s holding regarding apportionment of liability under CERCLA conflicts not only with the Second Restateement’s principles, but also with holdings from other circuits that consistently apply those principles. Petition at 2-3.

The Railroads sought en banc review, upon which the panel eliminated a few statements but did not modify its reasoning or conclusions. Petition at 21. Eight judges dissented from the denial of rehearing en banc, concluding that the panel’s opinion disregarded the Second Restatement’s test for apportionment, and that the district court’s findings provided not only a reasonable basis for apportionment of liability, but, “if anything, overestimated the contamination attributable to the Railroad parcel.” Id. at 21-22. The dissenters stated that if the evidence before the district court did not provide a reasonable estimate for apportionment of liability, it would be impossible to ever apportion under CERCLA. Id. at 22.

Upon the denial of rehearing en banc, the Railroads filed a petition for certiorari with the Supreme Court. The Supreme Court granted certiorari on October 1, 2008. The consolidated case has yet to be scheduled for oral argument.

V. Conclusion

The Obama Administration’s environmental policy will almost certainly build upon the Supreme Court’s Massachusetts opinion to regulate greenhouse gas emissions. Likewise, the ECA’s proposed for the nation’s ports and coastline will significantly impact air quality and shipping patterns. Together with the important environmental matters to be addressed by the Supreme Court in this term, these steps provide the foundation for a season of true change in the country’s environmental laws and standards. These changes may significantly impact shipping and port authorities for decades to come.

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