February 6th, 2012
Groundwater at many commercial properties in Long island and suburban areas of New York has been contaminated from discharges to dry wells, leaching pools and septic systems. In the 1980s, the New York State Department of Environmental Conservation (NYSDEC) frequently used consent orders issued pursuant to Title 17 of the Environmental Conservation Law which prohibits discharges of wastewater to groundwater without a permit to address groundwater contaminated from these sources.
Because the orders did not resolve CERCLA liability, they do not qualify as administrative settlements that would allow the remediating party to bring a contribution action under section 113(f) of CERCLA. Recently, though, federal district court for the northern district of New York suggested that the costs might be recoverable as removal actions under section 107 of CERCLA.
In New York State Elec. & Gas Corp. v. FirstEnergy Corp., 2011 U.S. Dist. LEXIS 101201 (N.D.N.Y. 9/7/11), a predecessor of New York State Electric and Gas (NYSEG) owned and operated manufactured gas plants throughout New York State. NYSEG sought recovery of its response costs from First Energy under veil piercing and successor liability theories. Following a bench trial, the court found First Energy liable as an owner and operator of the sixteen sites during all or portions of the period from 1922 through 1940. The court then allocated liability between the two principal parties based on the the volume of manufactured gas produced at the facilities during their relevant periods of ownership and operation.
First Energy filed a motion for reconsideration. One of the findings that First Energy challenged was the applicable statute of limitations for the cleanup performed at the Plattsburgh MGP site. In the mid-1970s, the NYSDEC became aware of seepage of coal tar into the Saranac River. Apparently, the former MGP had discharged a coal tar/water mixture to an on-site lagoon that had been located approximately 30 feet from the Saranac River. After the tar in the emulsion settled to the lagoon bottom, the remaining water was discharged without further treatment into the Saranac River.
In 1981, NYSEG entered into an order with the DEC pursuant to ECL 17-501 to voluntarily undertake a remedial project to prevent coal tar from reaching the Saranac River from the tar lagoon and to remove coal tar from the river. NYSEG installed a bentonite-soil slurry wall to isolate contamination in the lagoon pond, excavated contaminated sediments and riverbank soils, deposited the excavated materials into a second containment area abutting the coal tar pond containment, and then constructed a second bentonite-soil slurry wall around this containment area. Both containment cells were capped and covered with topsoil. NYSEG also constructed a bentonite-concrete slurry wall adjacent to the Saranac River to halt further migration of coal tar that had already passed the limits of the containment areas. The 1981 consent order did not require NYSEG to conduct any investigation or perform response actions in the area where the former MGP plant was located.
In the early 1990s, coal tar was once again reported to be seeping into the river. NYSEG subsequently entered into a multi-site order on consent in 1994 that required the company to investigate and implement necessary response actions at 33 former MGP sites, including the Plattsburgh property. From 2004-2010, NYSEG performed response actions at the PLattsburgh site consisting of excavating coal-tar wastes from three gas holder foundations and tar lagoon, and other areas where coal tar was found. NYSEG has begun developing a remedial program for the river. NYSEG incurred over $32MM in response costs at the Plattsburgh Site and estimated the costs reach $42MM.
NYSEG sought to recover its response costs for some of the former MGPs from First Energy. In addition to arguing that it was not liable under veil piercing or successor liability theories, First Energy argued that the six-year statute of limitations for remedial actions had expired because the lawsuit had been filed more than six years after the start of the remedial action. NYSEG responded that the work constituted removal rather than remedial action and its claim was not barred because the work under the 1981 Consent Order addressed violations of state clean water laws, and was not pursuant to CERCLA.
The court found that primary purpose of the 1981 consent order was to address migration of coal tar emanating from the tar lagoon located on the site into the Saranac River and that the order was issued under the authority of ECL 17-501, not CERCLA or the state superfund law. The court also said that work was not intended to be a comprehensive investigation and remediation of the human health and environmental concerns associated with coal tar. Supporting this conclusion, the court explained, was the fact that while some limited sampling was performed where the former MGP plant had been located, the focus of the consent order was the tar lagoon and the migration of tar from that point to the Saranac River. Indeed, the court noted that New York had not yet identified coal tar as a hazardous waste in 1981. Thus, the court concluded that the actions taken pursuant to the 1981 DEC consent order did not constitute a remedial action under CERCLA sufficient to trigger the six-year statute of limitations.
The court then went on to say that if it was required to categorize the work performed under the 1981 Consent Order to resolve the statute of limitations issue, it would hold that the work was more akin to a removal action.