Amicus Curiae Brief — Atlantic Richfield Co. v. United States

v. ites a S

| Supreme Comt, U2,

Nos. 92-500, -506 :

CIn G) he

Supreme Court of the CUnited-States

ATLANTIC RICHFIELD COMPANY and TEXACO, INC.

Petitioners,

Vv.

UNITED STATES OF AMERICA, et al.,

Respondents.

+

SHELL OIL COMPANY and UNION OIL COMPANY,

Petitioners,

Vv.

UNITED STATES OF AMERICA, et al.,

Respondents.

+

ON PETITIONS FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUuIT

‘ «

BRIEF AMICUS CURIAE OF THE

AMERICAN PETROLEUM INSTITUTE IN SUPPORT OF

THE PETITIONERS

+

Daniel M. Steinway G. William Frick

Thomas C. Jackson* Ralph J. Colleli, Jr.

Adam S. Vann Erik Milito

KELLEY DRYE & AMERICAN PETROLEUM

WARREN LLP INSTITUTE

1200 19th Street, NW, Ste 500 1220 L Street, NW

Washington, DC 20036 Washington, DC 20005

(202) 955-9600 (202) 682-8000

Counsel for Amicus Curiae Counsel for Amicus Curiae

*Counsel of Record

THE LEX GROUP®C ¢ One Massachusetts Ave., NW ¢ Suite 670 ¢ Washington, DC 20001 ) \ ¢

2

(202) 789-2400 @ Fax: (202) 789-1911 ¢ www.thelexgroupdc.com n|\ \ \

i

TABLE OF CONTENTS

Page(s)

INTEREST OF THE AMICUS CURIAE..................ccccecsesees 1

SUMMARY OF THE ARGUMENT................cccssssssssseseees 2

REASONS FOR GRANTING THE WRITS ........ eee 4

I. THE NINTH CIRCUIT RULING WILL

HAVE A SUBSTANTIAL IMPACT ON

THE SCOPE OF LIABILITY UNDER

a Ril snvvesictinchneh/sntcsnatisbeseninanisiibasntinacnataantdiestiotiatontonetie 4

A. The Scope of CERCLA “Arranger”

Liability Potentially Affects the

Allocation of Responsibility For

Billions of Dollars in Cleanup Costs ......... 4

B. The Ruling Will Affect

Determinations of Liability In a ‘

Wide Variety of Contexts...........scsscesesesees 10

II. THE NINTH CIRCUIT RULING EXPOSES

MANUFACTURING INDUSTRIES THAT

DO BUSINESS WITH THE UNITED

STATES TO UNREASONABLE AND

INEQUITABLE RISKS OF LIABILITY................. 13

See ix citensiiensiita sh cauarweascaionnninchnnenncncnliongaiiibenaciig 15

ii

TABLE OF AUTHORITIES

Page(s)

CASES

Boeing Co. v. Cascade Corp.,

M7 FE Sk TE77 CO GAR FI cornsisceineeessiionmpnibasnasacenn 15

Cadillac Fairview/California, Inc. v.Dow Chem. Co.,

299 FS LOTS (OU Ce, DICE) co sevssnccnncsrsnnsinsesssnssness 7

Centerior Serv. Co. v. Acme Scrap Iron & Metal Corp.,

153 F.Sel SAG (Gti Cie. 1O GB) cciicenesconencatveevereriseases 5-6

Control Data Corp. v. S.C.S.C. Corp.,

SS F Sek SOG Cs Cae, BID son nccnsscsisvhienieseternevionzere 11

E. Bay Mun. Util. Dist. v. U.S. Dep’t of Commerce,

142 F.3d 479 (D.C. Cir. 1998)............ sissibenighinteies 7,11

Elf Atochem N. Am. v. United States,

914 F. Supp. 1166 (E.D. Pa. 1996)... ceeeeeees 7

FMC Corp. v. U.S. Dep’t of Commerce,

29 FB Sk BSS (Be Cae: FO oacsiv sien ctcessncsarsscivicadstesesoss 7

United States v. Anthony Dell ' Aquila,

Enters. & Subsidiaries,

RGD FSk SEF Ce Cae TI ces scenssiasnswnicincienssnints 12

United States v. Bestfoods,

TOE UF Ze. FE CE svensiieciscrenesesncepeiniisiabeiniansesiiontso 11

United States v. Cent. Eureka Mining Co.,

Be, Ra I ctrensnsenses nsvevesvvewisenncosenszescosisinesicn 6

United States v. Power Eng’g Co.,

125 F. Supp. 2d 1050 (D. Colo. 2000), aff'd,

903 F.3d 1232 (10th Cir. 2002) .........00sserccsereseee 12

United States v. Shell Oil Co.,

13 F. Supp. 2d 1018 (C.D. Cal. 1998) 00... eeeseseee 2

United States v. Shell Oil Co.,

294 F.3d 1045 (9th Cir. 2002) .........ceeseseeees 2, 4, 5,8

United States v. TIC Inv. Corp.,

GB FOG BOSS Gt Cir. TIGS) 0. -cevesviccsccssssseservevene 4,11

United States v. Vertac Chem. Corp.,

OF Se ee Ct, DFO) seicssscccsccceccsesvvsetcvceseanesoes i

STATUTES

Be rs Ee PI i cssessntesssnsnivnternincaasaveninnonsipasssnnsscndacones 1

BE CAEAG.. F PORE i snesescicssscsvessesenesssevsssnvedarievessovesesevonee 11

NG TITY eaiiiicirenvnsinsnsicicuneconintnebsinbavtaesseveenecidinevens 4,10

iv

MISCELLANEOUS

General Accounting Office,

Corps Needs to Reassess Its Determinations

That Many Former Defense Sites Do Not Need

CN Ce ins cenniilhnenchonintetinctinpnsesienasehidaaccnnmtnasennsonises 8

General Accounting Office,

Superfund: Progress and Challenges,

Testimony of David G. Wood, Associate Director,

Before the U.S. Senate Committee on Environment

SN TRC VUES CEFF sv scsistresecsscsinsnsinscseysennevinsevenewstensons 10

John Lord O'Brian & Manly Fleischmann,

The War Production Board Administrative Policies

and Procedures,

13 Geo. Wash. L. Rev. 1 (1944)... cc eeeeeeeee 7,14

Michael T. Janik & Michael Reis,

CERCLA Claims Against the Government:

Rediscovering World War II Contracting Rules ..............00000 6

Nancy Perkins Spyke,

From War Strategy to Waste Strategy: The

Validity of Government CERCLA Liability for

War Production Site Cleanups,

4.N.Y.U. Envtl. LJ. 263 (1995)...........csccsscssssesssees 6,7

National Priorities List for Uncontrolled Hazardous

Waste Sites,

G7 Fed. Rag. G5S15 (Q002)...n....scsececssssrnenssvenessee 9,10

1

The American Petroleum Institute (“API”)

respectfully files this brief amicus curiae in support of

petitioners Atlantic Richfield Company and Texaco, Inc.

in Case No. 02-500 and petitioners Shell Oil Company

and Union Oil Company in Case No. 02-506.! Because

both of the petitions arise out of the same decision of the

U.S. Court of Appeals for the Ninth Circuit and because

the petitions raise substantially the same issue, API is

filing this amicus brief in support of both petitions.”

INTEREST OF THE AMICUS CURIAE

API is a non-profit, nationwide trade association

representing more than 400 member companies engaged

in all aspects of the petroleum and natural gas industry.

API’s members have been identified as potentially

responsible parties at contaminated sites across the

country pursuant to the Comprehensive Environmental

Response, Compensation, and Liability Act, 42 U.S.C. §§

9601-9675 (“CERCLA”), and have participated in cleaning

up many such sites. Moreover, API’s members have

undertaken various activities for and at the direction of

the United States and instrumentalities of the federal

government. Therefore, API and its members have a

substantial interest in the standards for liability for

cleanup costs under CERCLA. In particular, API and its

1 No counsel for any party has authored this brief in whole or in

part. No entities other than API and its members have made

monetary contributions to the preparation and submission of this

brief.

2 Written consent has been obtained from counsel for all

petitioners and the respondent for the filing of this brief pursuant

to Supreme Court Rule 37. The letters reflecting consent have

been filed with the Clerk’s Office.

2

members have a strong interest in the standards for

determining the extent of the federal government's

liability for the costs of cleaning up contamination at

numerous sites throughout the country that are

associated with wartime and other activities performed

by industry on behalf of the United States.

SUMMARY OF THE ARGUMENT

The Court should grant the writs because the

central issue raised in both petitions is a question of

fundamental national importance that should be decided

by this Court. Both petitions arise out of the Ninth

Circuit's decision in United States v. Shell Oil Co., 294 F.3d

1045 (9t Cir. 2002) (“Shell”), in which the court held that

the United States was not liable under CERCLA as an

“arranger” for certain costs of cleaning up the McColl

Superfund Site in Fullerton, California* The court

reached this conclusion despite the federal government's

extensive involvement in the production of aviation fuel

during World War II that resulted in the generation of the

waste material disposed of at the McColl Site, and the

government's effective foreclosure of other options for

managing the waste.

The Ninth Circuit's ruling is of critical importance.

First, the precedent established by the ruling could have

3 The United States conceded that it had arranged for the

disposal of waste at the McColl Site that was associated with the

production of benzol (which was in turn used in the production of

aviation gasoline), and therefore was liable under CERCLA for the

costs of cleaning up such waste. United States v. Shell Oil Co., 13 F.

Supp. 2d 1018, 1024 (C.D. Cal. 1998). The benzol-related waste

constituted 5.5% of the total waste at the McColl Site. Id. The

petitions in this case relate to the costs of cleaning up the “non-

benzol” waste at the Site.

3

important impacts on the scope of “arranger” liability

under CERCLA generally, as well as on the extent to

which the federal government will be required to

contribute to the cost of cleaning up _ historic

contamination caused by activities undertaken by private

parties on behalf of and at the direction of the United

States. The decision will in many cases determine who

will have ultimate responsibility for paying the billions of

dollars that have been and will be spent in cleaning up

numerous sites across the country.

In addition, the Ninth Circuit’s decision to limit

the scope of the federal government's liability for ~the

environmental consequences of activities in which the

government was extensively involved and which were

being undertaken for its benefit will undoubtedly affect

future commercial relationships between industry and

the United States. The decision creates a significant and

inequitable risk of liability for industries that supply the

United States with goods and services urgently needed in

time of war or other national emergencies. The decision

could in many instances force industries to accept the risk

of such liability, despite its inequity, because the

alternative of refusing to undertake work that serves a

vital national interest is simply untenable or even

unavailable. For these reasons and the reasons set forth

in the petitions, the Court should grant the writs to

provide direction to the lower courts in addressing these

issues of fundamental national importance.

4

REASONS FOR GRANTING THE WRITS

I. THE NINTH CIRCUIT RULING WILL HAVE A

SUBSTANTIAL IMPACT ON THE SCOPE OF

LIABILITY UNDER CERCLA

A. The Scope of CERCLA “Arranger”

Liability Potentially Affects the

Allocation of Responsibility For Billions

of Dollars in Cleanup Costs

The decision of the Ninth Circuit will have a

significant impact on parties who face potential liability

for the costs of cleaning up thousands of contaminated

sites across the country. In particular, the Ninth Circuit's

ruling will have an immediate and direct impact on the

scope of liability under section 107 of CERCLA, 42 U.S.C.

§ 9607, for those who are alleged to have arranged for the

disposal of hazardous substances at a site. In this case,

the Ninth Circuit ruled that the United States did not

arrange for the disposal of certain hazardous substances

at the McColl Site and therefore should not be held

responsible for cleaning up the vast majority of the

contamination at this site. The court based its decision on

the grounds that the U.S. neither owned the materials

used in the manufacturing process that generated the

waste nor exercised actual control over the waste disposal

process. Shell, 294 F.3d at 1056-57. In doing so, the court

rejected a test for imposing “arranger” liability on the

basis of the authority to control the processes related to

the generation and disposal of waste or the exercise of

extensive indirect forms of control over such generation

and disposal. Thus, the Ninth Circuit adopted a very

narrow view of “arranger” liability that is sharply at odds

with the rulings of other federal appellate courts. See, e.g.,

United States v. TIC Inv. Corp., 68 F.3d 1082 (8t* Cir. 1995)

5

(“TIC”). The impact of the ruling will be to effectively

exempt certain types of parties trom CERCLA liability in

many cases, including those parties that exert substantial

influence over the disposal of hazardous waste or have

the authority to control such disposal but who do not

exercise such control in ways that are direct and overt.

The ruling will clearly affect the allocation of

CERCLA liability at sites within the Ninth Circuit. In

addition, the Ninth Circuit’s decision can be expected to

serve as a precedent for courts in other circuits that have

not yet definitively established standards for determining

the scope of “arranger” liability. Even in those circuits

where existing case law sets forth standards for

“arranger” liability that conflict with the Ninth Circuit's

holdings in this case, the analysis in Shell may

nevertheless influence lower courts, for example, through

the Ninth Circuit’s narrow reading of precedents from

other circuits. In any event, parties assessing their

potential liability as arrangers in other circuits will be

forced to weigh the potential influence of the Ninth

Circuit’s decision as indicating a trend in the case law

toward a narrow view of “arranger” liability. Thus, the

impacts of the Ninth Circuit decision could be felt far

outside that court's jurisdiction.

The potentially dramatic impact of the Ninth

Circuit’s ruling in this case is underscored by the

potentially enormous cost of the cleanups involved at

contaminated sites to which the Ninth Circuit's ruling

could apply, which could easily total billions of dollars.

As the U.S. Court of Appeals for the Sixth Circuit has

observed, “[w]ho bears the burden for hazardous waste

cleanup costs is an issue of great consequence” in light of

the steadily rising costs of cleaning up_ these

contaminated sites. Centerior Serv. Co. v. Acme Scrap Iron

6

& Metal Corp., 153 F.3d 344, 349 n.9 (6% Cir. 1998) (noting

that the average cost of cleanup at a CERCLA site had

reached 25 to 30 million dollars).

The impacts of the Ninth Circuit’s ruling that the

United States is not liable for the costs of cleaning up

contamination associated with the production of

materials for the war effort will be felt most directly in

cases involving the cleanup of other contaminated sites

related to the production of materials by industry for the

U.S. during both World Wars and other national

emergencies. These activities involved not only the

production of fuels, but also range from the manufacture

of military equipment to the mining of necessary

minerals. For example, this Court has previously

examined the extensive involvement of the War

Production Board (“WPB”) in the mining industry as part

of the nation’s mobilization efforts during World War II.

See United States v. Cent. Eureka Mining Co., 357 U.S. 155

(1958) (claim for taking of private property resulting from

WPB order directing the shutdown of certain gold mines).

In fact, the scope of the WPB’s authority was “astonishing

in its breadth” and extended to many aspects of the

American wartime economy. Nancy Perkins Spyke, From

War Strategy to Waste Strategy: The Validity of Government

CERCLA Liability for War Production Site Cleanups, 4

N.Y.U. Envtl. L.J. 263, 267 (1995) (“War Strategy”). See also

Michael T. Janik & Michael Reis, CERCLA Claims Against

the Government: Rediscovering World War II Contracting

Rules, 66 Fed. Cont. Rep. (BNA) 207, 213-14 (1996)

(reviewing the “extraordinary new world of federally

ordered limitations, schedules, quotas, and employment

rules” created between 1942 and 1945). The exercise of

this authority led to the “direction and regulation of the

industrial effort by the Federal Government, on a scale

7

and of an intensity unprecedented in the annals of our

nation.” John Lord O’Brian & Manly Fleischmann, The

War Production Board Administrative Policies and Procedures,

13 Geo. Wash. L. Rev. 1, 4 (1944) (“War Production Board”).

The extensive involvement of the federal

government in war production activities has already

given rise to a number of cases involving claims for

recovery of the costs incurred in cleaning up the

hazardous waste generated by these efforts. See, e.g.,

FMC Corp. v. U.S. Dep’t of Commerce, 29 F.3d 833 (3d Cir.

1994) (“FMC”) (liability for cleanup of wastes associated

with rayon production); E. Bay Mun. Util. Dist. v. ULS.

Dep’t of Commerce, 142 F.3d 479 (D.C. Cir. 1998) (zinc

mining) (“East Bay”); Cadillac Fairview/California, Inc. v.

Dow Chem. Co., 299 F.3d 1019 (9 Cir. 2002) (synthetic

rubber production); Elf Atochem N. Am. v. United States,

914 F. Supp. 1166 (E.D. Pa. 1996) (production of poison

gas). These claims also extend to sites that were

contaminated as a result of production of materials for

other war efforts. See, e.g., United States v. Vertac Chem.

Corp., 46 F.3d 803 (8 Cir. 1995) (production of Agent

Orange for use in Vietnam). Given that “the number of

private sites that could contain wastes derived from war

production activities is potentially enormous,” War

Strategy, 4 N.Y.U. Envtl. LJ. at 269, the number of such

claims can be expected to increase in the future.

In all of these cases, the courts have been or will be

called upon to determine whether the costs of war should

be placed solely on individual companies contributing to

the war effort or should instead be shared by society as a

whole. The latter result has been held by the U.S. Court

of Appeals for the Third Circuit to be “neither untoward

nor inconsistent with the policy underlying CERCLA.”

FMC, 29 F.3d at 846. The Ninth Circuit itself recognized

8

in this case that cleanup costs from wartime activities

should properly be seen “as part of the war effort for

which the American public as a whole should pay.” 294

F.3d at 1060. Nevertheless, the Ninth Circuit held that the

United States had no responsibility for cleaning up the

vast majority of the contamination at the McColl Site,

thereby establishing a precedent that places the bulk of

cleanup costs from wartime activities on individual

companies rather than on society as a whole.

The number of potentially contaminated sites

associated with wartime activities and other defense-

related efforts is suggested by the federal government's

own cleanup activities. The Department of Defense has

already investigated or otherwise addressed

contamination at over 25,000 sites associated with

military or other defense-related activities, including

nearly 3,000 Formerly Used Defense Sites which were

previously owned, leased or operated by the Department

of Defense. U.S. Dep’t of Defense, Fiscal Year 2001 Defense

Environmental Restoration Program Annual Report to

Congress 33 (2002). The Department of Defense has

estimated that the cost of cleaniig up the Formerly Used

Defense Sites alone may be $15 to 20 billion. General

Accounting Office, Corps Needs to Reassess Its

Determinations That Many Former Defense Sites Do Not Need

Cleanup 1 (2002).

Similarly, the Department of Energy has

undertaken extensive efforts “to mitigate the risks and ©

hazards posed by the legacy of nuclear weapons

production.” Office of Envtl. Mgt., U.S. Dep’t of Energy,

Linking Legacies: Connecting the Cold War Nuclear Weapons

Production Processes to Their Environmental Consequences 1

(1997). Nuclear weapons production activities have

resulted in a legacy of 1.5 billion cubic meters of

9

contaminated water and 73 million cubic meters of

contaminated solid media. Id. at 71. This contamination

is found, among other places, at sites that are being

cleaned up by the U.S. Army Corps of Engineers (the

“Corps”) under the Formerly Used Sites Remedial Action

Program (“FUSRAP”) at a cost of up to $2.89 billion. U.S.

Army Corps of Engineers, Formerly Used Sites Remedial

Action Program (FUSRAP): Report to Congress 3 (1997). The

Corps has clearly stated its intent to seek reimbursement

of these cleanup costs from any private parties that may

be liable for such costs under CERCLA. Id. at 32. Such

cost recovery efforts by the federal government will

almost certainly give rise to additional claims regarding

the government's status as an “arranger” or “operator”

that will be subject to the standards enunciated by the

Ninth Circuit in this case.

Moreover, as discussed below, the Ninth Circuit's

ruling may well affect even more broadly the

determination of which non-governmental parties -

including “arrangers,” “operators” and others - are

generally liable for cleaning up contaminated sites under

the CERCLA program. There are thousands of

contaminated sites around the country, not involving past

activities of the government, that may give rise to claims

for cost recovery or contribution under CERCLA. For

example, as of October 1, 2002, there were 1,234 sites on

the National Priorities List (“NPL”), which includes the

sites that the U.S. Environmental Protection Agency

(“EPA”) has determined pose the highest risk to human

health and the environment. National Priorities List for

Uncontrolled Hazardous Waste Sites, 67 Fed. Reg. 65,315,

65,317-18 (2002). EPA has estimated that, through Fiscal

Year 1998, potentially responsible parties had committed

to conduct $15.5 billion in cleanups at such “Superfund”

10

sites while EPA itself has spent $16 billion to fund

cleanups. General Accounting Office, Superfund: Progress

and Challenges, Testimony of David G. Wood, Associate

Director, Before the U.S. Senate Committee on

Environment and Public Works 7 (1999). Moreover, a

congressionally-authorized study recently concluded that

the total cost to fund cleanups at these sites from Fiscal

Year 2000 through Fiscal Year 2009 could be as much as

an additional $18.3 billion. Resources For the Future,

Superfund’s Future: What Will It Cost? xxiii (2001). Thus,

the amounts at stake in cost recovery and contribution

claims under CERCLA will continue to be enormous and

the issue of “arranger” liability will undoubtedly recur

with frequency in connection with such claims even when

the government is not a potentially responsible party.

In short, the decision of the Ninth Circuit in this

case is likely to have wide-ranging impacts, potentially

affecting the allocation of cleanup costs totaling billions of

dollars at thousands of contaminated sites across the

country. The issues raised by the Ninth Circuit's ruling

are consequently of tremendous import for industry and

for the nation as a whole.

B. The Ruling Will Affect Determinations of

Liability In a Wide Variety of Contexts

The impact of the Ninth Circuit’s decision will

almost certainly extend beyond the bounds of “arranger”

liability. For example, the criteria for determining the

extent of liability in many other areas of CERCLA

jurisprudence involve concepts of control or authority to

control activities that are very similar to the standards for

determining “arranger” liability under that law. In

particular, the courts have held that liability as an

“operator” under section 107(a) of CERCLA is

11

determined based on a party’s actual control over a

facility or its authority to control the disposal of

hazardous substances. See, e.g., East Bay, 142 F.3d at 484-

85. This test is very-similar to the test established in some

circuits for determining “arranger” liability, see, e.g., TIC,

68 F.3d at 1087-88, differing only in that the decision as to

whether “operator” or “arranger” liability applies to a

particular party generally depends on whether the

hazardous substances were disposed of at the party’s

facility (resulting in possible “operator” liability) or at an

off-site location (resulting in possible “arranger” liability).

Thus, the Ninth Circuit’s ruling likely will have

substantial implications for determinations of “operator”

liability under CERCLA as well.

The Ninth Circuit’s ruling may also impact the

CERCLA liability of many other parties - including

financial institutions or commercial lenders, corporate

parents, officers and directors - whose liability for

cleanup costs may depend on the extent of their

participation in the management of a facility or on their

authority to control activities at a facility. For instance,

CERCLA provides that commercial lenders may be held

liable as “operators” if they participate in the

management or operational affairs of a facility. See 42

U.S.C. § 9601(20)(F). Similarly, this Court has held that a

corporate parent can be liable for disposal of hazardous

substances by a subsidiary if the parent exercised a

sufficient degree of control over the facility that produced

the hazardous waste. United States v. Bestfoods, 524 U.S.

51, 71 (1998) (“Bestfoods”). See also Control Data Corp. v.

S.C.S.C. Corp., 53 F.3d 930, 937 (8th Cir. 1995) (president of

corporation held liable as an “operator” under CERCLA

based on his control of facility operations).

12

The concept of imposing liability for the effects of

pollution based on a party’s control of, or authority to

control, the facility generating the pollution even extends

beyond CERCLA and is embodied in many other

environmental statutes. For example, liability has been

imposed on operators of facilities under the federal

Resource Conservation and Recovery Act based on the

extent of a party’s control of or authority to control

operations at a facility. See United States v. Power Eng’g

Co., 125 F. Supp. 2d 1050, 1070 (D. Colo. 2000), aff'd, 303

F.3d 1232 (10% Cir. 2002) (“Power Eng’g”). Likewise, the

courts have imposed “operator” liability for violations of

the federal Clean Air Act on parties based on a significant

degree of control over a facility. See, e.g., United States v.

Anthony Dell’Aquilla, Enters. & Subsidiaries, 150 F.3d 329,

333 (3d Cir. 1998). In making these determinations, the

courts have looked to decisions on “operator” liability

under CERCLA - including this Court's decision in

Bestfoods - in light of the similarities in language among

environmerttal statutes and their shared broad remedial

purposes. See id. at 334; Power Eng’g, 125 F. Supp. 2d at

1070 (“Although these tests have been devised to

determine whether an individual or entity is an ‘operator’

under [CERCLA], there is no reason not to apply them to

the ‘operator’ inquiry under the RCRA given the

similarity of the definitions in both statutes.”). Thus, it is

reasonable to conclude that the Ninth Circuit's decision in

this case, while arising in the context of “arranger”

liability under CERCLA, may well have broader

ramifications.

13

II. THE NINTH CIRCUIT RULING EXPOSES

MANUFACTURING INDUSTRIES THAT DO

BUSINESS WITH THE UNITED STATES TO

UNREASONABLE AND INEQUITABLE RISKS

OF LIABILITY

The ruling of the Ninth Circuit creates a significant

and unreasonable risk that manufacturing industries,

such as the petroleum and natural gas industry, that may

be called on or encouraged to do business with the

United States in order to further important national goals

will be exposed to potentially enormous liability for

environmental contamination that is largely attributable

to the government itself. The Ninth Circuit's decision

sends a clear message to manufacturing industries that

the federal government will not take - and will not be

required by the courts to take - responsibility for the

long-term environmental consequences of activities

undertaken by private industry at the behest of the

United States, even where the government has made

critical decisions and exercised substantial control over

the activity resulting in the contamination. In so doing,

the decision compounds the fundamental inequity of this

result because it may put industry in the position of

having no acceptable choice but to accept these liability

risks.

At first glance, companies would appear to have at

least two options in responding to the specter of multi-

million dollar liabilities for environmental cleanup

associated with production of equipment or material for

the United States, i.e., voluntarily accepting the risk of

liability despite its unfairness, or simply refusing to do

business with the United States. However, this is really a

Hobson's choice. On the one hand, although a company

could choose to accept the risk of liability for cleaning up

~ ate.

14

contamination that is ultimately the product of decisions

made by the federal government, that outcome is

decidedly inequitable and potentially enormously

expensive. On the other hand, the alternative - avoiding

liability by refusing to do business with the United States

and thus refusing to contribute to national security or

other important national goals - would be simply

unacceptable for companies striving to be good corporate

citizens. (In fact, the oil and natural gas industry’s

historic cooperation with the government during

previous national crises demonstrates such a commitment

to good corporate citizenship.) Moreover, the “option” of

not doing business with the United States may be

overshadowed, as it was during World War II, by the

threat of government seizure of a facility that refuses to

participate voluntarily in the government's efforts; or that

“option” may simply not exist if the government has

ordered the company to comply with government

directives.

The current war on terrorism and increased

emphasis on homeland security demonstrate that the

timing and nature of national emergencies cannot be

predicted with any certainty. Industry may be called on

at any time to provide necessary equipment or other

materials to wage war, combat the effects of biological or

chemical weapons or provide security for the nation’s

infrastructure. If industry plays its part in such situations

4 The United States in fact exercised both types of authority on

occasion during World War II. See, e.g., War Production Board, 13

Geo. Wash. L. Rev. at 9-10 (discussing “compulsory orders which

must be accepted under penalty of plant seizure and criminal

sanctions”). Thus, in any future national emergency, potential

government seizure of an industrial facility would not be seen as

merely a hypothetical possibility.

15

willingly - as it has done consistently in the past - or is

compelled by the government to provide essential goods

and services, it should not be penalized by being forced

to bear sole responsibility for multi-million dollar

cleanups of environmental contamination largely

attributable to the government's own decisions. Such an

outcome undermines one of the primary goals of

CERCLA - i.e., the equitable distribution of cleanup costs.

See Boeing Co. v. Cascade Corp., 207 F.3d 1177, 1185 (9% Cir.

2000) (“To leave one party shouldering the entire cost of

investigation and remediation while another rides for free

frustrates th[e] goal [of imposing the ultimate cost of

cleanup on the parties responsible for the contamination],

rather than ensuring that those who caused the

contamination pay their fair share of the costs associated

with clean-up.”)

Accordingly, the Court should grant the writs to

address the impact of the Ninth Circuit’s ruling in

creating inequities in future commercial relations

between vital industries and the federal government.

CONCLUSION

The decision of the Ninth Circuit will have

potentially wide-ranging implications in determining

who will bear the cost of cleaning up the legacy of

decades of production efforts undertaken by industry on

behalf of the United States to defend the country. In

addition to its implications for activities undertaken in

the past, the decision will also impact the relationship of

industry and the federal government in the future,

particularly in times of war or other national

emergencies. Moreover, the decision could affect the

scope of liability under CERCLA even more generally

and may well affect the scope of liability under other

16

environmental statutes. Given the very significant import —

of the Ninth Circuit's decision, the Court should grant the

writs in order to provide guidance to the lower courts on

these critical issues.

Dated: December 2, 2002

Respectfully submitted,

Daniel M. Steinway

Thomas C. Jackson*

Adam S. Vann

Kelley Drye & Warren LLP

1200 19% Street, NW, Ste 500

Washington, DC 20036

(202) 955-9600

G. William Frick

Ralph J. Colleli Jr.

Erik Milito

American Petroleum

Institute

1220 L Street, NW

Washington, DC 20005

(202) 682-8000

Counsel for Amicus Curiae

Counsel of Record"