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United States v. Shell Oil Co.

Citation: 32 ELR 20783
No. Nos. 00-55027, -55077, (9th Cir., 06/28/2002) reissued opinion

The court affirms in part and reverses in part a district court decision that found the U.S. government and oil companies liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for dumping acid sludge from the production of aviation gas during World War II and that allocated the response costs for cleanup of the acid sludge. The government argued that the district court erred in holding that CERCLA §120(a)(1) waives sovereign immunity, that it was not liable as an arranger of the nonbenzol waste, and that it was not liable for 100% of the response costs at the site. The oil companies argued that the district court erred in rejecting its claim that they were not liable under the CERCLA §107(b)(2) "act of war" defense. The court originally issued an opinion in the case, but withdrew the opinion when the oil companies petitioned for en banc review. When the petition for en banc review was denied, the opinion was reissued. The court first holds that CERCLA §120(a)(1) waives the government's sovereign immunity. The U.S. Supreme Court has ruled such, CERCLA §120 does not apply solely to federal facilities, and §120 is not limited to cases where the government has taken nongovernmental activities. However, the court holds that the government is not liable as an arranger of nonbenzol waste. Under a direct arranger theory, the government did not directly participate in the arrangements for waste disposal. Similarly, the court holds that the government is not liable as an arranger under a broader theory of sufficient control over the process that created the waste. The broad theory of arranger liability applies where the potentially responsible party is the source of the pollution or actually managed its disposal. Here, the government was not the source of the pollution and although it had the authority to control the disposal of the acid sludge, it did not do so. Thus, the United States is not responsible for the cleanup costs for the nonbenzol waste. The court then holds that because the government conceded liability as an arranger of the benzol waste, the district court has the discretion to allocate response costs among the parties based on equitable factors, and the equitable factors relied on by the district court support an allocation to the government of 100% of the response costs for the benzol waste. The court further holds that the "act of war" defense is not available to the companies because any action by the government under the War Powers Clause of the U.S. Constitution, such as requiring increased aviation gas production, does not constitute an "act of war," and even if it did the companies did not show that the disposal of the acid sludge was caused solely by an act of war as is required by CERCLA §107(b)(2).

[Prior decisions in this litigation are published at 22 ELR 20791, 24 ELR 20877, 29 ELR 20027, and 32 ELR 20468.]

Counsel for Plaintiff
Todd S. Kim
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Ronald L. Olson
Munger, Tolles & Olson
355 S. Grand Ave., 35th Fl., Los Angeles CA 90071
(213) 683-9100

Fletcher, J. Before Trott and Thomas, JJ.