Cole County Regional Sewer District v. United States

No. 249-88L (22 Cl. Ct. 551) (Cl. Ct. February 7, 1991)

In a claim for money damages under the Tucker Act, the court holds that the Environmental Protection Agency (EPA) acted within its discretion under the Federal Water Pollution Control Act (FWPCA) in withholding additional funding from a municipality for the acquisition of an existing wastewater treatment facility. The court first holds that it has jurisdiction, because the Claims Court historically has asserted jurisdiction under the Tucker Act over cases involving federal grant funds. Further, the court finds that the plaintiff maintains no continuing grant relationship with EPA and seeks monetary compensation only for past injury. The court next holds that the municipality's purchase of the wastewater treatment facility does not satisfy EPA's regulatory criteria for allowable wastewater treatment funding under the FWPCA, because the facility does not provide new pollution control benefits. Congress provided EPA with considerable latitude to allocate funds in a manner that will achieve the most progress in water quality at the least cost. EPA reasonably concluded that the purchase of treatment facilities that add nothing to overall wastewater treatment is not eligible for grant funding. Deferring to EPA's interpretation of its regulations on funding eligibility, the court holds that EPA properly applied those regulations to the municipality's acquisition of the treatment facility. Finally, the court holds that, although the state required the municipality to acquire the facility as a condition to funding, it did so to regionalize wastewater treatment systems, not to improve local pollution control.

Counsel for Plaintiff
Mark W. Comley
Brydon, Swearengen & England
Hammond Bldg., 312 E. Capitol Ave., P.O. Box 456, Jefferson City MO 65102
(314) 635-7166

Counsel for Defendant
Jon M. Lipshultz
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

[21 ELR 20921]

FUTEY, Judge.

This case is before the court for review of an administrative agency decision. Plaintiff, Cole County Regional Sewer District (RSD), contends that the United States Environmental Protection Agency (EPA) committed an abuse of discretion in refusing to award plaintiff additional grant funding under the Clean Water Act, 33 [21 ELR 20922] U.S.C. § 1251 et seq. (CWA). Defendant maintains that the EPA decision to withhold this funding was entirely consistent with applicable regulations and longstanding EPA policy, and should, therefore, not be disturbed by the court. For the reasons stated below, the court grants summary judgment in favor of defendant and denies plaintiff's motion for summary judgment.¹

Factual Background

This case involves a series of grants authorized by the EPA to finance an area-wide wastewater treatment system located in Missouri. Under Title II of the CWA, the EPA Administrator may award federal grants to a municipality for the construction of publicly-owned wastewater treatment works. 33 U.S.C. § 1281 et seq. These grant funds are appropriated by Congress on an annual basis and allotted to the states in accordance with section 205 of the CWA. 33 U.S.C. § 1285(c). The funds are, thereafter, obligated to individual projects within the state. In order to receive funding for a proposed project, the costs of that project must be allowable under Appendix A of Subpart I, 40 C.F.R. Part 35. In addition, a municipality must submit a detailed application to the state. The state must certify that the project is entitled to intrastate priority. The state may not certify a project for grant assistance unless the application meets various requirements set forth in the regulations. 40 C.F.R. § 35.2100 et seq. The EPA is ultimately responsible for determining whether the project meets the requisite criteria for grant award as established by statute and regulation. 33 U.S.C. §§ 1281(a), 1283, and 1284. The Administrator's approval of a municipal application is "deemed a contractual obligation of the United States for the payment of its proportional contribution to such project." 33 U.S.C. § 1283(a)(1).

Plaintiff submitted an application for a construction works grant to the Missouri Department of Natural Resources (MoDNR). Plaintiff sought funding for a project known as the Gray's Creek Wastewater Collection Facilities Project, which involved the construction of a series of wastewater treatment works in the Gray's Creek area. The project was designed to eliminate wastewater discharges in the Binder Basin watershed by rerouting them to a Jefferson City treatment facility for eventual discharge in the Missouri River. In April of 1983, Doug Garrett, a MoDNR representative, wrote to RSD concerning the project and related the following:

It is the state's opinion that the most critical problem facing the RSD will be acquiring the flow of the Binder Basin Sewer Company service area. We have been informed in the past that the RSD would obtain acquisition; if the RSD fails to do this future grant funding will be jeopardized. Also, failure to acquire the flow of the Sewer Company service area could result in the recovery of the previous Step 3 grant by the EPA.

Administrative Record (A.R.) No. 28c.

Mr. Garrett further advised RSD by letter of May 10, 1983:

To clarify our position, we expect the District to assume the flow of the Binder Basin Sewer Company Area, not the entire company. It is our understanding that you will pursue this matter by initiating negotiations with the Company. [Emphasis added.]

A.R. No. 28d.

In an effort to develop a regional wastewater treatment program, the MoDNR and the Missouri Clean Water Commission (Commission) issued a priority certification to the EPA on behalf of plaintiff on September 20, 1983.²

Plaintiff received several construction grants under Title II of the CWA for an interceptor and force main system. This system was developed to intercept the Binder Basin sewer flow and direct the flow to the Jefferson City secondary treatment facility.³ The Binder Basin Sewer Company (Binder Basin) was a privately-owned company located within the Cole County regional sewer district. The Binder Basin facility consisted of a three cell lagoon, a mechanical plant, and sewer connection lines. The facility discharged into streams flowing into Binder Lake. Two of these grants, issued to RSD on October 12, 1983 and September 14, 1984, contained the following condition: "[t]he flow from Binder Basin Sewer Company will be eliminated."⁴

Following EPA approval, RSD initiated negotiations with Binder Basin in an effort to meet the conditions imposed by the two grants. Binder Basin rejected all proposals for a leasing or "joint control" arrangement between the two concerns, and insisted that RSD purchase the entire facility from the company. RSD's negotiation efforts eventually resulted in the acquisition of the Binder Basin plant in 1986 for $205,700.00.⁵

On February 7, 1984, RSD filed a request with MoDNR for an increase in grant funds under grant number C290932-04 in order to cover the cost of acquiring the Binder Basin facility. MoDNR denied the request on March 26, 1984, concluding that RSD was not eligible for such funding under the regulations then in effect. Under those regulations, the purchase of an existing wastewater works was a compensable cost only if "[t]he acquisition, in and of itself, considered apart from any upgrade, expansion or rehabilitation, provide[d] new pollution control benefits." 40 C.F.R. § 35.2350, App. A (1984).⁶ Following discussions between MoDNR and RSD representatives, MoDNR agreed to reconsider the March 26, 1984, decision. On August 1, 1984, MoDNR upheld its previous determination that the costs associated with the purchase of Binder Basin were ineligible for grant participation. In the decision, MoDNR concluded that RSD's acquisition of Binder Basin would not, in and of itself, provide new pollution control benefits and, therefore, was not an "allowable cost" under 40 C.F.R. Part 35, Subpart I, App. A (1984).

RSD appealed the MoDNR decision to the EPA pursuant to 40 C.F.R. Part 30, Subpart L. On November 27, 1984, the disputes decision official of the EPA upheld the MoDNR final decision of August 1, 1984. The disputes decision official determined that MoDNR incorrectly applied the 1984 regulations, rather than the 1982 regulations in effect at the time of grant award, in reaching his decision. The disputes [21 ELR 20923] decision official nevertheless sustained the MoDNR decision as consistent with EPA policy memoranda issued prior to grant award. RSD appealed this decision to the Regional Administrator, EPA Region VII, on December 13, 1984. The Regional Administrator appointed a panel to review the decision. The panel conducted an informal conference with RSD to discuss the eligibility issue. At the conference, RSD challenged the propriety of MoDNR's inclusion of the grant condition for the first time. The Regional Administrator affirmed the disputes decision official's denial of grant funding for Binder Basin on January 2, 1987. The Administrator further ruled that RSD untimely raised the question of the propriety of the grant condition on appeal.⁷ On January 13, 1987, RSD requested discretionary review of the Regional Administrator's decision. The Assistant Administrator for Water denied this request on September 21, 1987.⁸

On November 20, 1987, RSD filed an action in the United States District Court for the Western District of Missouri, seeking review of the EPA's determination. Upon plaintiff's motion, the case was subsequently transferred to this court on April 26, 1988. On May 24, 1988, plaintiff filed a "Complaint for Judicial Review of Agency Action." Plaintiff amended the complaint on August 8, 1988. On September 18, 1990, plaintiff filed a "brief" with this court, contending that the EPA's determination that RSD was ineligible for CWA grant funding for the purchase of Binder Basin was arbitrary, capricious, and inconsistent with the regulations. Defendant filed an "Opposition to Plaintiff's Motion for Summary Judgment" on October 10, 1990. Defendant asserts that EPA's decision to deny plaintiff additional grant funding for the purchase of the wastewater treatment facility was based on a reasonable interpretation of applicable regulations, and should, therefore, not be overturned by the court. The court held oral argument in this case on December 11, 1990.

Jurisdiction

Under the Tucker Act, the Claims Court may review all claims founded "upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. § 1491(a). In the present case, plaintiff claims monetary damages under a wastewater treatment grant program. This court has historically asserted jurisdiction over cases involving federal grant funds under the Tucker Act. See Kentucky ex rel. Cabinet for Human Resources v. United States, 16 Cl.Ct. 755 (1989), and cases cited therein.

In Bowen v. Massachusetts, 487 U.S. 879, 108 S. Ct. 2722, 101 L. Ed. 2d 749 (1988), the Supreme Court held that federal district courts have jurisdiction under 28 U.S.C. § 1331 and the Administrative Procedure Act (APA), 5 U.S.C. §§ 702 and 704, to review a Department of Health and Human Services (DHHS) decision disallowing reimbursement of various state expenditures under the Medicaid grant program. Under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., the DHHS issues grant funding for state medical assistance programs for needy individuals. The state programs are funded by a "stream" of advance quarterly payments with subsequent adjustments to correspond with actual spending. In holding that federal district courts have jurisdiction to grant complete relief in grant disallowance cases, the Court did not address Court of Claims or Federal Circuit precedent concerning Tucker Act jurisdiction, but admonished: "[a]s a threshold matter, it is not altogether clear that the Claims Court would have jurisdiction under the Tucker Act . . . to review a disallowance claim." Bowen, 487 U.S. at 905-6, n. 42, 108 S. Ct. at 2738, n. 42.

In Wheeling v. United States, 20 Cl.Ct. 659 (1990), the court asserted jurisdiction over a claim for damages stemming from the same grant program as the present case. In Wheeling, the court reviewed an EPA decision denying a municipality additional grant funding for costs associated with the renegotiation of an engineering services contract. The court reasoned that the action involved a breach of contract claim for money damages, rather than declaratory or injunctive relief, and therefore fell within the court's jurisdiction over claims "founded upon an express or implied contract with the United States." Id. at 663. Following a thorough analysis of the jurisdictional impact of Bowen, the court concluded:

This case concerns a monetary claim based upon an individual grant agreement involving a wastewater treatment project. Unlike Bowen, this claim is for entitlement to grant money for an isolated project which has been completed, and one that seeks purely retroactive relief. [Citations omitted]. Rather than an open account and an ongoing relationship, plaintiff asks for a one-time payment of an amount of money as compensation for EPA's refusal to reimburse it for engineering fees in violation of a contractual obligation. Since Wheeling's relationship with the Government is not a continuous one, and since it seeks a remedy which is retroactive in nature (monetary compensation for an injury to property), the relief sought constitutes "money damages" and is properly before this Court.

Id. at 664.

The court agrees with the approach taken in Wheeling and concludes that jurisdiction is proper in the present case. As in Wheeling, plaintiff claims entitlement to additional grant funding for a wastewater treatment project. This entitlement is predicated on EPA's contractual obligation to pay its "proportional contribution to such project." 33 U.S.C. § 1283(a)(1). Furthermore, unlike the federal/state relationship necessitated by the "stream of revenue" adjustments under the Medicaid grant program in Bowen, plaintiff maintains no continuing grant relationship with the EPA. Rather, plaintiff seeks monetary compensation for past injury, contending that EPA violated its contractual obligations by failing to reimburse RSD for the acquisition of Binder Basin. As such, plaintiff advances a claim for money damages under the Tucker Act.

Summary Judgment

Summary judgment is appropriate where the pleadings raise no genuine dispute as to any material fact and, as a matter of law, the moving party is entitled to judgment. RUSCC 56; Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 2509, 91 L. Ed. 2d 202 (1986). The moving party bears the burden of establishing an absence of evidence to support the nonmovant's case. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970). The party opposing summary judgment has the burden of showing sufficient evidence, not necessarily admissible, of a genuine issue of material fact in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). Any doubt over factual issues must be resolved in favor of the party opposing summary judgment, Litton Indus. Prods., Inc. v. Solid State Sys. Corp., 755 F.2d 158, 163 (Fed.Cir.1985), to whom the benefit of all presumptions and inferences runs. H. F. Allen Orchards v. United States, 749 F.2d 1571, [21 ELR 20924] 1574 (Fed.Cir.1984), cert. denied, 474 U.S. 818, 106 S. Ct. 64, 88 L. Ed. 2d 52 (1985).

To grant summary judgment in the present case, the court must determine, as a matter of law, whether the EPA's denial of plaintiff's request for additional funding under the CWA was proper. The court is presented with questions of statutory and regulatory interpretation. The court may rule on such interpretations as a matter of law. McKart v. United States, 395 U.S. 185, 198, 89 S. Ct. 1657, 1665, 23 L. Ed. 2d 194 (1969).

Standard of Review

An administrative determination may not be overturned by the court unless "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Under this standard of review, the court must accord substantial deference to an agency decision, particularly in areas committed to the agency's technical expertise. Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 109 S. Ct. 1851, 104 L. Ed. 2d 377 (1989). This court has previously stated that "[a] department's interpretation of a statute it administers must receive considerable deference by a reviewing court." Ocean Technology, Inc. v. United States, 19 Cl.Ct. 288, 291 (1990). In reviewing an administrative decision, the court must not substitute its own judgment for that of the agency. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S. Ct. 814, 28 L. Ed. 2d 136 (1971). Rather, the court may overturn conclusions reached by an agency only if the decision cannot be supported by the administrative record. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984); EPA v. National Crushed Stone Assoc., 449 U.S. 64, 101 S. Ct. 295, 66 L. Ed. 2d 268 (1980).

Discussion

The sole issue before the court is whether the EPA properly denied additional funding to RSD under grant C290932-04 for the acquisition of the Binder Basin facility. Appendix A to 40 C.F.R. Part 35, Subpart I, provides EPA policy guidance for determining the allowability of wastewater treatment projects under the CWA. It is undisputed that the May 1982, regulations govern RSD's eligibility for additional grant funding since these regulations were in effect at the time of initial grant award. Appendix A provided at the time of grant issuance:

1. Allowable costs for land and rights-of-way include:

* * *

e. The cost of acquiring all or part of an existing publicly or privately owned wastewater treatment works provided all the following criteria are met:

(1) The acquisition provides new pollution control benefits; [Emphasis added.]

(2) The facility was not built with previous Federal or State financial assistance;

(3) The primary purpose of the acquisition is not the reduction, elimination or redistribution of public or private debt; and

(4) The acquisition is not being used as a means to circumvent the requirements of the Act [CWA], these regulations, or other Federal, State, or local requirements.

40 C.F.R.Part 35, Subpart I, Appendix A (1982).

Both plaintiff and the EPA agree that RSD's acquisition of Binder Basin meets criteria (2) through (4). Therefore, the only issue in dispute is whether the purchase of Binder Basin provides "new pollution control benefits" under the first criterion.⁹

Plaintiff contends that the EPA's interpretation of section D(1)(e)(1) of Appendix A was unduly restrictive. Plaintiff maintains that the EPA effectively concluded that the acquisition of Binder Basin, in and of itself, would not provide new pollution control benefits. In other words, plaintiff avers that the EPA imposed a grant eligibility requirement not present in the 1982 version of section D(1)(e)(1) when it determined that the acquisition of Binder Basin would provide no new pollution control benefits. Plaintiff further states that the elimination of the Binder Basin discharge clearly provided "new pollution control benefits," otherwise, such a condition would never have been placed in the RSD grant.¹⁰ Plaintiff concludes that "MoDNR's insistence that the [Binder Basin] company be eliminated in one form or the other, juxtaposed by the EPA's and MoDNR's refusal to acknowledge the pollution control benefits which would accrue because of its acquisition amply demonstrates the unreasonableness of the [EPA and MoDNR] interpretation."¹¹

Under the CWA, EPA is authorized to award grant funding for public wastewater treatment facilities in accordance with the general goals and policies of the Act. Wheeling, 20 Cl.Ct. at 666. The CWA does not specify the type of acquisitions subject to grant funding. Rather, section 201(g) of the CWA vests broad discretion in the EPA to select funding priorities that optimize "available manpower and funds." 33 U.S.C. § 1251(f). Congress has, therefore, provided the EPA with considerable latitude to allocate funds in a "manner which will achieve the most progress in water quality at the least cost" in furtherance of the "prevention, reduction, and elimination of pollution." Id.; 33 U.S.C. § 1251(b).

The EPA, like all government agencies, is subject to funding constraints and must effectuate policy objectives with available resources. The EPA determined that the limited grant funding available for water pollution control would be maximized through the construction of wastewater treatment facilities. Such facilities would provide additional pollution controls and thereby promote the goals of the CWA. By contrast, the mere transfer of ownership of a treatment facility, without more, would provide no additional pollution control benefits. The EPA therefore decided that grant funding should only be available to municipalities for construction of wastewater treatment facilities that provide new pollution control benefits, not for the acquisition of such pre-existing facilities. In so doing, the EPA acted within the discretion afforded it under the CWA. Given the evidence at hand, the court finds that EPA reasonably concluded that the purchase of treatment facilities which add nothing to overall wastewater treatment are not eligible for grant funding.

The EPA established a grant funding policy which favored the construction of new facilities over the purchase of existing facilities prior to the 1982 regulations. In a 1981 memorandum,¹² Henry L. Longest II, EPA Deputy Administrator for Water Program Operations, provided the following policy statement:

The acquisition of all or part of an existing wastewater treatment system usually provides no water pollution control benefits in addition to those already being provided prior to the acquisition, and thus is generally not eligible for grant assistance under Section 201.

A.R. No. 21d at 2.

The EPA originally promulgated Appendix A to 40 C.F.R. Part 35, Subpart I, in 1982. The EPA stated that the Appendix A guidelines memorialized prior agency policy statements. 47 Fed.Reg. 20,455 (May 18, [21 ELR 20884] any hazardous substance; 3) any person who by contract, agreement or otherwise arranged for disposal or treatment of hazardous substances owned or possessed by that person; and 4) any person who accepted any hazardous substances for transport to disposal or treatment facilities selected by that person. 42 U.S.C. § 9607(a)(1)-(4).

Section 107(a) requires proof of three elements: (1) that there was a release or a threat of a release of a hazardous substance at a facility; (2) that as a result of the release or threatened release, the United States incurred response costs; and (3) that defendants fall within one of the categories of responsible parties set forth above.

Section 107(a) provides that liability shall attach "[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section." 42 U.S.C. § 9607(a).

Section 107(b) exempts from liability those who,

can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by —

(1) an act of God;

(2) an act of war;

(3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant . . ., if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstances, and (b) he took precautions against foreseeable acts or omissions of any such third party and the consequences that could forseeably result from such acts or omissions; (4) any combination of the foregoing paragraphs.

42 U.S.C. § 9607(b).

Simply, the section 107(b)(3) defense is the "complete absence of causation." United States v. Monsanto Co., 858 F.2d 160, 168 (4th Cir.1988), cert. denied, 490 U.S. 1106, 109 S. Ct. 3156, 104 L. Ed. 2d 1019 (1989). That defense has three elements. A defendant must prove: (1) the release or threatened release was "caused solely by" an act or omission of an unrelated third party who was not an employee or agent of the defendant and with whom the defendant did not have a "contractual relationship"; (2) defendant exercised due care as to the hazardous substance; and (3) defendant took precautions against foreseeable acts or omissions of that unrelated third party. The Government asserts that no other substantive affirmative defenses beyond those in section 107(b) may be asserted.

The essential question before the court is whether defendants are limited to the section 107(b)(3) defense (since neither an act of God nor an act of war are at issue here). Plaintiff argues that the express language of section 107(a) so limits defendants, which offer a wide variety of affirmative defenses that admittedly fall outside the parameter of section 107(b)(3). Defendants argues that those defenses should not be stricken.

d) Section 113(g)(2) Requires A Declaratory Judgment In A Section 107(a) Response Cost Recovery Action

Before the complaint was amended, defendants cross-moved for judgment on the pleadings on the Government's claim for a declaratory judgment. Once the Government amended its complaint, and changed the language upon which defendants had based their cross-motion, as well as two affirmative defenses, then defendants withdrew their cross-motion. See Case Management Order ("CMO") No. 2, P28. However, defendants have not withdrawn the two affirmative defenses. They are: failure to state a claim and lack of subject matter jurisdiction regarding plaintiff's declaratory judgment claim. Since the first amended complaint changed the relevant language upon which those affirmative defenses were based, for the following reasons we shall strike them.

Pursuant to section 113(g)(2) of CERCLA, 42 U.S.C. § 9613(g)(2), and 28 U.S.C. § 2201, the complaint sought a declaratory judgment that defendants are "liable for all present and future releases and threatened releases of hazardous substances at the Site." Complaint, P2 of Prayer for Relief, at p. 10. Defendants alleged that the complaint was defective because "[t]here is simply no authority for a declaration of liability for 'releases or threatened releases' in the abstract — liability is only for response costs actually incurred that are not inconsistent with the [National Contingency Plan ("NCP")]." Joint Memorandum of Law in Opposition to United States' Motion to Strike Defendants' Defenses ("Joint Memo"), p. 6.

However, the first amended complaint seeks "a declaratory judgment that the defendants are jointly and severally liable for all future response costs incurred by the United States in connection with the Site." First Amended Complaint, P2 of Prayer for Relief, at p. 10 (emphasis added).

Section 113(g)(2), in relevant part, provides:

In any [action for recovery of the costs referred to in section 107] . . . the court shall enter a declaratory judgment on liability for response costs or damages that will be binding on any subsequent action or actions to recover further response costs or damages.

42 U.S.C. § 9613(g)(2) (emphasis added). The amended complaint seeks a declaratory judgment for "all future response costs," as specified in section 113(g)(2), which requires the court in a section 107 response costs recovery action to enter such a declaratory judgment. See United States v. Shaner, Civ. No. 85-1372, slip op. at 26, 1990 WL 115085, 1990 U.S. Dist. LEXIS 6893 (E.D.Pa. June 5, 1990) (section 113(g)(2) "expressly authorizes a court to enter a declaratory judgment on a PRP's liability for further response costs").

Thus, because AC's affirmative defenses of failure to state a claim and lack of subject matter jurisdiction are based on language that is no longer in the complaint, and the amended complaint conforms to the statutory form for the mandatory declaratory judgment in a section 107 cost recovery action, plaintiff states a claim for a declaratory judgment under section 113(g)(2), and the court has subject matter jurisdiction over that claim. Accordingly, both those affirmative defenses will be stricken.

e) Section 113 Creates Right To Seek Contribution And Permits Equitable Defenses

To compensate for the potentially unfair burden that section 107 joint and several strict liability might impose on named PRPs, when other PRPs have not been named in an action brought by the government under that section, CERCLA provides a right under section 113 for named PRPs to seek contribution from other PRPs to apportion response costs equitably. It is during this second stage of CERCLA proceedings when equitable considerations are proper.

Section 113(f)(1) provides, in relevant part: "Any person may seek contribution from any other person who is liable or potentially liable under section 107(a) . . ., during or following any civil action under section . . . 107(a). . . . In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." 42 U.S.C. § 9613(f)(1) (emphasis added). Thus, defendants need not suffer undue delay in obtaining contribution under section 113, since a section 113 action may be brought "during" the pendency of a section 107(a) [21 ELR 20885] action. Indeed, as noted above, defendants have filed a third-party complaint seeking contribution under section 113 against more than 250 third-party defendants, including 17 local governments. Thus, the section 113(f) contribution action is being brought "during" the civil action in which the government seeks to recover its response costs pursuant to section 107(a).

In Western Processing, the district court wrote:

There are two distinct contexts in which the issue of "apportionment" arises. It is critical that these two different contexts are not confused. In the first context, the question is whether the harm resulting from two or more causes is indivisible, or whether the harm is capable of division or apportionment among separate causes. If there is a single harm that is theoretically or practically indivisible, each defendant is jointly and severally liable for the entire injury. However, if there are distinct harms that are capable of division, then liability should be apportioned according to the contribution of each defendant.

The second context in which the issue of "apportionment" arises occurs after the first inquiry regarding the indivisibility of the harm. If the defendants are found to be jointly and severally liable,any defendant may seek to limit the amount of damages it would ultimately have to pay by seeking an order of contribution apportioning the damages among the defendants.

Thus, this Court may conclude in the contribution action that Unocal has overpaid based on equitable factors and is entitled to contribution. But the court's discretion in allocating damages among the defendants during the contribution phase does not affect the defendants' liability.

734 F. Supp. at 938, quoting United States v. Stringfellow, 661 F. Supp. 1053, 1060 (C.D.Cal.1987) (emphasis added.) Thus, an affirmative defense here that the harm at the Site is distinct and divisible is proper and goes to the liability of those defendants that can demonstrate divisibility of the harm. But as Western Processing observed, consideration of "equitable factors" only comes into play during the contribution phase and does not affect the liability of each defendant in a section 107 action.

Similarly, section 106 contemplates equitable considerations in deciding whether to grant injunctions under that section. Under section 106 the court may consider "the equities of the case" but under that section 107, in sharp contrast, PRPs have joint and several strict liability for all response costs, "[n]otwithstanding any other provision or rule of law, and subject only to the defenses" in section 107(b).

f) Plaintiff Is Not Barred From Bringing This Section 107 Action Even If It Was A Generator, Transporter Or Operator At The Site.

Defendants argue that discovery will reveal that the government was a large waste generator at the Site, and will therefore be liable for contribution in an anticipated counterclaim brought pursuant to section 113. The impact of that counterclaim, defendants initially alleged, will be to change the posture of the case from a section 107 response cost recovery action to a section 113 action for contribution, made by the government as one generator seeking contribution from other PRPs. Because equitable defenses would be available if the court construes the case as falling under section 113, that argument went, the court should refrain from striking the equitable defenses until the record is developed sufficiently to determine whether the action will be maintained under section 107 or must be brought under section 113.

Defendants' argument then evolved into an allegation that there is a "sufficient Section 113 equitable allocation component to allow Defendants to plead equitable defenses." See Defendants' Joint Supplemental Memo. at 2. Because the government "is itself liable as a generator of hazardous substances found at the site and Defendants accordingly plead a right to contribution, the CERCLA section 113(f)(1) contribution provisions necessarily must be read into the underlying Section 107 claim." Id. at 3.

At oral argument on September 7, 1990 defendants' counsel argued that "the procedural posture that we are in . . . means that the liability of the government in this case is going to be heard now whether denominated as a counterclaim or denominated as an affirmative defense." Tr. 15, 9-15. Counsel is correct that if the United States is named as a defendant in a section 113 contribution claim brought in this action, the liability of the government for contribution will be determined during this action, although almost certainly after defendants' joint and several liability to the government is determined under section 107(a).

Using the above premise as a launch point, counsel then argued that the government's motion to strike is "absolutely and completely moot. It accomplishes nothing to advance this case to conclusion." Tr. 22, 2-4. And if not moot, then arguing over whether the affirmative defenses are only proper in the context of counterclaims is "an artificial distinction":

[W]hat possible difference does it make to treat this as or to say the same set of facts can be asserted as a counterclaim against the United States to be heard now here but cannot be asserted as an affirmative defense to be heard against the United States now and here in mitigation of United States' claim? It's all one [and] the same thing.

[T]here seems to be an artificial distinction being sought to be made here between liability and mitigation. . . . The government's liability for contributing to this site mitigates the amount that we are liable for for contributing to this site. . . . [O]ur position is that the government is jointly and severally liable, just like us. . . . [T]he government is no different as one generator than any other generator.

Tr. 15, 22 to Tr. 16, 2; Tr. 17, 7-14, 20-21; Tr. 18, 8-9.

The government's potential liability for contribution does not affect this section 107(a) response cost recovery action. The government's potential liability alters neither the type of affirmative defenses permissible under section 107(a), nor the government's right to full recovery of its response costs. Defendants are correct that the government's ultimate recovery of its response costs would be decreased, once it was found liable for contribution and the amount to be apportioned to it of total response costs was determined. However, it is in the nature of the claims made, that even when, as here, a section 107(a) claim co-exists in a single action with section 113 contribution claims, defendants' liability on the government's section 107(a) claim almost certainly will be determined before the government's liability for contribution.

Defendants attempt to collapse this very real practical difference in the timing of the proofs by arguing that the government's liability for contribution "mitigates the amount that [defendants] are liable for contributing to this site." Ultimately, they may be right, but practically, the government recovers first, then contribution claims are resolved — even when all are comprised within one action. Defendants are also mistaken that the government is jointly and severally liable, "just like us." As defendants recognized later during oral argument, the "liability of initial defendants sued by the government under 107(a) . . . is joint and several[, but according to judicial precedent,] . . . the liability of third-party defendants is several only." Tr. 27, 3-11.

Finally, defendants are correct that, as to the government's liability for contribution, it "is no different as one generator than any other generator." But the government stands in a much different posture as plaintiff in a section 107(a) action, than it would as a PRP defendant in the same action, because it is the government and not the [21 ELR 20886] other PRPs that has incurred the response costs at the Site. Had any other PRP — and on this motion we consider the government to be a PRP — gone ahead and incurred response costs at the Site, then that PRP could have brought a section 107(a) recovery action, and this case would be in the same procedural posture, but with the government as a defendant. But the brute fact is that the government and not the named defendants has spent public monies on the cleanup, and is therefore entitled to full recovery of those monies, whatever its potential liability for contribution.

The legislative history of the Superfund Amendments of 1986 (which enacted section 113) makes clear that the United States may bring either a section 106 or 107 action, regardless of whether the United States itself was a generator of waste at the site:

This section does not affect the right of the United States to maintain a cause of action for cost recovery under Section 107 or injunctive relief under Section 106, whether or not the United States was an owner or operator of a facility or a generator of waste at the site. Where the United States has been required to pay response costs as a generator or facility owner or operator, the United States may maintain an action to recover such costs from other responsible parties.

See H.R.Rep. No. 253(I), 99th Cong., 2nd Sess. 1, 79-80 (1985), reprinted in 1986 U.S.Code Cong. & Admin.News 2835, 2861-62.

The Western Processing court held that the government was not barred from section 107 recovery merely because it had been an operator of a hazardous waste site: "The fact that the United States is a former site operator . . . does not bar a finding of liability against the defendants nor bar recovery in this [section 107(a)] action. At a future proceeding in the contribution and counterclaims action . . . the United States may be found liable as a former site operator and responsible for some portion of response costs incurred at the site." 734 F. Supp. at 939-940. That court recognized that the section 113 proceeding would be the appropriate forum to consider the government's liability for response costs. We agree.

Defendant Morton makes a slightly different argument, but toward the same end of seeking consideration of equitable factors regarding plaintiff's potential liability within the section 107(a) claim, rather than in the section 113 claim.

Morton argues that plaintiff is a liable party,¹⁴ and that if "Morton is successful in establishing the United States' liability, this will be a contribution case. The Court will have be a contribution case. The Court will have to determine at one time who is liable, what legitimate response costs have been incurred, and what percent of equitable responsibility should be borne by the various parties." Morton Memorandum of Law in Opposition to the United States' Motion to Strike Its Separate Defenses ("Morton Memo"), at p. 7.

Morton relies on PVO Int'l., Inc. v. Drew Chemical Corp., 19 ELR 20,077,16 Chem. Waste Lit. Rep. 669 (D.N.J.1988), for the proposition that "Section 107(a) requires [the court] to allocate clean-up costs between [the parties] according to relevant, equitable factors." Id., 16 Chem.Waste Lit.Rep. at 683, quoted in Morton Memo at 8. Thus, while not explicit inMorton's memorandum, we read Morton's argument not to be that plaintiff's liability will make this a section 113 contribution case, but that the court should apply equitable factors to allocate clean-up costs under the section 107(a) claim rather than under the section 113 claim.¹⁵

PVO used the following reasoning:

[S]ection [107(a)] does not specifically provide for apportionment of costs between liable parties. However, Section 107(a) should be read in conjunction with the contribution provision in section 113(f)(1), which does provide for allocation of response costs "among liable parties using such equitable factors as the court determines are appropriate." 42 U.S.C. sec. 9613. Congress clearly intended courts to allocate cleanup costs between liable parties, and it would be anomalous to allocate such responsibility in contribution actions but to allow it to fall only on defendants in section 107(a) actions, regardless of any partial responsibility of the plaintiff in contaminating the property or any other factors that would make it unfair to burden the defendant with the entire cost of cleanup. Thus, I conclude that section 107(a) requires me to allocate cleanup costs between [the parties] according to relevant equitable factors.

16 Chem.Waste Lit.Rep. at 683.¹⁶ What is implied here is that, since "Congress clearly intended courts to allocate cleanup costs between liable parties," and made provisions for such allocation in section 113 contribution actions, it also must have intended that those same equitable factors be considered and allocation be done in section 107 actions.

Collapsing the distinction between section 107 and section 113 ignores the clear language and structure of the statute. Section 107 imposes liability "[n]otwithstanding any other provision or rule of law and subject only to" the defenses set forth in section 107(b). Congress enacted section 113 as a separate section to address contribution.

We agree with PVO that it would be "anomalous" to permit apportionment of clean-up costs among PRPs in a section 113 action and not to permit apportionment in a section 107 action, but only if defendants in a section 107 action could not seek contribution in a section 113 action. But the structure of CERCLA does not preclude consideration of equitable factors, including the liability of a PRP who was (or is) plaintiff in a section 107 action. Rather, CERCLA separates those equitable factors from section 107 and considers them in a section 113 contribution action. "In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." 42 U.S.C. § 9613(f)(1). Defendants need not suffer undue delay in seeking contribution under section 113, since a section 113 action may be brought "during" the pendency of a section 107(a) action (defendants have done so here). Id.

Moreover, sections 107 and 113 serve distinct purposes. CERCLA was enacted to facilitate cleanup of the tens of thousands of hazardous waste sites in this country. Section 107 permits the government or a private party to go in, clean up the mess, pay the bill, then collect all its costs not inconsistent with the NCP from other responsible parties — even if plaintiff was also responsible for the contamination. Any PRP is entitled under section 113 to bring a contribution action against other PRPs — including [21 ELR 20925] 1982). The 1982 version of section D(1)(e)(1) of Appendix A was, therefore, written to restate EPA policy that acquisitions of existing facilities are not grant-eligible unless they provide new, additional pollution control benefits. Since this policy clearly existed prior to the 1982 regulations, it follows that the 1984 amendment to section D(1)(e)(1) functioned to clarify existing requirements, not to impose more stringent grant eligibility standards. In other words, the EPA's interpretation of section D(1)(e)(1) was consistent with the way the regulation was drafted. The EPA's interpretation of its own regulations is given considerable deference and this court will overturn such an interpretation only if "plainly erroneous" or "inconsistent with the regulation." Robertson v. Methow Valley Citizen's Council, 490 U.S. 332, 109 S. Ct. 1835, 104 L. Ed. 2d 351 (1989); Summit Contractors v. United States, 21 Cl.Ct. 767 (1990). Contrary to plaintiff's assertion, the court finds that the EPA properly construed section D(1)(e)(1) to require that the Binder Basin acquisition provide pollution control services not previously available to the community in order to be eligible for grant funding.

Plaintiff further asserts that RSD's purchase of Binder Basin would in fact generate new pollution control benefits since the Binder Basin flow was rerouted to another wastewater treatment plant. However, plaintiff confuses the pollution control benefits resulting from the entire Gray's Creek project with the benefits derived from the acquisition of Binder Basin. In the 1981 policy memorandum previously cited, Deputy Administrator Longest stated:

Where a project includes the acquisition of an existing wastewater treatment works, the upgrade or expansion portions of the project do provide additional water pollution control benefits. In those circumstances, the upgrade or expansion portions of the project are eligible for a section 201 grant, while the acquisition portion generally is not.

The Gray's Creek project encompassed numerous wastewater treatment facilities, including Binder Basin. As a whole, the Gray's Creek project provided new pollution control benefits through the construction of interceptor sewers and pumping stations which redirected the Binder Basin watershed flow to the Jefferson City plant.¹³ However, the acquisition of the Binder Basin facility itself provided no new control benefits. The distinction drawn by the EPA between costs of acquiring facilities and costs of upgrading and expanding acquired facilities is entirely reasonable and in accordance with CWA goals of achieving the greatest water pollution control at the lowest cost.

Plaintiff also argues that the elimination of the flow from the Binder Basin facility improved the water quality of Binder Lake.¹⁴ However, plaintiff provides no evidence that the Binder Basin facility posed a significant pollution hazard to Binder Lake. Rather, plaintiff maintains that MoDNR's inclusion of the grant condition, ipso facto, demonstrates that the threat to Binder Lake was significant. The record indicates that Binder Basin was at all relevant times in compliance with MoDNR effluent standards.¹⁵ This negates plaintiff's argument that the purpose of the Binder Basin acquisition was to protect Binder Lake from environmental risk. Furthermore, as plaintiff concedes, the Binder Basin acquisition helped effectuate MoDNR's policy of regionalization of wastewater treatment systems. Such policy was well within the discretion of MoDNR and EPA in implementing the CWA grant program. It is, therefore, apparent that MoDNR did not include the grant condition to improve pollution control of Binder Lake. Absent any further evidence in the record to the contrary, the court concludes that the EPA did not abuse its discretion in determining that the Binder Basin acquisition did not constitute a "new pollution control benefit" under section D(1)(e)(1). Accordingly, the court holds that the EPA correctly determined that RSD's purchase of Binder Basin was not an allowable cost under the CWA grant program.

Conclusion

For the foregoing reasons, the court finds that the EPA decision to deny RSD additional grant funding was not arbitrary, capricious, an abuse of discretion, or contrary to statute or regulation. The court, therefore, denies plaintiff's request for relief and grants summary judgment in favor of defendant. The Clerk is directed to dismiss the amended complaint. No costs.

1. Although plaintiff has entitled its submission "Brief of Plaintiff," the parties agree that plaintiff's claim may be resolved as a matter of law since there are no genuine issues of material fact in the case. Defendant's opposition, p. 2; transcript (tr.) pp. 3 — 4. The court will, therefore, treat plaintiff's and defendant's submissions as cross-motions for summary judgment. Tr. p. 4.

2. The Missouri Department of Natural Resources (MoDNR) certification stated in part:

This project is needed to abate pollution of the waters of the state and also to abate a serious public health hazard. The construction of the project will involve an excessive financial burden on the municipality therefore federal funds are necessary.

* * *

This project involves the elimination of numerous wastewater treatment facilities, ranging from single cell lagoons to extended aeration mechanical treatment plants. The state has established that effluent from the existing facilities is causing water quality problems in Binder Lake, a recreational and wildlife area outside of Jefferson City.

Administrative Record (A.R.) No. 1 at pp. 1-2.

3. A.R. No. 34 at 2.

4. A.R. No. 2 at 5; A.R. Nos. 15, 16, 17. Plaintiff's amended complaint seeks relief under grant number C290932-04, which was issued on October 12, 1983.

5. Tr. pp. 6-7. The record indicates that RSD purchased Binder Basin on July 31, 1986, for $ 200,000.00, plus the assumption of a $ 5,700.00 promissory note. Plaintiff's Brief, App. IV at 3.

6. The 1984 regulations modified the language of the 1982 regulatory standards. The 1982 regulations predicated grant eligibility in part on whether "[t]he acquisition provides new pollution control benefits" and did not contain the phrase "in and of itself, considered apart from any upgrade, expansion, or rehabilitation." 40 C.F.R. Part 35, Subpart I, App. A, section D(1)(e)(1) (1982).

7. Defendant contends that plaintiff is precluded from challenging MoDNR's inclusion of the grant condition in this court since applicable EPA regulations required RSD to first raise this argument before the state and EPA disputes decision official in order to preserve the argument on appeal. 40 C.F.R. §§ 30.1220-30.1235. However, plaintiff stated during oral argument that RSD does not challenge the propriety of the grant condition in the instant suit. Tr. p. 15. Therefore, the court need not address whether MoDNR's inclusion of the grant condition was proper.

8. If, as here, the EPA Assistant Administrator fails to exercise his discretionary review, the Regional Administrator's decision becomes the final administrative determination of the EPA. 40 C.F.R. §§ 30.1200-30.1235.

9. A.R. Nos. 13, 21 at 2, 34 at 3.

10. At oral argument, plaintiff stated:

If [the acquisition of Binder Basin] would not provide new pollution control benefits, then it would not make sense for Missouri DNR to insist that — be eliminated. I think that alone is fact enough to warrant the court's conclusion that the pollution control benefits would have been obtained from the acquisition.

Tr. p. 9.

11. Brief of Plaintiff, p. 18.

12. Further evidence of this longstanding policy is contained in a 1978 decision in which the Deputy Assistant Administrator for Water denied grant funding to a regional sewer district for the acquisition of a privately-owned sewer facility. A.R. No. 21b.

14. Morton's 26th and 29th defenses (United States is a generator of hazardous substances transported to the Site).

15. A significant difference between making this a section 113 contribution action because of plaintiff's potential liability as a generator of hazardous waste at the Site, and Morton's stance that the court should consider those equitable factors regarding plaintiff's liability, but still within the context of this section 107 action, is that were we to make this a section 113 action, other "equitable factors" raised by defendants would then be open to consideration, rather than only those affecting apportionment.

The joint supplemental memorandum changes the original position of the cooperating defendants by alleging that there is a sufficient "contribution component" in this section 107 case to require consideration of equitable factors. This would seem at once to concede the government's right to seek reimbursement under section 107 (which defendants did concede at oral argument), while inviting the court to consider all equitable factors that would be considered in a section 113 contribution action. We decline the invitation.

16. Plaintiff PVO did "not dispute that CERCLA allows equitable allocation of costs among parties in section 107(a) actions." Id. Rather, plaintiff claimed that defendant Drew was "responsible for all the contamination at the site." Id.

13. Defendant does not contest this point. In its decision of August 1, 1984, MoDNR stated:

The Department understands how the district can conclude that construction of an interceptor to eliminate the existing sewer company discharges will provide additional pollution control benefits, even though the existing discharges are apparently meeting effluent limits and no water quality standards violations have been noted. We certainly agree that the Gray's Creek project will have a pollution control benefit for the basin. However, the Department does not believe that acquisition of these facilities, in and of itself, will achieve any new pollution control benefit.

A.R. No. 13 at 1-2.

14. Plaintiff related at oral argument:

The existing [Binder Basin] facility was a three cell lagoon and a mechanical treatment plant. In the state certification for the grant, Binder Lake, which is located approximate to Binder basin Sewer Company was in jeopardy of getting — greater demands on it. It was environmentally at risk. By eliminating the flow from Binder Basin sewer company, the risk to the lake would be eliminated, therefore, that would be a new kind of [pollution] control. A control that would prevent the environmental risk to Binder Lake.

Tr. p. 10-11.

15. A.R. No. 9 at 1.