28 ELR 10089 | Environmental Law Reporter | copyright © 1998 | All rights reserved
Implications of Proposed CERCLA Reforms for Recoveries of Natural Resource DamagesSuellen Keiner
Ms. Keiner is a Senior Attorney at the Environmental Law Institute (ELI). She has managed a number of ELI research projects and taught a number of ELI training programs. During her 25 years in the field of environmental law, Ms. Keiner has served as an attorney at the U.S. Department of the Interior and the Council of State Planning Agencies. She has also been a public interest litigator representing national and local environmental groups. She is a graduate of Georgetown University Law Center and Bryn Mawr College.
[28 ELR 10089]
Debate over reforms to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)1 consumed substantial energy during the 1997 session of Congress, and those deliberations will continue in 1998 with the hope of finally producing consensus about how the law can be improved. While interested parties may have different, often opposing views of how CERCLA should be reformed, some of their proposals may not represent progress, particularly the procedural changes related to restoring injured natural resources and expediting recoveries of natural resource damages (NRD).
This Dialogue analyzes related issues of the rebuttable presumption for trustees' NRD assessments provided by bothCERCLA and the Oil Pollution Act (OPA)2 and the appropriate standard of judicial review for future challenges to those assessments. It highlights a forgotten opportunity for the U.S. Department of the Interior (DOI) and the National Oceanic and Atmospheric Administration (NOAA) to provide adjudicatory administrative hearings on disputes over NRD assessments and discusses how proposed CERCLA reforms would affect this approach to reducing transaction costs and streamlining trustees' recovery of damages in future NRD cases.
Congress' Intent in Allowing Trustees to Recover Natural Resource Damages
In authorizing recovery of natural resource damages under both CERCLA and the OPA, Congress adopted the principle that polluters must pay for the costs of remedying the environmental harms they have caused. In addition to being based on the polluter-pays principle, CERCLA and the OPA also share the requirement that the public will be made whole in two ways: first, through restoration of polluted natural resources and, second, through recovery of damages for lost uses of resources that are publicly owned or otherwise controlled by the United States, individual states, or Native American tribes.3
These statutes further provide that the methodology used by trustees for determining the amounts required to make the public whole is to be established in regulations adopted by the DOI under CERCLA and by NOAA under the OPA.4 In CERCLA, Congress directed the DOI to determine which methodologies qualify as the "best available procedures"5 for assessing natural resource damages. The recent decisions of the D.C. Circuit have now upheld most elements of both the DOI's and NOAA's regulations specifying the procedures that are sufficiently "reliable and valid" for trustees to use in calculating their NRD assessments.6
Congress was also quite interested in simplifying and streamlining the process for assessing and recovering NRD under both CERCLA and the OPA.7 As a result, Congress gave trustees (federal or state agencies or Native American tribes) the responsibility to assess and calculate the amount of damages.8 Moreover, Congress gave trustees an advantage over responsible parties in subsequent administrative or court proceedings challenging trustees' NRD assessments. For trustees who elect to follow the procedures of the DOI's or NOAA's regulations for conducting NRD assessments, identical language in both CERCLA and the OPA provides that their assessments of damages "shall have the force and effect of a rebuttable presumption on behalf of the [28 ELR 10090] trustee [who prepared the NRD assessment] in any administrative or judicial proceeding …."9
Thus, Congress contemplated that this rebuttable presumption for trustees' NRD assessments would be available during any administrative proceedings conducted by either the DOI or NOAA or during any judicial review conducted by U.S. district courts.10 In establishing this CERCLA/OPA system for agency-adopted NRD regulations, Congress conferred a rebuttable presumption on trustees' calculations of damages and continued its gradual trend toward requiring less stringent procedural standards for obtaining relief from polluters who damage the environment.11
While mostly upholding both the DOI's and NOAA's NRD regulations, the D.C. Circuit's two recent decisions in Kennecott Utah Copper Corp. v. U.S. Department of the Interior12 and General Electric Co. v. Department of Commerce13 explicitly noted the significance of the rebuttable presumption provided for trustees' assessments by Congress.14 Although the presumption was not itself an issue in the challenge to the DOI's regulations in Kennecott,15 it was directly challenged by the industry petitioners in General Electric, which addressed NOAA's regulations. The D.C. Circuit rejected this portion of their challenge, however, upholding the presumption because it was created by Congress, not NOAA, and finding that "legislative bodies, unlike administrative bodies, are 'free to adopt presumptions for policy reasons.'"16
In sustaining the presumption, the D.C. Circuit questioned petitioners' concern that it gave trustees a "powerful advantage" in any litigation challenging their NRD assessments: "More important, it is not at all clear that the rebuttable presumption even gives trustees a 'powerful advantage.' … As agency counsel described it at oral argument, the rebuttable presumption thus functions as nothing more than a 'burden shifting exercise.'"17
This observation raises the question of exactly what is accomplished by conferring this presumption. In past debates over CERCLA reforms, this issue apparently has been misunderstood and now deserves clarification before Congress continues its deliberations. First, the effect of a rebuttable presumption as a general rule needs to be clearly understood. Then it is possible to analyze the effects of the particular CERCLA/OPA rebuttable presumption on the respective responsibilities of both trustees and opposing parties during disputes over the accuracy of NRD assessments.
Implications of the Rebuttable Presumption for Trustees' NRD Assessments
In typical court proceedings, plaintiffs have the burden of proving their claims against the defendants by producing sufficient evidence to convince the judge or jury to rule in the plaintiffs' favor. The plaintiffs' burden of proof—sometimes also referred to as the "burden of persuasion"—is a relatively heavy burden. Consequently, in certain instances, the burden of proof has been shifted away from the plaintiffs to the defendants by judges or legislatures through rebuttable presumptions in the plaintiffs' favor. Typically, these rebuttable presumptions have been created in order to promote fairness or certain policy objectives, such as "to correct the imbalance resulting from one party's superior access to the evidence, to facilitate the prompt resolution of claims, and to favor certain claims for social and economic reasons."18 Congress acted out of similar concerns when it provided the rebuttable presumption for trustees' NRD assessments in CERCLA and the OPA.
It is very important to distinguish,19 however, the three components of the burden of proof that plaintiffs must satisfy. First, they have the burden of pleading their case. Second, they have the burden of production, which means that they must produce or "go forward" with the evidence. Third, they have the burden of persuasion, which means that they must convince the judge or jury to rule in their favor. The burden of persuasion and its corollary, the risk of nonpersuasion, never shift away from the plaintiff; but the burden of production or going forward with the evidence can be shifted from the plaintiff to opposing parties by legislative enactment of a rebuttable presumption.20
In creating a rebuttable presumption for trustees' NRD assessments when they are performed in accordance with the DOI's and NOAA's regulations, Congress was underscoring its desire to establish a streamlined, simplified process for trustees to be able to collect natural resource damages.21 This preference for trustees' calculations of the value of damaged resources expresses Congress' intent "simply to give the trustees a better chance of prevailing in cases involving difficult-to-prove ecological damage."22
In situations where statutes—such as CERCLA and the OPA—fail to specify the practical effects of a rebuttable presumption, Rule 301 of the Federal Rules of Evidence determines how the presumption will actually operate during [28 ELR 10091] administrative or judicial proceedings.23 Rule 301, which was first adopted in 1972, provides:
In all civil actions and proceedings not otherwise provided for by Act of Congress or by these rules, a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of nonpersuasion, which remains throughout the trial upon the party upon whom it was originally cast.24
A clear understanding of the CERCLA/OPA rebuttable presumption for trustees' NRD assessments conducted in accordance with the DOI/NOAA rules thus depends on how Rule 301 would apply to these proceedings.25 For the first element of the burden of proof, trustees must plead their case and present their evidence on the extent of environmental damage and the lost values of damaged natural resources, calculated according to the agencies' rules.
Then, for the second element of the burden of proof, the CERCLA/OPA rebuttable presumption shifts the burden of production to the responsible parties, who must present alternative evidence on damages to meet or rebut the trustees' initial evidence supporting their NRD assessments.26 This shift in the burden of going forward means that responsible parties must offer "evidence contradicting the presumed fact[s]"27 that have been demonstrated in the trustees' NRD assessments. Responsible parties can rebut the trustees' evidence with any contradictory evidence that challenges the accuracy of the trustees' NRD assessments and their methodologies for calculating damages, even if the assessments unquestionably followed the DOI's or NOAA's regulations.28
Nevertheless, the third element of the burden of proof, the burden of persuasion, remains to be satisfied by the trustees and does not ever shift to the responsible parties.29 Trustees have the ultimate responsibility to persuade the administrative or judicial trier of fact that their damage claims have been correctly calculated. The CERCLA/OPA rebuttable presumption does not, and cannot, shift away from trustees the burden of "persuading the fact finder that the damages presented by the trustees are not an appropriate measure of damages," as NOAA would have it.30 In short, despite the benefit of the CERCLA/OPA rebuttable presumption, trustees still have to sustain their burden of proof by responding to any contrary evidence submitted by responsible parties and by producing evidence that is sufficiently persuasive to convince a trier of fact that they are entitled to collect the entire amount of natural resource damages they have assessed against responsible parties.
These basic principles of the burden of proof and the effects of a rebuttable presumption need to be kept in mind as interested parties discuss future CERCLA reforms during Congress' 1998 session. One of the points of contention in the last session was whether to retain or delete the rebuttable presumption for trustees' NRD assessments. For example, S. 831 (the leading Senate bill for CERCLA reforms in the last session of Congress), as well as H.R. 272732 and H.R. 3000,33 all proposed to delete CERCLA's rebuttable presumption provision in § 107(f)(2)(C).34 It is not clear whether these deletions were intentional or inadvertent,35 but even the Administration's discussion draft (which was never introduced in the last session) proposed to strike the [28 ELR 10092] rebuttable presumption.36 These proposals suggest that perhaps none of the interested parties believes any longer that the rebuttable presumption is particularly important to trustees' ability to recover natural resource damages, but it is not clear whether that result represents a conscious decision to eliminate the rebuttable presumption and, if so, whether it was informed by a clear understanding of the presumption's practical effects.
Procedures for Challenging NRD Assessments
In the same sections that establish the rebuttable presumption, CERCLA37 and the OPA38 provide in identical language that, if an NRD assessment is made in accordance with the DOI's or NOAA's regulations, the presumption shall be available "on behalf of the trustee in any administrative or judicial proceeding."39 Thus, Congress clearly seems to have contemplated that trustees' NRD assessments could be challenged at either the administrative or the judicial level.
Both NOAA and the DOI have chosen to implement this requirement by providing for informal administrative proceedings, such as a notice-and-comment rulemaking, with preparation of an administrative record composed of all the trustees' documents and data generated in preparing their NRD assessments, as well as any public comments.40 The DOI's NRD rule provides that, once potentially responsible parties have been presented with a trustee's demand for an NRD assessment, they have at least 60 days to respond before the trustee then may file suit to recover those damages; however, there is no provision for them to obtain an administrative hearing to challenge trustees' demands.41 The DOI's preamble explains only that trustees' decisions in selecting a particular approach for measuring natural resource damages, and documentation of "their rationale for selecting a particular alternative," must be "included in both the Restoration and Compensation Determination Plan, which is subject to public review and comment, and in the Report of Assessment, which is reviewable in court."42
It is not clear why the DOI's NRD rules provide for trustees' Reports of Assessment to be reviewable in court without a prior administrative adjudication to review them. Both CERCLA and the OPA contemplate this intermediate proceeding in specifying that the rebuttable presumption would apply at administrative hearings.43 Since the very first version, the DOI's final NRD regulations have mentioned the possibility of an administrative hearing in providing that the trustees' Report of Assessment "shall have the force and effect of a rebuttable presumption on behalf of any Federal or State claimant in any judicial or adjudicatory administrative proceeding under CERCLA, or section 311 of the [Clean Water Act]."44 But the DOI's rules have never specified what administrative process might be available to responsible parties seeking review of trustees' damage claims.
NOAA's final NRD rules also fail to provide an administrative process for responsible parties to challenge trustees' damage claims. The preamble to the final NOAA rules acknowledges that commenters on the proposed rules had objected to the lack of procedures for administrative adjudications of NRD assessments.45 But NOAA's preamble never responds directly to that comment nor explains why administrative adjudications have not been provided in the final rules.
Administrative adjudications would be a significant improvement over direct court challenges to NRD assessments. Adjudicatory hearings would carry out Congress' intent both to expedite the NRD assessment process and to give trustees' assessments the benefit of a rebuttable presumption.46 The DOI and NOAA could provide for such hearings by exercising their discretion to give a reasonable interpretation to imprecise legislative language. Both agencies could allow for trial-type, adjudicatory hearings before administrative law judges (ALJs) when responsible parties seek to challenge NRD assessments.47 Such proceedings would be on the record in compliance with the Administrative Procedure Act,48 thus allowing responsible parties to challenge all aspects of trustees' data supporting their NRD assessments.
Administrative adjudicatory hearings offer a number of significant advantages for all sides involved in disputes over NRD assessments. Trustees' witnesses could be cross-examined, and responsible parties could present their own studies and witnesses to challenge trustees' valuations of damaged resources. Such hearings would also address NOAA's original concern in its advance notice of proposed rulemaking that "the Assessment/Restoration Plan be developed and implemented by the trustees pursuant to an administrative process, not by a courtroom battle of experts."49
Due process would also be well served by these administrative adjudicatory hearings. Interested members of the public who had participated in earlier phases of restoration [28 ELR 10093] planning would likely be able to intervene and participate in the hearings. Both trustees and opposing parties would have to disclose to each other, as well as to any intervening members of the public, scientific data that supports their respective calculations of natural resource damages. As one commentator has pointed out, "in an administrative proceeding, a party cannot withhold information in the hopes of 'sandbagging' the agency at the conclusion of the process in judicial review."50 Furthermore, transaction costs would be reduced and, in subsequent challenges to NRD assessments, courts would be less likely to overturn decisions by ALJs because those proceedings would be limited to reviews of the record from the adjudication applying the substantial evidence standard of review.51
Under CERCLA and the OPA as currently written, both the DOI and NOAA have discretion to provide for adjudicatory hearings on NRD assessments.52 Where a statute is silent in referring only to an "administrative proceeding" without specifying whether it must be formal—i.e., adjudicatory and on the record—or informal, an agency has discretion to resolve that ambiguity and may reasonably choose either approach, relying on the "normal tools of statutory interpretation."53 Other factors that may determine the reasonableness of provisions for adjudicatory hearings to review agency decisions include whether high financial stakes may be involved and the possible risk of error in deciding difficult substantive issues.54 Both of these elements are quite likely to be present in NRD assessments, thus making it all the more appropriate for the DOI and NOAA to exercise their discretion and provide for such administrative adjudications, even though they have not previously chosen to do so. In this context, it has been pointed out that "as the dollar amount of damages charged to responsible parties increases (private interest at stake), and as damage assessments become more dependant upon highly technical conclusions requiring significant levels of expertise and sophistication (risk of error), the dictates of constitutional due process become more demanding."55 By adding to their rules provisions for adjudicatory hearings on NRD assessments, the DOI and NOAA might thus forestall incipient due process challenges to future NRD assessments.
Adjudicatory hearings also make sense in light of the legislative histories of both CERCLA and the OPA. When first adopted in 1980, CERCLA established the rebuttable presumption in § 111(h)(2),56 which was the predecessor of the current language in § 107(f)(2)(C).57 The 1980 version clearly specified that the presumption would apply "in any judicial or adjudicatory administrative proceeding under this chapter or section 1321 of Title 33."58 Congress was apparently aware that, under 33 U.S.C. § 1321, which was somewhat the predecessor of the OPA, adjudicatory hearings using the rebuttable presumption were routinely conducted by the Coast Guard to determine whether an oil spill was harmful because it violated the "sheen test."59
When CERCLA was amended in 1986, transferring the rebuttable presumption from § 111 to § 107, Congress did not explain why it dropped the word "adjudicatory" from the original language.60 Then in 1990, the OPA incorporated the language of § 107 without further explanation, still providing for administrative proceedings.61 Based on this history, one commentator has concluded that "Congress clearly intended that if the Trustees conducted the natural resource damage assessment in an administrative proceeding, the responsible parties would be entitled to [an] adjudicative, trial-type administrative proceeding in which they would have the opportunity to offer evidence to negate the rebuttable presumption."62
Thus, administrative adjudicatory hearings to resolve disputes over NRD assessments are authorized by the current language of both the OPA and CERCLA, and they would also enable the DOI and NOAA to implement Congress' intent in providing for the rebuttable presumption in order to streamline the NRD assessment process. During such hearings, the rebuttable presumption would apply to the evidence submitted by trustees in support of their damage assessments at the hearings. It would give them an initial advantage in meeting their burden of pleading their case and would then shift to the responsible parties the burden of producing contradictory evidence to rebut the presumption in favor of the amounts demanded by the trustees.63 In addition, adjudicatory hearings will provide more due process for responsible parties who may be assessed very large amounts in damages. Such hearings may have added bonuses for trustees by allowing them to resolve many cases at the administrative level and by limiting any court challenges to a review of the record from the adjudicatory proceedings, using the substantial evidence test.64 This result would thereby accomplish Congress' original intent to establish an expedited process for assessing natural resource damages.65
Recent CERCLA reform bills that have deleted the rebuttable presumption have, either intentionally or inadvertently, stricken the rest of § 107(f)(2)(C), which also includes the agencies' authority for administrative proceedings on NRD assessments.66 Likewise, the Administration's draft bills in 1996 and 1997 deleted this authority along with [28 ELR 10094] the rebuttable presumption.67 When Congress continues its discussion of these reforms in its 1998 session, more serious consideration should be given to the implications of deleting this entire section. Retaining both the rebuttable presumption and the authority for administrative proceedings, so that the DOI and NOAA could still implement this long-neglected option by conducting adjudicatory hearings, would produce considerable advantages for satisfying Congress' original intent to expedite the resolution of NRD assessments, while improving due process for all parties.
Standard of Judicial Review for NRD Assessments
In their rules, NOAA and the DOI have sought to limit the scope of the courts' review to the administrative record, which will contain documents submitted to, or prepared by, the trustees and any related documents that they considered in conducting their NRD assessments.68 For those NRD assessments conducted under both CERCLA and the OPA, the DOI and NOAA have taken the position that the applicable standard of judicial review for the administrative record is whether the assessments are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."69
The agencies have apparently chosen this approach in order to gain what they believe to be an advantage for trustees in recovering damages and to limit court challenges to review on the record, rather than trial de novo.70 They have relied on both the 1986 Superfund Amendments and Reauthorization Act (SARA) and some previous court decisions under CERCLA, which established that judicial review of the U.S. Environmental Protection Agency's response actions is based "on the administrative record" using "arbitrary and capricious or not otherwise in accordance with law" as the standard of review.71 The agencies apparently assume that this standard of review will make it easier for trustees to defend their assessments against court challenges by responsible parties. Their position fails to take into account, however, the similarity between the arbitrary and capricious standard and the substantial evidence standard72 which would apply if the agencies provided for adjudicatory hearings on NRD assessments by ALJs.73
The traditional view has been that substantial evidence is a more difficult standard for an agency to satisfy than the arbitrary and capricious standard, but the trend since the early 1980s has been increasingly to view the two standards as virtually the same.74 Indeed, Justice (then Judge) Scalia has concluded that, "when the arbitrary or capricious standard is performing that function of assuring factual support, there is no substantive difference"75 between it and the substantial evidence standard. He also pointed out the "emerging consensus of the Courts of Appeals" that "the distinction between the substantial evidence test and the arbitrary and capricious test is 'largely semantic.'"76 Justice Scalia further explained the practical differences between the two standards. The substantial evidence test can only be satisfied by "substantial evidence to be found within the record of closed-record proceedings."77 For adjudicatory hearings on NRD assessments, this record would have to contain all agency and private-party documents supporting and opposing trustees' damage calculations. By contrast, the arbitrary and capricious standard is "less onerous" because not all of the data used to support an agency's decision "must have been made public in the proceedings and exposed to refutation," and the information presented to an agency decisionmaker "might well include crucial material that was neither shown to nor known by the private parties in the proceeding."78
In light of both CERCLA's and the OPA's requirements for public participation in the NRD assessment process, however, this evidentiary distinction should not be an obstacle for trustees in meeting the substantial evidence test, assuming the agencies were to provide for adjudicatory hearings on NRD assessments. In fact, it would seem particularly important and appropriate for trustees to be held to the substantial evidence test so that all of the documents supporting their assessments are contained in the administrative record and made publicly available and the damage awards are decided by ALJs who are independent of the agencies' usual decisionmaking process.
The DOI and NOAA had previously indicated that they intended for this public openness to occur anyway,79 and [28 ELR 10095] NOAA even asked for comment on whether transaction costs would be reduced and openness would be advanced by establishing administrative adjudications.80 Thus, trustees should be able to show that their assessments are based exclusively on evidence contained in the administrative record and thereby defend their NRD assessments just as easily under the substantial evidence test as under the arbitrary and capricious standard.
Reconciling the CERCLA/OPA Rebuttable Presumption and the Standard of Judicial Review
Because the DOI's and NOAA's rules have not provided for administrative hearings to adjudicate the correctness of trustees' NRD assessments, it is all the more difficult to understand the effects of the CERCLA/OPA rebuttable presumption when assessments are challenged in court. Whereas the presumption makes sense if applied during an adjudicatory proceeding and subsequent judicial review under the substantial evidence test, it is not clear how courts should apply the presumption when simply reviewing assessments on the basis of trustees' administrative records under the arbitrary or capricious test.
In a previously unreported decision which is the first to address this issue, the federal district court in Montana has recently confronted the problem of what the CERCLA rebuttable presumption means in a specific case and how it can be reconciled with the standard of judicial review for challenges to NRD assessments.81 In that case, which at presstime was being tried before a jury, Montana is seeking to recover natural resource damages under CERCLA and the Montana Comprehensive Environmental Cleanup and Responsibility Act (CECRA)82 for releases of heavy metals and other hazardous substances from mining in the Upper Clark Fork River Basin by Atlantic Richfield Company (ARCO) and its predecessors-in-interest. Montana moved for recovery of natural resource damages based on the administrative record for its NRD assessment conducted in compliance with the DOI's regulations. Montana asked the court to review that record and uphold its assessment using the arbitrary and capricious standard. ARCO responded by asserting that a de novo trial was necessary.
In deciding what method of judicial review was appropriate, the court noted, "CERCLA does not expressly prescribe the proper method of judicial review to be used in a natural resource damage case, where the trustee purports to quantify natural resource damages in accordance with applicable DOI regulations. Moreover, the issue has not been directly addressed by any court."83 The court then rejected Montana's claim for record review using the arbitrary and capricious standard and concluded that de novo review was appropriate in this case for two reasons. First, the court found that "record review would operate to make the rebuttable presumption superfluous."84 Second, the court ruled that "an action to recover natural resource damages involves rights and remedies enforced in an action at law, and therefore invokes the Seventh Amendment right to a jury trial."85 The court then found that a de novo hearing was all the more appropriate because record review would be incompatible with the right to a jury trial.86
Despite the ARCO decision, the relationship between the CERCLA rebuttable presumption and the standard of review is far from settled. CERCLA reform bills introduced in 1997 offered different approaches for dealing with this issue. S. 8 would have deleted both the rebuttable presumption and the agencies' authority for administrative proceedings, instead requiring that interested parties participate in development of an administrative record "on which trustees will base selection of a restoration plan and on which judicial review of restoration plans will be based."87 The latter provision leaves open the question, however, whether judicial review of that record will be under the arbitrary and capricious standard or the substantial evidence standard, which would apply to agency decisions "required by statute to be made on the record."88
H.R. 2727 also would have deleted the rebuttable presumption and administrative proceedings entirely by striking § 107(f)(2)(C), but it would have added a new provision explicitly requiring that NRD assessments be "adjudicated in a de novo trial in a Federal district court."89 That bill also attempted to eliminate the potential for either responsible parties or trustees to "sandbag" each other by withholding information during the development of the administrative record.90 It would have added a new provision rendering inadmissible in "any subsequent judicial or administrative proceeding" any information that had not been submitted to the public record but is "reasonably relevant … to the scope, extent and nature of injury to, destruction of, or loss of natural resources and the appropriate restoration."91
Unlike S. 8, which would have completely eliminated the possibility for the agencies to conduct administrative hearings on NRD damages, H.R. 2727 seemed to preserve that option; but its approach further complicated these issues rather than clarifying them. The rebuttable presumption might still be appropriate for the de novo trials authorized by H.R. 2727, yet the presumption was eliminated. The possibility of sandbagging was prevented by the bill's new provision on inadmissibility of evidence, yet responsible parties are likely to object strongly to being precluded from introducing later-developed evidence produced during normal discovery procedures which would usually be available for the de novo trials provided by the bill.
Rather than promote further confusion and potential litigation over the many questions raised by both these [28 ELR 10096] bills, the 1998 session of Congress could adopt a much simpler approach. Congress could leave intact the agencies' existing authority under § 107(f)(2)(C)92 to conduct adjudicatory hearings, presided over by ALJs, and retain the rebuttable presumption in favor of trustees' NRD assessments because it remains entirely relevant and appropriate in the context of such hearings. With Congress' endorsement of this authority, the agencies would be more likely to amend their NRD assessment rules to provide for adjudicatory proceedings. The resulting ALJ decisions on NRD assessments would then be reviewable under the substantial evidence test if, or when, they are challenged in court. This approach would still achieve Congress' goal of preventing sandbagging because, during an adjudication, all of the evidence must be included in the administrative record,93 unlike the arbitrary and capricious standard preferred by the agencies94 which would allow an agency decision to be based on materials not shown to opposing parties.95 At the same time, the resolution of NRD damage cases would be expedited and due process would be provided, as Congress originally intended.96
In continuing the debate over CERCLA reforms in 1998, it is important for Congress and interested parties to understand clearly the implications of last session's proposals for eliminating both the rebuttable presumption now available to trustees' NRD assessments and the opportunity for NOAA and the DOI to conduct adjudicatory hearings to resolve disputes over those assessments. Before deciding whether to retain or delete the rebuttable presumption, Congress might consider whether trustees should retain their current advantage in meeting the burden of pleading their case and whether responsible parties should continue to be required to meet the burden of rebutting trustees' assessments. In making this policy decision, Congress should remember that, even if the rebuttable presumption is retained, the ultimate burden of proof remains with trustees who must persuade the trier of fact to uphold their NRD assessments. On the other hand, Congress also has the option to specify how the CERCLA/OPA rebuttable presumption will operate and to make an explicit policy decision providing that, in challenges to trustees' NRD assessments, the burden of persuasion shifts to responsible parties, thereby overriding the effect of Federal Rule of Evidence 301. However, this approach would certainly be greeted with strenuous opposition from those who have promoted eliminating the presumption altogether.
During the next round of debate on CERCLA reforms, careful consideration will also need to be given to the implications of eliminating the agencies' authority for conducting adjudicatory hearings on NRD assessments before ALJs and substituting either de novo trials, as in H.R. 2727, or the arbitrary and capricious standard of review, as in the Clinton Administration's draft bills. Instead, adjudicatory administrative hearings on NRD assessments, as currently authorized by both CERCLA and the OPA, can accomplish many of Congress' original CERCLA goals more efficiently and economically than either of the proposed reforms. Through such hearings, trustees' recovery of natural resource damages can be expedited, and many disputes can be resolved administratively. Moreover, if the results of these administrative adjudications are later challenged in court, the substantial evidence test would be applied as the standard of judicial review. This standard would then have the additional advantages of preventing parties from sandbagging each other by withholding evidence and would also preserve judicial resources otherwise likely to be consumed by lengthy de novo court trials. For these reasons, Congress should not discard the rebuttable presumption and administrative hearings, but should afford the DOI and NOAA the opportunity to implement this valuable yet long-ignored approach for meeting Congress' original goals of streamlining and simplifying NRD assessments.
1. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA §§ 101-405.
2. 33 U.S.C. §§ 2701-2761, ELR STAT. OPA §§ 1001-7001.
3. 42 U.S.C. §§ 9607(a)(C), 9651(c)(2), ELR STAT. CERCLA §§ 107(a)(C), 301(c)(2); 33 U.S.C. §§ 2702(b)(2), 2706(d)(1), ELR STAT. OPA §§ 1002(b)(2), 1006(d)(1).
4. 42 U.S.C. § 9651(c), ELR STAT. CERCLA § 301(c); 33 U.S.C. § 2706(e), ELR STAT. OPA § 1006(e). These regulations were finalized by the DOI in 1994, 59 Fed. Reg. 14285 (Mar. 25, 1994), and by NOAA in 1996, 61 Fed. Reg. 440 (Jan. 5, 1996).
5. 42 U.S.C. § 9651(c)(2), ELR STAT. CERCLA § 301(c)(2). The OPA does not specify any similar criteria for the damage assessment procedures that must be included in NOAA's regulations. See 33 U.S.C. § 2706(e), ELR STAT. OPA § 1006(e).
6. 43 C.F.R. § 11.83 (1995); 15 C.F.R. § 990.27(a)(3) (1997); see Kennecott Utah Copper Corp. v. U.S. Department of the Interior, 88 F.3d 1191, 1217, 26 ELR 21489, 21498-99 (D.C. Cir. 1996); General Electric Co. v. Department of Commerce, No. 96-1096, slip op. (D.C. Cir. Nov. 18, 1997).
7. Both the Senate report and the House conference report on the OPA contain similar language about streamlining and simplifying the trustees' tasks of assessing and recovering damages. See, e.g., S. REP. No. 101-94, at 7 (1989) ("NOAA's rules … should streamline [trustees'] tasks in assessing and recovering full damages"); and H.R. CONF. REP. No. 101-653, at 109 (1990) (The regulations "should be designed to simplify the trustees' task of assessing and recovering the full measure of damages resulting from an incident."). Similarly, early in the deliberations on CERCLA, the Senate Committee on Environment and Public Works found that there was a "need for an improved, fair and expeditious mechanism for dealing with natural resource damages caused by releases of hazardous materials" and that "the principal hindrance to attaining such a mechanism was the absence of a standardized system for assessing such damage which is efficient as to both time and cost." S. REP. No. 96-848, at 84 (1980).
8. 42 U.S.C. § 9607(f), ELR STAT. CERCLA § 107(f); 33 U.S.C. § 2706(c), ELR STAT. OPA § 1006(c).
9. 42 U.S.C. § 9607(f)(2)(C), ELR STAT. CERCLA § 107(f)(2)(C) (emphasis added); 33 U.S.C. § 2706(e)(2), ELR STAT. OPA § 1006(e)(2) (emphasis added); for a discussion of the rebuttable presumption, see infra notes 18-36 and accompanying text.
10. 42 U.S.C. § 9613(b), ELR STAT. CERCLA § 113(b); 33 U.S.C. § 2717(b), ELR STAT. OPA § 1017(b).
11. That incremental process has been described as follows: "Superfund is part of a federal paradigm for remedial and compensatory legislation that has been gradually emerging for a number of years…. The paradigm assumes the relaxation of standards of liability, proof, and procedure that otherwise would apply under the common law and traditional norms of judicial process." Frederick R. Anderson, Natural Resource Damages, Superfund and the Courts, in VALUING NATURAL ASSETS: THE ECONOMICS OF NATURAL RESOURCE DAMAGE ASSESSMENTS 26, 36-37 (Raymond J. Kopp & V. Kerry Smith eds., 1993).
12. 88 F.3d 1191, 26 ELR 21489 (D.C. Cir. 1996).
13. No. 96-1096, slip op. (D.C. Cir. Nov. 18, 1997).
14. Kennecott, 88 F.3d at 1216, 26 ELR at 21491; General Electric, No. 96-1096, slip op.
15. Kennecott, passim.
16. General Electric, No. 96-1096, slip op., quoting Chemical Mfrs. Ass'n v. Department of Transp., 105 F.3d 702, 705 (D.C. Cir. 1997).
18. Frederick R. Anderson, Natural Resource Damages, Superfund, and the Courts, 16 ENVTL. AFF. 405, 436 (1989).
19. NOAA's final NRD rules fail to make this distinction and wrongly interpret the OPA's rebuttable presumption "to mean that the responsible parties have the burdens of presenting alternative evidence on damages and of persuading the fact finder that the damages presented by the trustees are not an appropriate measure of damages." 61 Fed. Reg. 440, 443 (Jan. 5, 1996) (emphasis added). In contrast, the DOI declined to delineate more precisely the effect of CERCLA's rebuttable presumption and left that determination to specific cases. Id. at 20560 (May 7, 1996).
20. Anderson, supra note 11, at 41-42 n.20 and authorities cited therein.
21. See supra note 7.
22. Anderson, supra note 11, at 49.
23. Authorities on this issue have observed that, "as to any subsequently adopted presumptions of unspecified effect, it is reasonable to suppose that they are enacted with the expectation that Rule 301 will govern." CHARLES ALAN WRIGHT & M. GRAHAM, 21 FEDERAL PRACTICE AND PROCEDURE § 583 (1977). On occasion, Congress has spelled out a distinction between the burdens of production and persuasion as when, for example, Title VII of the Civil Rights Act was amended in 1991. See 42 U.S.C. §§ 2000e(m), 2000e-2(k). In that context, the U.S. Supreme Court has noted Rule 301 with approval and held that "the ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all times with the plaintiff." St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 506-08 (1993), quoting Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 253 (1981).
24. FED. R. EVID. 301 (emphasis added). This effect of Rule 301 was noted by at least one commentator not too long after CERCLA was originally passed. Mark Menefee, Recovery for Natural Resource Damages Under Superfund: The Role of the Rebuttable Presumption, 12 ELR 15057, 15061-64 (Nov. 1982).
25. So far, only one court has ruled on the practical effects of CERCLA's rebuttable presumption in a particular case. Montana v. Atlantic Richfield Co., No. CV-83-317-HLN-PGH, slip op. (D. Mont. Mar. 3, 1997) ("a rebuttable presumption does not alter the burden of proof, which always remains with the plaintiff," relying on Rule 301); see infra notes 81-96 and accompanying text.
26. Rule 301, Notes of Conference Committee, H.R. REP. No. 93-1597 (1972) [hereinafter Rule 301 Report] ("[A] presumption shifts to the party against whom it is directed the burden of going forward with evidence to meet or rebut the presumption, but it does not shift to that party the burden of persuasion on the existence of the presumed fact"); Notes of Committee on the Judiciary, S. REP. No. 93-1277 (1972) ("The burden [of] persuasion remains on the party to whom it is allocated under the rules governing the allocation in the first instance.").
27. Rule 301 Report, supra note 26.
28. There are two views about what happens to a rebuttable presumption once the opposing party introduces evidence to contradict the plaintiff's initial case. Under Rule 301, the presumption is a "bursting bubble" which disappears once the adversary produces sufficient evidence; but others argue that the presumption does not vanish entirely and may be weighed by a court as one of many factors in deciding whether the plaintiff has met its ultimate burden of proof. See Adam Babich, Natural Resource Damages, HAZARDOUS WASTES, SUPERFUND, AND TOXIC SUBSTANCES (Oct. 30-Nov. 1, 1997) (American Law Institute-American Bar Association course of study materials), and sources cited therein. The Supreme Court seems to agree with the first view, holding in Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 255 n.10 (1981), that once a presumption is rebutted, it "drops from the case."
29. The agencies take the opposite view, asserting that CERCLA's rebuttable presumption "shifts to defendants the burden of proving by a preponderance of the evidence that the correct measure of damages differs from that found by the trustee—i.e., defendants cannot prevail by simply identifying flaws in the trustee's assessment, but must introduce affirmative evidence on an alternative measure of damages." John C. Cruden, Natural Resource Damages Under the Comprehensive Environmental Response, Compensation, and Liability Act, HAZARDOUS WASTES, SUPERFUND, AND TOXIC SUBSTANCES (Oct. 30-Nov. 1, 1997) (American Law Institute-American Bar Association course of study materials).
30. 61 Fed. Reg. 440, 443 (Jan. 5, 1996). In General Electric, the D.C. Circuit noted NOAA's interpretation of the rebuttable presumption but did not comment on its correctness and postponed for specific NRD assessment cases a determination of how the presumption "will work in practice." No. 96-1096, slip op.
31. S. 8, 105th Cong. (1997).
32. H.R. 2727, 105th Cong. (1997).
33. H.R. 3000, 105th Cong. (1997).
34. 42 U.S.C. § 9607(f)(2), ELR STAT. CERCLA § 107(f)(2).
35. Another bill introduced late in the session, H.R. 2750, retained the rebuttable presumption. H.R. 2750, 105th Cong. (1997).
36. Discussion Draft (Sept. 22, 1997) (on file with author). The 1996 version of the Administration's draft bill likewise eliminated the rebuttable presumption. Leslie M. Turner, Reforming CERCLA's Natural Resource Damage Provisions: A Challenge to the 105th Congress From the Clinton Administration, 27 ELR 10121, 10125 (Mar. 1997).
37. 42 U.S.C. § 9607(f)(2)(C), ELR STAT. CERCLA § 107(f)(2)(C).
38. 33 U.S.C. § 2706(c)(5), ELR STAT. OPA § 1006(c)(5).
39. See supra notes 37 & 38 (emphasis added).
40. 43 C.F.R. § 11.91(c) (1995); 15 C.F.R. § 990.45 (1997).
41. 43 C.F.R. § 11.91(d) (1995).
42. 59 Fed. Reg. 14273 (Mar. 24, 1994).
43. See supra notes 37 & 38.
44. 43 C.F.R. § 11.91(c) (1995); 51 Fed. Reg. 27751 (Aug. 1, 1986) (emphasis added).
45. 61 Fed. Reg. 440, 478 (Jan. 5, 1996).
46. As one commentator has observed, the statutes' references to applying the rebuttable presumption in both administrative and judicial proceedings may be "Congress' inartful way of trying to kill two birds with one stone, establishing a burden of proof in an anticipated adjudicatory hearing, regardless of whether the hearing took place before an administrative agency or a court." William S. Roush Jr., Procedural Options for the Process of Assessing and Collecting Natural Resource Damages Under the Oil Pollution Act of 1990, 45 BAYLOR L. REV. 315, 329 (1993).
47. Because providing for an adjudicatory hearing on NRD assessments would be a major change and was never contained in the proposed rules as a possible option for which public comment was sought, it would be necessary for the DOI and NOAA to propose amending their final NRD rules and seek public comment on this approach.
48. 5 U.S.C. §§ 554-557, available in ELR STAT. ADMIN. PROC.
49. Appendix III—Judicial Review of the Assessment/Restoration Process, 57 Fed. Reg. 8987 (Mar. 13, 1992) [hereinafter Assessment/Restoration].
50. Roush, supra note 46, at 327.
51. See infra notes 68-80 and accompanying text.
52. The DOI and NOAA already have general procedures for administrative adjudications which could be easily adapted, or maybe even cross-referenced, for use in NRD assessments. See 43 C.F.R. pt. 4 (1995) (the DOI); 15 C.F.R. pt. 904 (1997) (NOAA).
53. Chemical Waste Management, Inc. v. U.S. Environmental Protection Agency, 873 F.2d 1477, 19 ELR 20868 (D.C. Cir. 1989).
54. Id. at 1483, 19 ELR at 20873, paraphrasing Matthews v. Eldridge, 424 U.S. 319, 335 (1976).
55. Roush, supra note 46, at 325.
56. 42 U.S.C. § 9611(h)(2) (1980).
57. Id. § 9607(f)(2)(C), ELR STAT. CERCLA § 107(f)(2)(C).
58. Comprehensive Environmental Response, Compensation, and Liability Act of 1980, No. 96-510, § 111(h)(2), 94 Stat. 2767, 2791 (codified as amended at 42 U.S.C. § 9611(h)(2)) (emphasis added).
59. United States v. Chevron Oil Co., 583 F.2d 1357 (5th Cir. 1978).
60. Roush, supra note 46, at 337, n.89 (citing H.R. CONF. REP. No. 99-2817, at 305 (1986)).
61. 33 U.S.C. § 2706(c)(5), ELR STAT. OPA § 1006(c)(5).
62. Roush, supra note 46, at 337.
63. See supra notes 18-36 and accompanying text.
64. Such adjudicatory proceedings might also forestall responsible parties' demands for jury trials in NRD cases. The possible applicability of the Seventh Amendment to CERCLA actions "is an issue ripe for appellate review." Christopher G. Smith, The Right to Trial by Jury in CERCLA Cost-Recovery and Contribution Actions, 25 ELR 10185 (Apr. 1995).
65. See supra note 7.
66. See, e.g., H.R. 2727, 105th Cong. (1997); H.R. 3000, 105th Cong. (1997); S. 8, 105th Cong. (1997).
67. See supra note 36 and accompanying text. The Clinton Administration's draft bills have also included a provision for judicial review of trustees' administrative records which incorporates by reference the arbitrary and capricious standard of review in CERCLA § 113(j)(2) (42 U.S.C. § 9613(j)(2)).
68. See Assessment/Restoration, supra note 49, at 8987-88. (NOAA's proposed rule) and cases cited therein.
69. 5 U.S.C. § 706(1)(A), available in ELR STAT. ADMIN. PROC.
70. Id. According to NOAA's Appendix III to its proposed NRD rule, review on the record is also intended to avoid a trial de novo in district court, promote public participation in the assessment process, and create incentives for both trustees and opposing parties to disclose publicly the data that supports their respective positions. See Assessment/Restoration, supra note 49, at 8987-88. NOAA's final rules eliminate any reference to the standard of review for assessments. Instead, the preamble states that assessment decisions "constitute final agency actions typically subject to review on the record by federal courts, and [NOAA] fully expects that this is the standard of review that will be applied." 61 Fed. Reg. 440, 478 (Jan. 5, 1996).
71. 42 U.S.C. § 9613(j)(2), ELR STAT. CERCLA § 113(j)(2). Before SARA, court decisions were evenly divided as to the standard of review that would apply to EPA's selection of response actions.
72. 5 U.S.C. § 706(2)(E), available in ELR STAT. ADMIN. PROC. One often-quoted definition of the "substantial evidence" test is from Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 229 (1938) ("Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."). More recent decisions have almost completely blurred any distinction between the two standards. See Sierra Club v. Costle, 657 F.2d 298, 323 n.67, digested at 11 ELR 20455 (D.C. Cir. 1981) ("If the agency's decision is not based on substantial evidence then it will be held to be arbitrary and capricious"); Motor Vehicle Mfrs. Ass'n v. Ruckelshaus, 719 F.2d 1159, 1164 (D.C. Cir. 1983) ("Agency action is arbitrary and capricious if … [it] is not supported by substantial evidence.").
73. See supra notes 37-67 and accompanying text.
74. KENNETH CULP DAVIS, 5 ADMINISTRATIVE LAW TREATISE § 29:7, at 363 (2d ed. 1984) ("No useful purpose is served by recognizing a difference between the 'substantial evidence' standard and the 'arbitrary or capricious' standard, and review under the two standards should be the same").
75. Association of Data Processing Serv. Orgs. v. Board of Governors, 745 F.2d 677, 683 (D.C. Cir. 1984).
76. Id. at 684, quoting Pacific Legal Found. v. Department of Transp., 593 F.2d 1338, 1343 n.35 (D.C. Cir. 1979) and Aircraft Owners & Pilots Ass'n v. Federal Aviation Admin., 600 F.2d 965, 971 n.28 (D.C. Cir. 1979).
79. 59 Fed. Reg. 1084 (Jan. 7, 1994); Id. at 14273 (Mar. 24, 1994).
80. Id. at 32153 (June 22, 1994).
81. Montana v. Atlantic Richfield Co., No. CV-83-317-HLN-PGH, slip op. (D. Mont. Mar. 3, 1997) (ARCO).
82. MONT. CODE ANN. §§ 75-10-701 to -738. CECRA is the Montana counterpart of CERCLA.
83. ARCO, slip op. at 12.
84. Id. at 16.
85. Id. at 18.
86. Id. at 22-23.
87. S. 8, § 702, amending 42 U.S.C. § 9607(f)(2)(C), ELR STAT. CERCLA § 107(f)(2)(C).
88. 5 U.S.C. §§ 553(c), 706(2)(E), available in ELR STAT. ADMIN. PROC.
89. H.R. 2727, § 608, amending 42 U.S.C. § 9607(f)(1), ELR STAT. CERCLA § 107(f) by adding a new subsection (6)(A) "Process for Determining Damage—Standard of Review." Currently, subsection (6)(A) is called "Study of Options for Post-Closure Program."
90. See supra notes 49-50 and accompanying text.
91. H.R. 2727, § 608.
92. 42 U.S.C. § 9607(f)(2)(C), ELR STAT. CERCLA § 107(f)(2)(C).
93. See Roush, supra note 46.
94. If Congress were to adopt the Clinton Administration's approach of providing for judicial review ofthe trustees' administrative record under the arbitrary and capricious standard, it would likely override the district court's decision in ARCO. See supra note 81.
95. See Association of Data Processing Serv. Orgs. v. Board of Governors, 745 F.2d 677, 684 (D.C. Cir. 1984).
96. See supra note 7.
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