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Companies Win at U.S. Supreme Court on Cleanup Costs

By Greg Stohr

May 4 (Bloomberg) — The U.S. Supreme Court eased the financial burden on some companies accused of contributing to contamination of industrial sites in a ruling that shifts millions of dollars in Superfund cleanup costs to taxpayers.

The justices, voting 8-1, overturned a ruling requiring Shell Oil Co. to help pay for the cleanup of a California site that once housed a facility for storing and selling agricultural chemicals. The court also said Burlington Northern Santa Fe Corp.and Union Pacific Corp., which owned part of the contaminated site, don’t have to pay the full $42 million cleanup cost.

The ruling may force the government to pay more of the costs of cleanups, making it harder for officials to get reimbursement from companies. In settlements last year with the Environmental Protection Agency alone, private parties paid more than $2 billion under the Superfund law.

In the case before the justices, the federal government was trying to recoup the costs of cleaning up a site in Arvin, California. Brown & Bryant Inc., the company that ran the facility, was driven out of business in 1988 by an environmental investigation.

Shell, an affiliate of Royal Dutch Shell Plc, contended that it shouldn’t be held responsible for selling Brown & Bryant a pesticide known as D-D, which leaked into the ground and threatened water supplies.

The government pointed to a Superfund provision imposing cleanup costs on companies that “arranged for disposal” of hazardous substances. The government said Shell dictated how Brown & Bryant should receive and store the chemicals.

Steps Taken

Writing for the court, Justice John Paul Stevens took a more favorable view of the company’s actions. Shell “took numerous steps to encourage its distributors to reduce the likelihood of such spills,” Stevens said, pointing to safety manuals provided by the company and other steps.

“Although Shell’s efforts were less than wholly successful, given these facts, Shell’s mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell ‘arranged for the disposal of D-D,’” Stevens said.

Justice Ruth Bader Ginsburg was the lone dissenter.

The railroads sought to give judges more power to divide up cleanup costs, rather than holding each connected company accountable for the full expense.

The railroads’ involvement in the case stems from their ownership of some of the contaminated land. The railroads owned 19 percent of the 4.7 acres that Brown & Bryant used for the last 13 of its 28 years on the site.

Railroad Share

A federal trial judge relied on those figures in determining that the railroads should pay 9 percent of the cleanup costs. The judge also concluded that Shell was responsible for only 6 percent, saying most of the D-D spillage occurred after the chemical was under Brown & Bryant’s control.

The San Francisco-based 9th U.S. Circuit Court of Appeals said the judge should have imposed “joint and several” liability on the companies, making each responsible for the full cleanup cost. The appeals court also said Shell could be forced to play cleanup costs as an “arranger.”

The Superfund law is formally known as the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA.

The cases are Burlington Northern v. United States, 07- 1601, and Shell Oil v. United States, 07-1607.

To contact the reporter on this story: Greg Stohr in Washington at[email protected].


Last Updated: May 4, 2009 11:10 EDT 

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