On May 24, 2018, the State of Washington’s Supreme Court issued a decision narrowing the extent of “owner or operator” liability under the state’s Model Toxics Control Act (MTCA) and finding that the Washington Department of Natural Resources (DNR) was not liable under the MTCA. Although specific to Washington, this decision has significance for owners, operators, or lessees of businesses on contaminated property. [Pope Resources LP, et al. v. Washington State Department of Natural Resources, Case No. 94084-3 (Wash. May 24, 2018).]
Background
This case involved a former sawmill and forest products manufacturing facility, which was operational from 1853 to 1995 in Port Gamble Bay, Washington. That facility leased surrounding submerged tidelands from DNR starting in 1974. In 1985, the facility was transferred to a newly-formed Delaware company, Pope Resources, which leased the facility back to the original holder, Pope & Talbot, until the facility closed in 1995.
Pope Resources is now looking to develop the former mill facility property into a high-density community with a marina, but the area is extensively contaminated, due in part to the many sawmill and timber products manufacturing operations that took place at the facility. Pope Resources entered into a consent decree with the Washington Department of Ecology in 2013 to remediate portions of the facility, and subsequently sued DNR for natural resources damages and remedial costs, and for cost contribution, under MTCA. The lower court rejected Pope Resources’ claim, granting summary judgment to DNR. The decision was appealed, and the appellate court reversed, holding that DNR was an “owner or operator” with potential liability under MTCA. DNR appealed the decision to the Supreme Court.
MTCA was modeled on and is similar to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and contains a “potentially liable person,” or PLP, concept similar to CERCLA’s “potentially responsible party,” or PRP. Under MCTA, PLPs include current or prior owners or operators of a facility where a release of hazardous substances has occurred. An “owner or operator” under MTCA is “[a]ny person with any ownership interest in the facility or who exercises any control over the facility,” including state agencies, but excluding the State of Washington.
The Supreme Court’s Decision
Here, the Washington Supreme Court said, the appellate court erred in improperly conflating the concepts of “owner” and “operator” under MTCA. Ultimately, the court found that DNR was neither.
Because MTCA was designed with CERCLA in mind, Washington courts have, in the past, interpreted the scope of “operator” liability under MCTA to be coterminous with “operator” liability under CERCLA. As explained in the United States Supreme Court decision in United States v. Bestfoods, only persons or entities that manage, conduct, or direct operations that are specifically related to the activity that caused the pollution at issue, or that make decisions about compliance with environmental regulations, are liable as “operators” under the federal statute.
Here, DNR’s role as a manager of tidelands and other aquatic lands did not, the court determined, make it an “operator” of the facility under MTCA. Because DNR did not have any operational control over the Pope facility—a fact upon which both parties agreed—it could not exercise the “business management role directly over the facility” that would have been necessary to apply “operator” liability. Pope argued that, in leasing the tidelands, DNR had allowed and leased for log storage, which caused pollution at the facility; the court rejected the argument that this activity made DNR an “operator,” calling DNR’s actions “too slim a reed on which to hang MTCA liability.”
The court similarly found that DNR’s role as a lessor did not make it an “owner” under MTCA. Although the State of Washington had delegated to DNR the management of aquatic lands, the court held that this delegation did not constitute an “ownership interest” in the lands, which remained in the hands of the State. Pointing to lease documents and the public trust doctrine, the court determined that while DNR was the state’s “management agent” for the purposes of leasing the lands to Pope, the State remained the owner of the lands themselves, and operational control and the attendant MTCA liability for the facility was “clearly delineated” to Pope. Accordingly, said the court, the appellate court had erred in concluding DNR could be liable under MTCA due to its role as a lessor of tidelands.
Conclusion and Implications
DNR has leased millions of acres of aquatic lands, and under the appellate court’s decision, could have faced significant liability under MTCA; this decision shields DNR from future contribution actions by private parties like Pope under that law, and also means that DNR cannot be compelled to undertake cleanup activities at sites they have leased.
The decision may also impact private parties, as the court clarified that “owner” liability must be tied to a concrete real property interest, and “operator” liability is implicated only when an entity controls operations that are specifically related to the activities that caused the pollution, or when an entity controls environmental compliance activities. This narrows the universe of property interests upon which MTCA liability can be based and the scope of activities that will give rise to operator liability. The Court’s slip opinion on this decision is available online at: https://www.courts.wa.gov/opinions/pdf/940843.pdf
(Julia Stein)
