California’s Central District Awards the United States $49.8 Million at McColl Superfund Site

By: Jay Tufano

In the latest of a three-decade old saga involving the McColl Superfund Site in Fullerton, California, the Central District of California granted summary judgment in favor of the United States to recover some $49.8 million from Shell Oil Company and several other oil companies (collectively “Oil Companies”) in a CERCLA cost recovery action. United States v. Shell Oil. Company et al., No. CV 91-00589-CJC, 2020 WL 7331993, at *4 (C.D. Cal. Dec. 10, 2020) (hereafter “Shell”).

At issue in the McColl Site litigation is the cleanup liability for contaminated soil and groundwater caused by the production of and waste disposal practices associated with aviation gas (known as “Avgas”) during the World War II era. During the liability phase of trial, the Oil Companies were deemed liable for all cleanup costs, except the United States was liable for 6.25% of benzol waste. In filing for summary judgment, the United States sought to recover all costs incurred for the cleanup between 1990 and 2019 and prejudgment interest, less the United States’ 6.25% share.

In granting the United States’ motion, the district court rejected several of the Oil Companies’ arguments along the way:

Relying on the Supreme Court case, United States v. Atlantic Research, 551 U.S. 128 (2007) the Oil Companies argued that the motion should be denied because the United States was limited to pursuing recovery under CERCLA’s contribution provision (42 U.S.C. § 9613(f)) and could not recover pursuant to CERCLA’s “cost recovery” provision under Section 9607(a). As the district court observed, cost recovery actions are limited to situations where a PRP voluntarily incurs cleanup costs. Shell, supra, at *4. The court further explained that Section 9607 cost recovery actions do not apply where a PRP is seeking to recover costs paid via settlement or pursuant to a judgment or in instances where a party “may” bring a Section 9613 contribution action. Id. In such cases, the party must proceed under Section 9613. Id.

The Oil Companies claimed that the United States was ineligible to recovery under Section 9607(a) because the United States had been deemed a liable party; had previously been ordered by the Court of Federal Claims to reimburse the Oil Companies for certain remediation oversight and site security costs; had entered into partial consent decrees with the State of California for the State’s response costs; and had had stipulated to an allocation under CERCLA’s contribution provision under Section 9613(f). In dismissing this argument, the court first held that Atlantic Research was inapplicable because its holding does not apply in cases where the United States—as opposed to private parties—is seeking to recover. (Shell, supra, at *4.) The court further held that even if Atlantic Research did apply, the United States was still entitled to pursue recovery under Section 9607 because it was seeking to recover costs incurred to remediate the McColl Site as opposed to costs to satisfy a settlement or court judgment. Id. at *5.

The next issue addressed by the court was whether the United States’ costs were consistent with the National Contingency Plan (NCP). As a threshold point, the court rejected the Oil Companies’ argument that the United States was not entitled to Section 9607(a)(4)’s presumption of compliance with the NCP in favor of the United States because the Government appeared in the case as a PRP and not as “the United States.” (Id. at *6.) The court went on to hold that the United States’ direct costs, indirect costs, and costs for “annual allocations” (which do not relate to any specific site but include activities such as training contractors and developing operating procedures) were recoverable.

Finally, the court also awarded the United States prejudgment interest from the later of the date that it made its demand or the date the cost was incurred. Of note, the court rejected the Oil Companies’ argument that prejudgment interest should have been tolled during the 12-year stay of the case. Id. *7.