December 2003

A recent federal trial court decision could have a major impact on the manner in which California property owners and developers conduct environmental cleanups. The decision in Carson Harbor Village, Ltd. v. Unocal Corporation, 2003 U.S. Dist. LEXIS 14482 (August 11, 2003), emphasizes the importance of community involvement in remediating contaminated property -- a requirement which is often overlooked by developers, their environmental consultants and state regulators.

The Carson Harbor decision reemphasized this requirement. The United States District Court for the Central District of California denied a property owner the right to recover its cleanup costs from the parties who caused the environmental damage because the owner failed to involve the public in the selection of an appropriate cleanup method. The court’s decision is especially remarkable in light of the fact that the owner performed the cleanup with the blessing of the local Regional Water Quality Control Board (“Water Board”), the state agency overseeing the cleanup. This case reflects a growing trend requiring property owners to exceed the dictates of local environmental authorities to preserve their claims against the entities that contaminated their property.

The decision in Carson Harbor addresses a cost recovery claim under the Comprehensive Environmental Responsibility, Compensation and Liability Act (CERCLA), also known as the “Superfund” statute. In 1983, the plaintiff, Carson Harbor Village, Ltd. (“Carson”), purchased a mobile home park that had been leased to Unocal Corporation from 1945 to 1983. In 1993, Carson conducted an environmental investigation, which revealed a large amount of tar and slag. These contaminants were believed to have been deposited during Unocal’s use of the property for oil production. The owner prepared a Remedial Action Plan (“RAP”) that called for removal of roughly 1,000 tons of material from the property. The RAP was approved by the Water Board.

Carson sued Unocal, the prior owner of the property, and several governmental entities to recover the $285,000 it spent on the cleanup. Among other statutory and common law claims, Carson based its claim for recovery of cleanup costs on CERCLA. In order to prevail on its CERCLA claim, Carson was required to demonstrate that the environmental cleanup was performed in a manner “consistent” with CERCLA’s National Contingency Plan (“NCP”). The NCP comprises over 300 pages of intricate regulations detailing procedures for performing cleanups. It specifies different requirements for “remedial” actions versus “removal” actions. Removal actions are taken to remedy an immediate problem and are generally less complex than remedial actions. Consequently, the NCP requirements for removal actions are generally less onerous.

The court in Carson Harbor determined that the digging and hauling operation at the mobile home park constituted a remedial action. This determination was based on the lack of an immediate threat to the environment, a closure letter from the Water Board stating that the cleanup was final, and the fact that the cleanup was performed voluntarily rather than in response to an emergency condition. Accordingly, the court analyzed whether Carson’s cleanup complied with the NCP regulations applicable to remedial actions. It concluded that the cleanup failed to comply with two key provisions of the NCP.

First, Carson failed to comply with the NCP’s community involvement regulations. These requirements include preparation of a community relations plan, public notice of the cleanup, and an opportunity for public comment. As with the vast majority of cleanups supervised by California’s Water Boards, none of these requirements were met. Carson argued that the Water Board’s participation satisfied the public notice obligations because the agency represented the interests of the general public. The court acknowledged that other decisions have held that public agency involvement was sufficient to meet the NCP’s community participation requirements. Nonetheless, the court concluded that the Water Board’s involvement in Carson’s cleanup was not sufficiently “extensive” or “comprehensive” to meet the NCP’s standards.

Second, the court ruled that the RAP approved by the Water Board did not comply with the NCP’s requirement of a Remedial Investigation/Feasibility Study. The RAP was flawed due to the lack of any consideration of alternatives to the cleanup plan selected by Carson’s environmental consultants. The court held that Carson’s failure to comply with these two key components resulted in a cleanup that was not “consistent” with the NCP’s requirements. Based on that deficiency, the court denied Carson’s CERCLA cost recovery claim.

The Carson Harbor case is the second California federal court case in recent years to dismiss a CERCLA contribution action for failure to comply with the NCP’s public participation requirements. It has ramifications for environmental cleanups across California and in other states as well. Most voluntary remedial actions undertaken by property owners are conducted similarly to the one performed by Carson: the owner’s environmental consultants recommend a cleanup plan that is reviewed, sometimes revised, and ultimately approved by the state or local environmental authority. It is extremely rare that these cleanup plans include any consideration of alternative methods of remediation. Even more unlikely is the implementation of community notice and involvement requirements not generally required by the supervising agency. These additional requirements are likely to add significant costs and time to planned remediation projects. In fact, strict adherence to the NCP’s requirements is so unusual that many environmental consultants and state regulators have only a passing familiarity with those regulations.

In light of Carson Harbor, developers and other property owners faced with environmental contamination must give serious consideration to whether they should perform a cleanup above and beyond the bare minimum standard that will be required by local agencies. If a property owner hopes to recoup its cleanup costs in CERCLA litigation, it may well be worth the effort to hire knowledgeable consultants who can develop remedial plans consistent with the NCP, including the community notification requirements. The costs of involving the public may be high, but the loss of claims against other responsible parties could be even higher.

If you have any questions regarding this bulletin, please contact Barry MacNaughton, Esq., at 310.281.6342 or bmacnaughton@ecjlaw.com. If you would like to be a part of the Real Estate Reporter mailing list or if you would like to receive copies electronically, please contact Cynthia S. Kaiser at 310.281.6328 or ckaiser@ecjlaw.com.

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