GE Loses Constitutional Challenge to CERCLA §106 Orders

Under CERCLA once EPA identifies a hazardous site and has identified potentially responsible parties (“PRPs”) it generally initiates negotiations with the PRP’s to achieve clean up.  If negotiations fail EPA has several options.  It may clean up the site itself and recover clean up costs from the PRP’s.  It may seek a court order compelling clean up by a PRP.  Another option is for EPA to issue a unilateral administrative order (UAO) to a PRP for clean up under CERCLA §106.

A PRP receiving a UAO may comply, or if the PRP believes it is not responsible may refuse to comply.  If the PRP complies it may seek reimbursement from other PRP’s or EPA upon completion of the clean up.  If the PRP does not comply, EPA may seek two kinds of monetary penalties.  If PRP lacks sufficient cause and willfully violates the Order then EPA may seek a fine of $32,500 for each day of non-compliance.  EPA may also seek punitive damages up to three times the amount of any costs incurred as a result of the PRP’s failure to take proper action.

            In General Electric Company v. Jackson, 2009 WL 169437, (D.D.C. Jan. 27, 2009), General Electric Company challenged EPA’s administration of Section 106 claiming that EPA’s pattern and practice of issuing UAOs without a prior hearing violated the due-process requirements of the Fifth Amendment to the United States Constitution.  Over the years General Electric had never refused to comply with a UAO.

            General Electric’s main argument was that due process required a trial-type hearing for non-emergency “accusatory” agency decisions.  The court applied the balancing tests for such claims dictated by the United States Supreme Court in Matthews v. Eldridge, 424 U.S. 319 (1976).  The test involved a balancing of the private interest, the public interest and the risk of error to determine whether existing procedures regarding UAOs satisfied constitutional due process requirements.

            The Court relied upon a substantial record generated in discovery including expert opinions.  As the Court noted, the private interest depends on whether or not the PRP complies with UAO.  Based on the evidence, the Court concluded that the costs of compliance average $4 million and the deprivation—that is the time elapsed before PRP obtains contribution—is three years.  If the PRP does not comply with the UAO the evidence was inconclusive as to the quantum and length of deprivation.  However, the Court concluded both were substantial and, although only financial, normally may be large enough to have collateral effects on operations.

            The EPA asserted that the government had an interest in ordering emergency clean ups.  After reviewing the evidence which showed several years generally elapse between identification of the site and a UAO, the Court concluded the EPA does not issue UAOs in emergency situations.

            The Court was more receptive to EPA’s claim of a substantial financial and administrative interest in preserving its current procedure given the number of CERCLE UAOs it issues.  The Court concluded even minimal additional process would tax EPA’s resources.  As to the risk of error, the Court looked to the actual errors (five) made by EPA in issuing UAOs under Section 106 over 26 years to conclude that the risk was low.

            In determining that the balancing of these factors would not render the UAO procedure unconstitutional the Court determined:

(a)        Because of the number of UAOs a pre-issuance hearing by a presiding EPA officer would constitute a substantial financial and administrative cost to EPA. 

(b)        Because of the low number of historic errors made by EPA in issuing UAOs a pre-decision hearing by an EPA officer would not significantly reduce the risk of error.

(c)        The size and nature of the impacted private interests was not so great as to justify a large increase in government costs which would achieve only marginal improvement in the rate of error.

            Accordingly, the Court held that a pre-decision hearing before an agency officer was not constitutionally required.  The Court finally noted that the analysis does not change if the pre-decision hearing would be before an Administrative Law Judge.

This article was authored by James R. Snyder, Jackson Kelly PLLC. For more information on the author see here.