That Mine Is Yours, Not Theirs: Ninth Circuit Holds That WWII Shutdown Order Did Not Make Federal Government the CERCLA “Operator” of California Gold Mine

One perennially vexing issue for federal courts in cases brought under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law, is what makes someone an “operator” of a facility, and thus strictly (and, in most cases, jointly and severally) liable for cleanup costs. In particular, what degree and nature of control over a facility exercised by the government make it an operator? (We recently blogged on this issue.) In its recent decision in United States v. Sterling Centrecorp Inc., a divided panel of the Ninth Circuit held that a World War II-era federal order that shut down a gold mine in California did not give the government sufficient control over the operations of the mine to make it a CERCLA operator.

Upon entering World War II, the United States faced a serious shortage of nonferrous metals, especially copper, and a corresponding shortage of the machinery and materials needed to produce them. Scarce resources needed to be redirected from nonessential operations to essential ones, and gold mines, such as the Lava Cap mine in Nevada County, California, were deemed nonessential. An order of the War Production Board required the mine to cease operations in 1943. While the order was revoked in 1945, operations at the mine never resumed. It was acquired in 1952 by a company now known as Sterling Centrecorp Inc. (Sterling) through its subsidiary, Keystone Copper Corporation (Keystone). The mine lay dormant for decades. Dam failures in 1979 and 1997 released mine tailings containing high levels of arsenic. Federal and state authorities responded to the contamination, the site was named a Superfund site in 1999, and the United States and California eventually spent some $32 million on the cleanup. They sued Sterling and the mine’s current owner. The district court found that Sterling was a former operator of the mine and that the United States had not been an operator during World War II, and entered a judgment against Sterling and the current owner for all of the governments’ response costs.

On appeal, the Ninth Circuit affirmed the district court’s finding that Sterling’s direct involvement at the site made it a former operator, even though Keystone was formally in charge. Applying the Supreme Court’s 1998 decision in United States v. Bestfoods, the court found that the evidence showed that Sterling maintained “pervasive control” over operations at the site, including the response to the 1979 dam collapse. Sterling, the court held, had been the true operator of the site, not Keystone.

The appeal also raised a somewhat puzzling question: who operated the mine when it was not operating between and 1943 and 1945 as a result of the wartime government shutdown order? Applying the same Bestfoods factors, a 2-1 majority of the panel held that the order did not give the government the requisite active role in running the mine, including at least some operations “specifically related to pollution.” The order also allowed permitted normal maintenance and safety practices, such as keeping the dam in good repair. A dissent took issue with this conclusion, arguing that instructing the mine’s owner to shut down was surely tantamount to directing all of its operations. Moreover, the dissent pointed out, the order prohibited the removal of any waste from the site, effectively preventing any actions that might have reduced the risk of the eventual release.

CERCLA’s frustratingly unhelpful definition of the “operator” of a facility – “any person . . . operating such facility” – will continue to require federal courts to fill the gap left by Congress. Courts may also need to consider whether the general Bestfoods analysis needs to be supplemented by a more specific test applicable to the government, at least in cases where governmental regulation is sufficiently comprehensive. In the meantime, unless the full Ninth Circuit or the Supreme Court disagrees, Sterling and the current owner of the Lava Cap mine will bear 100% of the cleanup costs.