Risk & Compliance

A Toxic Mess

Companies discover a benefit to cleaning up environmental damages before the government tells them to.
Laura DeMarsJuly 27, 2007

It was a rare example of large companies banding together
with environmental groups — not to mention landowners and the
states — against the federal government. Last month the U.S.
Supreme Court ruled in the groups’ favor in United States v.
Atlantic Research Corp., a case that could have a major impact on
who pays for the cleanup of toxic-waste sites.

Atlantic Research, which modified rocket engines under contract
to the U.S. government, contaminated land at its Arkansas
facility. It voluntarily cleaned up the site, then sued the government
to recoup some of the costs, citing a section of the Superfund law as justification. The government argued that parties can sue other parties only after an enforcement action has been brought against them.

That, argued supporters of Atlantic Research, would greatly slow cleanup because the Environmental Protection Agency is too short-staffed to ferret out every instance of environmental damage. A similar case two years ago went in the government’s favor, but this case hinged on a different passage in the Superfund law.

This has the makings of a landmark case, says Reed Rubinstein, a partner at Greenberg Traurig. “If the Court had ruled for the government,”
he says, “companies that
own or operate contaminated sites
would have found that mitigating
the expense of cleanups through
cost recovery would be much more

The decision is not a complete
victory for Corporate America,
however. Companies that voluntarily
clean up toxic sites can sue
not only the government (under
certain circumstances) but other
companies that may bear some
responsibility. “It’s a good idea to
get in on cleanup efforts and reach
a settlement up front,” says Ken
Ayers, a managing director of
insurer Aon’s Environmental Services
Group. Companies associated
with “legacy sites” that they no
longer own or operate can buy
insurance that would protect
against possible future claims.

Expect to see plenty of lawsuits:
despite its name, the Superfund
is currently without funds,
because the tax on petroleum and
chemical companies that financed
it has expired. That has ratcheted
up the fever regarding who can sue
whom over cleanup costs.

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