Type: Law Bulletins
Date: 10/17/2016

Government's War-Time Closure of Gold Mine Insufficient to Establish "Operator" Liability Under CERCLA

On Sept. 20, the Eastern District of California ruled in the case of U.S. v. Sterling Centrecorp Inc., Case No. 2:08-cv-02556-MCE-JFM (E.D. Cal. Sept. 20, 2016) that the government’s forcible closure of a California gold mine during World War II did not make the government liable as an “operator” under CERCLA. The court’s opinion demonstrates the required showing that a party must make before establishing “operator” liability under CERCLA.

The case involved the former Lava Cap Mine in Nevada County, Calif., which was designated as a Superfund site by the United States and the California Department of Toxic Substances (collectively, the “government”) because of elevated arsenic levels from tailings and waste materials generated by mine operations. One of the defendants, Sterling Centrecorp Inc. (“Sterling”), was the successor by de facto merger of a former owner of the Lava Cap Mine and was thus found liable under CERCLA for the government’s removal and remediation costs. At the damages phase of the case, Sterling and the government filed competing motions for summary judgment regarding whether the government’s forcible closure of the mine during WWII made the government an “operator” of the mine under CERCLA. 

The closure order (“Order L-208”) had been issued by the War Production Board, a government entity created in 1941 to assist with converting America’s civilian industry to wartime production. The War Production Board gave priority to copper mining, which had useful military implications, and labeled gold mines (such as the Lava Cap Mine) as “nonessential” for purposes of WWII. As such, Order L-208 prohibited owners of “nonessential” mines like the Lava Cap Mine from taking any action to “acquire, consume, or use any material, facility, or equipment to break any new ore or to proceed with any development work or any new operations in or about such mine” and also prohibited owners from removing “any ore or waste from such mine, either above or below ground, or [from] conduct[ing] any other operations in or about such mine, except to the minimum amount necessary to maintain its buildings, machinery, and equipment in repair, and its access and development workings safe and accessible.”

In response to Order L-208, the Lava Cap Mine was shut down in 1943 and did not re-open until 1952 (even though the government revoked Order L-208 in 1945). Even after the mine was reopened, the owners took no action at the site for decades. Beginning in the 1970s, a series of waste releases occurred and historical contamination was discovered, eventually culminating in an EPA removal action in 1997 and the designation of the Lava Cap Mine as a Superfund site in 1999. In all, the EPA and the California Department of Toxic Substances Control alleged that they collectively spent more than $33 million in response costs at the site.

Sterling argued that the government’s temporary shutdown of the Lava Cap Mine between 1943 and 1945 prevented Sterling’s predecessor from properly securing mine tailings and amounted to exclusive government operation and control over the mine, thus giving rise to “operator” liability under CERCLA. The court disagreed, noting that:

[T]he Board never had any presence at the mine and neither constructed any facilities or built any roadways to facilitate access to mining operations. Nor did the Board have any role in managing [Sterling’s predecessor], direct any aspect of the company affairs, provide raw materials, dictate production, or regulate profits at the time. It was [Sterling’s predecessor] alone that generated mining waste, including tailings, and determined how and where that waste should be disposed. It was [Sterling’s predecessor] and not the government who designed and constructed the disposal system such that tailings were discharged […].

The court further noted that 9th Circuit precedent made it clear that CERCLA “operator” liability requires active management of the enterprise and/or decision-making authority over the facility’s waste disposal operations. The court contrasted the Sterling case with the 1995 Eastern District of California case of U.S. v. Iron Mountain Mines, Inc., in which:

[T]he government did more than simply prohibit gold mining at the site as not essential to the war effort. It established a Premium Price Plan as an incentive for the production of copper and zinc, secured an agreement from [the mine owner] to sell its entire copper and zinc output to the government and controlled marketing and pricing of the ore produced at the mine. [And the government was also alleged to have been] involved in the activities of the mine in numerous respects, including hiring workers, building access roads, facilitating shipments, and paying for equipment needed to expand ore exploration.

Despite such heightened allegations of government control over mine operations, the court in Iron Mountain Mines still refused to find the government liable as an “operator” because it was not involved in the day-to-day management of the mine and did not have any control over the waste disposal decisions at the mine. As such, the court in Sterling refused to find the government liable as an “operator” and granted the government’s motion for summary judgment (and denied Sterling’s motion).

The Sterling case illustrates the types of factors a court will review when determining “operator” liability under CERCLA. The court’s opinion is notable for refusing to find “operator” liability based on the exercise of broad, facility-wide powers (such as ordering the shut-down of a facility) and instead requiring a particularized showing that the alleged “operator” was involved in the day-to-day functions of the facility and/or had direct control over the waste disposal decisions at the facility.

You can access a full copy of the Sterling opinion here.

In This Article

You May Also Like