The Washington State Court of Appeals recently held the Department of Natural Resources (DNR) liable as an operator or owner of a contaminated site under the Model Toxics Control Act, RCW 70.105D (MTCA), in Pope Resources, LP v. Wash. Dept. of Natural Resources. 

DNR manages aquatic lands owned by the State of Washington and leased aquatic lands in Port Gamble to the predecessor of Pope Resources for log storage, rafting and booming. Industrial activities at the site, including lumber mill operations adjacent to Port Gamble Bay, released hazardous substances, and the Department of Ecology (Ecology) named Pope and DNR as potentially liable persons under MTCA. Pope conducted remedial actions and sued DNR for contribution of cleanup costs under MTCA. Reversing the superior court’s summary judgment order in favor of DNR, the court of appeals held that DNR’s management interests in the aquatic lands satisfied the broad MTCA definition of owner, which requires only “any ownership interest.”

The court also held that DNR’s control of the lands through the lease was sufficient to meet the MTCA standard for operator liability, which requires only exercise of “any control.” In addition to clarifying that DNR may be a liable party at MTCA cleanup sites, this decision potentially expands the reach of MTCA to parties with any ownership interest in or control of a contaminated property. 

Owner or Operator Liability Under MTCA

Potentially liable persons under MTCA include current and former owners or operators of facilities, including a site or area where hazardous substances were released or disposed of. MTCA defines an “owner or operator” as “[a]ny person with any ownership interest in the facility or who exercises any control over the facility.” MTCA’s definition of person does not include the state but does include state agencies. 

In several cases interpreting MTCA, Washington courts have followed federal courts’ interpretation of the scope of “operator” liability under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (CERCLA), the statute upon which MTCA was modeled. CERCLA defines “owner or operator,” in relevant part, as “any person who owned, operated, or otherwise controlled activities” at a facility. The United States Supreme Court has held that CERCLA operator liability attaches only to entities that manage, direct or conduct operations specifically related to the polluting activity or make decisions about compliance with environmental regulations. See United States v. Bestfoods, 524 U.S. 51 (1998). 

DNR as an Owner or Operator at Port Gamble

DNR has been delegated authority to manage aquatic lands in Washington. RCW 79.105.010. In 1974, the state, “acting by and through” DNR, leased aquatic lands to Pope’s predecessor for log storage, rafting and booming. The lease required specific methods of log booming, prohibited others and provided for other restrictions. DNR executed a similar lease in 1979 and again in 1991, noting in 1991 that pilings had been added on the leased lands and that the area was suitable for log storage. Internal DNR documents showed the department referred to itself as an owner at the site. 

Ecology named DNR and Pope as potentially liable persons at the site for activities between 1853 and 1995 that resulted in the release of hazardous substances, and Pope entered into an agreement with Ecology to conduct remedial actions. DNR declined to enter into any cleanup agreement, and Pope sued DNR for contribution of cleanup costs. Ecology filed an amicus brief in the court of appeals arguing in favor of DNR liability as an owner or operator under MTCA. 

DNR argued that it is not an owner at the site because the state, not the department, owns the aquatic lands at Port Gamble. The court of appeals rejected DNR’s argument that only fee simple ownership triggers “owner” liability under MTCA. Instead, the court emphasized MTCA’s broad definition of “owner” includes entities “with any ownership interest.” Looking at the plain language of the statute that any ownership interest triggers liability, the court held that any person holding some of the bundle of rights to use, manage or possess the property is liable as an owner under MTCA. DNR’s undisputed authority to manage the aquatic lands at Port Gamble was sufficient to make it liable as an owner of the site. 

DNR also argued that it is not an operator because it did not exercise control over the polluting activities at the site, citing Washington court decisions relying on federal courts’ interpretation of operator liability under CERCLA. The court of appeals declined to follow CERCLA caselaw and instead looked to the plain language of the MTCA definition of “operator,” which includes a person who exercises any control of the facility. The court noted that this definition is different from CERCLA’s definition of “operator,” which imposes liability only on persons who control the polluting activities at the facility. Because DNR exercised its statutory authority to manage the aquatic lands at Port Gamble, controlled the permitted uses of the lands and expressly authorized log storage on the lands, the court held DNR liable as an operator under MTCA. 

The court also rejected DNR’s policy argument that imposing owner or operator liability for the department’s management of aquatic lands would subject taxpayers to excessive MTCA liability, directing DNR to make the argument to the legislature and noting that a finding of liability is distinct from a final apportionment of cleanup costs based on equitable factors among liable parties. 

Although Ecology has named DNR a potentially liable person at other MTCA sites, Pope Resources marks the first time DNR has been found liable under MTCA. 

Broader Implications for Potential MTCA Owners and Operators

As the manager of 2.6 million acres of aquatic lands in Washington, DNR faces potentially broad MTCA liability after Pope Resources. The decision also has implications for private parties connected to contaminated sites. By applying a broad definition of “owner,” the court of appeals expanded the reach of MTCA ownership liability to any party with any of the rights traditionally associated with the bundle of sticks used to illustrate ownership interests. Similarly, by declining to follow CERCLA caselaw limiting operator liability to parties that control the pollution-causing activities at a site, the court of appeals potentially expanded the reach of MTCA to any party that exercises “any control” over a site, regardless of whether such control is related to the pollution-causing activities.

Finally, persons currently facing potential MTCA liability, or who may be confronted with potential liability in the future, should note the positions taken by Ecology in the amicus brief it filed in the case. Ecology’s position is that “any” ownership at a site or “any” control at a site triggers MTCA liability as an owner or operator. The agency’s brief was cited favorably by the court, and likely will serve as the agency’s position in negotiations with potentially liable persons for the foreseeable future.   

© 2017 Perkins Coie LLP