American Home Mortgage Servicing, Inc. (Star Bright Plating Site) (Board decision, May 27, 2011)

Plain-English summary

American Home Mortgage Servicing, Inc. sought reimbursement of about $200,000 plus interest for cleanup costs at the Star Bright Plating facility in Oregon. The company argued that emails and oral communications from an EPA Assistant Regional Counsel amounted to a CERCLA section 106(a) order. The EAB held that the communications lacked an enforceable directive, sanctions, and the formality required for a section 106(a) order, and that the sender lacked delegated authority to issue one. The Board denied the reimbursement petition in all respects.

Decision snapshot

• Cited authorities: CERCLA sections 106(a), 106(b), and 106(b)(2)(A), 42 U.S.C. §§ 9606(a), 9606(b), and 9606(b)(2)(A), and 40 C.F.R. § 19.4.
• Outcome: The petition for reimbursement was denied because AHMSI did not receive an order issued under CERCLA section 106(a).
• Key point: Informal EPA communications about a voluntary cleanup do not satisfy CERCLA section 106(b)'s requirement that the petitioner receive and comply with a formal section 106(a) order.

Full text (EPA EAB public release)

342 ENVIRONMENTAL ADMINISTRATIVE DECISIONS

         IN RE AMERICAN HOME MORTGAGE
                  SERVICING, INC.
                  CERCLA § 106(b) Petition No. 10-02

          FINAL ORDER DENYING REIMBURSEMENT



                            Decided May 27, 2011



                                      Syllabus

   American Home Mortgage Servicing, Inc. (“AHMSI”), seeks reimbursement of

$200,000 in costs, plus interest, incurred in responding to what it characterizes as an order issued under section 106(a) of the Comprehensive Environmental Response, Compensa- tion, and Liability Act of 1980 (“CERCLA”), 42 U.S.C §§ 9601-9675, as amended by the Superfund Amendments and Reauthorization Act of 1986.

   After receiving communications from a U.S. Environmental Protection Agency

(“EPA”) Assistant Regional Counsel regarding the removal of hazardous substances at the Star Bright Plating facility in Mulino, Oregon, AHMSI employed a contractor to perform an emergency abatement action at the facility. EPA Region 10 (“Region”) contends that AHMSI fails to meet one of the threshold requirements for obtaining reimbursement under CERCLA section 106(b), namely the receipt of an order issued under CERCLA sec- tion 106(a). AHMSI argues that emails and oral communications it received from the As- sistant Regional Counsel constitute receipt of an order issued under CERCLA sec- tion 106(a). The Region instead characterizes the emails and oral communications as serving to inform AHMSI of its options regarding the facility, to solicit a timely decision regarding those options, and to facilitate a voluntary response action.

 Held: The Board concludes that AHMSI did not receive an order issued under CER-

CLA section 106(a).

  CERCLA section 106(b) expressly requires the party petitioning for reimbursement

to have received and complied with an order issued under CERCLA section 106(a). In Region 10, the authority to issue section 106(a) orders has been redelegated to the Director, Office of Environmental Cleanup.

    What AHMSI asserts is that an order issued under section 106(a) lacks three princi-

pal features of such orders: an enforceable directive, sanctions, and formality. The lan- guage in the email communications that AHMSI received falls considerably short of for- mally invoking the Region’s CERCLA section 106 authority, and the emails do not expressly compel certain clean-up work, or include sanctions for failure to do so. In addi- tion, the methods of communication – email and telephone conversations – reflect an infor- mality that is at odds with the formal way that EPA issues CERCLA section 106(a) orders. Moreover, the sender of these communications was an Assistant Regional Counsel, who has not been delegated the authority to issue section 106(a) orders. An objective reading of

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the emails suggests that the Region was trying to determine whether AHMSI would con- duct the cleanup; if AHMSI did not act timely to conduct a cleanup, then and only then would the Region consider issuing a section 106(a) order. The Board holds that AHMSI has not received an order issued under CERCLA section 106(a), and thus, AHMSI has failed to demonstrate that it is entitled to recover any portion of its costs incurred in clean- ing up the Star Bright Plating facility.

 Before Environmental Appeals Judges Edward E. Reich, Kathie A.

Stein, and Anna L. Wolgast.

   Opinion of the Board by Judge Stein:

  American Home Mortgage Servicing, Inc. (“AHMSI”), filed a petition with

the Environmental Appeals Board (“Board”) seeking reimbursement of costs AHMSI incurred in responding to what it characterizes as an order issued under section 106(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C §§ 9601-9675, as amended by the Superfund Amendments and Reauthorization Act of 1986.1 The U.S. Environmental Protection Agency (“EPA”), Region 10 (“Region”), responded by moving to dismiss the petition for failure to meet the threshold requirements for obtaining reimbursement.

                           I. ISSUE BEFORE THE BOARD

   AHMSI asserts that it has met the prerequisites for obtaining reimbursement

under CERCLA section 106(b). Although AHMSI did not receive a document titled and stylized as a section 106(a) administrative order, AHMSI claims that a series of email and contemporaneous oral communications received from an As- sistant Regional Counsel in the Region’s Office of Regional Counsel is tanta- mount to receipt of a section 106(a) order. The Region disagrees that receipt of such communications meets the threshold requirement of receipt of a sec- tion 106(a) administrative order. Neither party disputes that receipt of a section 106(a) order is a prerequisite to obtaining reimbursement.

  The parties’ assertions present one question for the Board’s consideration:

Does AHMSI’s receipt of email and oral communications from an Assistant Re- gional Counsel constitute receipt of an “order issued under” CERCLA section 106(a)?

    1 The President delegated his authority to decide claims for reimbursement under sec-

tion 106(b) to the EPA Administrator, Exec. Order 12,580, 52 Fed. Reg. 2923 (Jan. 29, 1987), and the Administrator has re-delegated that authority to the Board. U.S. EPA Delegation of Authority 14-27, Petitions for Reimbursement (June 27, 2000). The Board is also authorized, as appropriate, to author- ize payments of such claims. U.S. EPA Delegation of Authority 14-27 § 2.a.

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                 II. FACTUAL AND PROCEDURAL HISTORY

   AHMSI is a residential loan servicing company acting as agent for the trus-

tee of a trust that obtained title to the Star Bright Plating facility in Mulino, Ore- gon (“Facility”). Petition at 3-4. The Region learned of potentially unlawful and dangerous storage of hazardous substances – including corrosive aqueous solu- tions and metal bearing sludge – at the Facility and contacted AHMSI orally and in writing regarding those storage conditions. Petition at 6-7; Motion to Dismiss at 3. Specifically, an Assistant Regional Counsel for the Region communicated by email with AHMSI on the following dates: August 20, 2010; August 25, 2010; August 27, 2010; and September 2, 2010.2 Petition at 6-7; Petition Exs. B, C, D,
& E. There were also contemporaneous oral communications, the substance of which were generally memorialized in the email communications. Petition at 2; Motion to Dismiss at 8; AHMSI Response to Motion to Dismiss at 4.

   AHMSI employed a contractor to perform an emergency abatement action

at the Facility. Petition at 4. On October 4, 2010, “[t]he final materials that were consolidated and packed for transportation were removed” from the Facility. Mo- tion to Dismiss at 4; see also Petition at 5 (“On or about October 4, 2010, the last of the known hazardous substances contained in drums and vats was removed from the [Facility] for disposal.”).

  On December 8, 2010, AHMSI filed a petition for reimbursement of ap-

proximately $200,000 in costs, plus interest, under CERCLA section 106(b). On January 7, 2011, the Region moved to dismiss the petition on grounds that AHMSI failed to meet the statutory prerequisites for obtaining reimbursement. AHMSI responded to the motion to dismiss on February 14, 2011. On Febru- ary 23, 2011, the Region sought leave to reply to AHMSI’s response. The Board now grants the Region’s motion for leave and accepts the reply brief for filing.

  On April 4, 2011, the Board issued a Preliminary Decision setting forth the

Board’s preliminary conclusions on the issue of whether AHMSI received an or- der issued under CERCLA section 106(a). Consistent with the Board’s practice in CERCLA section 106(b) reimbursement matters, the Board invited the parties to comment on the Preliminary Decision. U.S. EPA, Environmental Appeals Board, Revised Guidance on Procedures for Submission and Review of CERCLA Sec- tion 106(b) Reimbursement Petitions 9-10 (Nov. 10, 2004); Letter from Eurika Durr, Clerk of the Board, Environmental Appeals Board, U.S. EPA, to Daniel D.

    2 Additional email correspondence concerning a request for “a draft agreement of some sort

covering [AHMSI’s] work at this site” was exchanged between the parties between September 30, 2010, and October 5, 2010. Pet. Ex. F. Because AHMSI does not rely on these later email communica- tions in its argument that it received an order issued under CERCLA section 106(a), see Petition at 6-7; AHMSI Response to Motion to Dismiss at 6, they are not discussed in detail in this Final Order Denying Reimbursement.

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Opalski, Director, Office of Environmental Cleanup, U.S. EPA Region 10, et al. (Apr. 4, 2011). Neither AHMSI nor the Region submitted comments. Accord- ingly, the Board issues this Final Order Denying Reimbursement.

                                         III. ANALYSIS

   CERCLA section 106(b)(2)(A) provides that “[a]ny person who receives

and complies with the terms of any order issued under subsection (a) of this sec- tion may, within 60 days after completion of the required action, petition the Pres- ident for reimbursement * * * for the reasonable costs of such action, plus inter- est.” 42 U.S.C. § 9606(b)(2)(A). “[R]eimbursement under CERCLA section 106(b)(2)(A) is available only when an order under section 106(a) is actu- ally issued. * * * [C]leanups ordered pursuant to some other authority can not serve as a predicate for CERCLA reimbursement.” In re Katania Shipping Co., 8 E.A.D. 294, 298 (EAB 1999). Petitioner bears the burden of demonstrating that it received an order issued under section 106(a). Id.

  There is no dispute that AHMSI did not receive a document that was styl-

ized or titled as an administrative order issued under CERCLA section 106(a). Rather, at issue is whether AHMSI’s receipt of email and oral communications from an Assistant Regional Counsel constitutes receipt of an order issued under CERCLA section 106(a).

  The authority to issue orders under CERCLA section 106(a) is vested in the

President. Pursuant to a series of delegations, that authority has been delegated to the EPA Regional Offices, and specifically, in Region 10, to the Director, Office of Environmental Cleanup. No further re-delegation is permitted.3 Notably, an As- sistant Regional Counsel is not a person authorized to issue such orders.

    3 Under CERCLA section 106(a), the President is authorized to issue administrative orders as

may be necessary to protect the public health and welfare, and the environment, when there may be an imminent and substantial endangerment to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance from a facility. CERCLA § 106(a), 42 U.S.C.
§ 9606(a). The President’s authority to issue section 106(a) administrative orders has been delegated to various federal officers, including the EPA Administrator. Exec. Order No. 12,580, 52 Fed. Reg. 2923 (Jan. 29, 1987); see also Exec. Order No. 13,016 (Aug. 28, 1996), 61 Fed. Reg. 45,871 (Aug. 28, 1996). The authority delegated to the EPA Administrator has, in turn, been re-delegated to EPA’s Regional Administrators. U.S. EPA Delegation of Authority 14-14-A, Determinations of Imminent and Substantial Endangerment (Apr. 15, 1994); U.S. EPA Delegation of Authority 14-14-B, Adminis- trative Actions Through Unilateral Orders (May 11, 1994). The Regional Administrator, Region 10, has re-delegated the authority to issue unilateral administrative orders to the Director, Office of Envi- ronmental Cleanup, with no further re-delegation permitted. EPA Region 10 Delegation of Authority R10-14-14-B, Administrative Actions Through Unilateral Orders §§ 1, 4 (Oct. 5, 1998).

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   In In re Katania Shipping Co., the Board observed that, although the format

for administrative orders issued under section 106(a) is not defined in CERCLA or its regulations, three key features of such orders are (1) a directive to perform specified cleanup activities; (2) the order is enforceable; and (3) formality. Id. at 299-300. Recognizing that substantial penalties – up to $37,500 per violation per day and treble damages – may result from failure to comply with a sec- tion 106(a) order, the Board cautioned that “CERCLA section 106 authority is an important and powerful tool for impelling private party cleanups, and agencies authorized to issue section 106(a) orders should be mindful of the need to invoke the authority in a clear and unambiguous manner.” Id. at 300 n.3; see also CER- CLA § 106(b)(1), 42 U.S.C. § 9606(b)(1) (as modified by the Civil Monetary Penalty Inflation Adjustments, 40 C.F.R. § 19.4, for penalties effective after Janu- ary 12, 2009); Katania, 8 E.A.D. at 299. Thus, “[t]he use of the term ‘order’ rather than ‘request’ [in section 106(a)] reflects a conscious choice on the part of the Congress to construct a regime under section 106 that relies not on informal meth- ods for eliciting voluntary assistance, but rather on formal orders.” Katania, 8 E.A.D. at 300.

  The August 20, August 25, August 27, and September 2 email communica-

tions are each less than a page long. In the August 20 email, the Assistant Re- gional Counsel who sent the message identifies the Facility and references a con- ference call. The email then states:

        It is EPA’s expectation and understanding that [the trus-
        tee] will obtain the necessary approvals to hire a contrac-
        tor to remove the hazardous substances from the [Facility]
        by Wednesday, August 25, 2010. * * * If company pro-
        cedures will not allow you to obtain the necessary ap-
        provals by this date, under the authority of the Compre-
        hensive Environmental Response, Compensation and
        Liability Act, EPA will conduct the removal or issue a
        Unilateral Administrative Order to [the trustee] to per-
        form the removal.

Pet. Ex. B (emphasis added).

   The next email, dated August 25, references a conversation that occurred

earlier in the day and provides “the scope of work for Part I of Phase 1,” which is further described as the following:

        Removal [of] all hazardous materials which are unsecured
        in open vats, including all liquids and sludges containing
        hazardous substances, by an EPA approved method(s).

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        Transport hazardous substances and materials removed
        from the [Facility] to an EPA approved disposal facility.

Pet. Ex. C. In the same August 25 email, the Assistant Regional Counsel also inquires as to when a conference call can be scheduled and indicates the purpose of that call: “At that time EPA would need to know whether it is possible for your client to have a contractor on the site to begin work no later than next week.” Id.

  The August 27 email states that it is based on an earlier conversation, and

the Assistant Regional Counsel outlines “EPA’s anticipated schedule of possible events for the next few weeks.” Pet. Ex. D. Specifically, three weeks from Au- gust 30 through September 13 are listed. For the week of August 30 through Sep- tember 3, the email provides: “[AHMSI] contractor on site, performing substantial work as described in 8/25 email * * * . Provide advance notice to EPA, the first date on which AHMSI contractor will be on-site to begin the work.” Id. For the week of September 6, the email indicates that “[i]n the event that AHMSI’s con- tractor is not [able] to perform the work to abate the imminent and substantial endangerment at the site, [EPA will] issue a Unilateral Administrative Order to AHMSI to perform the removal action,” and for the week of September 13, the email states, “In the event that AHMSI does not comply with the Unilateral Ad- ministrative Order, EPA will perform the work.” Id. (emphasis added).

  Finally, in the September 2 email, the Assistant Regional Counsel expresses

the importance of clear and prompt communication, and states the need to identify “a single contact person who is responsible for coordinating with EPA.” Pet. Ex. E. The email then lists “two issues that need immediate attention,” which ap- pear to be quotations from emails sent by other individuals. Id.

  The Region characterizes these emails as communications that served to in-

form AHMSI of its options regarding the Facility, to solicit a timely decision re- garding those options, and to facilitate a voluntary response action. Motion to Dismiss at 6-7. Although one email identifies a “scope of work for Part I of Phase I,” see Pet. Ex. C, the Board does not glean from the emails, nor has AHMSI shown, that the sum of the email communications set forth an enforcea- ble directive to conduct the described work. To the contrary, an objective reading of the emails suggests that the Region was trying to determine whether AHMSI would conduct the cleanup; if AHMSI did not act timely to conduct a cleanup, then and only then would the Region consider issuing a section 106(a) order. See Pet. Exs. B, D. Short of such issuance, AHMSI was conducting a voluntary cleanup.

  In this case, the so-called order lacks the three principal features of a sec-

tion 106(a) order discussed in Katania: an enforceable directive, sanctions, and formality. The language in the email communications that AHMSI received falls considerably short of formally invoking the Region’s CERCLA section 106 au-

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thority, and the emails do not expressly compel certain clean-up work, or include sanctions for failure to do so. The email communications make this demonstrably clear: the described consequence of AHMSI not proceeding at a pace satisfactory to the Region is the Region either conducting the cleanup itself or issuing a sec- tion 106(a) order, not the sanction of treble damages available to EPA for non-compliance with a section 106(a) order.4 In addition, the methods of commu- nication – email and telephone conversations – reflect an informality that is at odds with the formal way that EPA issues CERCLA section 106(a) orders. Finally and significantly, the sender of these communications was an Assistant Regional Counsel, who has not been delegated the authority to issue section 106(a) orders. Accordingly, the Board is not persuaded that AHMSI has received an order issued under CERCLA section 106(a).

  In its reply brief, the Region persuasively identifies the dangers of blurring

the clear lines between the formal issuance of a section 106(a) order by a person authorized to issue it and communications about the consequences of failing to conduct a voluntary cleanup. AHMSI’s argument muddies the waters. It would seriously undermine the CERCLA statutory scheme for the Board to treat infor- mal comments by an EPA lawyer seeking to ascertain whether a voluntary cleanup will occur as tantamount to the formal issuance of a section 106(a) order, particularly given the severe consequences that can arise from noncompliance with a section 106(a) order.

                                    IV. CONCLUSION

 Based on the foregoing discussion, the Board’s final decision is that AHMSI

has not received an order issued under CERCLA section 106(a), and thus, AHMSI lacks a legal basis to seek reimbursement under CERCLA section 106(b). Accordingly, AHMSI’s petition for reimbursement for response costs under CER- CLA section 106(b) is denied in all respects.

   So ordered.




    4 In fact, to conclude, as AHMSI urges, that the communications it received are tantamount to

a section 106(a) order could yield the nonsensical result of EPA issuing a section 106(a) order upon noncompliance with the so-called section 106(a) order AHMSI claims to have received.

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