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U.S. v. Hyndai Merchant Marine Co., 172 F.3d 1187 (9th Cir. 1999).

Kristen M. Fletcher, J.D., LL.M.

The Ninth Circuit U.S. Court of Appeals recently joined the Fifth Circuit in finding that governmental oversight costs of an environmental clean-up are properly charged to the party responsible for the damage. In U.S. v. Hyndai Merchant Marine, the Ninth Circuit affirmed a ruling holding Hyndai liable to the U.S. Coast Guard for its costs incurred in monitoring Hyndai's cleanup of fuel oil from a grounded ship in Alaska. Its ruling conflicts with a 1993 Third Circuit ruling finding that a governmental agency cannot shift its administrative costs, such as monitoring costs, to a regulated party without the congressional intent to delegate taxing power to the agency.
 

The Hyndai Grounding & Suit

The case arose from the 1991 grounding of the bulk carrier M/V Hyndai No. 12 which ran aground in the Shumagin Islands of Alaska, an environmentally sensitive area approximately 260 miles west of Kodiak, while carrying close to 200,000 gallons of bunker oil in its bottom fuel tanks. The crew soon discovered that the ship's tanks were fractured and leaking oil, performed the containment procedures, and freed the ship at Hyndai's expense. During the containment, the Coast Guard stood ready with men and equipment to contain a possible major oil spill and monitored Hyndai's efforts to free the ship, consulting on and approving Hyndai's plan of operation.

The U.S. sued under the Oil Pollution Act (OPA)1 to recover its costs from Hyndai for the Coast Guard's response to the emergency. The district court awarded the U.S. over $1.7 million and Hyndai, while recognizing its duty to reimburse for certain limited costs, appealed the award claiming that monitoring costs were not recoverable under the OPA which only provides for recovery of actual removal costs.

The court determined that the Coast Guard's activities were an attempt to "mitigate or prevent a substantial threat of a discharge"2 and its monitoring was a means of "directing private actions to remove the discharge or to mitigate or prevent the threat of discharge of oil,"3 as called for under the OPA. The court explained that "Hyndai's emphasis on actual removal unduly minimizes the importance of the Coast Guard's emergency stand-by operation, which qualifies as an act of 'prevention,' the cost of which is clearly recoverable under the terms of the definition as it applies to the liability imposed by § 2702."4 It relied upon the sensitive circumstances of the spill, as well, stating that the "grounding of the Hyndai No. 12 contained the seeds of a major ecological disaster. In the circumstances, it was only prudent for the government to rush personnel and equipment to the scene and maintain them there until the threat was over."5
 

The Circuit Split

Hyndai also challenged the assessment of Coast Guard monitoring costs on the basis of a 1974 Supreme Court decision, National Cable Television Ass'n v. U.S. (which established the NCTA doctrine), which "[reminds] Congress that it may not delegate away its taxing power to an executive agency."6 Hyndai argued that the district court failed to ask whether the OPA allows a federal agency to shift its administrative costs, such as monitoring costs, to a regulated party. Under the NCTA doctrine, Congress' intent to delegate a taxing power to an executive agency must be unequivocal and Hyndai argued that the OPA does not provide for such a delegation. The Ninth Circuit quickly dismissed this argument by stating that the "OPA authorizes recovery of costs, not taxation,"7 citing the Fifth Circuit holding that the NCTA doctrine does not apply to a CERCLA8 clean up because a recovery of such clean up costs is neither a fee nor a tax.9

The Ninth and Fifth Circuit decisions conflict with a Third Circuit case10 which applied the doctrine to a government suit for monitoring costs under the Resource Conservation and Recovery Act (RCRA),11 finding that the government could not recover monitoring costs because "[n]owhere is there an explicit statement that Congress considers administrative and regulatory costs incurred overseeing the removal and remedial actions of a private party to be removal costs in and of themselves."12 Finding this congressional omission significant, it denied governmental recovery.
 

Conclusion

The resulting split leaves questions regarding monitoring costs under OPA, RCRA, and CERCLA and other federal statutes that may call for environmental clean up. As a defendant, Hyndai argued that parties should be able to challenge the unreasonable and unnecessary administrative costs as a result of duplicative monitoring activities in environmental cases. The Ninth Circuit found the monitoring costs in the clean up of the Hyndai to be part of the "mitigation and prevention of a substantial threat of discharge of oil" that the Coast Guard is called upon under OPA to perform.13 Federal agencies are now armed with the Ninth Circuit decision to argue that such monitoring activities are necessary costs of clean up and do not require specific congressional delegation to recover.
 

Endnotes

1. Oil Pollution Act of 1990, 33 U.S.C. §§ 2701 - 2761 (1999).

2. 33 U.S.C. § 1321(c)(1)(B) (1999).

3. Id. at (A).

4. 172 F.3d at 1190.

5. Id. The court used this rationale to deny the argument that the monitoring costs were unnecessary and not recoverable under the OPA.

6. National Cable Television Ass'n v. U.S., 415 U.S. 336, 342 (1974).

7. 172 F.3d at 1191.

8.Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 - 9675 (1999).

9. Id., citing United States v. Lowe, 118 F.3d 399 (5th Cir. 1997).

10. U.S. v. Rohm & Haas Co., 2 F.3d 1265 (1993).

11. 42. U.S.C. §§ 6901 - 6991 (1999).

12. Id. at 1275.

13. 33 U.S.C. § 1321(c)(1)(A) (1999).

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