Resolving an apparent split between two divisions of the Washington Court of Appeals, the Washington Supreme Court has ruled that a state agency with delegated management authority over state-owned aquatic lands does not have “ownership” for purposes of liability under the Washington Model Toxics Control Act (MTCA), and liability as an “operator” requires actual operational control over the polluting condition.
Pope Resources, L.P. v. Department of Natural Resources involved a former sawmill and forest products manufacturing facility on Port Gamble Bay in Kitsap County. The Department of Natural Resources (DNR) is the manager of state-owned aquatic lands and, in 1974, leased some of those lands to Pope & Talbot. The facility’s operations, which included sawing logs for timber, chip barge loading and log-transfer facilities, wood and wood waste burning, in-water log rafting and storage, and creosote treated pilings, resulted in environmental contamination that required cleanup. After Pope & Talbot and its partner, OPG, entered into a consent decree with the
Washington Department of Ecology (Ecology), they sued DNR for contribution under MTCA as an owner and operator.
The trial court dismissed the claims against DNR, but Division Two of the Court of Appeals reversed. In doing so, the court of appeals said that MTCA defines “owner or operator” more broadly than its federal counterpart — the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) — to include any person with any ownership interest in a facility. The appeals court held DNR exercised an “ownership interest” by dictating what activities are allowed and not allowed on the leased property. The court of appeals also said that MTCA’s definition of “owner or operator” applies to a person who exercises “any control” over the facility. That court said DNR exercised control by allowing the activity that led to the contamination. The Washington Supreme Court, however, disagreed and reversed the court of appeals in a 6-3 decision.
First, the Court said DNR did not have an ownership interest in the Port Gamble Bay facility because there were no deeds, grants, patents, or other instruments conveying an ownership interest in the aquatic lands to DNR. According to the Court, the appeals court “mistakenly” attributed DNR’s delegated management authority for a real property right. The Court said DNR’s interest in the aquatic lands is solely as the state’s management agent, under authority delegated by the legislature. Furthermore, as part of its protection of the public trust in those lands, DNR’s lease provided that Pope & Talbot would be “fully and completely liable to the state and waive all claims against the State for contribution” and would indemnify the state for all liabilities and damages.
Second, the Court said DNR also was not an “operator” because it had no control over the facility, let alone the causes of the pollution. The Court said that in the MTCA definitional phrase “any control” the operative word is “control,” not “any.” The Court rejected what it called a “minimalist” test in favor of one adopted by Division One of the Court of Appeals in 1999 in Unigard Ins. Co. v. Leven and reaffirmed in 2006 by Taliesen Corp. v. Razore Land Co. Although those two courts did not address any definitional differences between CERCLA and MTCA, the Court said those opinions properly interpreted MTCA to align with CERCLA. Thus, under the Court’s decision the test is whether the alleged “operator” directed the workings of, managed or conducted the affairs of the facility. The Court considered DNR’s role as the state’s designated manager and lessor of aquatic lands as “too slim a reed on which to hang MTCA liability” because it did not amount to necessary facilities operations control.
Three of the justices disagreed and said that MTCA’s definition of “owner or operator” liability is broader than under CERCLA and, therefore, DNR should have been held liable as an “operator” because it had the requisite “any control” through the ability to exclude, execute leases and police violations.
Whether or not the majority’s approach is correct, the decision is now the definitive statement of how Washington state courts should apply the MTCA liability of owners or operators. Thus, it may be harder in the future to maintain an “owner or operator” liability claim against a state agency, and this ruling also may give non-government parties an avenue for defending against MTCA claims.