“Removal vs. Remedial Action? – That is the Question” Second Circuit Answers “Removal” and Vacates District Court’s Grant of Dismissal on CERCLA Statute of Limitations Grounds in State of New York v. Next Millenium Realty, LLC

Environmental attorneys have long wrestled with the issue of whether particular clean-up activities under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) fall under the statute of limitations for remedial actions, considered to be permanent responsive action, or for removals, considered to be interim remedial measures to address immediate threats to public health. In a governmental cost recovery action, guessing wrong can deprive a federal or state governmental entity of its ability to recover its clean up costs from Potentially Responsible Parties. In State of New York v. Next Millenium Realty, LLC, the Second Circuit vacated the District Court’s determination, holding that once an activity is instituted as a removal, it remains a removal until completion, even if it is incorporated into the final permanent remedy.

In Next Millenium Realty, the District Court below found that the action was a remedial action under CERCLA and barred by the six year statute of limitations under Section 113(g)(2)(B). Such actions are barred if filed more than six years after commencement of the cleanup efforts. Reversing the District Court, the Second Circuit held that the impetus for the underlying clean up activity was an immediate threat to public health when the actions were undertaken and therefore constituted a removal action under CERCLA Section 101(23). The statute of limitations for a removal action is three years, but does not begin running until the removal action is completed. The Court reasoned that once the activity began as a removal action it remained a removal action and was not converted into a remedial action under Section 101(24). The Court made this determination notwithstanding the fact that the New York Department of Environmental Conservation (NYDEC) issued a Record of Decision (ROD) in October 2003 incorporating some of the features of the removal action into a permanent remedy.

The key facts, according to the Second Circuit, were that the impetus for remedial activity was a removal action, i.e. an immediate threat to human health, and that until the removal action was completed the statute did not begin to run. Only if the removal action was completed and the threat no longer existed would the three year statute of limitations for a removal action commence. The fact that the original removal action was incorporated into the permanent remedial solution meant that the removal action remained the driving force and the activities “still constituted ‘removal’ actions at all times relevant to the statute of limitations question.” Slip op 27.

The underlying removal action began in 1989 when volatile organic compounds (VOCs) were found in the Town of Hempstead’s water. In 1990, the Town installed a granulated activated carbon adsorption system (GAC) to remove the contaminants. The system did not function well because of the volume of VOCs. After the Town’s investigation, an air stripper was proposed in 1995 and completed in 1997. Thereafter, NYDEC became involved and investigated the site until 2000. Based on the feasibility study NYDEC issued a ROD in October 2003. NYDEC, however, beginning on June 27, 2001, entered into agreements tolling the statute of limitations. NYDEC filed suit on March 13, 2006.

The Second Circuit noted that both the GAC and the air stripper treated the water, but did not remedy the contamination and was therefore not a permanent remedy. Similarly, the Court dispensed with the notion that the duration of the actions and the costs were too expensive to constitute a removal action by relying on the fact that there was an immediate risk to public health and a continuing response action was required, thus meeting one of the exceptions to the limitations set forth in Section 104(c)(1). Lastly, the Court was not impressed that the term “remedial” had been used in documents authored by the State, drawing a distinction between the CERCLA term of art defining a remedial action to mean a permanent and final remedy and the generic or common use of “remedial” to describe any effort toward solving an environmental issue.

The Second Circuit seemed to be trying to limit the precedential value of the opinion, warning “Thus, we conclude, as a matter of law, that under the circumstances of this case, these two systems, which were built in response to an immediate health threat and designed to render the drinking water safe without addressing the underlying source of pollution, were ‘removal’ and not ‘remedial’ actions at least up until the time that the State adopted a remediation plan that incorporated them.” The Court continued its warning in a footnote that they were not holding that all GAC systems or all air stripper towers constituted removal actions, emphasizing that the determination of whether activities were removal or remedial required a fact specific case-by-case analysis.