In 2009, the U.S. Supreme Court issued a decision in the consolidated cases of Shell Oil v. U.S. and Burlington Northern and Santa Fe Railway Co. v. U.S. (“Shell Oil“) that narrowed the scope of “arranger” liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). 

That decision reversed a lower court decision that had found Shell Oil Company liable for “arranging for disposal” of a hazardous substance because it shipped hazardous substances under conditions that it knew would result in a portion of the substances being spilled by the purchaser or the common carrier.   

Last month, the 5th Circuit Court of Appeals became the first federal appellate court to further narrow arranger liability under CERCLA. 

In Celanese Corporation v. Martin K. Eby Construction Company, Celanese sued Eby to recover cleanup costs Celanese had incurred after an Eby employee damaged a Celanese methanol pipeline, which then leaked methanol over the course of several years.  Celanese argued that Eby had “arranged for disposal” of the leaked methanol and was therefore liable under CERCLA.  The 5th Circuit rejected that contention, relying on Shell Oil.  The Court followed the Supreme Court’s approach of interpreting the phrase “arranged for disposal” “according to its ordinary meaning.” 

The 5th Circuit ruled that under Shell Oil, an entity’s knowledge that its action will result in a spill or leak is insufficient, by itself, to establish arranger liability.  The entity must take intentional steps or plan for “the disposal of the hazardous substance” to be liable as an arranger.  Finding that Eby did not even know that its construction activities had damaged the methanol pipeline, the 5th Circuit held that Eby could not be held liable as an arranger.

It is expected that courts will continue to narrow the previously broad scope of arranger liability under CERCLA in the wake of Shell Oil. 

Watch this blog, and sign up for SGR’s weekly newsletter (sustainability@sgrlaw.com), for further developments. Please also feel free to contact Steve O’Day (soday@sgrlaw.com) if you would like further information on the subject.