Private-party plaintiffs unknowingly sabotage their CERCLA cost recovery claims all too often by failing to understand and comply with the National Contingency Plan (“NCP”). The U.S. Court of Appeals for the Ninth Circuit confirmed this recently for the City of Colton, California (“Colton”) in City of Colton v. American Promotional Events, Inc.-West, 2010 WL 2991399 (9th Cir. 2010). Colton’s fumble cost the city its claim for past response costs of $4 million and its declaratory judgment claim to establish liability for future response costs estimated between $55 and $75 million.

Colton’s predicament arose from contamination to the city’s drinking water supply. Colton detected perchlorate in three of its drinking water supply wells at concentrations of 4 to 10 ppb. At the time, the California Department of Health Services (“CDHS”) had an “advisory action level” for perchlorate of 4 ppb. Because “advisory” meant non-enforceable, the CDHS advised Colton that it could continue to use the supply wells. Instead, in a closed-session meeting with the City Council and City Attorney, Colton adopted a policy prohibiting the use of water above 4 ppb of perchlorate. Colton then took the impacted wells out of service and instituted a wellhead treatment program. It later sued the 20 defendants claiming their industrial activities caused the groundwater contamination. Colton sought to recover its past response costs and a declaration that defendants were liable for Colton’s future response costs.

The Ninth Circuit Court of Appeals affirmed the District Court’s order granting summary judgment against Colton on both claims. First, the Ninth Circuit found that Colton’s claim for past response costs failed because Colton failed to prove that its actions were “necessary” under the NCP. Response costs are considered “necessary” when an actual and real threat to human health or the environment exists, which Colton could not establish. Second, the Ninth Circuit joined the Court of Appeals for the Second, Third, and Eighth Circuits in finding that a CERCLA plaintiff’s failure to establish liability for past costs scuttles its ability to obtain a declaratory judgment as to liability for future costs. (The First and Tenth Circuits, however, have suggested that declaratory relief may be available even in the absence of recoverable past costs.) In the end, the Ninth Circuit held “declaratory relief is available only if liability for past costs has been established under Section 107” of CERCLA. So why must plaintiff comply with the NCP? Section 107(a) of CERCLA requires it. Section 107 provides that a private party may recover expenses associated with cleaning up contaminated sites only if it establishes, among other elements, that the release or threatened release of hazardous substances has caused plaintiff to incur response costs that were “necessary” and “consistent with the national contingency plan.”

How must a plaintiff comply with the NCP? The NCP, codified at 40 CFR Part 300, is designed to make the party seeking response costs to choose a cost-effective course of action to protect public health and the environment. The NCP requirements include, in part, providing the public information about the contamination and for meaningful community input, an appropriate evaluation of the health and environmental threat, documentation to support all actions taken and that form the basis for the cost recovery, remedial investigations and feasibility studies to consider different treatment technologies, identification of all applicable or relevant and appropriate requirements, and cost analysis. So for Colton, even if it could have shown that action was necessary, it would still have had to demonstrate to the court that it substantially complied with the NCP requirements before it could recover its response costs.

It is very important to seek sound advice early in these types of disputes because, while compliance may be complex, failing to comply with the NCP will be fatal.