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Oregon Supreme Court Applies Landfill Closure Requirements Broadly in Kinzua Resources, LLC v. Oregon Department of Environmental Quality

In a case involving a dispute over landfill closure requirements, the Oregon Supreme Court concluded last week that the owners of Kinzua Resources, LLC, a limited liability company that held the permit for and title to the Pilot Rock Landfill, could not escape liability for failing to comply with Oregon’s landfill closure laws even though they did not own or operate the landfill directly.  Kinzua Resources, LLC v. Oregon Dep’t of Envtl. Quality, --- P.3d ----, 366 Or. 674 (2020). The decision underscores the broad reach of environmental liabilities under Oregon law and serves as a warning against the use of corporate structures to avoid end-of-life compliance obligations for landfills.  

In Oregon, if a landfill permit holder does not comply with closure requirements, “the person owning or controlling the property on which the disposal site is located, shall close and maintain the site” as prescribed by law. ORS 459.268see also ORS 459.205(2). The Court held that the landfill closure requirements may be enforced against persons “having authority to control the site, regardless of whether that authority had been exercised.” Significantly, the Court also determined that the “liability shield” under the Oregon Limited Liability Company Act did not preclude the owners of a limited liability company from being directly liable for violations of landfill closure requirements where the owners could be considered persons “controlling” the landfill property.

The Pilot Rock Landfill had been used for saw mill waste.  After closing in 2010, several fires occurred at the landfill. The Oregon Department of Environmental Quality (DEQ) assessed a substantial civil penalty for Kinzua Resources, the two entities that were “members” or owners[1] of Kinzua Resources, and an individual with multiple roles within the corporate family. The Oregon Environmental Quality Commission upheld a high six figure penalty, concluding that all parties were responsible for obtaining financial assurance and a closure permit and for closing the landfill in accordance with DEQ’s rules. The owners of Kinzua Resources petitioned for judicial review.

The Meaning of Controlling”

The Court’s decision centered on the meaning of the term “controlling” under ORS 459.205 and ORS 459.268. The Court found that “controlling” was an “inexact term.” It expressed “a complete legislative meaning, albeit with less precision than is true of an exact term.” Looking first to common usage, the Court observed that the dictionary definitions were varied and supported both sides' contentions.  Consistent with the petitioners’ view, “controlling” could mean “to exercise retraining or directing influence” (“akin to being an operator”), or, as DEQ argued, it could mean “to have power over.”

The Court ultimately embraced DEQ’s view – that persons are deemed to be “controlling” if they “possess authority over the site.” In the context of the statute, both ORS 459.205 and ORS 459.268 refer to persons “owning or controlling” the “disposal site.” This language creates an obligation for “owners” based on their status alone regardless of whether they are actively participating in the operation of a landfill.  If participation is not essential to trigger obligations for persons “owning” a landfill, the Court reasoned that it also should not be a necessary element for persons “controlling” the property either. The Court reasoned further that the obligations for persons “owning or controlling” only arose if the permit holder fails to act, suggesting that the contingent closure obligation was intended to apply to parties based on their status alone. Finally, consulting legislative history, the Court found that a broader definition of the term “controlling” was more consistent with the legislative purpose of addressing “‘critical’ post-closure maintenance" of landfills.

Environmental Liability for Limited Liability Company Owners

In applying the landfill closure requirements to the owners of Kinzua Resources, the Court dismissed concerns about a “conflict” between the environmental statute and the Oregon Limited Liability Company Act, which specifies that a “member or manager is not personally liable for a debt, obligation or liability of the limited liability company solely by reason of being or acting as a member or manager.”  ORS 63.165(1).

The Court sought to harmonize the two laws by confining the protections under ORS 63.165 to “vicarious liability.” In contrast, the owners’ liability for the landfill closure requirements was “direct liability, which ORS 63.165(1) does not prevent.” The environmental “obligations are premised on the person’s own authority – retained or exercised – over the site at which the permit-holder has failed to act,” the Court concluded.

Conclusion

The circumstances and analysis in the Kinzua Resources decision highlight the expansive reach of laws intended to prevent the creation of contaminated sites in the first instance. While limited liability for corporate owners is a bedrock legal principle, the Court’s willingness to impose substantial liability here, despite the existence of a corporate shield, is a reminder that courts may be motivated to resolve conflicts between environmental and corporate laws in favor of the public interest – especially when the corporate shield would result in an orphan site needing public funds to clean up. 


[1] A member is “a person with both an ownership interest in a limited liability company and all the rights and obligations of a member.” ORS 63.001(21)(a).

© 2020 Beveridge & Diamond PC National Law Review, Volume X, Number 196

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About this Author

Rachel K. Roberts Land Use Attorney Beveridge & Diamond Seattle, WA
Associate

Rachel Roberts helps clients resolve complex matters involving contaminated sites, land use, and water rights.

Rachel’s practice focuses on contaminated site remediation under CERCLA and state laws, as well as water rights disputes and federal land use issues. Rachel helps clients steer complex and long-running cases to a successful resolution. She also enjoys helping clients navigate challenging regulatory environments.

Prior to joining Beveridge & Diamond, Rachel served as a Trial Attorney for U.S. Department of Justice’s Natural Resources Section of the Environment and...

206-315-4814
Augustus E. Winkes Environmental Attorney Beveridge & Diamond Seattle, WA
Associate

 

Augustus E. Winkes focuses his practice on contaminated site cleanup and litigation under CERCLA and state Superfund statutes. He is the deputy for the firm’s CERCLA, Brownfields, and Subsurface Contamination practice group.

He also advises clients on regulatory compliance and defends enforcement actions under federal and state hazardous waste, water quality, air quality, and climate change laws, and he has experience in natural resource management matters.

Mr. Winkes also serves on the Stakeholder and Tribal Advisory Group tasked with providing guidance as the Washington State Department of Ecology amends the state's contaminated site cleanup regulations under the Model Toxics Control Act.

Before joining the firm, Gus interned at the Seattle City Attorney’s Office, the San Francisco City Attorney’s Office, and the Sierra Club.

In law school, he served as an editor of the University of Michigan Journal of Law Reform and co-founded the Michigan Journal of Environmental and Administrative Law. He also served as a teaching assistant for an undergraduate environmental law and policy course.

Prior to law school, he worked as an environmental consultant in Seattle.

206-315-4813
Lucy K. Infeld Environmental Regulatory & Litigation Attorney Beveridge & Diamond Seattle, WA
Associate

Lucy solves problems in creative ways, relying on her expertise in water rights, natural resources, and land use issues in Washington state and the western U.S.

She is an experienced environmental regulatory and litigation attorney on nationwide issues, with a focus on water rights, the Clean Air Act (CAA), the Clean Water Act (CWA), and the Comprehensive Environmental Response, Compensation, and Liability Act (CERLCA), as well Washington state environmental statutes.

She assists on Superfund allocations in advocating for clients, working with experts and other attorneys to...

206-315-4817