A recent case decided by the North Carolina Court of Appeals held that an entity involved only in post-closure activities at a site may still be considered an “operator” for purposes of 15A NCAC 13A .0109(h), making the entity subject to closure and post-closure standards for hazardous waste treatment, storage, and disposal facilities.

In 2013, WASCO LLC (WASCO) filed a petition for a contested case hearing in the Office of Administrative Hearings seeking a declaration that it was not an “operator” of a landfill associated with a former knitwear business in Swannanoa, NC (the Site) and, therefore, was not responsible for remedial hazardous waste cleanup efforts required by federal and state laws. The Administrative Law Judge ultimately granted summary judgment in favor of the North Carolina Department of Natural Resources Division of Waste Management (DWM). WASCO filed a petition for judicial review of the order, which came before the Wake County Superior Court. On October 23, 2015, the Wake County Superior Court affirmed the grant of summary judgment in favor of DWM, concluding that, “[a]s a matter of law, WASCO is an operator of a landfill for purposes of the State Hazardous Waste Program’s post-closure permitting requirement.”

WASCO appealed this ruling to the Court of Appeals, which held, in the present case, that WASCO was in fact an “operator” responsible for post-closure requirements at the Site despite the fact that WASCO’s relationship to the Site was limited to post-closure involvement. WASCO, LLC v. N.C. Dep’t. of Env’t & Nat. Res., No. COA16-414, 2017 BL 125671 (N.C. Ct. App. Apr. 18, 2017); see also 15A NCAC 13A .0109(h).

The Site has a long history involving several different parties.  Asheville Dyeing & Finishing (AD&F)—a division of Winston Mills, Inc.—operated a knitwear business on the Site, utilizing underground tanks to store virgin and waste perchloroethylene (PCE). PCE was historically used as a common dry cleaning solvent. At some point prior to 1985, PCE leaked from those tanks and contaminated the soil. The storage tanks were removed in 1985 and the resulting pits were backfilled with the contaminated soil left in place. In 1990, Winston Mills and the DWM entered into an Administrative Consent Order detailing plans to close the Site, and Winston Mills completed closure of the Site as a landfill in 1992.  Winston Mills and its parent corporation sold the Site to Anvil Knitwear, Inc. (Anvil) in 1995, and, with a co-guarantee from Culligan International Company (Culligan), provided Anvil indemnification rights for “environmental requirements.”

WASCO became involved in 1998 when its predecessor United States Filter Corporation acquired Culligan Water Technologies, Inc. (the owner of Culligan). Thereafter, WASCO provided financial assurances on behalf of Culligan. Further, when WASCO divested itself of Culligan in 2004, it agreed to indemnify the buyer for any identified environmental issues at the Site. At the time of the sale, a letter from Culligan to the DWM represented that WASCO was assuming Culligan’s remediation responsibilities at the Site and directed further communications to WASCO’s director of environmental affairs.

In 2007, WASCO was informed by letter from the DWM that the Site “was included on a list of facilities needing corrective action.” A follow-up letter indicated “that additional action was needed to develop a groundwater assessment plan to address the migration of hazardous waste in the groundwater.”

In 2008, Anvil sold the Site to Dyna-Diggr, LLC. From that point forward, responsibility for compliance with the DWM’s requirements and corresponding state hazardous waste laws became an issue, as both WASCO and Anvil disclaimed responsibility. By that time, North Carolina had confirmed that hazardous waste from the Site was migrating offsite and was contaminating nearby groundwater. WASCO asserted it was only participating in post-closure actions on the Site on a voluntary basis and was thus not an “operator” as that term is defined. The contested case, judicial review, and this appeal followed.

WASCO raised two main issues on appeal.

First, it argued the lower court erred in entering summary judgment on the basis of the conclusion that WASCO was an “operator” for purposes of post-closure permitting requirements.

The term “operator” is defined in many places in the state hazardous waste rules. However, in the section of the state rules most specific to the post-closure permit requirement at issue in the appeal, the rules incorporate relevant federal regulations, including the definition in 40 C.F.R. § 270.2 stating that “[o]wner or operator means the owner or operator of any facility or activity subject to regulation under RCRA.” See 15A NCAC 13A .0113(a). The court determined WASCO was an “operator” based on that definition. In addition to the state and federal regulations, the lower court also looked at federal case law analyzing operator liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and considered the discussion of the definition of “operator” in United States v. Bestfoods, 524 U.S. 51, 66-67 (1998).

For its part, WASCO asserted the court’s allegedly exclusive reliance on CERCLA, without considering the elements of the “operator” definition under North Carolina law, was incorrect. See N.C.G.S. § 130A-290(a)(21). The Court of Appeals disagreed, however, stating that the lower court did not exclusively rely on the CERCLA language, but instead used it only for guidance on how to interpret the definitions of “operator” in the state rules adopting the definition from federal regulations. Moreover, the lower court was not limited to an analysis of the definition under North Carolina law and was correct to look for guidance in federal law since the federal sources were specific to the hazardous waste at issue, while North Carolina’s more detailed definition applied only to solid waste management facilities.

Second, WASCO asserted the lower court erred in characterizing it as an operator “even though WASCO did not become involved with the Site until after” it was certified closed. Although WASCO recognized that both RCRA and the State Hazardous Waste Program impose duties on operators to provide post-closure care, it contends  those duties can only be imposed on someone who owns and operates the facility before the time that the facility ceases to operate.

The appeals court also rejected this argument, holding that the pit where the underground storage tanks were located on the Site (and which was subject to regulation) was not designated a landfill for purposes of the state Hazardous Waste Permit Program until the time that it was closed with hazardous waste in place. In the present case, this occurred after the facility ceased to operate. According to the court, the Hazardous Waste Permit Program clearly applies to operators of landfills and those facilities closed as landfills. Even applying the definition of “operator” in N.C.G.S. § 130A-290(a)(21), as WASCO preferred, WASCO has been the party principally engaged in, or in charge of, the post-closure operation, supervision, and maintenance of the Site for purposes of the hazardous waste permit program since 2004 and is, therefore, an “operator.”

In addition to the statutory language, the court also relied on the analysis in Bestfoods, concluding that, “[c]onsistent with Bestfoods and its progeny, . . . post-closure operatorship is based on an examination of the totality of the circumstances.”

Though the Court of Appeals stated the ruling in this case is consistent with the intersection of federal and state law within the state hazardous waste rules, others in the industry may consider the court’s holding to signal a broader reading of the definition of “operator” as that term is used in relation to post-closure care.

Laura Boorman is an Associate in the Raleigh, NC office of Troutman Sanders LLP.  Ms. Boorman’s practice touches a variety of environmental areas and industries, but frequently involves solid and hazardous waste issues under the federal RCRA program and North Carolina law.

* This article originally appeared in Environmental News, the newsletter of the North Carolina Bar Association’s Environment, Energy & Natural Resources Section