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LIABILITY FOR LEAKING UNDERGROUND STORAGE TANKS: WHO IS AN OPERATOR?
by Brian Hair, ATG Law Clerk

Introduction

Under what circumstances may an individual succeed in a private cause of action against a non-government entity to recover costs incurred for cleaning up the site of a leaking underground storage tank (LUST) or for taking other related corrective actions? This is one of the murkier questions growing out of the complex and developing law governing LUSTs.

The law of LUSTs can be understood only by untangling a web of state and federal statutes and case law. One of the functions of these laws is to distribute costs of LUST corrective actions in a manner that is equitable - or at least not terribly inequitable. Some would argue that the cost of corrective actions should not be borne fully by a person who was not responsible for the problem. Yet, private causes of action for recovering costs for LUST corrective actions are difficult, if not impossible, under federal law. Furrer v Brown, 62 F 3d 518 (9th Cir 1995), rev'd 516 US 479 (1996).

Therefore, parties looking for such recovery are more likely to look to state law, and the chance of success may depend upon which state they are located. For instance, although persons who pay for cleanup in Illinois may, depending on the circumstances, be able to be reimbursed by the Underground Storage Tank Fund, 415 ILCS 5/57.8-12, a private cause of action to recover costs that are not reimbursed by the fund may be difficult. Meanwhile, plaintiffs in Indiana may be more fortunate, because they can utilize an express statutory provision that allows them to recover from those who owned or operated the underground storage tank at the time it leaked. IC 13-23-13-8(b). The bulk of the remainder of this article will be devoted to important recent developments in the Indiana Supreme Court's interpretation of this provision.

Recent Developments in Indiana

Two recent Indiana cases have dealt with the private cost recovery question in the context of applying the Indiana statutory provision that specifically provides for contributions for corrective costs from certain prior operators of leaking tanks. Shell Oil Company v Meyer, 705 NE2d 962 (Ind 1999); Shell Oil Company v Lovold Company, 705 NE2d 981 (Ind 1999). The statute provides that "a person" may recover incurred corrective action expenses from "a person" who owned or operated the tank at the time the leak occurred. IC 13-23-13-8(b). The two cases specifically address if and under what circumstances an oil company may be held liable as a former "operator" under Indiana's Underground Storage Tank Act (Act) when the leaking tanks were located at an independently owned station that was supplied by the oil company through an intermediary. The cases were decided simultaneously.

The facts of Meyer are as follows. Six landowning families who relied on groundwater sued Shell and Unocal, asserting claims under common law and for the costs of corrective actions under the Act. The source of contamination was West Point, a nearby retail gas station. Fred Smith had purchased the station in 1946, at which time it took on the appearance of a Shell station. When Smith bought the West Point station, he was a commissioned driver for Shell. Smith owned his own truck but pulled Shell-owned tanks containing Shell-owned gasoline, delivering the gasoline from Shell's bulk plant to several destinations, including his own station. Shell retained title to the gasoline until the ultimate purchaser remitted payment to Shell.

In 1963, Bill Murphy purchased the bulk plant from Shell and became a "jobber" for Shell. At the same time, Murphy took ownership of the tank that Smith pulled, and Murphy began purchasing gasoline from Shell and storing it at the bulk plant. Thus, Smith became a commissioned driver for Murphy instead of Shell. In 1971, Murphy changed gasoline suppliers from Shell to Unocal. This affiliation with Unocal ended in 1980. Smith distributed gasoline from Murphy's bulk plant until Smith's death in 1979. During the entire period from 1946 - 1979, Smith owned the West Point station, but he never managed it. However, as a commissioned driver, Smith filled the tanks and measured the volume of gasoline in those tanks at the station when he delivered gas for Shell and then for Murphy.

The trial court found for the oil companies on the common law counts, but found them liable as "operators" of the tanks under I.C. 13-11-2-148(d) of the Act. The court of appeals affirmed, and both oil companies appealed.

The Indiana Supreme Court in Meyer ruled that Unocal was not an operator under the Act, but that Shell was an operator under the Act until 1963. An oil company is not an operator merely because the company creates practical leverage over the gas station with its brand. Unocal supplied its gasoline only during the period when Murphy acted as a jobber between the original supplier and Smith. Before 1963, however, there was no jobber between Shell and Smith. An oil company can be liable as an operator if there is no jobber in the chain of responsibility, and a contractor for the company carries out tasks that constitute "daily operations" of the tank. This is so because under the Act, just as under common law, the company can be derivatively liable for a contractor's actions if the contractor's work is inherently dangerous and creates a nuisance. By filling the tanks and measuring the tanks, Smith was an operator of the tanks. Shell is therefore an operator derivatively. Further, the findings of fact suggest that the contamination occurred during the time Smith was a commissioned driver for Shell.

The court first had to determine whether the landowners even had standing to bring this suit under the Act, considering that they were not presently responsible for the leaking tanks. They did have standing because the legislature's use of the word "person" in the Act signifies that they intended for anyone who initiates a corrective action to be able to collect.

In the Lovold case, a local fire department found a petroleum leak from underground storage tanks at a gas station and reported it to the Indiana Department of Environmental Management. Soon thereafter, Lovold Company, the property owner, removed the tanks and the contaminated soil. From the mid-1960s to the late 1970s, Almond Oil was a jobber or "independent distributor" for Shell, supplying Shell gasoline to the station. The extent of its role in the distribution chain throughout this period is unclear, however. Lovold sued Shell to recover its cleanup costs, claiming that Shell was an operator under the Act. Shell moved for summary judgment on the ground that it was not an operator of the tank under the Act and therefore had no liability.

The trial court denied the motion, stating that whether Shell was an operator was a genuine issue of material fact. Shell appealed, and the court of appeals reversed and remanded, holding that Shell should have been granted summary judgment, since it was not an operator under the Act. Lovold appealed this reversal.

Subsequently, the Indiana Supreme Court in Lovold reversed the court of appeals and ruled that Shell is not entitled to summary judgment. Although a renewed motion for summary judgment may succeed if it can be shown that Almond Oil was a jobber in the distribution chain at all times, as was Murphy in Meyer, Shell did not designate evidence establishing this or negating the possibility of the existence of a commissioned driver, such as Smith in Meyer. Therefore, a genuine issue of material fact exists, which precludes summary judgment.

Illinois Considerations

If the facts of these cases were applied to Illinois law, Shell would probably not have to contribute to cleanup costs in either case and could probably win on a motion for summary judgment in Lovold. The statutory scheme governing rights to cleanup contribution is different in Illinois than in Indiana. There appears to be no explicit private right of action against former operators of underground storage tanks - at least not under Illinois LUST statutory provisions.

The Federal District Court for the Northern District of Illinois has held that under certain circumstances, a private right of action against former LUST owners can be brought under the Illinois Environmental Protection Act (IEPA) provisions for recovery of cleanup costs. Singer v Bulk Petroleum Corp, 9 F Supp 2d 916 (N D Ill, 1998). However, recovery under the IEPA is likely possible only if ownership extended beyond the July 1, 1970 enactment of the IEPA. Casanave v Amoco Oil Co, PCB No 97-84 (Ill Pollution Control Bd 1997). Moreover, it does not seem likely that recovery under the IEPA would be probable from a person who merely filled and measured the tanks, as opposed to a tank owner or a party more directly responsible for the leaking.

However, it may be possible to recover such costs from a responsible party under the Illinois Contribution Act, People v Brockman, 143 Ill 2d 351, 574 NE2d 626 (Ill 1991), but only for actions that occurred after March 1, 1978, Village of Fox River Grove v Grayhill, Inc, 806 F Supp 785, 795 (N D Ill 1992). Even if the timing of the oil companies' actions was not a factor, it is still unlikely that in Illinois they would have to pay as the defendant's liability under the IEPA for recovery would probably need to be shown, even under the Contribution Act. People v Brockman, 143 Ill 2d 351, 574 NE2d 626 (1991).

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