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 459.268; see 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.
Beveridge & Diamond's Waste and Recycling practice group and Waste Treatment, Recycling, and Disposal Services industry group advise companies and municipalities on waste issues, including compliance counseling, litigation, and regulatory advocacy under federal and state law. We help clients comply with constantly-changing requirements, minimize exposures to environmental liabilities, develop business opportunities, and enhance profitability. For more information, please contact the authors.
[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).
