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Northern States Power Co. v. City of Ashland

United States District Court, W.D. Wisconsin

September 11, 2015


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[Copyrighted Material Omitted]

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          For Northern States Power Company, Plaintiff, Counter Defendant: Albert Bianchi, Jr., LEAD ATTORNEY, Michael Best & Friedrich, LLP, Madison, WI; Arthur Francis Foerster, Margrethe Krontoft Kearney, Mary Rose Alexander, LEAD ATTORNEYS, Latham & Watkins, Chicago, IL; David A. Crass, LEAD ATTORNEY, Madison, WI; Jon G. Furlow, LEAD ATTORNEY, Michael Best & Friedrich, Madison, WI.

         For The City of Ashland, Wisconsin, Defendant: Richard Carlisle Yde, Jr., Ted Waskowski, LEAD ATTORNEYS, Barbara A. Neider, Stafford Rosenbaum LLP, Madison, WI; Margaret Irish Hoefer, Stafford Rosenbaum, Madison, WI.

         For Soo Line Railroad Company, Defendant: Andrew William Davis, LEAD ATTORNEY, Gregory Alan Fontaine, Nathan Eric Endrud, Wendy Marena Carlisle, Leonard, Street and Deinard, Minneapolis, MN .

         For Wisconsin Central, LTD., Defendant: Robert Michael Baratta, Jr., LEAD ATTORNEY, David Scott Becker, Freeborn & Peters LLP, Chicago, IL.

         For L.E. Myers Company, Defendant, Cross Defendant: Mark William Schneider, LEAD ATTORNEY, Perkins Coie LLP, Seattle, WA; Teresa Gail Jacobs, LEAD ATTORNEY, Perkins Coie LLP, Portland, OR; Christopher G. Hanewicz, Perkins Coie LLP, Madison, WI.

         For Ashland County, Wisconsin, Defendant, Cross Claimant, Counter Claimant: Richard J. Lewandowski, Whyte Hirschboeck Dudek, Madison, WI.

         For The City of Ashland, Wisconsin, Counter Claimant: Barbara A. Neider, Ted Waskowski, LEAD ATTORNEYS, Stafford Rosenbaum LLP, Madison, WI; Margaret Irish Hoefer, Stafford Rosenbaum, Madison, WI.

         For The City of Ashland, Wisconsin, Counter Claimant: Richard Carlisle Yde, Jr., Ted Waskowski, LEAD ATTORNEYS, Stafford Rosenbaum LLP, Madison, WI; Margaret Irish Hoefer, Stafford Rosenbaum, Madison, WI.

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         BARBARA B. CRABB, District Judge.

         From 1885 until 1947, a manufactured gas plant operated in Ashland, Wisconsin, on a bluff above Lake Superior, generating gas for heating and lighting. For that entire time, the plant discharged tar wastes into the bluff. In 1987, plaintiff Northern States Power Company acquired the plant site and shortly thereafter discovered contamination. It notified the Wisconsin Department of Natural Resources, which began an investigation of the site in 1994.

         In 2002, the entire site, which includes the bluff on which the plant stood, the land below the bluff, known generally as Kreher Park, Chequamegon Bay of Lake Superior and the deepwater in the Copper Falls aquifer underlying the site, was added to the National Priorities List and the Environmental Protection Agency took over the state's work. Ten years later, the agency entered into a consent decree with plaintiff, which agreed to remediate the site.

         Now plaintiff is pursuing claims against defendants City of Ashland and Ashland County for contribution to the costs of the cleanup under 42 U.S.C. § 9613. Although plaintiff has accepted responsibility for the remediation of the Upper Bluff, it denies that the discharges are the sole

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source or even the major source of the contamination that has been found in Kreher Park and in Lake Superior's Chequamegon Bay. Instead, plaintiff contends that both Ashland County and the City of Ashland bear responsibility for all or most of the contamination below the bluff.

         As to defendant Ashland County, plaintiff alleges that in the three years from 1939 to 1942 in which it owned the area, it failed to clean up the wood treating chemicals left by the former owner, Schroeder Lumber Company, leaving these chemicals to sink into the ground and eventually create a waste pond. In addition, plaintiff alleges that while the County owned the land, it demolished the company's smokestacks and refuse burner, adding contaminants to the soil. As to the City of Ashland, plaintiff alleges that this defendant has owned the land since 1942 and that it too failed to clean up the wood treating chemical waste. In addition, plaintiff alleges, the City dispersed contaminants through construction projects in the area, drained the waste dump into the bay, sanctioned the dumping of refuse and the changing of oil for city vehicles and built a city sewer through the park that emptied into the bay. Plaintiff's claims are asserted under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, 42 U.S.C. § § 9601-75.

         From the evidence adduced during the eight-day trial to the court, I find that defendant County is not covered under CERCLA and cannot be held liable for any hazardous substances in the land below the bluff or in the bay. Although the County gained title to the Schroeder Company property after the company failed to pay its property taxes in the 1930s, it did so only as a result of the company's tax delinquency and it did not cause or contribute to the release or threatened release of hazardous substances from the facility.

         Unlike the County, defendant City has potential liability under CERCLA because it operated Kreher Park. However, plaintiff has not shown that the City was responsible for the addition of any hazardous substances to the site. At most, it may have dispersed some of the existing contamination discharged from the manufactured gas plant. Even assuming that it did, the equitable allocation of response costs is a discretionary decision for the court to make, taking into consideration such factors as the relative contributions of hazardous waste, the plaintiff's settlements with other parties, the defendant's level of voluntary cooperation with the cleanup efforts, the extent of the parties' financial resources and the benefit of the cleanup to the potential contributor. In this case, the factors bearing on that determination weigh in the City's favor and support an allocation of 0%.

         For the purpose of deciding this case, I find the following facts from the evidence adduced at trial.


         A. Background

         Plaintiff Northern States Power first discovered tar waste in the bluff when it began construction work on the plant site in 1987, after acquiring the site through merger of its subsidiary, NSP-Wisconsin, with Lake Superior District Power. Two years later, the City of Ashland discovered soil contamination in Kreher Park, a city park that lies between the bluff and Chequamegon Bay. (It is not clear whether the boundaries of the park and the area beneath the bluff and within the remediation area are congruent, but because it makes no difference to the outcome of the case, I will assume they are.) The park occupies a portion of an area that was open water in the 1880's and now lies on a substratum of wood waste dumped into the bay by the

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lumber companies that lined the shoreline in the late 1880s and early 1900s.

         In 1994, when the Wisconsin Department of Natural Resources began investigating the site and undertaking cleanup efforts, it discovered that the contamination of the site was more widespread than it had previously believed, with the principal contamination being two substances. The first was polycyclic aromatic hydrocarbons or PAHs, a category of chemicals often found together in groups of two or more. They " are created when products like coal, oil, gas and garbage are burned but the burning process is not complete." Polycyclic Aromatic Hydrocarbons (PAHs) Fact Sheet, EPA, Jan. 2008. The other was non-aqueous phase liquids, or NAPLS. Non-aqueous phase liquids are either light non-aqueous phase liquids, that is, one of a group of organic substances, including petroleum chemicals, that are relatively insoluble in water but less dense than water, whereas dense non-aqueous phase liquids are also relatively insoluble in water but are denser than water and tend not to mix with it., visited Sept. 9, 2015). In 2002, the site was added to the National Priorities List, qualifying it for federal funding for cleanup activities. With this action, the Environmental Protection Agency took over the state's work, entering into an agreement with plaintiff for a study and significant cleanup of the site.

         In 2012, plaintiff entered into a consent decree with the EPA covering the remediation of the site. Plaintiff then brought suit against the City of Ashland, Ashland County, two railroads that operated at the base of the bluff at one time (the Soo Line Railroad and the Wisconsin Central Railroad, Ltd.), and L.E. Myers Company (which allegedly played a role in the operation of the manufactured gas plant between 1917 and 1922), in an effort to obtain contribution from other potentially responsible parties for the anticipated costs of restoring Kreher Park and Chequamegon Bay. Plaintiff asserted claims under both state law and CERCLA for contribution, cost recovery, declaratory relief and damages. Both railroads settled with plaintiff before trial and L. E. Myers reached a settlement shortly after the start of trial. The state law claims were asserted only against the railroads, leaving only CERCLA claims against the City and County.

         B. The Site

         The site at issue covers about 40 acres of land in the city and county of Ashland, along the southern shore of Chequamegon Bay. For remedial and investigative purposes, the site has been divided into four parts, referred to by the government agencies as " areas of concern" : (1) the soils and groundwater of the Upper Bluff, which is where the manufactured gas plant was located; (2) the Kreher Park soils and shallow groundwater; (3) the sediments in the bay; and (4) deep groundwater in the Copper Falls Aquifer underlying the site. Only the first three areas play any part in this case.

         The manufactured gas plant was built on the Upper Bluff in 1885, with about one-

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fifth of the plant straddling a ravine that ran down to the bay. Within the next few years, the ravine was filled in completely with a mix of materials, including the nearly impenetrable native soil known as " Miller Creek." (The exact date in which the ravine was filled completely is unknown. All of the witnesses on the subject and the EPA agree that it was filled by the early 1900s.)

         In 1885, the Ashland area was riding a short-lived economic boom fueled by the harvesting and sale of timber from Wisconsin's extensive forests of eastern white pine. Lumber companies had established sites at the harbor and rafts and ships were plying the lake with cargoes of harvest timber and lumber products. Railroads moved in and built tracks along the base of the bluff, running in a generally east-west direction along the waterfront.

         Within a short time, the waterfront became so full of timber waste that it could support buildings. From 1901 until the early 1930s, the John Schroeder Lumber Company owned and occupied a good part of the area at the base of the bluff below the gas plant. It stopped processing lumber sometime around 1930; in 1939, it lost any remaining ownership rights it had in the land when it failed to pay its property taxes and the property reverted to defendant Ashland County.

         In 1942, the City took over the County's ownership rights in the area, which is now called Kreher Park. In 1951, it began construction of a wastewater treatment plant in the northeastern part of the park area. It expanded the facility in the early 1970s and considered further expansion in 1989 until early explorations of the expansion site disclosed contaminated soil and groundwater. The City notified the Wisconsin Department of Natural Resources and began building a new plant a few miles away.

         C. The Manufactured Gas Plant

         1. Gas production

         During the 62 years that the manufactured gas plant was operating, it used three different processes to manufacture gas, starting with the Patton Process, which vaporized naphtha oil. In 1899, the plant switched to a carbureted water-gas process and used it until 1947, when it stopped manufacturing gas altogether. For a short period around 1917, the plant also used a coal gasification process that did not use petroleum for carburization.

         Manufacturers of gas employ large " holders," both for containing the gas before it is sent out to customers and for relief purposes when the production exceeds immediate demand. The Ashland gas plant began with one relief holder, known as Holder No. 1, which was used in the original Patton Process and possibly in the initial period of the carbureted water-gas process. At some time, that first holder was replaced by a second holder, No. 2, that was used as a production holder for the early years of carbureted water-gas production until it too was replaced by two new holders, Nos. 3 and 4, which were used until production ended at the site. Also on site at one time or another were tanks for storing gas oil (a heavier version of crude oil) and naphtha. The naphtha tanks were built above ground at first, but were replaced by underground tanks at some time before 1923.

         Each of the gas holders had a metal superstructure on the outside. Within this superstructure, a structure resembling an inverted cup moved up and down over the gas as it was produced and then released. A water tank on the bottom formed a water seal so that the gas did not escape, but rode up and down with the inverted cup structure.

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          In producing carbureted water-gas, the plant operators started with a gas that was enriched with a petroleum product, put it through a superheater to insure that the added petroleum vapor would stay in vapor form and then sent the gas through a " washbox," which took out about 30 percent of the tar from the gas stream. From there, the gas continued into a " relief holder," after which a variety of condensers and tar extractors took the remainder of the tar out of the gas stream in preparation for the production holder. At this point, very little tar remained in the gas, as shown by the near absence of contamination in the ground that has been excavated under holder no. 4, which was used as a production holder.

         So long as the plant was in operation, the washbox and relief holder would have released tars and wastewater. The relief holder alone would have accumulated about 70% of the tars from the process, all of which had to overflow at some point. Although the plant had a tar well on site by 1923, it, too, would have overflowed regularly as fluids were added to it. Inevitably, tar wastes overflowed into the ravine, unencapsulated, or later, in pipes, after 1902, when the city enacted an ordinance requiring gas plant waste to be discharged only through underground sewers.

         The precise nature of the emulsions and of the tar changed, depending on the feedstock. If, for example, anthracite coal was used as the carbon source, the composition of the tars and waste products would be different from the composition of the waste produced by bituminous coal. Other differences would result if the company used naphtha, gas oil or heavier oils. Records from approximately 1908 to 1947 show that changes in the BTU value of the gas during the time period, indicating changes in the materials used.

         To meet the requirements of the 1902 city ordinance, the manufactured gas plant installed vitrified clay tiles in various diameters for discharge of tar waste into the ravine. These clay pipes were made of pieces joined end-to-end in a simple friction fit for use in conveying drainage or waste.

         During the entire period in which it operated, the gas company submitted annual reports to the Wisconsin Public Service Commission and to the Railroad Commission. The reports showed that the gas plant produced approximately 1.4 billion cubic feet of gas over its lifetime. This level of production would have generated 700,000 to 1,000,000 gallons of tar and tar emulsions. During this same period, the company reported selling about 126,400 gallons of tar and using 11,200 gallons of tar for boiler fuel. In addition, as of early 2014, 14,000 gallons of tar had been recovered from the Copper Falls Aquifer. If these 151,600 gallons of known tar releases are subtracted from the amount generated over the years, approximately 450,000 to 840,000 gallons of tar releases are unaccounted for, without counting the 1.5 to 3 millions gallons of wastewater containing tar emulsions that would have had to go somewhere.

         Neither the company's own records nor those of the two commissions with which the company filed annual reports show that the plant ever engaged in tar sales of any size. Nothing in any record indicates that the gas plant had the equipment that would be expected to be found in a plant that was undertaking significant tar recovery for resale, such s a separator, tar dehydrator or other tar handling equipment.

         2. Excavation findings

         During the excavation of the Upper Bluff, investigators found a number of the vitrified clay tiles within the gas plant site, in the filled ravine and running east and west along the base of the bluff where they

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would have been connected to an open ditch running to the bay. Many of these clay pipes discharged tar and tar emulsions directly to the ravine. From there, the waste would have migrated down to Kreher Park, which is more than 20 feet lower in elevation than the gas plant site.

         During excavations in 2014, investigators found black viscous, tarry material within many of the clay pipes, one of which was a 12-inch diameter pipe at the very bottom of the ravine, running under St. Claire Street (an east-west street located at the base of the bluff). As the investigators encountered the pipes and broke them open, tar flowed out, demonstrating its continuing mobility in the environment. Originally, the 12-inch pipe was connected to an east-west pipe that carried the tar and other waste to an open ditch ending at the bay, but the connection failed between the two pipes at some time, presumably before 1939, when the open ditch was filled in. The loss of the connection allowed the direct discharge of the 12-inch pipe into the wood fill material in the old lake bed that is now the park. Some of the tar continues to migrate through Kreher Park out toward the bay through the wood fill.

         The excavations revealed three different pathways from the gas plant: (1) before 1902, the tar flowed down through the ravine under the gas plant and into bay; (2) in 1902, after the city enacted its ordinance on waste discharges, the plant began discharging its tar waste through clay tile pipes down through the filled ravine, then along the base of the bluff to the west to the open ditch that took the waste out into the bay; and (3) after the ...

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