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Bean Dredging, LLC v. United States

March 30, 2010

BEAN DREDGING, LLC, ET AL., PLAINTIFFS,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiff Bean Dredging, LLC ("Bean Dredging"),*fn1 successor in interest to Bean Dredging Corporation, filed this lawsuit under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq., seeking judicial review of the final agency action of the National Pollution Funds Center ("NPFC") denying Bean Dredging's claim under the Oil Protection Act of 1990, 33 U.S.C. § 2701, et seq., for reimbursement of costs and damages incurred in connection with an oil pollution incident in Humboldt Bay, California on September 6, 1999. This matter comes before the Court on the parties' cross-motions for summary judgment. The Court has conducted a searching review of the parties' motions and responsive briefing, the attachments thereto, the relevant statutes, regulations and case law, and the record of this case as a whole. For the reasons set forth below, the Court shall GRANT-IN-PART and DENY-IN-PART the United States' [19] Motion for Summary Judgment, shall DENY Bean Dredging's [20] Motion for Summary Judgment, and shall remand this matter to the NPFC for further proceedings consistent with this Memorandum Opinion. Specifically, the Court DENIES WITHOUT PREJUDICE both the United States' [19] Motion for Summary Judgment and Bean Dredging's [20] Motion for Summary Judgment with respect to Bean Dredging's claims that the NPFC erred when it misinterpreted and misapplied the term "seas" as used in 46 C.F.R. § 44.340(a)(1), and shall remand this matter to the NPFC for further explanation of its interpretation of the relevant regulations and its reasons for rejecting the interpretation advanced by Bean Dredging. In addition, the Court shall GRANT the United States' [19] Motion for Summary Judgment and shall DENY Bean Dredging's [20] Motion for Summary Judgment insofar as Bean Dredging asserts that the NPFC's final determination is inconsistent with the MCIR and is therefore arbitrary and capricious.

I. BACKGROUND

A. Statutory Background

Congress passed the Oil Pollution Act ("OPA") of 1990 in response to the disastrous March 1989 oil spill involving the Exxon Valdez in Prince William Sound, Alaska. Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220, 226 (D.D.C. 2007). Pursuant to the terms of the OPA, "each responsible party*fn2 for a vessel... from which oil is discharged... into or upon the navigable waters... is liable for the removal costs and damages... that result from such incident." 33 U.S.C. § 2702(a). This includes all removal costs incurred by the United States government and certain removal costs incurred by other individuals as well as damages to natural resources, property, etc. Id. § 2702(b).

In certain circumstances, however, the OPA permits responsible parties to limit their financial liability for removal costs and damages and to seek reimbursement for costs incurred. See 33 U.S.C. §§ 2704, 2708. A responsible party who believes it is eligible for reimbursement may submit its claim for removal costs or damages directly to the Oil Spill Liability Fund. Id. § 2713. The NPFC, which is a part of and administered by the U.S. Coast Guard, a component of the Department of Homeland Security, is responsible for processing claims for reimbursement under the OPA. Pl.'s Stmt. ¶ 3. The NPFC may deny a claim for reimbursement if certain conditions are not met. In particular, as is relevant to the case at hand, a responsible party is not eligible for reimbursement of any costs or damages incurred as a result of an oil spill if, inter alia, "the incident was proximately caused by... the violation of an applicable Federal safety, construction, or operating regulation by the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the contractual party." Id. § 2704(C)(1)(B).

B. Factual Background

1. The September 6, 1999 Oil Spill

As indicated above, this lawsuit arises from an oil spill that occurred on September 6, 1999, in Humboldt Bay, California. Bean Dredging Corporation was the operator of the Dredge Stuyvesant (the "Stuyvesant"), the vessel involved in that incident. Pl.'s Stmt. ¶ 1.*fn3 The Stuyvesant is a diesel propelled, hydraulic hopper dredge that was, at the time of the incident, operating under a contract with the United States Army Corps of Engineers to perform maintenance dredging at the Outer Bar channel of the entrance to Humboldt Bay. Id. ¶¶ 4-5, 13.

The immediate cause of the oil spill is not in dispute. The parties agree that the incident was caused when fuel oil spilled out from a 15 inch fracture in the hull plate of the Stuyvesant's aft starboard fuel oil tank. Id. ¶¶ 48, 56. The parties further agree that the fracture in the hull plate was almost certainly caused when the starboard dredge head*fn4 hit the Stuyvesant's fuel oil tank as the vessel executed a 180 degree turn to port during its dredging operations*fn5 at approximately 6:00 P.M. on September 6th. Id. ¶¶ 54-56. This is reflected in the Court Guard's Marine Casualty Investigative Report ("MCIR") issued after the incident in question, in which the Coast Guard indicated that "the vessel apparently rolled several times during the turn and the draghead collided with the side plate," causing the fracture through which the oil leak occurred. Id. ¶ 57. The Coast Guard further concluded in the MCIR that the accident was likely caused by bad weather and an error in judgment by the vessel's crew. See id. While the parties dispute, to some extent, the severity of the weather conditions existing in Humboldt Bay at the time of the incident, this dispute is not material for purposes of the instant Memorandum Opinion. Rather, it is sufficient to note that Bean Dredging itself concedes that at the time of incident the Stuyvesant was encountering at least "occasional" swells of 10 feet or greater. See id. ¶ 25 ("Captain Howcraft estimated that the seas and swells were anywhere from approx. six feet to twelve feet (at times)."); see also ¶¶ 91-92.

The oil spill was first noticed at approximately 7:10 P.M. on September 6th, at which time the Stuyvesant immediately notified the Coast Guard Station at Humboldt Bay, Bean Dredging's site office, and the National Response Center, that the spill had occurred. Id. ¶¶ 32-38. Precautions were undertaken to minimize the spill and to patch the fracture in the hull plate. Id. ¶¶ 40-45. By approximately 2:00 A.M. the following morning (i.e., September 7, 1999), the fuel oil had been contained and the Coast Guard permitted the Stuyvesant to sail to shore for repairs. Id. ¶ 46. The Coast Guard estimated that approximately 2,100 gallons of Intermediate Fuel Oil 180 was lost before the oil spill was ultimately contained. Id. ¶ 53. Bean Dredging alleges that it incurred uncompensated removal costs in the amount of $8.5 million and that it had also agreed to pay an additional $7.8 million in damages as part of a settlement with the National Resource Trustees and the State of California as compensation for injuries sustained to various natural resources as a result of the oil spill. Id. ¶¶ 64-68.

2. Proceedings Before the NPFC

On September 2, 2005, Bean Dredging filed a claim with the NPFC for reimbursement of removal costs and damages (the "Claim"). Id. ¶ 71. Bean Dredging asserted in its Claim that it was entitled under the OPA to a limitation on its financial liability for the oil spill and requested reimbursement of approximately $11.7 million in incurred removal costs and damages. Id.

The NPFC initially denied the Claim on December 14, 2006, based, in relevant part, on its determination that Bean Dredging was ineligible for reimbursement under the OPA because the spill had been caused by the vessel's violation of two federal operating and safety regulations - specifically, 46 C.F.R. § 44.340 and 46 C.F.R. § 42.09-1(c). Id. ¶ 73; see also Administrative Record ("A.R.") at 8.*fn6 The former regulation provides, in relevant part, that "[e]ach hopper dredge assigned a working freeboard may be operated at drafts from the normal freeboard to the working freeboard if," inter alia, the "[s]eas are not more than 10 feet." 46 C.F.R. ยง 44.340(a)(1). The latter regulation provides that "[t]he master of the vessel for which a load line certificate has been issued shall be responsible for the maintenance of such certificate on board such vessel and for compliance with its terms ...


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