Background
Harris Investment Holdings bought commercial property in Greensboro, North Carolina, adjoining a gas station and convenience store owned by BFJ of USA. Environmental testing found volatile organic compounds and other hazardous substances in the groundwater beneath Harris’s property at concentrations above regulatory standards. Harris installed a vapor-intrusion mitigation system during construction and sued BFJ and its members under CERCLA and North Carolina law to recover associated costs.
BFJ’s property had long operated as a gas station and contained several generations of underground storage tanks. Earlier investigations documented releases involving petroleum products, including a leak associated with a waste-oil tank closed in 1996. The district court granted BFJ summary judgment, holding that the CERCLA claim was barred by CERCLA’s petroleum exclusion and that Harris lacked sufficient causation evidence for its state-law negligence, nuisance, trespass, and statutory claims. The court also excluded statements in Harris expert Peter de Haven’s summary-judgment declaration concerning chromium found on the properties.
The Court’s Holding
The Fourth Circuit vacated the summary judgment and remanded. Addressing the petroleum exclusion for the first time in the circuit, the court held that petroleum and crude-oil fractions remain excluded from CERCLA merely because they contain hazardous substances indigenous to crude oil or introduced through refining. But the exclusion does not cover petroleum contaminated through use or otherwise containing additional hazardous substances not normally present, or present above normal levels.
Because BFJ bore the burden of proving the exclusion, evidence that petroleum had been released did not establish that only unadulterated petroleum was released. The leaking waste-oil tank raised a factual question about whether contaminated oil outside the exclusion had been discharged. The court also vacated the exclusion of de Haven’s chromium statements, explaining that they were factual statements rather than expert opinions and directing the district court to reconsider whether they were permissible supplementation or correction under Rule 26(e).
The court further held that de Haven’s timely reports provided enough causation evidence—although barely—for the North Carolina claims to survive summary judgment. His rebuttal report ruled against Harris’s property as the contamination source and opined that transverse groundwater flow likely carried gasoline constituents from BFJ’s property. The Fourth Circuit nevertheless affirmed the denial of Harris’s motion to compel entry onto BFJ’s property for additional testing, finding no abuse of discretion.
Key Takeaways
- A CERCLA defendant invoking the petroleum exclusion must prove that the released petroleum was not contaminated with non-petroleum hazardous substances.
- Hazardous components naturally present in crude oil or introduced during refining do not alone remove petroleum from the exclusion, but contaminants added through use or other contamination can do so.
- Evidence of a leaking waste-oil tank created a factual dispute that precluded summary judgment, and an expert’s timely opinion that migration from the defendant’s property was “likely” was sufficient, though barely, to support causation under North Carolina law.
Why It Matters
The decision establishes Fourth Circuit law on CERCLA’s petroleum exclusion and clarifies that proof of a petroleum release is not enough for a defendant to obtain the exclusion at summary judgment. Where used oil or another petroleum product may contain added hazardous substances, the defendant must establish that the released material was unadulterated.
The ruling also cautions courts to distinguish an expert’s factual recitation of testing data from a new expert opinion and confirms that less-than-categorical causation language may still create a triable issue when the expert rules out competing sources and identifies the defendant’s property as the likely source.