Court of Federal Claims Confirms that EPA Was Responsible for “Taking” Steel Making Byproduct Purchased by a Private Party

On May 18, the U.S. Court of Federal Claims decided the case of Gadsden Indus. Park, LLC v. U.S., ruling that the Environmental Protection Agency (EPA) was responsible for the “taking” of byproduct materials produced by the steel making process and later purchased by plaintiff Gadsden Industrial Park (GIP) in a bankruptcy sale. The Court of Federal Claims held that GIP was entitled to compensation in the amount of $755,494 (together with interest).

The events as described by the Court of Federal Claims, are most unusual. GIP purchased these materials (along with 400 acres of real property and personalty) for $ 6.3M at an auction, and these secondary materials consisted of kish, slag and scrap that were located at the site of a bankrupt steel mill once operated by Gulf States Steel. The mill ceased operations in 2000, and GIP purchased these materials through the bankruptcy trustee in December 2002, intending to recover and re-sell some of these materials.

However, the site later became a potential Superfund site; consequently, EPA’s on-scene coordinator and remedial project manager determined that one of the lagoons on the property should be filled in with slag stored on site as a way to address contaminated storm water and wastewater overflows which concerned both the Alabama Department of Environmental Management and EPA. EPA was aware of GIP’s ownership interests in these materials (and kish, slag and assorted scrap are, by law, suitable for a Constitutional takings claim), but the Court of Federal Claims concluded that neither EPA nor GIP were able to describe and understand these ownership interests with sufficient clarity. In the resulting confusion, large quantities of slag owned by GIP were used to fill up one of the lagoons.

The Court of Federal Claims concluded that GIP purchased kish, 420,000 cubic yards of slag and assorted scrap, and was well within its reasonable contractual time to remove those materials from the site when another EPA contractor was also engaged in on-site metals recovery operations. The Court of Federal Claims found that EPA’s contractors used 92,500 cubic yards of slag owned by GIP to clean up at least one of the worrisome lagoons at the site. As a result, some of the materials that GIP purchased were used by one of EPA’s contractors to fill up and remediate this lagoon, depriving GIP of the value of this asset.