PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1200 McKinney Street, Suite 4100 Houston, Texas 77010
INTERNAL MEMORANDUM
Matter No.: 1016-00006
July 9, 2025
TO: Sandra Tung, Responsible Partner Oliver Mackenzie, Billing Partner Devon Archer, Working Associate
FROM: Cynthia Ho, Lead Associate (Real Estate)
REVIEWED BY: Sandra Tung, Partner
RE: Environmental Liability & Cost-Allocation Analysis — Dunmore Energy Holdings Ltd. (as successor-in-interest to Dunmore Terminal Services, Inc.) and Rowan Creek Fuel Distributors, Inc. — Dunmore Wharton Terminal Site, 14200 FM 1301, Wharton, Wharton County, Texas 77488 (TCEQ VCP Tracking No. VCP-2517)
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I. Executive Summary
The purpose of this memorandum is to analyze the allocation of estimated remediation costs totaling approximately $9.74 million between Dunmore Energy Holdings Ltd. ("DEH"), as successor-in-interest to Dunmore Terminal Services, Inc. ("DTS"), and Rowan Creek Fuel Distributors, Inc. ("RCFD") with respect to the Dunmore Wharton Terminal Site located at 14200 FM 1301, Wharton, Wharton County, Texas 77488 (the "Site"). The $9.74 million estimate was prepared by Pinehill Environmental Consulting LLC and issued in April 2025, with a low-to-high range of $7.81 million to $12.18 million. This memorandum evaluates the viability of claims against RCFD under both the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") § 107(a), 42 U.S.C. § 9607(a), and the Texas Solid Waste Disposal Act, Texas Health & Safety Code § 361.344, and provides a recommended cost-allocation framework for purposes of settlement negotiations and, if necessary, litigation.
Bottom-Line Conclusion. Based on the analysis set forth below, DEH has a strong basis to recover $4.647 million from RCFD. This figure comprises RCFD's allocated share of $4.26 million in future remediation costs, plus $387,000 in investigative costs already incurred by DEH between January 2024 and June 2025 (representing Pinehill Environmental Consulting LLC Phase I, Phase II, and supplemental investigation invoices). As a cross-check, the proposed allocation assigns DEH's share at $5.48 million and RCFD's share at $4.26 million, totaling the full $9.74 million estimate.
RCFD's primary anticipated defenses — including statute of limitations, divisibility of harm, and contractual allocation arguments under the 1991 Joint Operating Agreement — are surmountable, though not frivolous. Each is assessed in detail in Sections V and VIII below. Notably, the federal limitations period under CERCLA § 113(g)(2) has not yet begun to run because no remedial action has been initiated at the Site, and the Texas state-law claim is timely under any applicable limitations framework.
RCFD, through its counsel at Whitfield Barr LLP, has counter-proposed a global settlement of $750,000 — a figure that represents only approximately 16.1% of RCFD's allocated share. This counter-offer is grossly inadequate and should be rejected. RCFD is a financially viable entity with estimated annual revenues of approximately $89 million and has the capacity to satisfy a judgment in the amount sought.
This memorandum proceeds as follows: Section II sets forth the factual background, including the Site description, the parties' respective relationships to the Site, the release history, contamination profile, and remediation cost estimates. Section III discusses the applicable legal framework under federal and state law. Section IV presents the equitable allocation analysis under the Gore factors. Section V addresses RCFD's anticipated defenses. Section VI provides a cost-allocation summary table. Section VII evaluates RCFD's counter-offer. Section VIII discusses risk assessment and litigation considerations. Sections IX and X address insurance and financial reporting considerations, respectively. Section XI sets forth conclusions and recommendations.
II. Factual Background
A. The Site
The property at issue in this matter is commonly known as the Dunmore Wharton Terminal (the "Site"). The Site is located at 14200 FM 1301, Wharton, Wharton County, Texas 77488, within unincorporated Wharton County. The Site is zoned Heavy Industrial (HI) under Wharton County's applicable land use designations.
The legal description of the Site is as follows: a 48.7-acre tract comprising Lots 3 and 4 of the H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas. The deed conveying the property is recorded at Volume 1892, Page 417, Official Public Records, Wharton County, Texas. The Site's tax parcel identification number is WC-0241-0034.
The Site consists of a decommissioned petroleum storage and distribution terminal. The principal improvements and infrastructure include: (i) twelve aboveground storage tanks ("ASTs") located in the northern portion of the Site (the "northern tank farm" or "N-farm"), with an aggregate storage capacity of approximately 420,000 barrels; (ii) twelve ASTs located in the southern portion of the Site (the "southern tank farm" or "S-farm"), with an aggregate storage capacity of approximately 315,000 barrels; (iii) a decommissioned truck loading rack; (iv) disconnected pipeline interconnects to the Ashbury Holdings right-of-way; and (v) an abandoned administrative building. No active petroleum operations have been conducted at the Site since DTS ceased all terminal operations in 2015, and the pipeline interconnects were physically disconnected in 2016.
B. Parties and Their Relationship to the Site
1. Dunmore Terminal Services, Inc. (DTS)
Dunmore Terminal Services, Inc. ("DTS") was a Texas corporation that operated the Dunmore Wharton Terminal from 1974 through 2015 — a period of approximately forty-one years. DTS maintained its registered office at 800 Travis Street, Suite 1440, Houston, Texas 77002 during its operational period. Its historical Employer Identification Number was 76-0384291.
DTS ceased all terminal operations at the Site in 2015. Pipeline interconnects to the Colonial Pipeline right-of-way were disconnected in 2016 as part of the decommissioning process. Following the cessation of operations, DTS's board of directors approved a Plan of Dissolution and Assignment of Liabilities, which was executed on October 15, 2017. DTS was formally dissolved with the Texas Secretary of State, effective December 31, 2017. Pursuant to the Plan of Dissolution, all of DTS's liabilities — including, expressly, environmental obligations arising from the ownership and operation of the Site — were assumed by Dunmore Energy Holdings Ltd. ("DEH"). A copy of the Plan of Dissolution and Assignment of Liabilities is attached hereto as Appendix E.
2. Dunmore Energy Holdings Ltd. (DEH)
Dunmore Energy Holdings Ltd. ("DEH") is an exempted company incorporated under the laws of the Cayman Islands, bearing Cayman Registration No. MC-318574. DEH maintains its principal headquarters at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1002, Cayman Islands. Gavin Rourke serves as Chairman and Chief Executive Officer.
For the fiscal year ended December 31, 2024, DEH reported consolidated revenue of approximately $347 million and a net asset value of approximately $1.24 billion. DEH's current business focus is on renewable energy development, and the company no longer maintains petroleum terminal or distribution operations.
DEH is the successor-in-interest to DTS with respect to all liabilities arising from the Site, including environmental remediation obligations. In January 2024, DEH retained Pinehill Environmental Consulting LLC to conduct a comprehensive environmental investigation of the Site, which has resulted in the Phase I Environmental Site Assessment, Phase II Environmental Site Assessment, and supplemental investigation that underpin the remediation cost estimate at issue in this memorandum.
3. Rowan Creek Fuel Distributors, Inc. (RCFD)
Rowan Creek Fuel Distributors, Inc. ("RCFD") is an active Texas corporation, bearing Employer Identification Number 74-2951683. RCFD's principal office is located at 1150 Lavaca Street, Suite 600, Austin, Texas 78701. Malcolm Griggs serves as President. RCFD's estimated annual revenue is approximately $89 million. RCFD is engaged in wholesale fuel distribution operations across central and south Texas.
From 1991 through 2010, RCFD co-operated the southern tank farm at the Site pursuant to a Joint Operating Agreement ("JOA") with DTS. Under the terms of the JOA, RCFD was granted exclusive operational control over Tanks S-1 through S-12 in the southern tank farm, encompassing approximately 18 of the Site's 48.7 total acres. During the JOA period, at least four documented releases of diesel fuel and gasoline originated from tanks under RCFD's operational control, as described in detail in Section II.D below. The JOA terminated in 2010, and RCFD ceased all operations at the Site at that time.
RCFD is represented in this matter by Whitfield Barr LLP, specifically by Thomas Kessler, Partner, Environmental Litigation, whose offices are located at 500 West 5th Street, Suite 3200, Austin, Texas 78701.
4. Calera Properties Group LLC (CPG)
Calera Properties Group LLC ("CPG") is a Texas limited liability company, bearing Employer Identification Number 84-3207156. CPG's managing member is Rebecca Strand, and its principal office is located at 2900 Woodlands Parkway, Suite 310, The Woodlands, Texas 77381.
CPG acquired the 48.7-acre Site at a tax foreclosure sale in March 2019 for a purchase price of $612,000. Since acquisition, CPG has incurred approximately $285,400 in post-acquisition carrying costs, including fencing, security services, and property taxes, covering the period from March 2019 through June 2025. CPG is not considered a responsible party for purposes of environmental cost allocation; rather, CPG is the current fee simple owner of the Site that controls physical access to the property. CPG has been cooperating in good faith with DEH regarding a Site Access & Cost-Sharing Agreement to facilitate the remediation activities contemplated under the TCEQ Voluntary Cleanup Program.
CPG is represented by Kerrigan, Pace & Sullivan LLP, specifically by Nora Fujimoto.
C. The 1991 Joint Operating Agreement
The Joint Operating Agreement (the "JOA") was executed in 1991 between DTS, as the owner and primary operator of the Site, and RCFD, as an incoming co-operator. Key excerpts from the JOA are attached hereto as Appendix C.
Under the JOA, RCFD was granted exclusive operational control over the southern tank farm, comprising Tanks S-1 through S-12, which occupy approximately 18 of the Site's 48.7 total acres. RCFD's operational control encompassed all aspects of day-to-day management of the S-farm, including but not limited to: product receipt and throughput; tank filling and discharge operations; tank inspection and maintenance; spill prevention and response; and compliance with applicable environmental regulations in connection with S-farm operations.
DTS retained operational control of the northern tank farm (Tanks N-1 through N-12), the truck loading rack, the pipeline interconnects to Colonial Pipeline, and all common infrastructure supporting both tank farms — including shared access roads, drainage systems, and utilities.
The JOA terminated in 2010 upon the expiration of its initial twenty-year term. At that time, RCFD ceased all operations at the Site and removed its personnel, equipment, and product inventory. RCFD has not conducted any activities at the Site since that time.
Several provisions of the JOA are relevant to the liability analysis in this memorandum. Most significantly, the JOA contains provisions under which RCFD assumed full operational responsibility and maintenance obligations for the S-farm tanks during the JOA term. The JOA also contains indemnification provisions, the scope and effect of which are discussed in detail in Section V.F below. It bears noting at the outset that any contractual indemnification or allocation provisions in the JOA cannot override or transfer statutory liability under CERCLA, which by its terms provides that such agreements are enforceable only as between the parties to the agreement and do not bar cost-recovery claims by third parties or by co-PRPs asserting statutory rights. See 42 U.S.C. § 9607(e)(1).
D. Release History
The environmental investigation and historical records review conducted by Pinehill Environmental Consulting LLC, together with incident reports filed with the Texas Commission on Environmental Quality ("TCEQ"), document a total of five significant releases of petroleum products at the Site. These releases are categorized below by the area of the Site at which they occurred and the party exercising operational control at the time of each release.
RCFD-Attributable Releases (Southern Tank Farm)
Three documented releases occurred in the southern tank farm during the period in which RCFD exercised exclusive operational control under the JOA (1991–2010):
1. 1996 — Tank S-4. Approximately 8,000 gallons of diesel fuel were released from Tank S-4 due to a failure at the tank's bottom seam. The release was reported to the TCEQ, and a partial cleanup was performed at the time, consisting of limited soil excavation in the immediate vicinity of the tank. However, the partial cleanup did not fully address the contamination, and residual diesel-range petroleum hydrocarbons remain in subsurface soils in the Tank S-4 area, as confirmed by Pinehill's Phase II ESA sampling.
2. 2001 — Tank S-7. Approximately 3,200 gallons of gasoline were released from Tank S-7. This incident was assigned TCEQ Incident No. 142876. The gasoline release is of particular significance because gasoline contains substantially higher concentrations of benzene — a known human carcinogen and the primary contaminant of concern in the dissolved-phase groundwater plume — than diesel fuel. The 2001 Tank S-7 release is likely the predominant source of the elevated benzene and MTBE concentrations detected in the downgradient groundwater plume, as discussed further in Section II.E.
3. 2008 — Tank S-11. Approximately 5,600 gallons of diesel fuel were released from Tank S-11. This incident was assigned TCEQ Incident No. 197503. Soil sampling in the vicinity of Tank S-11 has revealed TPH concentrations exceeding applicable TCEQ Protective Concentration Levels ("PCLs").
In total, documented releases from RCFD-operated tanks in the southern tank farm amount to approximately 16,800 gallons of petroleum product across three separate incidents spanning a twelve-year period.
DTS-Attributable Releases (Northern Tank Farm / Common Areas)
Two documented releases occurred in areas under DTS's operational control:
4. 2003 — Tank N-3. Approximately 1,500 gallons of gasoline were released from Tank N-3 in the northern tank farm. This incident was assigned TCEQ Incident No. 158432. DTS promptly reported the release to the TCEQ and undertook initial response measures.
5. 2014 — Loading Rack Area. Approximately 600 gallons of diesel fuel were released in the vicinity of the truck loading rack, which is located in the common infrastructure area of the Site. This incident was assigned TCEQ Incident No. 251044. DTS again promptly reported the release and performed a limited cleanup at the time.
In total, documented releases from DTS-operated areas amount to approximately 2,100 gallons of petroleum product across two incidents.
Comparative Release Volume. The total documented release volume from RCFD-operated areas (approximately 16,800 gallons) is approximately eight times the total documented release volume from DTS-operated areas (approximately 2,100 gallons). This disparity is a significant factor in the equitable allocation analysis set forth in Section IV below.
E. Contamination Profile
The environmental investigation conducted by Pinehill Environmental Consulting LLC (Phase I ESA, Phase II ESA, and supplemental investigation, January 2024 through March 2025) has delineated the following contamination conditions at the Site:
Contaminants of Concern (COCs). The principal contaminants of concern at the Site are: benzene, toluene, ethylbenzene, and xylenes (collectively, "BTEX"); total petroleum hydrocarbons ("TPH"); methyl tert-butyl ether ("MTBE"); and dissolved-phase lead.
Soil Contamination. Soil sampling has revealed the following conditions:
• In the southern tank farm (RCFD-operated area), TPH concentrations reach up to 14,200 mg/kg in the vicinity of Tank S-7 — the site of the 2001 gasoline release. This represents the highest soil contamination detected anywhere at the Site.
• In the northern tank farm (DTS-operated area), TPH concentrations reach up to 8,750 mg/kg in the vicinity of Tank N-3 — the site of the 2003 gasoline release.
• Benzene concentrations in soil reach up to 42 mg/kg in the southern tank farm area. For reference, the applicable TCEQ Tier 1 Protective Concentration Levels for benzene in soil are 1.8 mg/kg for residential land use and 5.3 mg/kg for commercial/industrial land use. The detected concentrations thus exceed even the less-stringent commercial/industrial PCL by a factor of approximately 7.9.
Groundwater Contamination. Groundwater sampling has revealed a dissolved-phase benzene plume extending approximately 2,400 feet downgradient (in a south-southwesterly direction) from the southern tank farm. The principal characteristics of the groundwater plume are as follows:
• The maximum dissolved benzene concentration detected in groundwater is 3.8 mg/L. The federal Maximum Contaminant Level ("MCL") for benzene is 0.005 mg/L. The maximum detected concentration thus exceeds the MCL by a factor of approximately 760.
• MTBE, a gasoline additive, has been detected in groundwater at concentrations up to 1.2 mg/L. The presence of MTBE is further evidence that gasoline releases — particularly the 2001 Tank S-7 release — are a primary source of groundwater contamination at the Site.
• Dissolved lead has been detected in groundwater at concentrations up to 0.087 mg/L, exceeding the federal action level of 0.015 mg/L by a factor of approximately 5.8.
• The affected aquifer is the Chicot Aquifer (shallow zone), which is encountered at approximately 22 feet below ground surface ("bgs") at the Site.
Nearest Receptor. The nearest identified downgradient receptor is a residential water well located at 16405 FM 1301 (the "Ingram Property"), approximately 3,100 feet south-southwest of the current leading edge of the dissolved benzene plume. Pinehill sampled the Ingram Property well in February 2025 and reported no COC detections above MCLs at that time. However, given the direction and rate of plume migration, continued monitoring of the Ingram Property well is warranted and is included in the long-term monitoring program.
Plume Origin Analysis. Pinehill's Phase II ESA data, supplemental investigation results, and isoconcentration mapping indicate that the center and highest-concentration zone of the dissolved benzene plume are located in and immediately downgradient of the southern tank farm, particularly the areas surrounding Tank S-7 and Tank S-11. Both of these tanks were under RCFD's exclusive operational control during the JOA period and were the sites of documented release incidents. The isoconcentration map (Appendix H) depicts the highest dissolved benzene concentrations radiating outward from the S-farm source area. While some contribution from the northern tank farm (Tank N-3 area) cannot be entirely excluded, the overwhelming weight of the hydrogeologic data indicates that the S-farm is the primary source of the dissolved benzene and MTBE plume.
F. Remediation Cost Estimates
The remediation cost estimate that forms the basis of this analysis was prepared by Pinehill Environmental Consulting LLC under the supervision of Dr. Lena Vasquez, P.E., P.G., Principal-in-Charge. The estimate is dated April 2025 and is attached hereto as Appendix A.
The total estimated remediation cost is $9.74 million, with a low-end estimate of $7.81 million and a high-end estimate of $12.18 million. The component costs are as follows:
The soil excavation costs are geographically divided between the two tank farms and can be attributed with reasonable confidence to the operations of the respective controlling parties. The groundwater treatment, long-term monitoring, institutional controls, and project management costs relate to the commingled groundwater plume and overall site management and are not as readily divisible.
G. Procedural Posture
DEH filed an application for participation in the TCEQ Voluntary Cleanup Program ("VCP") on June 25, 2025. The application was accepted for processing, and TCEQ assigned VCP Tracking No. VCP-2517 to the Site. DEH paid the required $1,000 application fee at the time of submission.
TCEQ's formal acknowledgment letter is anticipated to be issued approximately in August 2025. Upon receipt of the acknowledgment letter and execution of a VCP Agreement between DEH and the TCEQ, DEH will prepare and submit an Affected Property Assessment Report ("APAR"), with a target submission date of October 31, 2025. TCEQ oversight fees are charged at a rate of $225 per hour, and the projected total oversight cost over the life of the project is approximately $135,000.
On the cost-recovery front, Calderwood & Harkness sent a pre-suit demand letter to RCFD on May 12, 2025, demanding payment of $4.647 million, representing RCFD's allocated share of remediation costs ($4.26 million) plus investigative costs incurred by DEH ($387,000). The demand letter set a sixty-day response deadline of July 11, 2025. A copy of the demand letter is attached hereto as Appendix F.
RCFD responded via its counsel, Thomas Kessler of Whitfield Barr LLP, by letter dated July 8, 2025. A copy of the response is attached hereto as Appendix G. In its response, RCFD denied liability on multiple grounds, raised a statute of limitations defense and various allocation arguments, and counter-proposed a global settlement of $750,000. The adequacy of this counter-offer is evaluated in Section VII below.
III. Legal Framework
A. CERCLA § 107(a) — Federal Cost-Recovery
1. Elements of a CERCLA § 107(a) Claim
The Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675, provides a federal cause of action for the recovery of environmental response costs. Under CERCLA § 107(a), 42 U.S.C. § 9607(a), liability attaches to four categories of potentially responsible parties ("PRPs"):
(a) current owners and operators of a facility;
(b) past owners and operators of a facility at the time of disposal of any hazardous substance;
(c) persons who arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances at a facility; and
(d) persons who accepted hazardous substances for transport to disposal or treatment facilities selected by such persons.
To establish liability under CERCLA § 107(a), the plaintiff must demonstrate four elements:
(i) the site qualifies as a "facility" within the meaning of CERCLA;
(ii) a "release" or "threatened release" of a "hazardous substance" has occurred at the facility;
(iii) the release has caused the plaintiff to incur "response costs" that are consistent with the National Contingency Plan ("NCP"); and
(iv) the defendant falls within one or more of the four PRP categories enumerated above.
CERCLA liability is strict — there is no requirement of negligence or intent. It is joint and several — any single PRP may be held liable for the entire cost of remediation, absent a showing by the defendant that the harm is divisible. And it is retroactive — it applies to contamination that occurred prior to CERCLA's enactment in 1980. These features make CERCLA one of the most potent environmental cost-recovery tools available under federal law.
2. Application to RCFD
Each of the four elements of a CERCLA § 107(a) claim is satisfied with respect to RCFD:
(a) Facility. The Site qualifies as a "facility" under CERCLA § 101(9), 42 U.S.C. § 9601(9), which defines "facility" to include "any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located." The Site is a petroleum storage terminal at which hazardous substances — including benzene, toluene, ethylbenzene, xylenes, and lead — have been stored, released, and deposited into the environment.
(b) Release of Hazardous Substances. Multiple "releases" within the meaning of CERCLA § 101(22), 42 U.S.C. § 9601(22), have occurred at the Site. The five documented release incidents described in Section II.D are well-established through TCEQ incident reports and Pinehill's environmental investigation data. Benzene is a listed CERCLA hazardous substance under 40 C.F.R. § 302.4 (with a reportable quantity of 10 pounds). Lead, toluene, ethylbenzene, and xylenes are also listed hazardous substances. The releases have resulted in documented soil and groundwater contamination at levels vastly exceeding applicable regulatory standards.
(c) Response Costs. DEH has incurred and will continue to incur "response costs" within the meaning of CERCLA § 107(a)(4)(B). To date, DEH has expended $387,000 on investigative activities — specifically, the Phase I Environmental Site Assessment, Phase II Environmental Site Assessment, and supplemental investigation performed by Pinehill Environmental Consulting LLC between January 2024 and June 2025. The total projected response cost for full remediation of the Site is $9.74 million. These costs are, or will be, "consistent with the National Contingency Plan" as required by CERCLA. DEH's entry into the TCEQ Voluntary Cleanup Program and its commitment to comply with a TCEQ-approved cleanup plan will substantially support a finding of NCP consistency, as discussed further in Section V.E below.
(d) PRP Status — RCFD as Past Operator. RCFD qualifies as a PRP under the second category: a past operator of the facility "at the time of disposal." Under the Supreme Court's framework articulated in United States v. Bestfoods, 524 U.S. 51 (1998), an entity qualifies as an "operator" under CERCLA when it "directs the workings of, manages, or conducts the affairs of a facility." RCFD exercised precisely this level of control over the southern tank farm (Tanks S-1 through S-12) under the 1991 JOA. RCFD's operational control was comprehensive: RCFD employed its own personnel at the S-farm, managed day-to-day tank operations, directed product handling and throughput, performed (or failed to perform) tank maintenance and inspections, and bore responsibility for spill prevention and response in the S-farm area. Three of the five documented releases at the Site occurred in the S-farm during RCFD's period of operational control — constituting "disposal" at the facility during RCFD's period of operation. RCFD's status as a past operator is thus firmly established.
3. DEH's Own PRP Status
It must be acknowledged that DEH, as successor-in-interest to DTS, is itself a PRP under CERCLA § 107(a)(2). DTS owned and operated the Site from 1974 through 2015, and at least two documented releases occurred in areas under DTS's operational control (the 2003 Tank N-3 gasoline release and the 2014 Loading Rack diesel release). DEH assumed all of DTS's environmental liabilities, including those arising under CERCLA, pursuant to the Plan of Dissolution executed in October 2017.
The question of whether a PRP that has voluntarily incurred response costs may bring a cost-recovery action under § 107(a) against other PRPs, rather than being limited to a contribution claim under § 113(f), has been the subject of significant judicial attention. The critical distinction is as follows:
• CERCLA § 107(a)(4)(B) authorizes "any other person" who has incurred response costs to recover those costs from PRPs. A PRP that voluntarily undertakes remediation — without having been subject to a CERCLA civil action or administrative order — may pursue a cost-recovery claim under § 107.
• CERCLA § 113(f)(1) authorizes contribution claims among PRPs, but only where a party has been subjected to a civil action under § 106 or § 107. Because DEH has not been the subject of any CERCLA civil action or administrative order, the § 113(f)(1) contribution mechanism has not been triggered.
• CERCLA § 113(f)(3)(B) provides a right of contribution to a party that has resolved its liability through an administrative or judicially approved settlement. While DEH's participation in the TCEQ VCP may eventually provide a basis for a § 113(f)(3)(B) claim, no such settlement has yet been finalized.
Under the current procedural posture, the § 107(a) cost-recovery path is the appropriate vehicle for DEH's claims against RCFD. This is consistent with the approach endorsed by the majority of federal circuits, which permit a PRP to bring a § 107 action where the PRP has not been compelled to clean up under § 106 or § 107 and is voluntarily incurring response costs.
Even if a court were to recharacterize DEH's claim as one for contribution under § 113(f), DEH's equitable position remains strong. The equitable allocation factors (the "Gore factors") — discussed in Section IV — weigh heavily in DEH's favor, and the claimed allocation of costs between DEH and RCFD would remain well-supported.
B. Texas Health & Safety Code § 361.344 — State Cost-Recovery
1. Statutory Framework
In addition to the federal CERCLA claim, DEH possesses a viable cost-recovery claim against RCFD under the Texas Solid Waste Disposal Act ("TSWDA"), codified at Texas Health & Safety Code Chapter 361. Specifically, Texas Health & Safety Code § 361.344 authorizes a "responsible person" who has incurred costs in cleaning up contamination at a site to bring an action to recover a proportionate share of those costs from other responsible persons.
The TSWDA imposes a strict liability standard. A "responsible person" under the TSWDA includes, among others, "any person who at the time of processing, storage, or disposal of a solid waste or hazardous substance owned or operated the solid waste facility at which the processing, storage, or disposal took place." Tex. Health & Safety Code § 361.271(a)(2). RCFD's operation of the S-farm during periods of documented releases (1996, 2001, and 2008) squarely places RCFD within the definition of a responsible person under the TSWDA.
2. Advantages of the State-Law Claim
The Texas state-law claim offers several practical advantages over the federal CERCLA claim:
No NCP-Consistency Requirement. Unlike CERCLA § 107, which requires that response costs be "consistent with the National Contingency Plan" in order to be recoverable, the TSWDA does not impose an NCP-consistency requirement. This eliminates one potential defense that RCFD might otherwise raise.
Recovery of Attorney's Fees. The TSWDA authorizes the recovery of reasonable and necessary attorney's fees incurred in prosecuting a cost-recovery claim. See Tex. Health & Safety Code § 361.344(b). This represents a significant advantage over CERCLA, under which attorney's fees are generally not recoverable in § 107 cost-recovery actions.
Flexible Forum Selection. The state-law claim may be brought in Texas state court (e.g., in Wharton County, where the Site is located) or in federal court, either as an independent claim or as a supplemental claim pendant to a CERCLA action. The availability of both forums provides strategic flexibility.
C. Joint and Several Liability vs. Divisibility
Under CERCLA, liability is presumptively joint and several. This means that any single PRP may be held liable for the entirety of the response costs at a site, regardless of the extent of that PRP's actual contribution to the contamination. The burden falls on the defendant to demonstrate that the harm is divisible and that there exists a reasonable basis for apportionment. Burlington Northern & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 614 (2009); United States v. Monsanto Co., 858 F.2d 160, 171–72 (4th Cir. 1988).
RCFD may attempt to argue that the harm at the Site is divisible because the Site has two geographically distinct tank farms — the northern tank farm (operated by DTS) and the southern tank farm (operated by RCFD) — and that contamination can be traced to each respective area. There is a surface-level appeal to this argument: the soil contamination in the S-farm is attributable to RCFD's operations, and the soil contamination in the N-farm is attributable to DTS's operations. If a clean geographic line could be drawn, RCFD might argue that it is responsible only for its own share.
However, there are powerful counter-arguments that undermine the divisibility defense, particularly with respect to the groundwater contamination:
(i) Commingled Groundwater Plume. The dissolved benzene plume extends approximately 2,400 feet south-southwest from the southern tank farm and encompasses contributions from both the S-farm and N-farm source areas. The Chicot Aquifer (shallow zone) is a unitary hydrogeologic unit, and dissolved-phase contaminants from both source areas have migrated and merged within a single aquifer zone. It is not possible, as a practical or scientific matter, to disaggregate the plume into discrete contributions from each source area with any precision.
(ii) Groundwater Remediation Is Indivisible. Even if some soil contamination can be geographically divided between the two tank farms, the groundwater treatment system — which must address the commingled plume as a whole — represents an indivisible remediation effort. The in-situ chemical oxidation and enhanced bioremediation program, the long-term monitoring network, and the institutional controls must be designed and implemented on a site-wide basis. These costs ($2.15 million + $1.06 million + $0.18 million = $3.39 million) cannot be meaningfully divided based on the geographic origin of individual contaminant contributions.
(iii) RCFD's Disproportionate Contribution. Even under a divisibility analysis, the evidence demonstrates that RCFD bears a proportionally larger share of responsibility. The S-farm soil contamination is more severe than the N-farm contamination (TPH up to 14,200 mg/kg at S-7 vs. 8,750 mg/kg at N-3), RCFD's documented release volume (approximately 16,800 gallons) is approximately eight times that of DTS's documented releases (approximately 2,100 gallons), and the center of the dissolved benzene plume traces back to the S-farm source area.
Accordingly, joint and several liability should apply to at least the groundwater-related remediation components. Even if the court entertains a divisibility argument for soil remediation, the overall effect would not substantially reduce RCFD's share below the allocation proposed herein, which already conservatively assigns the N-farm soil remediation costs entirely to DEH.
IV. Equitable Allocation Analysis
A. Gore Factors
When apportioning costs among PRPs — whether under a CERCLA § 113(f) contribution framework or as part of an equitable allocation within a § 107 cost-recovery action — courts commonly consider the factors set forth in the legislative history of CERCLA, known as the "Gore factors" (named for then-Representative Al Gore, who proposed them during the 1980 congressional debates). The Gore factors are not statutory requirements but are widely accepted by federal courts as the framework for equitable allocation. They include:
1. The ability of the parties to demonstrate that their contribution to a release can be distinguished from that of other parties;
2. The amount and toxicity of the hazardous substances involved;
3. The degree of involvement of the parties in the generation, transportation, treatment, storage, or disposal of the hazardous substances;
4. The degree of care exercised by each party with respect to the hazardous substances, taking into account the characteristics of the substances; and
5. The degree of cooperation of the parties with federal, state, or local officials to prevent any harm to the public health or the environment.
Courts may also consider additional factors as they deem appropriate under the circumstances of a particular case, including the financial resources of the parties, the equities of each party's position, and any agreements between the parties regarding the allocation of liability.
B. Application of Gore Factors to DEH and RCFD
Factor 1 — Distinguishability of Contributions
The evidence supports a high degree of distinguishability between the contributions of RCFD and DTS/DEH. RCFD was the sole operator of the S-farm under the JOA from 1991 through 2010. During that period, three documented releases occurred from RCFD-operated tanks, totaling approximately 16,800 gallons of petroleum product. DTS was the operator of the N-farm and common areas during the same period and throughout the broader 1974–2015 operational history of the Site, during which two documented releases occurred, totaling approximately 2,100 gallons.
The volume ratio of documented releases is stark: RCFD accounts for approximately 89% of the total documented release volume, while DTS accounts for approximately 11%. This ratio is further corroborated by the soil contamination data: TPH concentrations in the S-farm (up to 14,200 mg/kg in the Tank S-7 area) are significantly higher than in the N-farm (up to 8,750 mg/kg in the Tank N-3 area). The groundwater plume's centerline traces back to the S-farm, providing additional spatial evidence that RCFD's operational area is the predominant source of site-wide contamination.
Factor 2 — Amount and Toxicity
RCFD's releases involved both diesel fuel and gasoline. Gasoline is a more acutely hazardous product than diesel fuel for purposes of groundwater contamination because it contains substantially higher concentrations of benzene, a Group 1 human carcinogen, and MTBE, a highly mobile and persistent groundwater contaminant. The 2001 Tank S-7 release of approximately 3,200 gallons of gasoline is likely the predominant source of the benzene and MTBE contamination in the dissolved-phase groundwater plume, which has migrated 2,400 feet downgradient and exhibits benzene concentrations 760 times the federal MCL.
The maximum benzene concentration in groundwater (3.8 mg/L) was detected directly downgradient of the S-farm. MTBE, a gasoline additive that was in widespread use in Texas motor gasoline during the 1990s and early 2000s, has been detected in groundwater at concentrations up to 1.2 mg/L — further confirming that gasoline releases from the S-farm are a primary source of groundwater contamination. These facts weigh heavily in favor of assigning a greater share of remediation costs to RCFD.
Factor 3 — Degree of Involvement
RCFD's involvement in the operations that gave rise to the contamination was direct and substantial. Under the JOA, RCFD exercised exclusive day-to-day operational control over the S-farm. RCFD employed its own personnel to manage tank operations, directed product handling and throughput, was responsible for tank inspection and maintenance, and bore primary responsibility for spill prevention and response within the S-farm.
DTS, by contrast, provided infrastructure support and common-area services to the S-farm but did not direct or control RCFD's day-to-day operations within the S-farm. The JOA clearly delineated operational responsibility, and RCFD cannot credibly argue that DTS was responsible for the releases that occurred in the S-farm during RCFD's period of exclusive operational control.
Factor 4 — Degree of Care
The evidence available to date suggests that RCFD exercised a materially lesser degree of care than DTS with respect to the prevention and management of petroleum releases.
Craig Pemberton, who served as DTS's Senior Operations Manager from 1988 through 2015, has provided preliminary information (obtained through informal interviews and document review) indicating that RCFD resisted DTS-recommended tank inspection protocols for the S-farm and that RCFD delayed reporting the 2001 Tank S-7 and 2008 Tank S-11 releases to the TCEQ. If confirmed through formal testimony, this evidence would support the conclusion that RCFD's substandard operational practices contributed to the severity and extent of the contamination emanating from the S-farm.
By contrast, DTS's own releases (the 2003 Tank N-3 gasoline release and the 2014 Loading Rack diesel release) were promptly reported to the TCEQ and at least partially addressed through initial response measures. While DTS cannot claim a flawless operational record, its operational practices appear to have been meaningfully superior to those of RCFD, particularly with respect to timely reporting and inspection compliance.
Factor 5 — Cooperation with Authorities
DEH (as successor to DTS) has demonstrated a proactive and cooperative posture toward regulatory authorities. DEH retained Pinehill Environmental Consulting LLC in January 2024 to conduct a comprehensive environmental investigation of the Site — well before any regulatory agency directed it to do so. DEH filed a VCP application with the TCEQ on June 25, 2025, voluntarily committing to a supervised cleanup of the Site. DEH's cooperative approach underscores its commitment to addressing the environmental conditions at the Site and strengthens its equitable position in any allocation analysis.
RCFD, by contrast, has not participated in any investigation or cleanup activities at the Site since ceasing operations in 2010. RCFD's July 8, 2025 response to the pre-suit demand letter denied all liability and offered an inadequate global settlement of $750,000, which does not reflect a meaningful acknowledgment of RCFD's role in creating the contamination conditions that necessitate remediation.
C. Proposed Allocation
Based on the foregoing analysis of the Gore factors and the site-specific data, the following cost allocation is proposed:
Soil Remediation. S-Farm Soil Excavation and Disposal ($3.42 million) — 100% allocated to RCFD. All contamination in the southern tank farm is attributable to releases that occurred during the period of RCFD's exclusive operational control under the JOA (1991–2010). The three documented S-farm release incidents (1996 Tank S-4, 2001 Tank S-7, 2008 Tank S-11) occurred on RCFD's watch, and RCFD was the sole operator of the S-farm tanks at the time of each release. There is no basis for assigning any portion of the S-farm soil remediation costs to DEH.
N-Farm Soil Excavation and Disposal ($1.87 million) — 100% allocated to DEH (as successor to DTS). The contamination in the northern tank farm is attributable to releases from DTS-operated tanks, specifically the 2003 Tank N-3 gasoline release. DEH, as DTS's successor, appropriately bears the full cost of N-farm soil remediation.
Groundwater Treatment. In-Situ Groundwater Treatment ($2.15 million) — 50/50 split between DEH and RCFD ($1.075 million each). The dissolved benzene plume is a commingled product of releases from both the S-farm and N-farm source areas. A 50/50 split of groundwater treatment costs is a conservative allocation that favors RCFD, in light of the evidence that the S-farm (RCFD-operated) is the predominant source of the benzene and MTBE plume. A volume-weighted allocation (89% RCFD / 11% DTS) or a source-area-weighted allocation (reflecting the higher benzene concentrations originating from the S-farm) would assign RCFD a substantially higher share. The 50/50 split is adopted here to present a defensible, conservative position that maximizes DEH's credibility in negotiations and litigation.
Long-Term Groundwater Monitoring
Long-Term Monitoring ($1.06 million) — 50/50 split between DEH and RCFD ($0.53 million each). The same rationale applies as for groundwater treatment: the monitoring program addresses the commingled plume and the site as a whole, and a 50/50 allocation is conservative but defensible.
Institutional Controls. Institutional Controls and Deed Restrictions ($0.18 million) — 50/50 split between DEH and RCFD ($0.09 million each). Institutional controls, including deed restrictions limiting future land use, are a site-wide remedial measure that benefits and protects against risks attributable to both parties' contributions to contamination.
Project Management, Reporting, and Regulatory Liaison
Project Management ($1.06 million) — 100% initially borne by DEH. As the party managing the VCP process and the overall remediation effort, DEH will be the entity interfacing with the TCEQ, supervising Pinehill, and managing the remediation contractors. These costs are best characterized as administrative and operational overhead. However, a portion of project management costs is potentially recoverable as an administrative response cost, and DEH reserves the right to seek recovery of a proportionate share from RCFD in any future allocation determination.
Contingency Allocation. Contingency/Rounding Allocation ($0.855 million) — allocated to DEH's share. This residual amount, reflecting rounding and inherent uncertainty in the cost estimate, is allocated entirely to DEH as a conservative measure. This allocation avoids any appearance of overreaching in DEH's demand and further strengthens the credibility of the overall allocation framework.
Summary.
Cross-check: $5,480,000 + $4,260,000 = $9,740,000
Investigative Costs. In addition to its share of prospective remediation costs, RCFD is liable for a proportionate share of the investigative costs already incurred by DEH. DEH has incurred $387,000 in costs associated with the Pinehill Phase I ESA, Phase II ESA, and supplemental investigation (January 2024 through June 2025). These investigative costs are recoverable as "necessary costs of response" under CERCLA § 107(a)(4)(B) and as investigation costs under Texas Health & Safety Code § 361.344.
Total Claimed Recovery from RCFD: $4,260,000 + $387,000 = $4,647,000.
Assessment of Allocation Defensibility
The proposed allocation is deliberately conservative. The 50/50 split of shared costs (groundwater treatment, long-term monitoring, and institutional controls) significantly favors RCFD. DEH could credibly argue for a 70/30 or even 80/20 allocation of shared costs in its favor, based on: (i) the release volume ratio (89% RCFD / 11% DTS); (ii) the plume source analysis showing the S-farm as the predominant source area; and (iii) RCFD's documented operational deficiencies. By adopting a more conservative posture, DEH strengthens both its negotiating position and its litigation posture. A court is unlikely to assign RCFD a share lower than the 50/50 allocation of shared costs given the weight of the evidence.
The allocation of 100% of S-farm soil remediation costs to RCFD is well-supported on any analysis. RCFD was the sole operator of the S-farm, all three S-farm releases occurred on RCFD's watch, and the highest soil contamination at the Site (TPH at 14,200 mg/kg at Tank S-7) is directly traceable to RCFD's operations. There is no credible basis for assigning any portion of the S-farm soil costs to DEH.
V. RCFD's Anticipated Defenses
A. Statute of Limitations
1. CERCLA § 113(g)(2) — Federal Limitations Period
Under CERCLA § 113(g)(2), 42 U.S.C. § 9613(g)(2), the limitations period for a cost-recovery action under § 107 depends on the type of response action:
(i) For a remedial action, the claim must be brought within six years after initiation of physical on-site construction of the remedial action;
(ii) For a removal action, the claim must be brought within three years after completion of the removal action.
No remedial action has yet been initiated at the Site. The VCP application was filed with the TCEQ on June 25, 2025, and active remediation is estimated to commence in approximately June 2026, with projected completion by December 2028 (exclusive of the eight-year long-term monitoring period). The federal limitations period under CERCLA § 113(g)(2) has not yet begun to run with respect to remedial action costs. RCFD's statute of limitations argument under CERCLA is therefore premature and lacks merit.
With respect to the $387,000 in investigative costs already incurred by DEH, these costs represent initial response costs. A claim for initial response costs accrues upon the incurrence of such costs. DEH began incurring investigative costs in January 2024, placing the incurrence well within any applicable limitations period.
2. Texas Limitations Period
The Texas Health & Safety Code does not prescribe a specific limitations period for cost-recovery actions under § 361.344. In the absence of a specific statutory limitations period, the applicable period is generally the residual four-year statute of limitations under Texas Civil Practice and Remedies Code § 16.004, or, arguably, the two-year statute for statutory liability claims.
Under either the four-year or two-year period, the discovery rule may apply. DEH's investigative costs were first incurred in January 2024, and the remediation cost estimate was not finalized until April 2025. Under the discovery rule, the limitations period would not begin to run until the plaintiff knew or should have known of the facts giving rise to the cause of action, which in this context means the date on which DEH first incurred recoverable response costs or, at the earliest, the date on which DEH became aware of the contamination conditions at the Site. Any Texas-law cost-recovery claim filed in 2025 or 2026 will be timely under any applicable limitations analysis.
3. Assessment. RCFD's statute of limitations defense, as articulated in the July 8, 2025 Whitfield Barr letter, is weak. The defense appears to conflate the dates of the underlying releases (1996, 2001, and 2008) with the accrual of a cost-recovery claim. This is a fundamental error. Under both CERCLA and Texas law, a cost-recovery claim does not accrue upon the date of the release. Rather, the claim accrues upon the incurrence of response costs (for initial response costs) or upon the commencement of remedial action (for remedial action costs). Because DEH did not begin incurring response costs until January 2024, and because no remedial action has yet been initiated at the Site, RCFD's limitations defense fails under any applicable framework.
B. Divisibility / Apportionment Defense
RCFD's divisibility argument has been addressed in detail in Section III.C above. To summarize: RCFD may argue that its liability should be limited to the S-farm soil remediation costs ($3.42 million) and that it bears no responsibility for groundwater remediation. However, the dissolved benzene plume originates primarily from the S-farm source area (which was under RCFD's operational control), and the commingled nature of the plume defeats any attempt to achieve a clean geographic apportionment of groundwater remediation costs. Even if the court accepts a divisibility analysis for certain components, RCFD's share would not be reduced below the conservative allocation proposed herein, because RCFD's releases (particularly the 2001 gasoline release from Tank S-7) are the likely primary source of the benzene and MTBE contamination in groundwater.
Moreover, a successful divisibility argument by RCFD would be a double-edged sword: if RCFD establishes that the harm is divisible, the logical allocation would assign RCFD not merely the S-farm soil costs but also a proportionate share of the groundwater costs reflecting the S-farm's contribution as the predominant source area. Under any reasonable divisibility analysis, RCFD's share would exceed, not fall below, the amounts claimed by DEH in this memorandum.
C. Third-Party / Innocent Landowner Defenses
CERCLA provides limited affirmative defenses for parties that can demonstrate that contamination was caused solely by an act of God, an act of war, or the acts or omissions of a third party with whom the defendant had no contractual relationship. See 42 U.S.C. § 9607(b)(1)–(3). The "innocent landowner" defense under § 107(b)(3) and the "bona fide prospective purchaser" defense under § 107(r) are available only to parties that acquired contaminated property without knowledge of contamination and after conducting appropriate due diligence.
None of these defenses is available to RCFD. RCFD was not a passive landowner or a subsequent purchaser of contaminated property; it was an active operator that had exclusive day-to-day control over the S-farm tanks and that was directly responsible for the releases that contaminated the soil and groundwater. RCFD had a direct contractual relationship with DTS through the JOA, which forecloses any third-party defense. The innocent landowner and bona fide prospective purchaser defenses are likewise inapplicable because RCFD's connection to the Site was as an operator, not as a purchaser or landowner.
D. Contribution Protection / Prior Settlement
Under CERCLA § 113(f)(2), 42 U.S.C. § 9613(f)(2), a person who has resolved its liability to the United States or a state in an administrative or judicially approved settlement is entitled to "contribution protection" — i.e., such a person may not be held liable for claims for contribution regarding matters addressed in the settlement. This provision bars subsequent contribution claims by co-PRPs against settling parties.
No prior CERCLA or state administrative settlement exists involving the Site. Neither DEH, RCFD, nor any other party has entered into a consent decree, administrative order on consent, or other settlement agreement with the EPA, the TCEQ, or any other governmental authority regarding the Site. Therefore, no contribution protection bars DEH's cost-recovery claim against RCFD.
E. NCP Consistency (CERCLA-Specific)
Under CERCLA § 107(a)(4)(B), a private-party plaintiff must demonstrate that its response costs were incurred "consistent with the National Contingency Plan." 42 U.S.C. § 9607(a)(4)(B). This requirement ensures that response actions are conducted in an efficient and cost-effective manner consistent with the standards and procedures set forth in the NCP (40 C.F.R. Part 300).
RCFD may challenge the NCP consistency of DEH's response costs as a defense to the § 107 claim. However, this challenge faces substantial obstacles:
(i) DEH has entered the TCEQ Voluntary Cleanup Program (VCP-2517), a state-supervised remediation framework that imposes detailed requirements for site investigation, risk assessment, and remediation. Compliance with a TCEQ-approved cleanup plan provides substantial — though not per se — evidence of NCP consistency.
(ii) Federal courts generally afford a rebuttable presumption of NCP consistency to cleanups conducted under state voluntary cleanup programs, particularly where the state program has been authorized or recognized by the EPA. Texas's VCP, administered by the TCEQ, is a well-established and EPA-recognized program.
(iii) DEH's investigation and remediation activities to date have been conducted by a qualified environmental consulting firm (Pinehill Environmental Consulting LLC, under the supervision of Dr. Lena Vasquez, P.E., P.G.) in accordance with generally accepted environmental remediation standards.
Accordingly, while NCP consistency remains a technical element that DEH must satisfy, it is not anticipated to present a significant vulnerability.
F. Waiver / Contractual Defenses Under the JOA
RCFD may point to indemnification or limitation-of-liability provisions in the 1991 JOA as a defense to DEH's cost-recovery claims. However, this defense faces two independent barriers:
First, CERCLA § 107(e)(1) provides that liability under CERCLA may not be transferred by agreement. Specifically, § 107(e)(1) states that "[n]o indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release . . . to any other person the liability imposed under this section." 42 U.S.C. § 9607(e)(1). Even if the JOA contains an indemnification running from DTS to RCFD — which must be confirmed through a complete review of the JOA provisions — such a provision would not bar DEH's statutory CERCLA claim. At most, the JOA indemnification would give rise to a separate contractual claim by RCFD against DEH (as DTS's successor) for indemnification. The enforceability of any such contractual indemnification provision is, of course, subject to the terms of the JOA itself, including any expiration or survival provisions.