* Federal Circuit revives claim by BP, Chevron, Shell
* Oil companies dumped toxic sludge near Los Angeles
* Litigation began in 1991
By Jonathan Stempel
April 28 (Reuters) - A divided U.S. appeals court on Mondayrevived efforts by oil companies to force the federal governmentto cover their costs to clean up a southern California sitewhere they had dumped toxic sludge during World War Two.
By a 2-1 vote, the U.S. Court of Appeals for the FederalCircuit reversed the dismissal of claims by BP Plc,Chevron Corp and Royal Dutch Shell Plc in a now23-year-old case that their wartime contracts to produce gas tofuel military aircraft entitled them to reimbursement.
The appeals court returned the case to Judge Thomas Wheelerof the U.S. Court of Federal Claims for a damages trial, sayingthe amount of environmental harm from the contracts remains indispute. The oil companies are seeking roughly $100 million.
"We're very pleased with the court's decision, recognizingthe United States' contractual obligation to reimburse the oilcompanies for costs arising from their fulfillment of theseWorld War Two contracts," said Michael Kirk, a partner at Cooper& Kirk representing the oil companies.
A U.S. Department of Justice spokeswoman had no immediatecomment.
The "acid sludge" was dumped at a site set up by formerShell engineer Eli McColl in Fullerton, California, about 30miles (50 km) southeast of Los Angeles, and was a byproduct ofefforts to produce high-octane aviation gas.
That site was later put on the U.S. Environmental ProtectionAgency's Superfund list in 1983, and now houses a golf course.(http://www.epa.gov/superfund/programs/recycle/live/region9_ca.html)
In 2002, a federal appeals court in California rejected theoil companies' bid to make the government pay for cleanup costsat the site under the federal Comprehensive EnvironmentalResponse, Compensation, and Liability Act ("CERCLA").
The companies' breach of contract counterclaim was latersent to the Court of Federal Claims, and dismissed by Wheeler inFebruary 2013.
Writing for the Federal Circuit majority, Circuit Judge EvanWallach said it was wrong to conclude that cleanup costs werenot among the "taxes, fees, or charges" that the government hadpromised to reimburse.
The United States "needed the oil companies' cooperation toconstruct new production facilities to meet the extraordinarydemand for avgas," Wallach wrote. "The oil companies agreed tothe avgas contracts' low profits in return for the government'sassumption of certain risks outside of the oil companies'control. The CERCLA charges in this case are one such risk."
Circuit Judge Jimmie Reyna dissented, saying the majorityturned the disputed clause into a "catch-all indemnificationprovision" that the "sophisticated" oil companies did notnegotiate, and would have known not to negotiate.
The named plaintiffs include Shell; Atlantic Richfield Co,which is now part of BP; and Texaco Inc and Union Oil Co ofCalifornia, which are now part of Chevron.
Exxon Mobil Corp, which said it had won favorablecourt rulings in similar cases over sites in Baytown, Texas andBaton Rouge, Louisiana, filed a brief supporting the oilcompanies' appeal.
The case is Shell Oil co et al v. U.S., U.S. Federal CircuitCourt of Appeals, No. 2013-5051. (Reporting by Jonathan Stempel in New York; Editing byBernadette Baum)
BP (BP.)
