Federal Legal Liability Concerns when Acquiring Contaminated
Property Rona H. Gregory US Environmental Protection Agency New
England Region Vermont Brownfields Forum November 29, 2012 Slide 2
Environmental Liability Assessing Project Risk Understand which
federal, state, and local statutes/regulations apply Government
agencies exercise discretion in making enforcement decisions
Enforcement decisions are very site- and fact-specific EPA
generally uses CERCLA authority for sites that are not likely to be
adequately addressed otherwise Most properties are addressed
through state cleanup programs Environmental liability is one
project risk evaluate it in context of all project risks For
example, liability for a relatively inexpensive cleanup may
contribute only minimally to project risks 2 Slide 3 Environmental
Liability Assessing Project Risk If liability is a concern, there
is a need to understand what triggers that liability, what
liability protections are available, and what must be done to
qualify for and retain those protections Different fact patterns
may present different liability risks Ownership vs. leasing
Activities taken (or not taken) during period of ownership or
leasing 3 Slide 4 Environmental Liability Superfund Superfund is
the federal environmental program implementing the CERCLA statute
CERCLA provides EPA broad authority to respond to releases or
threatened releases of hazardous substances, pollutants, and
contaminants CERCLA applies in all 50 states and U.S. territories
EPA can compel responsible parties to perform cleanup or to
reimburse EPA for cleanups performed by EPA CERCLA authorizes two
general kinds of response actions Removal actions Remedial actions
4 Slide 5 Environmental Liability Superfund Superfund undeserved
stigma? Hazardous substances must be present Petroleum exclusion
under CERCLA Asbestos in buildings addressed in limited
circumstances If hazardous substances are present, Superfund
authority may be best option to clean up a property for
redevelopment If no other available resources Brings broad array of
federal resources to site Cleanup process requires public
participation Transparency in remedy selection Site investigations
and remedial work performed to clear standards Slide 6
Environmental Liability Superfund CERCLA names four groups of
potentially responsible parties Current owners and operators Owners
or operators who owned or operated the property at the time of
disposal Those that arranged for treatment or disposal (typically
the generators) Transporters who selected the disposal site CERCLA
liability is retroactive, joint and several, and strict 6 Slide 7
Environmental Liability Superfund Evolution of liability
protections Reaction to backlash against Superfund liability scheme
Attempt to mitigate unintended consequences Involuntary acquisition
by state and local government [1986] Innocent landowner [1986]
Lender liability rule [1996] Prospective purchaser agreements
[administrative fix] Bona fide prospective purchaser [2002] 7 Slide
8 Environmental Liability Superfund CERCLA Liability Protections,
Defenses, and Policies Key statutory provisions Third Party Defense
[CERCLA 107(b)(3)] Legally complex Includes eminent domain takings
[CERCLA 101(35)(a)(ii)] Includes innocent landowner protection
[CERCLA 101(35)(a)(i)] Lender liability protection [CERCLA
101(20)(E), (F), (G)] Asset Conservation, Lender Liability, and
Deposit Insurance Protection Act, 1996 Secured creditor exemption
eliminating liability for lenders who hold ownership in a CERCLA
facility primarily to protect their security interest as long as
they do not participate in the management of the facility 8 Slide 9
Environmental Liability Superfund CERCLA Liability Protections,
Defenses, and Policies Involuntary Acquisition [CERCLA 101(20)(D)]
Includes acquisitions by tax delinquency, bankruptcy, abandonment
State or local government must not cause or contribute to release
Bona Fide Prospective Purchaser [BFPP] [CERCLA 101(40); CERCLA
107(q)(C); CERCLA 107(r)] Includes acquisition by purchase, gift,
donation Contiguous Property Owner [CPO] [CERCLA 107(q)] Applies to
contamination originating from an off-site source Enforcement Bar
[CERCLA 128(b)(1)] Limits federal enforcement where a cleanup is
being conducted or has been completed in compliance with a state
response program Slide 10 Environmental Liability Superfund CERCLA
Liability Protections, Defenses, and Policies CERCLA requirements
to attain and maintain liability protections Requirements are
similar but not identical for each liability protection Threshold
criteria Necessary to qualify for a liability protection Continuing
obligations Obligations that require additional affirmative steps
to ensure that the protections survive over time 10 Slide 11
Environmental Liability -- Superfund CERCLA Liability Protections,
Defenses, and Policies Threshold criteria Must perform all
appropriate inquiry [AAI] prior to acquisition of property [BFPP /
CPO / ILO] Cannot be liable or potentially liable for response
costs [BFPP / CPO] Cannot be affiliated with someone who is liable
or potentially liable for response costs [BFPP / CPO] Slide 12
Environmental Liability -- Superfund CERCLA Liability Protections,
Defenses, and Policies Continuing obligations [BFPP / CPO / ILO]
Comply with land use restrictions Not impede effectiveness or
integrity of any institutional control Take reasonable steps [
CERCLA 101(35)(B)] to: Stop continuing releases Prevent threatened
future releases Prevent or limit human, environmental, or natural
resource exposure to earlier hazardous substance releases Slide 13
Environmental Liability -- Superfund CERCLA Liability Protections,
Defenses, and Policies Continuing obligations [BFPP / CPO / ILO]
Provide cooperation, assistance, and access to persons authorized
to conduct response actions Including cooperation and access
necessary for installation, integrity, operation, and maintenance
of complete or partial response action Slide 14 Environmental
Liability -- Superfund CERCLA Liability Protections, Defenses, and
Policies Continuing obligations [BFPP / CPO] Comply with
information requests and administrative subpoenas Provide legally
required notices with respect to the discovery or release of any
hazardous substances Slide 15 Environmental Liability -- Superfund
CERCLA Liability Protections, Defenses, and Policies Bona fide
prospective purchaser [CERCLA 101(40)] Only liability protection
available to purchaser who knows prior to purchase that the
property is contaminated Applies to property acquired through gift
/ donation Threshold criteria Property acquired after January 11,
2002 All disposal of hazardous substances occurred prior to
acquisition Conduct all appropriate inquiry into previous ownership
and uses of property prior to acquisition Slide 16 Environmental
Liability -- Superfund CERCLA Liability Defenses, Exemptions and
Policies Contiguous property owner [CERCLA 107(q)] Owner of
property that is contaminated by a release coming from property
owned by a different entity Owner did not cause, contribute, or
consent to the release After conducting AAI, owner did not know or
have reason to know that property was or could be contaminated by
releases from other real property Slide 17 Environmental Liability
Superfund CERCLA Liability Protections, Defenses, and Policies 17
Table 7.3 Applicability of CERCLA Liability Provisions Based on the
Method of Acquisition Key CERCLA Liability Protection Provisions
Methods of Municipal Property Acquisition Tax Foreclosure
Bankruptcy Escheat Eminent Domain Purchase Inheritance/Bequest
Abandonment Gift/Donation Involuntary Acquisition 101(20)(D) Bona
Fide Prospective Purchaser 101(40) and 107(r)(1) Third Party
Defense 107(b)(3) and 101(35)(A) Enforcement Bar 128(b) Could apply
to local governments Could apply to local governments under certain
circumstances Slide 18 Environmental Liability Superfund CERCLA
Liability Protections, Defenses, and Policies 18 CERCLA ProvisionIs
AAI Required? Involuntary Acquisition by a Municipality No, but
recommended Bona Fide Prospective Purchaser Yes Third Party Defense
(Innocent Landowner) Yes Contiguous Property OwnerYes Figure 7.2
CERCLA provisions requiring AAI prior to acquisition Slide 19
Environmental Liability Superfund All appropriate inquiry [AAI]
What is AAI Initial assessment of a site to identify potential
presence of environmental contamination or Recognized Environmental
Conditions (RECs) Conducted for real estate transactions, site
discovery, CERCLA liability protection, Brownfields grants, assess
business environmental risk concerns Does not delineate
contamination or quantify risk Slide 20 Environmental Liability
Superfund All appropriate inquiry [AAI] CERCLA amendments in 2002
Not later than 2 years after January 11, 2002, EPA shall by
regulation establish standards and practices for the purpose of
satisfying the requirement to carry out all appropriate inquiries
under CERCLA 101(35)(b)(i) The EPA final rule became effective on
November 1, 2006 All appropriate inquiries must be conducted in
compliance with either EPAs final rule, or ASTM E1527-05 Phase I
Environmental Site Assessment Process to obtain protection from
potential liability under CERCLA as a bona fide prospective
purchaser, a contiguous property owner, or an innocent landowner
Parties cannot use ASTM Transaction Screen standard or ASTM Phase
II ESA standard to comply with AAI Slide 21 Environmental Liability
Superfund All appropriate inquiry [AAI] How does AAI affect you?
Threshold criteria for most CERCLA liability protections Parties
seeking protection from CERCLA liability must conduct AAI prior to
purchasing property Threshold criteria for federal Brownfields
Grant applicants Grant applicant must demonstrate protection from
CERCLA liability to be eligible for a grant Cleanup grant
applicants must have performed ASTM Phase II or equivalent
Recipients of federal Brownfields Assessment Grants Must conduct
assessments in compliance with AAI. Targeted Brownfields Assessment
(TBA) TBAs should be performed in compliance with AAI or ASTM Phase
I E1527-05 to ensure prospective property owners liability
protection and to ensure eligibility for future cleanup grant Slide
22 Environmental Liability Superfund All appropriate inquiry [AAI]
When must AAI be performed? Any party seeking liability protection
must perform AAI before acquiring the property -- before date of
title transfer AAI must be conducted or updated within one year
prior to date of acquisition Interviews, records review, site
inspection, and the environmental cleanup lien search must be
conducted or updated within 180 days prior to the date of
acquisition Slide 23 Environmental Liability Superfund All
appropriate inquiry [AAI] Who can perform AAI? Must be performed by
an Environmental Professional (EP) Only an EP can supervise or
oversee the conduct of AAI Person who does not qualify as an EP may
assist in the conduct of a AAI if he or she is under the
supervision or responsible charge of an EP EP required to sign
AAI-compliant reports Slide 24 Environmental Liability Superfund
All appropriate inquiry [AAI] Definition of EP Person who has:
Sufficient specific education, training, and experience to exercise
professional judgment to develop opinions and conclusions regarding
the presence of releases or threatened releases of hazardous
substances AND Holds a professional engineer or professional
geologist license, or other state, federal, or tribal certification
or environmental professional license and has 3 years of relevant
full-time experience OR Has a degree in science or engineering and
5 years of relevant full-time experience OR Has 10 years of
relevant full-time experience. Slide 25 Environmental Liability
Superfund All appropriate inquiry [AAI] Relevant experience
Participation in the performance of all appropriate inquiries
investigations, environmental site assessments, or other site
investigations that may include environmental analyses,
investigations, and remediation which involve the understanding of
surface and subsurface environmental conditions and the processes
used to evaluate these conditions Slide 26 Environmental Liability
Superfund All appropriate inquiry [AAI] Key regulatory requirements
Interviews with past and present owners, operators, and occupants
Reviews of historical sources of information Reviews of federal,
state, tribal, and local government records Reviews of activity and
use limitations Visual inspections of the facility and of adjoining
properties Slide 27 Environmental Liability RCRA Resource
Conservation and Recovery Act (RCRA) Regulates Hazardous waste
(Subtitle C) Solid waste (Subtitle D) Underground storage tanks
(Subtitle I) 27 Slide 28 Environmental Liability RCRA Hazardous
Waste (Subtitle C) Hazardous waste management Cradle to Grave
Generation Transportation Treatment, storage and disposal
Corrective action to clean up releases Categories of RCRA
facilities Treatment, Storage, & Disposal (TSD) facilities
Commercial TSD facilities (relatively few) Many manufacturing and
some commercial facilities conduct TSD operations (est. 8,000
nationally) Generators Most manufacturing and some commercial
facilities (e.g., dry cleaners) Facilities (including
municipalities) can become a generator as the result of clean up
operations Transporters Most states are authorized to conduct RCRA
(Subtitle C) in lieu of EPA States may be more stringent and
broader in scope Vermont is authorized for base program and
corrective action 28 Slide 29 Environmental Liability RCRA
Hazardous Waste (Subtitle C) RCRA (Subtitle C) Cleanup Programs
Closure/Post-Closure of treatment, storage, and disposal units
Applicable to TSD facilities and generators Corrective action
Required for all permitted TSD facilities Address releases of
hazardous waste and hazardous constituents within entire facility
boundary and those that have moved off-site Can be required for
interim status TSD facilities (i.e., awaiting a permitting
decision) Cleanups may require a TSD permit, but a streamlined
permit is available (i.e., Remedial Action Plan) 29 Slide 30
Environmental Liability RCRA Hazardous Waste Points to consider EPA
and states maintain a data base of all known TSD facilities,
generators, and transporters (must self-notify) Make sure
environmental consultants and legal counsel have expertise with
RCRA Subtitle C Work with authorized state to ensure RCRA
requirements are met State voluntary cleanup programs may satisfy
these requirements 30 Slide 31 Environmental Liability RCRA Solid
Waste (Subtitle D) Solid waste generally includes Garbage, refuse,
and other discarded waste, including hazardous waste and
non-hazardous waste Solid, liquid, semisolid or containerized gases
Subtitle D regulates disposal of Non-hazardous solid waste
Hazardous wastes exempt from RCRA Subtitle C EPA sets technical
standards, but state and local governments generally implement the
program States can adopt more stringent requirements 31 Slide 32
Environmental Liability RCRA Solid Waste (Subtitle D) Two types of
facilities Municipal solid waste landfills Most towns own or
operate MSWLs Non-hazardous solid waste disposal facilities (e.g.,
construction and demolition landfills) Sometimes found on
commercial and industrial properties Must meet design, operating,
closure and other standards Solid waste disposal facilities that
receive Non-exempt hazardous waste could be subject to RCRA
Subtitle C requirements Regulated asbestos materials could be
subject to the Clean Air Act PCBs could be subject to the Toxic
Substances Control Act (TSCA) 32 Slide 33 Environmental Liability
RCRA Underground Storage Tanks (Subtitle I) Subtitle I regulates
certain underground storage tanks (USTs) containing petroleum and
hazardous substances At least 10 percent of combined volume of
tanks and piping must be underground Certain categories of tanks
are excluded Most states are authorized to implement UST program in
lieu of federal program EPA sets technical standards, but many
state UST programs are more stringent or broader in scope than
federal requirements 33 Slide 34 Environmental Liability RCRA
Underground Storage Tanks (Subtitle I) USTs are commonly associated
with gas stations but may be found on many commercial and
industrial properties Parties, including municipalities, that
acquire a property containing USTs may become responsible for
removal of out-of-service USTs, inspection of tanks, testing of
soils, and cleaning up of releases 34 Slide 35 Environmental
Liability TSCA (Title I) PCB and PCB-Containing Wastes and
Equipment The Toxic Substances Control Act (TSCA) contains four
major sub-divisions Title I regulates the cleanup, management, and
disposal of PCBs and PCB-containing waste and equipment Title II
regulates asbestos abatement in schools Title III regulates air
radon Title IV regulated lead-based paint Title I cannot be
delegated to states, but many states have established their own PCB
laws and regulations Parties, including municipalities, that
acquire a property contaminated with regulated levels of PCBs may
become responsible for clean up or decontamination In addition to
TSCA, EPA may require cleanup of PCBs under RCRA and CERCLA Slide
36 Environmental Liability Clean Air Act Asbestos NESHAP The
National Emission Standards for Hazardous Air Pollutants (NESHAP)
for asbestos Establishes work practices to minimize asbestos
releases during demolition and renovation Regulates asbestos in
active and inactive waste disposal sites Privately-owned
residential buildings with four or less dwelling units are
generally excluded unless they are part of a commercial or public
project EPA may delegate this authority to state and local
authorities, but retains enforcement authority Facilities that will
be undergoing demolition or renovation must first be properly
inspected for regulated asbestos containing materials (RACM) NESHAP
also establishes notification and management requirements RACM must
be properly disposed of in an asbestos NESHAP approved landfill
Many municipal landfills do not accept RACM
