By Richard J. Brickwedde, Esq.,
On January 11, 2002, President Bush signed the Small Business Liability Relief and Brownfields Revitalization Act (the Act) which is the first significant amendment to the Superfund Law (Comprehensive Environmental Response, Compensation and Liability Act [CERCLA]) with regard to the Superfund liability scheme since the Superfund Recycling Equity Act in 1999 and the SARA Amendments in 1985.
The 2002 amendments changed the definition of innocent landowner found in CERCLA§101(35) and added definitions for Brownfields Site sec.101(39), Bona Fide Prospective Purchaser sec.101(40) and Eligible Response Site sec.101(41).
The 2002 amendments then modified the liability provisions of CERCLA by adding sec.107(o) to provide for a de micromis exemption, sec.101(o), to provide a municipal solid waste exemption, sec.101(p) to provide specific provisions with regard to contiguous properties, sec.101(q) and prospective purchaser and windfall lien provisions sec.101(r). The Act also amended sec.122(g) with regard to de minimis settlements. The act also codified EPAsec.s existing ability to pay sec.122(g)(7).
In Title 2 of the Act, CERCLA sec.104(k) is added, which provides for substantial federal funding for Brownfields work.
INTRODUCTION TO CERCLA OR SUPERFUND AND ITS AMENDMENTS.
1980 CERCLA or Superfund passed in the winning days of the Carter administration in January 1980, just before Ronald Reagan took office.
1986 The Superfund Amendments and Reauthorization Act (SARA) amendments to CERCLA created the "innocent purchaser" defense and "due diligence" undefined standard in response in part to the United States Supreme Court decision in Midlantic Bank v. New Jersey DEP. A companion case to Midlantic Bank had its origin in Syracuse at a hazardous waste site on Lodi Street near Hiawatha Boulevard in the City of Syracuse.
1996 The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996 was passed in response to United States v. Fleet Factors 901 F. 2d 1550 (11th Cir. 1990) cert denied 11 Supreme Court 752 (1991).
1999 Superfund Recycling Equity Act which was passed to eliminate the disadvantage recycling had acquired as a result of some early CERCLA decisions.
January 11, 2002 The Small Business Liability Relief and Brownfields Revitalization Act was passed which is the subject of this presentation.
CERCLA imposed strict and joint liability on past and present owners, operators, generators and transporters for the disposal of hazardous substances.
The only defenses to CERCLA liability (42 USC 9607(b) were:
Act of War
Act of God
Third Party Defense
(a) Solely caused by a third party;
(b) Person not in contractual relationship with a person who caused the spill;
(c) Person took reasonable precautions against the acts or omissions of the third party;
(d) Person exercised due care with regard to hazardous substances on the property.
Some parties claimed that the acquisition of property or a lease in the chain of title created liability which prevented the opportunity to use the defense. Another position was that the relationship with the person who caused the spill had to be one which involved hazardous substances. In the 2d Circuit this issue was addressed in State of New York v. Lashins Arcade Co. 91 F. 3d 353 (2d Cir. 1996). The court held that merely having a contract to purchase the property (or purchasing the property) was not the type of contractual relationship referred to in the statute. Rather the contractual relationship had to involve the hazardous waste. The 2nd Circuit also determined on the facts of the case that the steps taken by the purchaser constituted due care so as to preserve the third party defense. A subsequent decision in the Western District of New York Idylwoods Assoc. v. Mader Capital, Inc. 956 F. Supp 410 (1997) distinguished Lashins on a very different set of facts with regard to the issue of due care.
THE INNOCENT LAND OWNER DEFENSE CERCLA §101 (35).
sec.101 (35) was amended by the Act by amending (B) reason to know to add the following specific requirements: That the defendant made
(I) All appropriate inquires
(i) for acquisitions on or before the date on which the defendant acquired the facility, the defendant must demonstrate to a court that the defendant did all the things required by sec.101 (35) (B) ii and iv into the previous ownership and uses of the facility in accordance with generally accepted good commercial customary standards and practices; and
(ii) the defendant took reasonable steps to
(aa) stop any continuing release;
(bb) prevent any threatened future release; and
(cc) prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance.
(ii) standards and practices.
The EPA is required to adopt regulations by January 11, 2004, utilizing the following criteria:
The results of an inquiry by an environmental professional
Interviews with past and present owners, operators, and occupants of the facility for the purpose of gathering information regarding the potential of contamination at the facility.
Reviews of historical sources such as chain of title documents, aerial photographs, building department records, and land use records, to determine previous uses and occupancy the real property since the property was first developed.
Searches for recorded environmental cleanup liens against the facility that are filed under federal, state or local law.
Reviews of federal, state or local government records, waste disposal records, underground storage tank records, and hazardous waste handling, generation, treatment, disposal, and spill records, concerning contamination at or near the facility.
Visual inspection of the facility and of adjoining properties.
Specialized knowledge or experience on the part of the defendant.
The relationship of the purchase price to the value of the property, if the property was not contaminated.
Commonly known or reasonably ascertainable information about the property.
The degree of obviousness of the presence or likely presence of contamination at the property, and the ability to detect the contamination by appropriate investigation.
Interim Standards and Practices
For property purchased before May 31, 1997.
With respect to property purchased before May 31, 1997, in making a determination with respect to a defendant described above, a court should take into account:
Any specialized knowledge or experience on the part of the defendant;
The relationship of the purchase price to the value of the property, if the property was not contaminated;
Commonly known or reasonably ascertainable information about the property;
The obviousness of the presence or likely presence of contamination at the property;
The ability of the defendant to detect the contamination by appropriate investigation.
For property purchased on or after May 31, 1997
For property purchased on or after May 31, 1997, and until EPA adopts the regulations described above, the procedures of the ASTM "standard E 1527- 97" entitled Standard Practice for Environmental Site Assessment Phase I Environmental Site Assessment Process shall satisfy the due diligence requirements.
2 B. RESIDENTIAL PROPERTY 42 USC 9601 (35)(B)(v)
In the case of property purchased for residential use by a nongovernmental or noncommercial entity, a facility inspection and title search that reveals no basis for further investigation shall be considered to satisfy the requirements.
KNOWLEDGE WITHOUT DISCLOSURE 42 USC 9601(35)(C)
If a defendant obtains actual knowledge of the release or the threatened release of a hazardous substance at the property while the defendant owned the property and then subsequently transferred the property to another person without disclosing such knowledge, the defendant will be treated as liable under sec.107 (a) (1) of CERCLA and no defense under section 9607(b)(3) [act or omission of a third party not in a contractual relationship with the defendant] shall be available.
BONA FIDE PROSPECTIVE PURCHASERS, CERCLA § 101(40) AND WINDFALL LIENS § 107 (r)
All disposal of hazardous substances at the facility occurred before the person acquired the facility.
CERCLA sec.101 (40) was added to define Bona Fide Prospective Purchaser to mean a person or a tenant of a person that acquires ownership of a facility after January 11, 2002 and who establishes by a preponderance of the evidence the following (note: This too is an affirmative defense)
A person should have made all appropriate inquires under sec.101 (35); and
The person must provide all legally required notices with respect to the discovery or release of any hazardous substances at the facility.
The person must have exercised appropriate care with respect to hazardous substances found at the facility by taking reasonable steps to;
stop any continuing release;
prevent any threatened future release; and
prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance.
Cooperation, Assistance and Access
The person provides full cooperation, assistance and access to persons that are authorized to conduct response actions or natural resource restoration at the facility including the cooperation and access necessary for the installation, integrity, operation, and maintenance of any complete or partial response actions or natural resource restoration.
The person would have to be in compliance with any land use restrictions established or relied on in connection with response action at the facility; and does not impede the effectiveness or integrity of institutional control employed at that facility in connection with response action.
The person complies with any requests for information or administrative subpoena issued by the President; and
The person is not a PRP or affiliated with a PRP and has no direct or indirect familial relationship; or any contractual, corporate or financial relationship (other than a contractual, corporate or financial relationship that is created by the instruments by which title to the facility is conveyed or financed by a contract for the sale of goods or services); or is a result of a reorganization of a business entity that was a PRP.
sec.107 of CERCLA was amended to add a subdivision (r) which provides that notwithstanding the provisions of subsection (a) (1) of sec.107 (r) a Bona Fide Prospective Purchaser whose potential liability for a release or threatened release is based solely on the purchasers being considered to be an owner or operator of a facility shall not be liable as long as the Bona Fide Prospective Purchaser does not impede the performance of a response action or natural resource restoration.
However, if there are unrecovered response costs, incurred by the United States at the facility for which an owner of the facility is not liable because they are a Bona Fide Prospective Purchaser, and if each of the conditions described below are met, the United States would have a lien on the facility, or may by agreement with the owner, obtain from the owner a lien on any other property or other assurance of payment satisfactory to the EPA for the unrecovered response costs.
The conditions referred to above are as follows:
A response action for which there are unrecovered costs of the United States was carried out at the facility.
The response action increased the fair market value of the facility above the fair market value of the facility that existed before the response action was initiated.
A Windfall Lien shall be in an amount not to exceed the increase in fair market value of the property attributable to the response action at the time of a sale or other disposition of the property and shall arise at the time at which costs are first incurred by the United States with respect to a response action at the facility, shall be subject to the requirements of subsection (1) (3); and shall continue until the satisfaction of the lien by sale or other means; or notwithstanding any statute of limitations under CERCLA sec.113, recovery of all response costs incurred at the facility.
CONTIGUOUS PROPERTIES § 107(q).
The owner of a contiguous property is not considered to be an owner or operator.
A person who owns real property that is contiguous to or otherwise similarly situated with respect to, and that is or maybe contaminated by a release or threatened release of a hazardous substance from real property that is not owned by that person shall not be considered to be an owner solely by reason of the contamination if one:
The person did not cause, contribute, or consent to the release or threatened release.
The person is not potentially liable, or affiliated with any other person that is
potentially liable for response costs at a facility through any direct or indirect familial relationship or any contractual, corporate or financial relationship (other than a contractual, corporate, or financial relationship that is created by a contract for the sale of goods or services; or
the result of a reorganization of a business entity that was potentially liable;
iii. the person takes reasonable steps to;
stop any continuing release;
prevent any threatened future release; and
prevent or limit human, environmental, or natural resource exposure to any hazardous substance released on or from property owned by that person.
iv. the person provides full cooperation, assistance, and access to persons that authorized to conduct response actions or natural resource restoration at the facility from which there has been a release or threatened release (including the cooperation and access necessary for the installation, integrity, operation, and maintenance of any complete or partial response action or natural resource restoration at the facility; v. (the person);
is in compliance with any land use restrictions established or relied on in connection with the response action at the facility;
does not impede the effectiveness or integrity of any institutional control employed in connection with a response action;
vi. the person is in compliance with any request for information or administrative subpoena issued by the President under the Act;
vii. the person provides all legally required notices with respect to the discovery or release of any hazardous substance at the facility; and
viii. at the time at which the person acquired the property, the person
conducted all appropriate inquires within the meaning of sec.101 (35) (B) with respect to the property; and
did not know or have reason to know the property was or could be contaminated by a release or threatened release of one or more hazardous substances from other real property not owned or operated by the person.
To qualify for the contiguous property defense, the person must demonstrate by a preponderance of the evidence that they have complied with the above conditions.
A person who does not qualify above because they had or had reason to have knowledge specified at the time of acquisition of the real property may still qualify as a Bona Fide Prospective Purchaser under sec.101 (40) if the person is otherwise described in that section.
A contiguous property owner does not have any obligation to conduct groundwater investigations or to install groundwater remediation systems except in accordance with the policy of the EPA concerning owners of property containing contaminated aquifers dated May 24, 1995.
The EPA administrator is given the authority to issue an assurance that no enforcement action under the Act shall be initiated against a person described above and is also authorized to grant a person described above protection against a cost recovery or contribution action under sec.113 (f) of CERCLA
Richard J. Brickwedde, Esq.
Brickwedde Law Firm
Telephone: (315) 423-3302