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Due Care and Continuing Obligations: Government Requirements Relating to Long-Term Environmental Stewardship A. J. Birkbeck President, American Brownfields.

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Presentation on theme: "Due Care and Continuing Obligations: Government Requirements Relating to Long-Term Environmental Stewardship A. J. Birkbeck President, American Brownfields."— Presentation transcript:

1 Due Care and Continuing Obligations: Government Requirements Relating to Long-Term Environmental Stewardship A. J. Birkbeck President, American Brownfields Assurance Co., Inc. Managing Attorney, Fulcrum Law November 9, :15 pm – 1:45 pm Air & Waste Management Association East Michigan Chapter – East Central Section

2  Founded in 1999 as nationwide firm supporting Not-for-Profit Sentinel Stewardship Companies  Primary purpose is planning and overseeing long-term Continuing Obligations and Due Care efforts  Not-for-Profit Stewardship Services include:  Drafting of Continuing Obligations Plans  Working with existing Counsel and ECs to ensure stewardship  Providing a full menu of additional stewardship services  Clients include Property Owners, Banks and Insurers The American Brownfields Assurance Company, Inc.

3 Same Purpose - both state & federal approaches are intended to encourage brownfield redevelopment while preventing potential exposure at sites that have undergone risk-based cleanups. Federal – Continuing Obligations - Uses a Carrot – providing a defense to liability - Very Little Available Guidance Michigan – Due Care - Uses a Stick – providing for fines/penalties - Increased emphasis on Due Care in pending bills - Increased consistency with federal approach in pending bills Two Regulatory Approaches to Long-Term Care

4 Federal – Continuing Obligations - Existing – CERCLA/Brownfield Amendments - Upcoming – ASTM Continuing Obligations – Standard Guide Michigan – Due Care - Existing – Part Upcoming: - Senate Bill 437 – Contains Due Care Provisions - Senate Bill 1349 – Primary focus is Due Care Provisions - Senate Bills , 1346, 1347, 1348 and 1442 Statutory Bases for Two Approaches

5 Different Liability Presumptions (carrot v. stick): Federal CERCLA – strict joint and several liability for owners of contaminated property, even if owners did not cause or contribute to the contamination Continuing Obligations offer a defense to that liability MI Senate Bills 437/1439 – no liability to those who did not cause a release (& post-1995, who timely submitted a BEA), but Part 201 as revised would impose liability for : Cost of Remediation & Natural Resources Damages - for the exacerbation of existing contamination Fines/Penalties – for failure to perform due care obligations: Failing to take Due Care to prevent exposure; Failure to take Precautions to prevent 3 rd Party acts/omissions; or Failure to Comply with LURs, impeding LURs or RURs, not cooperating and failing to conform with deed restictions (and revised cleanup criteria) Liability – Differences Federal vs. Michigan

6 Ownership – state versus federal overlap and differences:  Federal Liability Protection is limited to 3 Types of Owners, but it is not generally available to operators (separate obligations for each):  Bona Fide Prospective Purchaser (BFPP);  Contiguous Property Owner (CPO) – adjacent to impacted property; and  Innocent Land Owner (ILO) – purchases without knowledge of contamination after AAI or Phase I  Michigan due care applies to Owners and Operators of Facilities – so overlap with federal BFPP, CPO and ILO owner status Impact of Ownership Status Federal vs. Michigan

7 Two Step Process (Federal & Michigan may soon be more alike):  Must Complete:  Phase I (ASTM 1527 – Federal Only);  All Appropriate Inquiry (40 CFR 312);  BEA (Michigan only)  Must conform with Continuing Obligations/Due Care:  currently no guidance available to landowners – only limited references in US EPA’s Common Elements Guidance  Michigan approach relies on federal, so will there be a lack of specifics in the state approach too? Complying with Due Care & Continuing Obligations

8 Reasonable Steps to prevent exposure – definition of “exposure” differs: Michigan – only required to prevent exposure to protect human health Federal – must also prevent releases and environmental and natural resource exposure Compliance, Effectiveness and Integrity – owner must: be in compliance with any land use restriction (LUR) or Resource Use Restriction (RUR) established or relied on in connection with a response action. not impede the effectiveness or integrity of any institutional controls. Additional Obligations: Be in compliance with requests for information Provide full cooperation, assistance (MI requires only reasonable cooperation and assistance) Provide access to those authorized to conduct response actions or natural resource restoration Michigan - conform with any deed restriction, subject to revised cleanup criteria Federal - provide all legally required notices MI has some notice requirements - Notice of Migration and Notice of Abandoned Containers What ARE Due Care/Continuing Obligations?

9  Standard Guide  intended to fill the void as to how to satisfy Continuing Obligations requirements – but also would satisfy MI law in current form (since incorporates state requirements)  Been in formulation for 6 years  Fifteen internal versions of the Standard  Just completed 5 th Ballot  Next Ballot Targeted for January 2011  Target to complete by First Quarter 2011  Your Participation is Encouraged ASTM International Continuing Obligations Standard

10  Current Draft has Four Steps : 1) Initial Determination of No Continuing Obligations  May find “No Continuing Obligations” based on AAI/Phase I/BEA 2) Collect, Review and Analyze Existing Information  Identify Activity and Use Limitations (AULs) and determine whether additional investigation is required to fill data gaps 3) Formulate Continuing Obligations Plan  Including performance of any Initial Continuing Obligations 4) Conduct Ongoing Continuing Obligations – incl. periodic inspections & monitoring to:  Ensure compliance, effectiveness and integrity  Identify the need for any reasonable steps ASTM International Continuing Obligations Standard

11 Step 1 - Initial Determination of No Continuing Obligations Detailed Review of Phase I/AAI/BEA Analyze Recognized Environmental Conditions (RECs) and Activity and Use Limitations (AULs), which include LURs, RURs and ICs If no RECs or AULs, then may make a determination of “No Continuing Obligations” – majority of sites Recommend documenting the determination If RECs or AULs are found, proceed to Step 2 ASTM International Continuing Obligations Standard

12 Step 2 - Collect, Review and Analyze Existing Information Go beyond Phase I to Identify information on AULs and RECs Determine whether additional investigation is required to fill data gaps Could still determine that RECs do not involve AULs or potential exposure and still make a determination of “No Continuing Obligations” If Continuing Obligations are required to secure LLP (federal) or avoid fines and penalties (MI), proceed to Step 3. ASTM International Continuing Obligations Standard

13  Proprietary Controls (conventional property law)  Deed Notices and Restrictions  Easements  State and Local Government Controls  Zoning and Ordinances  Well Drilling Prohibitions  Highway Authority Agreements  Enforceable Agreements  Responsible Parties Agreements to Mitigate land use changes  Affirmative Obligations (e.g., a 5-year status review)  Information Devices  Utility Clearance Notice  Building Department Notices  Deed Notice  Engineering Controls – e.g., caps.  Note: Not all ECs restrict use Information to be Reviewed in Step 2

14 Step 3 - Formulate Continuing Obligations Plan Performed as soon as practicable after acquisition Provides the Framework for Ongoing Continuing Obligations: Nature and Scope of AUL Evaluation Reasonable Steps Frequency Stewardship Entities Involved Cost – budgeting based on the factors above This step also includes performance of any Initial Continuing Obligations ASTM International Continuing Obligations Standard

15 Step 4 - Conduct Ongoing Continuing Obligations: Periodic Inspections and Monitoring to ensure: Compliance with LURs and RURs That the Owner is not impeding the “effectiveness” or the “integrity “ of Institutional Controls If open exposure pathways, need to identify and take “reasonable steps” to prevent exposure due to: Newly discovered contamination Inadequate AULs ASTM International Continuing Obligations Standard

16  Primary Outstanding Issues:  Compliance with “ANY” Land Use Restriction  Broad Interpretation – Statute Language and EPA  Narrow Interpretation – legally binding on Current Owner  Do Engineering Controls Constitute LURs?  To what extent can Owners rely exclusively on existing Phase I/AAI/BEA data when finding “No Continuing Obligations”? And for how long?  What is the owner’s duty to conduct additional investigation and due diligence (aka, Head in the Sand Factor)?  What is the Owner’s duty to document? ASTM International Continuing Obligations Standard

17 Proportional to Site Complexity Frequency of Verification Term of Stewardship – trade-off between: Cost Certainty Premium to Account for Rising Costs Unknown Cost Variables – include: Likelihood of Undiscovered Contamination and need for additional Reasonable Steps Durability of Control Mechanisms Cost Considerations

18 Baseline – at least every 5 years, consistent with EPA’s 5 year review Engineering Controls – at least every 2 years AUL Requirements – deference is given to frequency specified in AUL documentation Legal Requirements – some states specify periodic reviews, by regulation or permit Continuing Obligation Evaluations and Inspections - Frequency -

19 Federal - Prior owner liability limited to ownership at time of disposal. 42 USC 9607(a)(2) Federal Continuing Obligations - Language written in present tense, indicating Continuing Obligations terminate on sale. Michigan – no liability, except for costs/fines/penalties for non- compliance. Due Care obligations terminate on sale. When Do Continuing Obligations End?

20 Liability – associated with Due Care and Continuing Obligations: Michigan – due care failure results in liability only for cost of addressing exacerbation and fines and penalties (may have separate liability for BEA non-compliance) Federal – defense to strict joint and several liability to perform cleanup & repay Exposure Prevention: Michigan – exposure prevention relates only to human health Federal – limit human, environment & natural resource exposure Releases – stop or prevent continuing or threatened releases: Michigan – no obligation to stop/prevent releases, but maintenance obligations (containers) Federal – must stop continuing releases and prevent threatened releases Notices: Michigan – no general notice provisions (but see, e.g., migration & subsequent owners) Federal – owner must provide “all legally required notices,” not just Pt. 201 Third Party Acts and Omissions: Michigan – take precautions against reasonably foreseeable 3 rd Party acts or omissions Federal – no Continuing Obligations requirement re 3 rd Party acts or omissions Differences Between Federal and Proposed Michigan Approaches

21 Does a REC Exist? Phase I Recommendations Phase II to assess REC. Continuing Release? Exposure? Institutional Controls? Response Activity Plan or Continuing Obligation Plan? Identify and Address Due Care or Continuing Obligations Basis for Selection Implement Plan Practical Implementation (Do I know what to do?)

22 Stewardship services include: - Formulation of Continuing Obligations Plan -Providing access to qualified Stewardship Professionals -Arranging and coordinating physical inspections -Monitoring of land use changes and building -Reporting to owners and stakeholders -Providing long term financing of stewardship activities -Escrow services and provision of rate locks -Maintaining a database to track ICs/ECs -Providing access to insurance products These services may be provided more cost effectively with economies of scale and through not-for-profit entities. Stewardship Program Services

23 _____ A. J. Birkbeck American Brownfields Assurance Co., Inc. (888) Continuing Obligations and Due Care


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