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Agenda Overview of CERCLA liability Defenses to CERCLA liability for brownfields acquisitions Scope and limitations of defenses Comfort and Status Letters
Brownfields Acquisitions Brownfields: Obstacles or Opportunities?
Brownfields Acquisitions Local governments can acquire brownfields through a variety of means, including: Negotiated sales Eminent domain Tax liens, foreclosures, etc.
Overview of CERCLA Liability Liability is triggered if: Hazardous substances are present at a facility There is a release (or a possibility of a release) of these hazardous substances Response costs have been or will be incurred, and The defendant is a liable party.
Overview of CERCLA Liability Enables EPA, states, or private parties to impose cleanup liability on any “potentially responsible party” Potentially Responsible Parties: – Current owner/operator – Owner/operator at time of contamination – Arranger of the disposal – Transporter of hazardous substance
Overview of CERCLA Liability Liability is Strict Joint and Several Retroactive
Defenses to CERCLA Liability For Brownfields Acquisitions Exemption for Involuntary Acquisitions by Local Governments Third-Party (Innocent Landowner) Defense Bona Fide Prospective Purchaser EPA Enforcement Bar for Sites Under State Voluntary Cleanup Program
Exemption for Involuntary Acquisitions by Local Governments “The term ‘owner or operator’ does not include a unit of State or local government which acquired ownership or control involuntarily through bankruptcy, tax delinquency, abandonment, or other circumstances in which the government involuntarily acquires title by virtue of its function as sovereign.” CERCLA, Section 101(20)(D)
Involuntary Acquisitions Ambiguity in the word “involuntarily” Involuntary on the part of the local government or the prior owner?
Involuntary Acquisitions EPA also includes acquisitions by local governments: acting as conservator or receiver through foreclosure and its equivalents pursuant to seizure or forfeiture authority EPA, The Effect of Superfund on Involuntary Acquisitions of Contaminated Property by Government Entities 2 (Dec. 1995)
Involuntary Acquisitions EPA’s test for “involuntary”: An acquisition is involuntary if “[t]he government’s interest in, and ultimate ownership of, the property exists only because the actions of a non- governmental party give rise to the government’s legal right to control or take title to the property.” EPA, The Effect of Superfund on Involuntary Acquisitions of Contaminated Property by Government Entities 2 (Dec. 1995)
Involuntary Acquisitions However, EPA clarifies that: “a government entity need not be completely ‘passive’ in order for the acquisition to be considered ‘involuntary’ for purposes of CERCLA.”
Eminent Domain under 101(20)(D) Eminent domain not included as an “involuntary” acquisition under 101(20)(D) – EPA, Questions and Answers Regarding Federal Brownfields Property Liability 4 (Nov. 2003) – City of Wichita v. Aero Holdings, Inc., 177 F.Supp.2d 1153 (D. Kan. 2000). – U.S.A. v. Occidental Chemical Corp., 965 F.Supp. 408 (W.D.N.Y. 1997).
Third-Party Affirmative Defense There shall be no liability for “an act or omission of a third party other than an employee or agent of the defendant” or any person with a “contractual relationship” with the defendant. CERCLA Section 107(b)(3)
Third-Party Affirmative Defense “Contractual relationship” excludes transfers of title where “...a government entity which acquired the facility by escheat, or through any involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation.” CERCLA Section 101(35)(A)(ii)
Scope and Limitations Local government must show that it: exercised “due care” and took precautions against foreseeable acts complied with other pre and post-purchase requirements
Scope and Limitations Due Care: Identifying/assessing contamination Notifying state and federal agencies Taking steps to control/limit exposure Warning public Lack of Due Care: No action upon learning of contamination Failing to prevent spread Failing to warn public
Eminent Domain and the Third-party Defense Eminent Domain does qualify for this defense, but unclear whether it needs to be fully litigated. City of Toledo v. Beazer Materials & Servs. Inc., 923 F. Supp. 1013 (N.D. Ohio 1996): No defense if ultimately purchased. City of Emeryville v. Elementis Pigments, Inc., No. 99-03719, 2001 WL 964230 (N.D. Cal. Mar. 6, 2001): Defense available even if ultimately purchased.
Bona Fide Prospective Purchaser (BFPP) Defense “[A] bona fide prospective purchaser whose potential liability … is based solely on [it] being considered to be an owner or operator of a facility shall not be liable as long as [it] does not impede the performance of a response action or natural resource restoration.” CERCLA Section 107(r)
Requirements for BFPP Status All appropriate inquiries No affiliation with liable party Comply with land use restrictions and institutional controls “Reasonable steps” to prevent releases Provide cooperation, assistance and access Comply with information requests, notices Not impede response action or restoration
EPA Enforcement Bar for Eligible Response Sites: Section 128(b) EPA may not take enforcement action at a site which is in compliance with a State Voluntary Cleanup Program
EPA Enforcement Bar for Eligible Response Sites: Section 128(b) State Voluntary Cleanup Programs: Often have lower cleanup standards for industrial sites. Broader range of people can initiate cleanup. Many states offer financial incentives to entice developers.
Scope and Limitations Protection granted is not absolute State asks EPA for response action Contamination migrates across state line or onto Federal property Site presents an imminent and substantial endangerment and requires additional response actions
Comfort and Status Letters EPA comfort/status letters addressing most common inquiries regarding brownfields No Previous Federal Superfund Interest Letter No Current Federal Superfund Interest Letter Federal Interest Letter State Action Letter
Scope and Limitations Letters are intended solely for informational purposes and relate only to EPA’s intent to exercise its response and enforcement authorities Letters do not provide a release from CERCLA liability
Conclusion Have a plan for defending against potential liability Explore options and proceed with caution
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