1. Federal Legal Liability Concerns when Acquiring Contaminated Property
Rona H. Gregory
US Environmental Protection Agency – New England Region
Vermont Brownfields Forum
November 29, 2012

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

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

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

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

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

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]

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

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

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

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]

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

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

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

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

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

17. Environmental Liability – Superfund CERCLA Liability Protections, Defenses, and Policies
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

18. Environmental Liability – Superfund CERCLA Liability Protections, Defenses, and Policies
CERCLA Provision
Is AAI Required?
Involuntary Acquisition by a Municipality
No, but recommended
Bona Fide Prospective Purchaser
Yes
Third Party Defense (Innocent Landowner)
Contiguous Property Owner
Figure 7.2 – CERCLA provisions requiring AAI prior to acquisition

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

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 EPA’s final rule, or ASTM E 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

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 E to ensure prospective property owner’s liability protection and to ensure eligibility for future cleanup grant

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

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

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.

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

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

27. Environmental Liability RCRA
Resource Conservation and Recovery Act (RCRA)
Regulates
Hazardous waste (Subtitle C)
Solid waste (Subtitle D)
Underground storage tanks (Subtitle I)

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

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)

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

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

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)

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

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

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

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