All Appropriate Inquiry The New Rules SARA BETH WATSON Steptoe & Johnson LLP Washington, D.C. American Bar Association Teleconference Wednesday, November 16, :00 pm -1:30 pm EST (202)

Brownfield Amendments The Small Business Liability Relief and the Brownfields Revitalization Act of 2002 (Brownfield Amendments) Potential for federal CERCLA liability relief Hurdles to qualify for the relief before the acquisition of the property Long-term commitments to maintain the relief State law liability issues must be considered separately

How Does One Meet the Qualifying Criteria? A.“All Appropriate Inquiry” Criteria B.Full Cooperation C.Compliance with Land Use Restrictions and Institutional Controls D.Did Not Cause, Contribute or Consent to a Release/Disposal Occurred Prior to Acquisition E.Compliance with All Requests for Information F.All Legally Required Notices G.No Affiliation with a Potential Liable Party H.Reasonable Steps 42 U.S.C. § 9601(35)(B)(iii) Evaluation of compliance preformed on a “careful, fact-specific analysis” Statutory Criteria for compliance:

1.Innocent purchasers 2.Contiguous property owners 3.Bona fide prospective purchasers To whom is AAI applicable? All Appropriate Inquiry is applicable to 3 categories of property owners: * provided that the property owner meets the statutory criteria, which will be analyzed on a fact-specific basis 4.Certain Brownfield grant recipients

To whom is AAI applicable? All Appropriate Inquiry is applicable to relief from CERCLA liability for the 3 categories of property owners i.e. limited to CERCLA hazardous substances definition Need to consider other liability schemes for non-CERCLA substances such as petroleum Grant recipients have a broader range of substances under AAI

Statutory Criteria For Compliance – All Appropriate Inquiry Statute requires EPA to promulgate regulations and consider several factors in developing the regulations Results of the inquiry of an environmental professional Interview with past and present owners, operators and occupant regarding the potential for contamination Review of historical sources Searches for recorded environmental clean-up liens Reviews of federal, state and local records Visual inspections for the facility and adjoining properties Relationship of the purchase price to the value of the property if not contaminated Commonly known or reasonably ascertainable information about the property The degree of obviousness of the presence or likely presence of contamination and the ability to detect contamination by appropriate investigation

All Appropriate Inquiry Regulations EPA instituted a negotiated rulemaking to develop All Appropriate Inquiry regulations. The Federal Advisory Committee represented a variety of interests The negotiating committee included representatives from commercial real estate, mortgage bankers, engineers and geologists, Tribes, state and local government, environmental groups, conservation groups and environmental justice groups SEER served as a resource Insurance interests served as a resource Consensus draft in November 2003 Proposed Regulations published August 26, Fed. Reg. 52,542 Final Rule published November 1, Fed. Reg. 66,070 Effective date of regulations is November 1, 2006.

All Appropriate Inquiry Regulations The inquiry is time sensitive nAAI must be conducted prior to the acquisition of the property (date on which person acquires title to the subject property) nAAI must be conducted within one year before the acquisition (earlier information can be used in the report) nCertain elements must be current within 180 days prior to acquisition nTime components may impact other aspects of the deal nPerformance based; not a checklist

All Appropriate Inquiry Regulations Results of the inquiry of an environmental professional (EP) nWhat is an environmental professional? nEP must identify data gaps, identify sources used to address gaps and comment on significance of the data gaps on the ability to identify conditions nResults must be documented in a written report which must include an opinion as to whether conditions are indicative of a release and signed by EP

All Appropriate Inquiry Regulations The inquiry of the EP must include nInterviews with past and present owners, operators, and occupants regarding the potential for contamination nMust interview current owner and occupant, if multiple occupants must include major occupants and those likely to use, store or handle hazardous material nTo extent necessary to achieve objectives include current and past managers, past owners, and current and former employees nSpecial rules for “abandoned properties”

All Appropriate Inquiry Regulations nReview of historical sources nAs far back in history as the subject property had structures or was first used for residential, agricultural, commercial, industrial or government purposes nEP can use judgment as to how far back in time EP needs to go to meet objectives

nReviews of federal, state and local records nSpecific search distances provided in regulations. nEP may modify if written justification in the report nIncludes tribal records in some circumstances All Appropriate Inquiry Regulations

nVisual inspections for the facility and adjoining properties nPhysical limitations on the inspection such as weather must be documented nMust have on-site inspection of subject property except in unusual circumstances nVisual inspection of adjoining property from subject property line or other vantage point nThe degree of obviousness of the presence or likely presence of contamination and the ability to detect contamination by appropriate investigation All Appropriate Inquiry Regulations

Information that can developed by others nSpecialized knowledge or experience on the part of the defendant nRelationship of the Purchase Price to the value of the property if not contaminated (need not share with EP) nSearched for recorded environmental clean up liens nCommonly known or reasonably ascertainable information about the property nDocumentation of information developed by others is critical to liability relief defense All Appropriate Inquiry Regulations

Important Points to Remember Regarding All Appropriate Inquiry 1.Is AAI relevant to my site? 2.Specified time frames i.e. the All Appropriate Inquiry must be completed before ownership is acquired Inquiries have a shelf life Ongoing obligations after acquisition required by the amendments (202)

Important Points to Remember Regarding All Appropriate Inquiry 3.State law programs may be relevant and have different criteria 4.Site specific issues 5.Constraints of the deal (202)