Federal Legal Liability Concerns when
Acquiring Contaminated Property
Rona H. Gregory
US Environmental Protection Agency – New England Region
Vermont Brownfields Forum
November 29, 2012
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
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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
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Environmental Liability
Superfund
 Superfund is the federal environmental program implementing
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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
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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
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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
Environmental Liability
Superfund
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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
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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]
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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)]
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Asset Conservation, Lender Liability, and Deposit Insurance Protection Act, 1996
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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
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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)]
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Applies to contamination originating from an off-site source
 Enforcement Bar [CERCLA 128(b)(1)]
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Limits federal enforcement where a cleanup is being conducted or has been
completed in compliance with a state response program
Environmental Liability – Superfund
CERCLA Liability Protections, Defenses, and Policies
 CERCLA requirements to attain and maintain liability
protections
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Requirements are similar but not identical for each liability
protection
 Threshold criteria
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Necessary to qualify for a liability protection
 Continuing obligations
 Obligations that require additional affirmative steps to ensure that
the protections survive over time
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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]
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:
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Stop continuing releases
Prevent threatened future releases
Prevent or limit human, environmental, or natural resource
exposure to earlier hazardous substance releases
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
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Including cooperation and access necessary for installation,
integrity, operation, and maintenance of complete or partial
response action
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
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
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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
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
Environmental Liability – Superfund
CERCLA Liability Protections, Defenses, and Policies
Table 7.3 – Applicability of CERCLA Liability Provisions Based on the Method of Acquisition
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Gift/Donation
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Abandonment
Eminent Domain
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Purchase
Escheat
Bona Fide Prospective
Purchaser
Bankruptcy
§ 101(20)(D)
Tax Foreclosure
Involuntary Acquisition
Inheritance/Bequest
Methods of Municipal Property Acquisition
Key CERCLA Liability
Protection Provisions
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§ § 101(40) and 107(r)(1)
Third Party Defense
§ § 107(b)(3) and
101(35)(A)
Enforcement Bar
§ 128(b)
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● – Could apply to local governments
○ – Could apply to local governments under certain circumstances
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Environmental Liability – Superfund
CERCLA Liability Protections, Defenses, and Policies
CERCLA Provision
Involuntary Acquisition by a
Municipality
Is AAI Required?
No, but
recommended
Bona Fide Prospective
Purchaser
Yes
Third Party Defense
(Innocent Landowner)
Yes
Contiguous Property Owner
Yes
Figure 7.2 – CERCLA provisions requiring AAI prior to acquisition
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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
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 E1527-05 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
Environmental Liability – Superfund
All appropriate inquiry [AAI]
How does AAI affect you?
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Threshold criteria for most CERCLA liability protections
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Threshold criteria for federal Brownfields Grant applicants
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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
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Parties seeking protection from CERCLA liability must conduct AAI prior to purchasing
property
Must conduct assessments in compliance with AAI.
Targeted Brownfields Assessment (TBA)
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TBAs should be performed in compliance with AAI or ASTM Phase I E1527-05 to ensure
prospective property owner’s liability protection and to ensure eligibility for future
cleanup grant
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
Environmental Liability – Superfund
All appropriate inquiry [AAI]
Who can perform AAI?
 Must be performed by an Environmental Professional
(EP)
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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
Environmental Liability – Superfund
All appropriate inquiry [AAI]
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Definition of EP
Person who has:
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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
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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
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Has a degree in science or engineering and 5 years of relevant full-time
experience OR
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Has 10 years of relevant full-time experience.
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
Environmental Liability – Superfund
All appropriate inquiry [AAI]
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Key regulatory requirements
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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
Environmental Liability
RCRA
 Resource Conservation and Recovery Act (RCRA)
 Regulates
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Hazardous waste (Subtitle C)
Solid waste (Subtitle D)
Underground storage tanks (Subtitle I)
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Environmental Liability
RCRA
Hazardous Waste (Subtitle C)
 Hazardous waste management
 “Cradle to Grave”
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Generation
Transportation
Treatment, storage and disposal
 Corrective action to clean up releases
 Categories of RCRA facilities
 Treatment, Storage, & Disposal (TSD) facilities
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Commercial TSD facilities (relatively few)
Many manufacturing and some commercial facilities conduct TSD operations (est. 8,000 nationally)
 Generators
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Most manufacturing and some commercial facilities (e.g., dry cleaners)
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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
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Environmental Liability
RCRA
Hazardous Waste (Subtitle C)
 RCRA (Subtitle C) Cleanup Programs
 Closure/Post-Closure of treatment, storage, and disposal
units
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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)
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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
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State voluntary cleanup programs may satisfy these requirements
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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
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Environmental Liability
RCRA
Solid Waste (Subtitle D)
 Two types of facilities
 Municipal solid waste landfills
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Most towns own or operate MSWLs
 Non-hazardous solid waste disposal facilities (e.g., construction
and demolition landfills)
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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)
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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
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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
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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
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
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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