august 13, 2009 brownfields redevelopment and the threat of cercla liability

August 13, 2009

Brownfields Redevelopment and the Threat of CERCLA Liability

Presenter:

Elaine Lippmann, Spiegel & McDiarmid LLP

Spiegel & McDiarmid LLP

Mid-sized, Washington, DC-based law firm with a nationally known litigation, regulatory and government affairs practice

Practice areas include: Electricity, Hydropower, Environmental Law, Climate Change, Natural Gas, Nuclear & Renewable Energy, Utility Regulation & Deregulation, Antitrust, and Airport Regulation

NALGEP

The National Association of Local Government Environmental Professionals (NALGEP) is a non-profit organization founded in 1993

NALGEP is a national organization representing local government environmental professionals

NALGEP provides its members with new information on environmental policy, valuable opportunities to share information on innovative environmental practices, training and technical assistance, and helps communicate their views on national environmental policies to key decision makers

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.


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


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?


CERCLA includes:

Bankruptcy Tax delinquency Abandonment


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)


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)


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


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.


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


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

Contact Information

Elaine C. LippmannSpiegel & McDiarmid LLP

1333 New Hampshire Avenue, NWWashington, DC 20036

(202) [email protected]

august 13, 2009 brownfields redevelopment and the threat of cercla liability

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