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August 13, 2009
Brownfields Redevelopment and the Threat of CERCLA Liability
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Presenter:
Elaine Lippmann, Spiegel & McDiarmid LLP
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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
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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
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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
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Brownfields Acquisitions
Brownfields: Obstacles or Opportunities?
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Brownfields Acquisitions
Local governments can acquire brownfields through a variety of means, including:
Negotiated sales Eminent domain Tax liens, foreclosures, etc.
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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.
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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
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Overview of CERCLA Liability
Liability is Strict Joint and Several Retroactive
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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
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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)
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Involuntary Acquisitions
Ambiguity in the word “involuntarily”
Involuntary on the part of the local government or the prior owner?
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Involuntary Acquisitions
CERCLA includes:
Bankruptcy Tax delinquency Abandonment
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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)
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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)
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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.”
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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).
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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)
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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)
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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
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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
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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.
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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)
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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
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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
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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.
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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
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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
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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
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Conclusion
Have a plan for defending against potential liability
Explore options and proceed with caution
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Contact Information
Elaine C. LippmannSpiegel & McDiarmid LLP
1333 New Hampshire Avenue, NWWashington, DC 20036
(202) [email protected]