EPA Releases Updated CERCLA Common Elements Guide - Enforcement Discretion Guidance Provides Important Direction on Landowner Liability Protections Under 2002 Amendments to CERCLA

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Highlights

  • The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes strict, joint and several, retroactive liability on property owners and operators for releases of hazardous substances. However, there are certain steps (or "common elements") that a prospective property owner or operator must establish to achieve and maintain one of the three statutory liability defenses under the 2002 Brownfields Amendments to CERCLA.
  • The U.S. Environmental Protection Agency (EPA) recently released its long-awaited Enforcement Discretion Guidance Regarding Statutory Criteria for Those Who May Qualify as CERCLA Bona Fide Prospective Purchasers, Contiguous Property Owners, or Innocent Landowners (Guide). The 2019 Guide supersedes the 2003 Interim Guide on this topic.
  • This Holland & Knight alert outlines immediate practice pointers that can be gleaned from the Guide, provides a brief overview of key elements of the statutory liability defenses and summarizes significant changes in the new Guide.

The U.S. Environmental Protection Agency (EPA) on July 29, 2019, released its long-awaited Enforcement Discretion Guidance Regarding Statutory Criteria for Those Who May Qualify as CERCLA Bona Fide Prospective Purchasers, Contiguous Property Owners, or Innocent Landowners ("Common Elements" or Guide). The 2019 Guide supersedes the 2003 Interim Guide on this topic.

Generally, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes strict, joint and several, retroactive liability on property owners and operators for releases of hazardous substances. However, there are certain steps (or "common elements") that a prospective property owner or operator must establish to achieve and maintain one of the three statutory liability defenses under the 2002 Brownfields Amendments to CERCLA (i.e., the bona fide prospective purchaser (BFPP), contiguous property owner (CPO) and innocent landowner (ILO) defenses).

The updated Guide was developed as part of EPA's Superfund Reform Task Force initiative and responded to concerns that have been raised over the past 16 years regarding statements in the previously issued 2003 Interim Guide. The updated Guide provides important clarifications on several key elements of these defenses, particularly what steps must be completed subsequent to purchase.

Notably, EPA discusses what constitutes a "disposal" prior to acquisition and what is meant by a "land use restriction." EPA also clarifies what "reasonable steps" should be taken after purchase with respect to existing or identified hazardous substances, and what EPA expects in the form of adequate "cooperation/access" with regulatory agencies.

The remainder of this Holland & Knight alert outlines immediate practice pointers that can be gleaned from the Guide, provides a brief overview of key elements of the statutory liability defenses and summarizes significant changes in the new Guide. In essence, to avoid CERCLA liability, due diligence cannot begin and end with a Phase I Environmental Site Assessment. EPA's guidance serves as a reminder that purchasers and operators of properties must promptly address any existing or subsequent contamination, comply with ongoing land use restrictions, not impede the effectiveness or integrity of institutional controls (ICs), and cooperate with regulatory agencies.

Immediate Practice Pointers from the Guide

  • For the first time, EPA is linking the implementation of ICs with the post-closure requirement to cooperate with agencies. In order to satisfy the "cooperation" prong of these defenses, parties must now pay close attention to whether an IC was selected for a response action but has not yet been implemented. The purchaser might lose its defense if it resists implementing a previously contemplated IC post-closing.
  • EPA suggests that parties evaluate and document "reasonable steps" undertaken to stop any continuing releases and to prevent any threatened future releases in accordance with ASTM E2790. Further, EPA suggests that parties discuss these steps prior to purchase with legal counsel.
  • EPA determined that the pre-2002 "due care" line of cases is not necessarily dispositive in determining whether a party has satisfied the "appropriate care/reasonable steps" prong of the landowner liability defenses. Nevertheless, prospective purchasers and operators must be aware of these earlier cases as they may be applied in a site-specific analysis.
  • Attachment B to the Guide provides concrete examples of what EPA considers to be "reasonable steps" under specific circumstances. According to EPA, a "reasonable step" may boil down to what a similarly situated reasonable and prudent person would have done in light of all the facts and circumstances.

Background

All three landowner liability protections (LLPs) contain both threshold criteria and continuing obligations that a property owner or operator must meet. These criteria are as follows:

The threshold criteria for owners and operators to satisfy prior to purchase or operation include:

  • performance of "all appropriate inquiries" (40 CFR Part 312 or ASTM E1527-13/ASTM E2247-16)
  • having no affiliation with the person liable for response costs1

Following purchase, the continuing obligations include:

  • no disposal after acquisition
  • compliance with land use restrictions/not impeding the effectiveness or integrity of institutional controls
  • taking "reasonable steps" with respect to releases of hazardous substances
  • providing cooperation/assistance/access
  • complying with information requests/subpoenas
  • providing legally required notices

Significant Changes in the Guide

The 2019 Guide addresses a number of concerns that have been raised over the years about the continuing obligations and how performance or lack thereof impacts a prospective purchaser's or operator's ability to qualify for the LLPs. The 2019 Guide did not make any significant changes in the threshold criteria. However, it did provide a number of clarifications in the continuing obligations, as follows:

  • No disposal after acquisition

The Guide outlines two types of disposals – "initial" and "secondary" disposals – and what "reasonable steps" should be taken depending on which type of disposal has been identified. The Guide suggests that a disposal resulting from earthmoving or construction activities should not disqualify the landowner liability defenses if the disposal occurred as a direct result of a party undertaking "reasonable steps." EPA will assert its enforcement discretion when determining what constitutes a "disposal," while acknowledging that the courts have the ultimate authority to make that determination.

  • Compliance with land use restrictions/not impeding the effectiveness or integrity of institutional controls

EPA clarifies that land use restrictions are a subset of ICs. EPA believes that parties seeking a liability defense in situations where a land use restriction was not in place at the time of purchase have an obligation to cooperate with EPA and the state/local government to be sure that the restriction is established in connection with the cleanup remedy. EPA also clarified that it considers land use restrictions as legally binding restrictions or limitations on the use of land or resources, that bind both current and future owners and users. Purchasers are expected to search government records, property records, historical documents, chain of title documents and land use records as part of "all appropriate inquiries" (AAI) to ensure compliance with land use restrictions. Many parties do not currently comply with this aspect of AAI and may lose their defenses if they don't place greater emphasis on this key element of AAI.

The Guide discusses what EPA might consider impeding the integrity or effectiveness of an institutional control. For example, property owners could lose their landowner liability protection if they remove or void a notice about an IC or apply for a zoning change or variance where the remedy relied on the designated zoning use as an IC. An owner's refusal to agree to an easement or covenant might be another example of impeding the effectiveness or integrity of an IC.

Importantly, however, EPA clarified that a property owner may seek changes to land use restrictions and ICs so long as it follows the procedures required by the regulatory agency that oversaw the original response action, as the controls may not need to remain in place in perpetuity.

EPA also highlighted that monitoring the integrity or effectiveness of the IC may be another way to ensure compliance with the land use restriction and not impeding the integrity or effectiveness of the IC. EPA generally recommends that ICs be monitored annually, but it pointed out that shorter intervals may also be appropriate. EPA referenced technologies and approaches for actively monitoring ICs. In particular, EPA pointed users to its PIME Guidance2 and to its "Advanced Monitoring Technologies and Approaches to Support Long-Term Stewardship" memo.3

EPA views compliances with ICs to be related to the continuing obligation to provide cooperation and assistance to regulatory agencies. So if an IC has not been fully implemented prior to purchase, the person seeking to assert the liability defense must continue to cooperate in the implementation of the IC post-closing.

Important new language in the Guide related to EPA's new linkage of these continuing obligation components includes the following: "If the PRP[potentially responsible party]-landowner later transfers the property and a future party, such as a potential BFPP, acquires the property, that party must cooperate with and assist the EPA in implementing that IC as part of attaining BFPP status. Similarly, if, for example, a potential BFPP or ILO acquires property and an IC selected as part of a remedy was not implemented because the previous owner could not be located, then the new owner must cooperate with and assist the EPA by signing and implementing that IC." (Guide, p. 16, emphasis added)

EPA also views the IC "continuing obligation" to be related to the "reasonable steps" continuing obligation. EPA stated that "cooperating with and assisting the EPA in implementing ICs not yet in place may be appropriate 'reasonable steps' to achieving and maintaining a landowner liability protection." (Id.)

  • Taking "reasonable steps" with respect to releases of hazardous substances

EPA reiterated that a person asserting a LLP defense4 is generally not expected to undertake the same types of "reasonable steps" as a responsible party would. EPA emphasized that a prospective purchaser's knowledge of contamination and its opportunity to plan prior to purchase would be important factors in EPA's evaluation of whether appropriate reasonable steps (for BFPPs in particular) were undertaken. EPA suggested that purchasers seeking to satisfy the BFPP defense should consult with environmental professionals and legal counsel when determining what the "reasonable steps" might be. EPA pointed to the ASTM Standard Guide for Identifying and Complying with Continuing Obligations (E2790) as one resource that might be helpful in determining what those steps might be.5

EPA also explained that the third-party defense, which predates the 2002 Brownfields Amendments, and the due care line of cases analyzing the third-party defense is a distinct analysis from the "reasonable steps" and "appropriate care" language in the Brownfields Amendments. Accordingly, EPA concluded that the due care line of cases is not dispositive of whether a LLP has met its "reasonable steps" obligations. Instead, EPA noted that the pre-2002 factors are relevant in a site-specific, fact-based analysis of evaluating whether the landowner acted reasonably.

The Guide includes an Attachment B, which identifies examples of reasonable steps taken from prior cases and previously issued EPA comfort/status letters. The examples given are intended to be illustrative and general guidance only. The EPA encourages parties to review its Policy on the Issuance of Superfund Comfort/Status Letters.6 EPA explains that its analysis of whether or not "reasonable steps" were taken may boil down to what a similarly situated reasonable and prudent person would have done in light of all facts and circumstances. (Attachment B at 2). Courts have generally examined whether the landowner took timely and reasonable action based upon the available information, whether it protected others from exposure to the chemicals of concern and whether it prevented the migration of the contamination.

  • Providing cooperation/assistance/access

EPA indicated that it interprets these provisions, which are based in CERCLA,7 broadly together with other continuing obligations needed to establish the LLPs.

  • Complying with information requests/subpoenas

EPA expects all recipients of Section 104(e) information requests to provide timely, accurate and complete responses, but noted that minor errors (such as missing a deadline by a day or sending the response to the wrong address) are not likely to defeat the LLP defenses.

  • Providing legally required notices

EPA indicated that the burden is on BFPPs and CPOs to determine what "legally required notices" may exist. EPA stressed that this is an ongoing obligation. EPA may require parties to self-certify in the form of a letter signed by the landowner that all applicable notice requirements have been met.


Notes

1Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA's Bona Fide Prospective Purchaser and Contiguous Property Owner Liability Protections (Sept. 21, 2011).

2Institutional Controls: A Guide to Planning, Implementing, Maintaining, and Enforcing Institutional Controls at Sites (PIME Guidance) (December 2012).

3 EPA Office of Site Remediation Enforcement, Advanced Monitoring Technologies and Approaches to Support Long-Term Stewardship (July 2018).

4 Only a BFPP may purchase property with prior knowledge that it is contaminated. Persons claiming the CPO or ILO defense must not know, or have any reason to know, that contamination may be present on the property.

5 Author Amy L. Edwards has been an active participant on the ASTM Continuing Obligations Task Force from its inception.

6 EPA Memorandum, Transmittal of Revised Policy on the Issuance of Superfund Comfort/Status Letters (Aug. 25, 2015).

7 CERCLA §§ 101(40)(B)(v), 107(q)(1)(A)(iv), and 101(35(A).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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