President Bush Signs Brownfields Bill Into Law
 
January 23, 2002
 
Amy L. Edwards- Washington

On January 11, 2002, President Bush signed into law the brownfields bill passed by both houses of Congress on December 20, 2001.

H.R. 2869, the Small Business Liability Relief and Brownfields Revitalization Act, is likely to affect the way in which property is bought and sold, and the way in which parties seek recovery of cleanup costs at existing Superfund sites, for years to come. Key changes include the following:

Exemptions from CERCLA Liability

The law clarifies that a bona fide prospective purchaser is exempt from liability even if it has knowledge of the existence of contamination at a site after conducting "all appropriate inquiry." This is an important exemption from liability for brownfields redevelopers. This provision became effective on the date of enactment and applies if the prospective purchaser can show, by a preponderance of the evidence, that (i) all disposal occurred prior to the time that it acquired ownership, and (ii) it made "all appropriate inquiry" into the prior uses of the property in accordance with "good commercial and customary standards and practices." The prospective purchaser also would need to show that it had (i) made all legally required disclosures, (ii) taken "reasonable steps" to stop any continuing release and prevent any future releases, and (iii) not impeded the effectiveness or integrity of any institutional controls. If the property will be used for residential purposes, the standard will have been met if the facility inspection and title search have revealed no basis for further investigation.

The law contains two other exemptions from liability: the innocent landowner defense and the contiguous landowner defense. The party claiming these defenses would have the burden of proof to show that it had not caused, contributed to or consented to the release. It would also need to show that it had taken the "reasonable steps" regarding "all appropriate inquiry," disclosures, prevention of releases and maintenance of institutional controls discussed above. The innocent landowner and contiguous property owner defenses would not apply if the property owner had prior knowledge of the contamination.

The law also codifies the Environmental Protection Agency’s (EPA) May 24, 1995, policy regarding contaminated aquifers. The law provides that a contiguous property owner shall not be required to conduct ground water investigations or to install ground water remediation systems except in accordance with EPA’s 1995 policy.

All Appropriate Inquiry. Congress has clarified that a Phase I Environmental Site Assessment conducted on or after May 31, 1997, in accordance with ASTM E 1527-97 will constitute "all appropriate inquiry" under CERCLA, at least until EPA promulgates its own regulations. Among other things, the property owner must not have taken any action to impair any institutional controls that were placed on the site. Congress has further directed EPA to develop its own regulations regarding what constitutes "all appropriate inquiry" within the next two years.

Affirmative Obligations to Comply with Institutional Controls and Prevent Releases. The law clarifies that property owners have an affirmative obligation to maintain institutional controls that may have been imposed on contaminated property. The law further provides that property owners have an affirmative duty to prevent releases in order to qualify for any of the three exemptions (innocent landowner, contiguous landowner or bona fide prospective purchaser) from CERCLA liability.

Windfall Profit Lien Provision. The law provides that EPA may impose a lien on contaminated property where EPA has incurred response costs in order to recover any "windfall profit" resulting from the increase in the fair market value. The lien arises at the time that EPA begins a response action, but EPA would need to go into court at the time the property is sold in order to perfect its lien.

De Micromis and Municipal Solid Waste Exemptions from Liability. Parties contributing less than 110 gallons of liquid materials or 200 pounds of solid hazardous materials that were sent to an NPL site prior to April 1, 2001, will enjoy the de micromis exemption from liability. The government may make an exception to this exemption if (i) it determines that the materials contributed significantly to the cost of the response action, (ii) the respondent failed to comply with an information request or impeded the performance of a response action, or (iii) the respondent has been convicted of a criminal violation. The government’s decisions under (i) and (ii) above are not subject to judicial review.

In addition, residential households, businesses employing no more than 100 full-time employees, and Section 501(c)(3) organizations employing no more than 100 paid individuals at the location that generated the solid waste and that disposed of municipal solid waste only at an NPL site, will be exempt from liability. The government may make an exception to this exemption if (i) it determines that the materials contributed significantly to the cost of the response action, or (ii) the respondent failed to comply with an information request or impeded the performance of a response action. The government’s decisions regarding eligibility for the exemption are not subject to judicial review.

The statute clarifies who will bear the burden of proof in an enforcement action. If the government brings the enforcement action, the burden of proof will rest upon the party claiming the exemption. However, in private litigation, the burden will rest upon the plaintiff to prove that the party claiming the exemption is not entitled to it. In addition, new language in the law will allow the prevailing party to recover its attorneys fees in private litigation.

State Inventory of Sites. States desiring brownfields grant funding must ensure that their response programs include mechanisms for (i) maintaining an inventory of brownfields sites, (ii) sustaining adequate enforcement authorities that will ensure that response actions (including long-term operation and maintenance activities) will be completed, and (iii) providing for meaningful public notice and participation. In addition, a state may not receive funding unless it maintains and makes available to the public a record of brownfields sites.

Federal Enforcement Deferral. EPA will not take enforcement action against a site that is an "eligible response site" unless (i) the state requests federal assistance, (ii) the contamination has migrated across state lines, (iii) after taking into account the actions that have been taken, EPA determines that the release presents an imminent and substantial endangerment and that additional remedial action is needed, or (iv) there is new information that was not known at the time the initial cleanup was approved or completed (e.g., that the contamination at the site is more toxic than originally expected). This deferral authority applies only if the state (i) maintains a record of sites where response actions have been completed, (ii) indicates whether the site is suitable for unrestricted use, and (iii) identifies any institutional controls relied upon in the remedy. This deferral provision applies only to those response actions conducted after February 15, 2001.

Background

EPA has estimated that there are 500,000 brownfields sites nationwide. Brownfields sites are those where expansion, redevelopment or reuse may be complicated by the presence or potential presence of hazardous substances, pollutants or contaminants. Brownfields sites now include mine-scarred lands, petroleum-contaminated sites and sites contaminated with controlled substances.

Under the law, many types of sites do NOT constitute brownfields sites, including:

• any site listed on the NPL

• any site undergoing a removal action

• any facility subject to a unilateral administrative order, court order, administrative order on consent or judicial consent decree

• any facility that has received a permit under the Clean Water Act, the Safe Drinking Water Act, the Solid Waste Disposal Act or the Toxic Substances Control Act

• any site undergoing corrective action or subject to closure under RCRA

• any site where there has been a release of PCBs

The government may determine, on a case-by-case basis, that some (but not all) of the sites excluded from the brownfields definition may nevertheless be eligible for funding.

Key Provisions of the Statute

H.R. 2869, which combines elements of S. 350 (passed 99-0 by the Senate in April 2001) and H.R. 1831 (passed 419-0 by the House in May 2001), enjoyed widespread support when it moved through Congress. It provides the following types of financial incentives and exemptions from liability:

Financial Assistance

• $250 million per year will be provided for the next five years, for a total of $1.25 billion, to fund brownfields cleanups. The language in the bill is an authorization, not an appropriation, so EPA does not expect to have the additional funds in its budget until FY 2003.

• $150 million per year of these funds will be used to assess sites, $50 million per year will be used to clean up sites, and the other $50 million will be used to cleanup sites contaminated with petroleum products. Non-profit entities that own brownfield sites, as well as governmental entities, will be eligible to apply for the remediation funding.

• A local government may use up to 10 percent of the grant to establish a program to (i) monitor health, or (ii) monitor and enforce institutional controls

Exemptions from Liability

• Persons who would otherwise be liable at an NPL site based solely upon their status as a generator or transporter of hazardous substances, and who contributed less than 110 gallons of liquid materials or less than 200 pounds of solid material, would be exempt from liability where disposal, treatment or transport occurred prior to April 1, 2001

• Small businesses (i.e., those with fewer than 100 full-time employees); owners, operators and lessees of residential property; and non-profit entities would not be liable for municipal solid waste disposed of at an NPL site

• In a contribution action brought by a non-governmental entity under either Section 107 or 113 of CERCLA, the burden would be on the party bringing the action to establish that the foregoing exemptions do not apply. If the party is unsuccessful because the exemption in fact applies, it shall pay the defendant’s reasonable defense costs

• Owners of contiguous properties who can show by a preponderance of the evidence that they did not cause or contribute to the contamination, who conducted "all appropriate inquiry," and who complied with numerous other requirements, shall be exempt from liability

• Bona fide prospective purchasers shall generally be exempt from cleanup requirements, but the government may impose a lien (not in excess of the increase in fair market value) on their property to recover any unrecovered response costs

Other

• Brownfields funds can be used to encourage the development of parks, greenways and recreational areas.

• Assessments and cleanups will generally be conducted under state authority and oversight.

• EPA reserves the right to intervene in the event of an "imminent and substantial endangerment."

• EPA is required to submit a report on the status of all brownfields sites within three years.

For more information about Holland & Knight’s Brownfields Initiative or ASTM E 2091-00, Standard Guide for Use of Activity and Use Limitations, Including Institutional and Engineering Controls, contact Amy L. Edwards at 888-688-8500 or at aedwards@hklaw.com.