EPA Issues Guidance on CERCLA Contiguous Landowner Defense

Introduction

As described in our fourth quarter 2001 newsletter, on January 11, 2002, President Bush signed into law the Small Business Liability Relief and Brownfields Revitalization Act. The law provides the Environmental Protection Agency (EPA) with independent legislative authority to provide funding and technical assistance to state, tribal, and local governments for evaluation and cleanup of Brownfields properties. Among other things, the law attempts to encourage redevelopment by expanding the definition of a Brownfields site, expanding the types of entities eligible for Brownfields funding, increasing the types of grants available, and establishing independent funding authority for EPA’s Brownfields program. The law also allows EPA to fund Brownfields properties being addressed under other environmental statutes.

The Brownfields law also provides liability clarifications for innocent landowners of potentially contaminated properties. The law amended the “Innocent Landowner Defense” (must have no knowledge of the contamination) and created two new categories of potential defenses against CERCLA liability:

• Contiguous property owner defense (must have no knowledge of the contamination).
• Bona fide prospective purchaser defense (may purchase with knowledge of the contamination).

These two categories of protection are known as the “Landowner Liability Protections,” or “LLPs.”

New Guidance Released

On January 13, 2004, EPA released an interim enforcement discretion guidance document regarding contiguous property owners under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) §107(q). The new guidance provides advice on:

The criteria a landowner must meet in order to qualify for the contiguous property owner liability protection.

• The application of §107(q) to current and former owners of property.
• The relationship between new §107(q) and EPA’s Residential Homeowner Policy and Contaminated Aquifers Policy.
• The mechanisms EPA may provide, in its discretion, to resolve the liability concerns of contiguous property owners.

Contiguous Property Owner Criteria

The guidance reviews the statutory criteria that a contiguous landowner must demonstrate to gain liability protection.[1] In the first of eight [2] statutory criteria, a landowner must show that he or she “did not cause, contribute, or consent to the release or threatened release.”

In the guidance, EPA recognizes that there may be several, discrete, releases on a landowner’s property – some of which originated on the owner’s property, and some which may have migrated onto the property from an adjoining site. Under such circumstances, even if the landowner does not fully meet the criteria of a contiguous property owner, EPA may exercise its enforcement discretion and not pursue the landowner for the release which migrated onto his property.

Application of §107(q) to Current and Former Landowners

EPA has concluded that the shield from liability contained in §107(q) clearly applies to current owners of property who meet the statutory criteria. In the guidance, EPA recognizes that courts are split on the potential liability of former landowners with respect to passive migration of contamination. Regardless of this split, EPA states in its guidance that it may treat former landowners as protected §107(q) parties, so long as those landowners met the statutory criteria while they owned the property.

Relationship of §107(q) to Residential Homeowner Policy and Contaminated Aquifers Policy

The contiguous property owner provision protects many landowners that EPA did not previously pursue, through the exercise of its enforcement discretion, prior to the Brownfields amendments. The guidance provides background on these older enforcement discretion policies and explains their relationship to the statutory contiguous property owner liability protection.

Under the Residential Homeowner Policy, EPA will generally not take a CERCLA enforcement action against an owner of a residential property unless the homeowner’s activities lead to a release or threatened release resulting in the taking of a response action at a site. Pursuant to the Contaminated Aquifers Policy, subject to certain conditions, EPA will generally not take enforcement action “where hazardous substances have come to be located on or in a property solely as the result of subsurface migration in an aquifer from a source or sources outside the property. …”

The new guidance describes circumstances when the Residential Homeowner Policy and Contaminated Aquifers Policy may be broader than §107(q). For example, under the Residential Homeowner Policy, an owner of a residential property can purchase with knowledge or reason to know that contamination was present on the site and still be covered by the policy. Under §107(q), a person must purchase without knowledge or reason to know that the property is or could be contaminated in order to avoid liability. In cases where the Residential Homeowner Policy and the Contaminated Aquifers Policy are broader than § 107(q), EPA can still apply these policies through the exercise of its enforcement discretion.

The new guidance also describes instances in which §107(q) may be broader than these two policies. For example, the Residential Homeowner Policy applies only to owners of residential property; while the contiguous property owner liability protection of §107(q) applies to owners of any type of property.

Mechanisms to Resolve Contiguous Property Owner Liability Concerns

Generally, §107(q) provides liability protection to those who meet the statutory criteria, regardless of whether they have actually sought feedback of their status from EPA. Furthermore, Congress provided EPA with procedures to resolve all doubt on liability status issues. Under §107(q)(3), the EPA Administrator can issue an “assurance” letter to a landowner, stating that there will be no CERCLA enforcement action, when:

1. EPA receives a written request for an assurance letter from a landowner who can demonstrate that he or she meets the statutory criteria; and

2. EPA has been involved at the landowner’s property and/or at such property where there is a release or threat of a release.

Conclusion

It is important to note that this new EPA guidance document is only an interim policy. Over time, EPA may revise the guidance based upon its experience administering the Brownfields law.

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1. See CERCLA §§ 107(q)(1)(A)(i)-(viii). The statute places the burden of proof on the landowner. CERCLA § 107(q)(1)(B).

2. To meet the contiguous property owner statutory criteria, a landowner must show that he:

1. did not cause, contribute, or consent to the release or threatened release;

 

2. is not:

a. potentially liable for response costs at the facility, or “affiliated” with any such person through any direct or indirect familial relationship, or any contractual, corporate or financial relationship (excluding relationships created by a contract for sale of goods or services), or

b. the result of a reorganization of a business entity that was potentially liable;

    3. takes reasonable steps to:

a. stop any continuing release,

b. prevent any threatened future release, and

c. prevent or limit human, environmental or natural resource exposure to any hazardous substance released on or from property he owns;

4. provides full cooperation, assistance and access to those authorized to conduct response actions or natural resource restoration;

 

5. is in compliance with any land use restrictions established or relied on in connection with a response action and does not impede the effectiveness or integrity of any institutional control employed in connection with a response action;

 

6. is in compliance with any request for information or administrative subpoena under CERCLA;

 

7. provides all legally required notices with respect to the discovery or release of any hazardous substances at the facility; and

 

8. conducted all appropriate inquiry in accordance with CERCLA § 101(35)(B) at the time of acquiring the property, and did not know or have reason to know that the property was or could be contaminated by a release or threat of a release of a hazardous substance from property not owned or operated by him.