Environmental professionals and lenders often ask for examples of case law dealing with CERCLA liability defenses. EDR Insight is pleased to share this timely piece just published by the Virginia Environmental Law Journal, authored by attorney William R. Weissman and J. Michael Sowinski, Jr., VP at Terradex, Inc. The article, titled “Revitalizing the Brownfields Revitalization and Environmental Restoration Act: Harmonizing the Liability Defense Language to Achieve Brownfield Restoration,” examines the context and legislative intent of the Brownfields Amendments to demonstrate how certain key aspects of the Amendments can and should be interpreted by courts to protect innocent brownfield purchasers from CERCLA liability—and how some courts may be getting it wrong. This is an important read for prospective purchasers of contaminated properties and their attorneys on how best to maintain their CERCLA liability protection as a bona fide prospective purchaser over the course of ownership.
- The 2002 Brownfields Amendments establish 3 CERCLA liability protections for purchasers.
As its principal feature, the 2002 Brownfields Amendments created incentives for property developers to acquire environmentally contaminated brownfield properties and to cleanup and redevelop these properties into economically productive enterprises. Congress was responding to many years of developer reluctance to acquire and redevelop these abandoned properties for fear that by becoming owners of contaminated properties they would become potentially liable for the entire cleanup cost, even when these developers had nothing to do with causing the contamination. To create these incentives, the statute established liability defenses for three types of “innocent” purchasers:
- innocent landowners (ILO);
- contiguous property owners (CPO); and
- bona fide prospective purchasers (BFPPs).
A property owner can qualify for these defenses by conducting a pre-acquisition due diligence in accordance with EPA’s All Appropriate Inquiry regulations and, importantly, by satisfying enumerated statutory post-acquisition continuing obligations at the property. Of the three defenses, only BFPPs can satisfy the defense even if the buyer knows the property is contaminated before acquiring it. Thus, as a practical matter, most brownfield purchasers seek to qualify as a BFPP.
- The aim of the Amendments was to remove impediments to developers cleaning up brownfields.
Congress passed the Brownfields Amendments unanimously and its aim could not have been clearer. As Senator Barbara Boxer (D-Calif.), one of the bill’s sponsors, explained:
The innocent parties are people who are interested in cleaning up the brownfield site, but they are afraid to get involved because they may become liable for somebody else’s mess. Our bill makes it clear that innocent parties will not be held liable for the work they do on a brownfield site.
Senator Mike Crapo (R-Idaho) echoed this view. He focused his remarks on removing the impediments that discouraged developers from stepping up to the plate. The goal is:
not simply [to] create another approach to the issue that runs into the same problems we have dealt with under the Superfund statute for so many years. In other words, we need to craft it so the effort to reclaim these areas and make them green again is not a failure and we don’t simply pass legislation that creates another set of difficult, burdensome approaches to the issue.
- Nearly all property owners that have invoked the BFPP defense in CERCLA litigation have failed.
Courts construing the Brownfields Amendments have largely ignored Congress’ intent to strike a balance between the dual goals of brownfield redevelopment and site cleanup by removing unnecessary impediments to acquiring and redeveloping brownfield properties. To be sure, the courts are not entirely to blame for this lack of progress in brownfield redevelopment. In some of the cases where the BFPP defense was rejected, the developers failed to demonstrate that they had satisfied the continuing obligations.
- Three types of continuing obligations are the most problematic.
Three of the most problematic continuing obligations associated with the liability defenses are:
(a) the prohibition of disposal of hazardous substances after acquiring the property;
Parties remain eligible for liability relief under the Brownfields Amendments’ liability defenses only if “disposal” does not occur after they purchased the property. Problematically, some pre-2002 CERCLA cases state that moving contaminated soil within a property – almost certainly an inevitable consequence of property redevelopment – as well as certain “passive migration” can constitute a new disposal. Does it make sense to disqualify developers from the liability defenses for doing the very acts that Congress was promoting? That surely cannot be what Congress intended.
(b) compliance with land use restrictions and not impeding the effectiveness of institutional controls;
The need to comply with “land use restrictions,” though not yet litigated, nonetheless causes consternation among brownfield attorneys and has led to controversial guidance from EPA. The Brownfields Amendments do not define “land use restrictions,” leaving open the question of how narrowly or expansively this phrase should be interpreted and, in turn, the breadth of compliance required by those seeking liability defenses.
(c) the prohibition of a contractual relationship between a BFPP and a CERCLA liable party.
The contractual relationship prohibition has already tripped up one BFPP who, as part of the purchase price for the property, agreed to indemnify the seller if the seller were ultimately held liable for response costs at the property.
These statutory provisions provide classic examples of ambiguous, redundant, and confusing legislative language that, depending on how courts interpret them, could essentially negate the liability defenses that Congress established to incentivize brownfield redevelopment. For each of these continuing obligations, the authors suggest an interpretative approach that reconciles the legislative language with what Congress sought to achieve with the 2002 Amendments.
FOR MORE INFORMATION
The Virginia Environmental Law Journal has made the full article available on their website. If you are an environmental professional with clients buying contaminated properties, the article provides guidelines to assist new property owners in satisfying the continuing obligations, especially the obligation to exercise appropriate care in managing releases on the property by taking reasonable steps to stop a continuing release, to prevent any threatened future release, and to prevent or limit human, environmental, or natural resource exposure to an existing hazardous substance release.
 147 Cong. Rec. 6241 (2001).
 Id. at 6246.