The U. S. Environmental Protection Agency (EPA) is clamoring to get Superfund sites redeveloped. But, is the Agency downplaying the liability you face?

The EPA recently announced that it will review site cleanups and remedies at 20 Superfund Sites and oversee reviews at 4 federal facilities across New England this year. This got us to thinking about the relationship between the Agency’s efforts in encouraging the redevelopment of these sites and liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) aka Superfund.

You can be liable as a Potentially Responsible Party (PRP) under Superfund if you:

  • Are the owner or operator of the property
  • Owned or operated any facility where hazardous wastes were disposed of at the time of disposal
  • Arranged for hazardous substance disposal or treatment
  • Arranged with a transporter for transport of hazardous substances for disposal or treatment
  • Accepted hazardous substances for transport to disposal or treatment facilities, incineration vessels, or sites, and selected the site

EPA’s Superfund Redevelopment Initiative is aimed at returning Superfund sites to beneficial use. However, the fear of becoming entangled in the potentially unending quagmire that can be a Superfund cleanup has kept many people from purchasing a remediated Superfund site.

Do You Want to Be a BFPP?

Part of the encouragement to redevelop Superfund sites is the CERCLA provision that allows for what is called a “bona fide prospective purchaser defense”.

A bona fide prospective purchaser (BFPP) (as defined in 42 UCS 9601(40)) is not liable for hazardous substances that the purchaser knew were on the property when it was purchased after January 11, 2002. In order to take advantage of this opportunity to purchase and redevelop a Superfund site without fear of liability, you must have (among other conditions) acquired the property after all the hazardous substance disposal had occurred and not be affiliated in any way with a PRP. You can’t be a family member (i.e., have a “direct or indirect familial relationship”) or have any financial, corporate, or contractual relationship with a PRP.

It’s important to note here that neither “affiliation” nor “direct or indirect familial relationship” is defined in CERCLA. The EPA addresses this issue in a March 2003 memo, wherein the Agency recognizes that the term “affiliation” could be taken to an extreme. The memo states that in exercising its enforcement discretion, EPA intends to be guided by “Congress’s intent of preventing transactions structured to avoid liability.”

You can also lose your BFPP status and become entangled in liability issues if you do not comply with any land use restrictions established in connection with the response actions for the property or if you somehow impede the effectiveness or integrity of any institutional controls employed in connection with the response actions. You will certainly incur liability if you cause any additional hazardous substance releases on the property after you purchased it.

You Must Protect your BFPP Status

In order to protect your status as a BFPP, you must also be careful to:

  • Make all appropriate inquiry before you purchase the property.
  • Provide all legally required notices pertaining to hazardous substances discovered or released on the property.
  • Take “reasonable steps” (another term not defined in CERCLA but addressed in the March 2003 memo) to stop continuing releases, prevent or limit future releases, and prevent or limit human, environmental, or natural resource exposure to any previous release.
  • Cooperate with and assist those conducting response actions.
  • Comply with any information requested under CERCLA.

Problems with Data

Any steps you must take to protect yourself against Superfund liability is further complicated by potential insufficient or incomplete data compiled by the EPA in its 5 year reviews (FYR) of Superfund sites. A February 2012 report by EPA’s Office of the Inspector General (OIG) identified issues in sample FYRs, including:

  • The site-monitoring network was inadequate to assess whether off-site migration of contamination had been controlled by the remedy, affecting EPA’s ability to make accurate protectiveness determination.
  • Environmental sampling data did not support the site’s protectiveness determination.
  • Long-term sampling had not sufficiently measured ecological impacts and, therefore, the protectiveness determination could be challenged.
  • Oversight of long-term monitoring did not detect the collection, reporting, and analysis of invalid data that was then used in completing the site’s FYR.

The EPA has identified more than 66,000 EPA- and state-tracked contaminated properties and mine sites (comprising over 35 million acres) with the potential for development as solar, wind, biomass, and/or geothermal facilities. However, before launching such a project, you should take a serious look at potential liability.

In a reference guide that addresses potential liability issues when siting renewable energy projects on contaminated property, the EPA tends to downplay the potential. In addition to the bona fide protective purchaser (BFPP) issues discussed above, EPA’s reference guide points out issues that may exist for those who lease property and tenants of BFPPs.

What about leasing?

According to the EPA, potential liability concerns for renewable energy projects commonly arise when a developer leases contaminated property to build and operate a generation facility. For example, the installation of renewable energy infrastructure often may require activities such as grading or earth removal and the installation of footings, power lines, and other infrastructure.

A developer will need to make a careful technical and legal analysis of the property and the proposed activities to determine whether these or other activities may exacerbate existing contamination or whether the appropriate “reasonable steps” are being taken to achieve and maintain CERCLA liability protection.

What if the owner is a BFPP?

Tenants may have BFPP protection from CERCLA liability if they enter into a lease with an owner who is itself a BFPP.

If the owner loses its own BFPP status through no fault of the tenant, the EPA says it will deal with issues on a property-specific basis and not pursue the tenant so long as the lessee meets the BFPP liability provisions discussed above, with the exception of the all appropriate inquiry (AAI) provision. Although there is no AAI requirement for a tenant with derivative BFPP status, a tenant may need to obtain information on the prior uses of the property to have an informed basis on which to comply with the other BFPP requirements.

What if the owner is not a BFPP?

Many developers who lease contaminated property for renewable energy projects may not lease from a BFPP. If the owner is not a BFPP, the EPA says the Agency intends to treat the tenant as a BFPP when the tenant itself meets all the BFPP provisions.

Notwithstanding CERCLA’s requirement that a person must have acquired ownership of a property after January 11, 2002, in order to qualify for BFPP liability protection, the EPA has stated its intent to treat tenants as BFPPs if their lease agreement was executed after that date so long as they also meet the other BFPP provisions.

For more information or assistance with your Environmental and Health & Safety regulatory compliance needs, contact Ralph Carito at Total Environmental & Safety, LLC (Total) at rcarito@TotalEnviron.com or 908-442-8599.