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To:            Michael Kerr
From:          James Doty
Date:          September 26, 2006
Re:            Comparison of the Uniform Environmental Covenants Act (“UECA”) and Current Oregon Law.

        The Oregon Department of Environmental Quality (ODEQ) uses Easement and Equitable Servitude agreements (EES) as a tool to
institute land use controls following a hazardous site cleanup and to promote the productive use of properties once contaminated by
hazardous substances. Like a UECA covenant, an EES is a real property instrument designed to place a set of institutional controls on a
particular property to prevent future avoidable exposure to and any further release of hazardous substances remaining following a
remediation action at a site. However, as is the case in many states, EES’s rely on the underlying common law of real property and thus are
subject to extinguishment under a wide variety of common law doctrines and real world situations. UECA, by contrast, creates a special
instrument defined in statute which explicitly deals with these problems. Adoption of UECA in Oregon will provide the option of a
stronger, more reliable tool for creating enforceable long-term use restriction on a particular property.

        Despite the benefits of the current EES approach, it has some very substantial and important shortcomings. Oregon law does not
address how traditional property law restrictions are affected by the institutional controls. Though it appears to be a statutory goal that these
instruments apply to the property itself in perpetuity, Oregon’s scheme is completely silent as to what happens when an EES contradicts
traditional property law principles. This could occur in many situations, such as when an agreement does not have privity with respect to
subsequent purchasers, is not appurtenant to an interest in real property, has not been recognized traditionally at common law, imposes a
negative burden, or imposes an affirmative obligation on a person having an interest in the real property. Section 5(b) of UECA explicitly
addresses and answers these questions.
       The Oregon law also implicitly leaves the question of whether the state’s interest in an agreement site is an interest in real property
for courts to decide. UECA addresses this important question by clearly stating that a state’s interest in an environmental covenant is not
considered an interest in real property. Other vital real property considerations not addressed by Oregon law but covered by UECA include:
whether an interest with priority under other law is affected by the environmental covenant, and whether the foreclosure of a prior interest
extinguishes the latter recorded restriction; what relationship exists between current land use law and the agreement; whether the agreement
can be extinguished by a tax lien, tax deed, or common law doctrines like adverse possession, prescription, abandonment and waiver;
whether the agreement can be extinguished by the state marketable title or dormant mineral interests statutes (both of which operate to
automatically terminate non-possessory interests which are non re-recorded within a certain period of time), and what happens to a recorded
use restriction when a property is the subject of an eminent domain proceeding.

       One of the major benefit of UECA are the remedies available to the state should a breach in institutional controls occur. Under
UECA, the ODEQ or another affected party may bring an action for immediate injunctive or other equitable relief if a breach of covenant
occurs. UECA gives the ODEQ immediate recourse if a party begins to contaminate the property in violation of the agreement. This
enforcement authority is supplemental to the agencies existing regulatory authority.

       Another important benefit of the UECA paradigm is its uniformity. UECA is a recent NCCUSL project, but as of this writing,
sixteen jurisdictions, including Idaho, have already enacted it; twelve additional states have introduced it for enactment; and sixteen more
states, including Washington, are likely to introduce it in 2007. This will be a boon for Oregon if the state were to uniformly adopt UECA,
as other state’s case law, forms, and experience with the act will be available as an aid in Oregon adjudications and implementation. It will
also benefit other parties to remediations and redevelopment projects, especially those operating in multiple states, by creating a common
instrument and national base of knowledge and experience. The uniformity of UECA’s definitional sections and other important provision
will make the effects of the adoption of an environmental covenant more predictable and therefore more attractive to the state of Oregon and
property owners.

       In sum, the adoption of UECA in Oregon would provide a more reliable means of placing long-term controls on contaminated
properties and would benefit economic development through uniformity and consistency of environmental controls and land usage. The
following chart gives a brief side-by-side comparison of the Oregon law and UECA.

             ISSUE                                          UECA                                             STATE LAW

Does the law mandate the              No. UECA only creates the means to implement           No. The law states that one way in which
institutional controls to be          the environmental covenant, it does NOT mandate        remedial action may achieve protection of
imposed on the property?              the specific institutional controls that are to be     human health and the environment is through
                                      contained in that covenant. Of course, institutional   the establishment of institutional controls, such
                                      controls will be implemented as part of the            as those provided in the EES, but gives no
                                      agreement reached between the agency and the           specific mandate. § 465.315(1)(c).
                                      parties to the agreement. Specific institutional
                                      controls may be required by state or federal law,
                                      but UECA only creates the means to implement
                                      such controls, it does not mandate the institutional
                                      controls to be adopted. The state agency has
                                      control over what institutional controls will be
                                      contained in the covenant.

Are there restrictions on the types   Very few. UECA allows the use of environmental
of environmental response             covenants in a broad range of situations. UECA         Yes. In order to enter an agreement for
projects that can use                 defines an “environmental covenant” as “a              remedial action with the ODEQ that results in
environmental covenants?              servitude arising under an environmental response      the implementation of institutional controls, the
                                      project that imposes activity and use limitations.”    ODEQ must believe the agreement will result in
                                      § 2(4). An “environmental response project” in         a substantial public benefit, which includes but
                                      turn is “a plan or work performed for                  is not limited to:
                                      environmental remediation or real property and         (A) The generation of substantial funding or
                                      conducted:                                             other resources facilitating remedial measures
                                          (A) under a federal or state program governing     at the facility in accordance with this section;
                                               environmental remediation of real

             ISSUE                                       UECA                                             STATE LAW
                                       (B) incident to closure of a solid or hazardous   (B) A commitment to perform substantial
                                           waste management unit, if the closure is      remedial measures at the facility in accordance
                                           conducted with approval of an agency; or      with this section;
                                       (C) under a state voluntary clean-up program
                                           authorized [under state law].”                (C) Productive reuse of a vacant or abandoned
                                   § 2(5).                                               industrial or commercial facility; or

                                                                                         (D) Development of a facility by a
                                                                                         governmental entity or nonprofit organization
                                                                                         to address an important public purpose.

Is the right of a state agency     No, except when the agency acts as a holder. §        Not addressed.
under the environmental            3(b) specifies that a “right of an agency under the
covenant or instrument an          act or under an environmental covenant . . . is not
interest in real property?         an interest in real property.”

                                                                                         Not addressed.
Can the environmental covenant     Yes. An environmental covenant may identify
or instrument be entered by more   more than one “holder.” §3(a). Any person,
parties than the agency and the    including an agency or unit of government, may be
current owner?                     a holder. The definition of “person” in UECA is
                                   broad. See § 2(7).

How is an interest with priority   Under § 3(d)(1), “an interest that has priority       Not addressed.
under other law affected by the    under other law is not affected by an
environmental covenant or          environmental covenant unless the person that
similar instrument?                owns the interest subordinates that interest to the
                                   covenant.” Agreeing to subordinate an interest
                                   “does not by itself impose any affirmative
                                   obligation on the person with respect to the

            ISSUE                                         UECA                                               STATE LAW
                                    environmental covenant.” §3(d)(4).

                                                                                            Not addressed.
Does the environmental covenant     UECA itself does not address clean up liability.
or similar instrument limit         Such decisions are left to existing state law. UECA
liability of the private parties    does provide that a party who is able to enforce the
affected?                           covenant is not liable or responsible for
                                    environmental remediation solely based that
                                    ability. § 11(c).

Is the environmental covenant or    Yes. Under § 5(b), an environmental covenant is         Not addressed.
similar instrument enforceable      valid and enforceable even if:
even if it contradicts common law       (1) it is not appurtenant to an interest in real
restrictions on real property?              property;
                                        (2) it can be or has been assigned to a person
                                            other than the original holder;
                                        (3) it is not of a character that has been
                                            recognized traditionally at common law;
                                        (4) it imposes a negative burden;
                                        (5) it imposes an affirmative obligation on a
                                            person having an interest in the real
                                            property or on the holder;
                                        (6) the benefit or the burden does not touch or
                                            concern real property;
                                        (7) there is no privity of estate or contract;
                                        (8) the holder dies, ceases to exist, resigns, or
                                            is replaced; or
                                        (9) the owner of an interest subject to the
                                            environmental covenant and the holder are
                                            the same person.
                                    An agreement made before UECA is adopted that
                                    contains activity and use limitations is not invalid
                                    or unenforceable because of any of the above

            ISSUE                                         UECA                                            STATE LAW
                                   limitations. § 5(c).

What is the relationship between   UECA does not authorize a use of real property        Not addressed.
existing land use law and the      otherwise prohibited by zoning, by other law
environmental covenant or          regulating the use of real property, or by a
similar instrument?                recorded instrument that has priority over the
                                   environmental covenant. § 6. However, an
                                   environmental covenant MAY prohibit or restrict
                                   real property use that would otherwise be
                                   authorized by zoning or other law. Id.

Is the environmental covenant or   Yes. An environmental covenant must be recorded       Not in all cases. ODEQ may require the
similar instrument recorded, and   in every county where the real property is located.   property owner to record an EES that transfers a
if so, how?                        Holders are treated as grantees for indexing. The     property "right" (such as the right to install a
                                   environmental covenant is subject to the state laws   drinking water well, or the right to dig on a
                                   governing recording and priority of interests in      certain part of the property) to ODEQ, allowing
                                   real estate. § 8(a), (b).                             it to act as a deed restriction.

                                   UECA also includes an optional provision
                                   establishing a registry for environmental
                                   covenants. § 12.

What is the duration of an         Under UECA § 9(a), an environmental covenant is       The benefits and burdens of the Easement and
environmental covenant or          perpetual, unless:                                    Equitable Servitude run with the land and bind
similar instrument?                   1. It is limited by its terms to specific          all current and future owners. DEQ also has
                                          duration or terminates when a certain event    the perpetual right to enforce the conditions and
                                          occurs;                                        restrictions set forth in the EES.
                                      2. terminated by consent’
                                      3. terminated by foreclosure or an interest
                                          that has priority over the covenant; or
                                      4. it is terminated by an eminent domain

             ISSUE                                       UECA                                               STATE LAW
                                           proceeding in certain circumstances.\

                                                                                           Not addressed.
Can the state agency unilaterally   Yes, but only via a court order under the doctrine
terminate or modify the             of changed circumstances after the state agency
environmental covenant or           has determined that the intended benefits of the
similar instrument?                 covenant can no longer be realized. § 9(b).

Can the environmental covenant      No, UECA specifically deals with these real-world      Not addressed.
or similar instrument be modified   problems by stating an environmental covenant
by a tax lien, tax deed, or the     cannot be modified by issuance of a tax deed,
common law doctrines like           foreclosure of a tax lien, or application of the
adverse possession, prescription,   doctrine of adverse possession, prescription,
abandonment and waiver?             abandonment, waiver, lack of enforcement, or
                                    acquiescence, or a similar doctrine, unless
                                    otherwise provided in § 9(a) or (b), as described in
                                    the two immediate boxes above.

Can the environmental covenant      No. § 9(d).                                            Not addressed.
be modified by the state
marketable title or dormant
mineral interests statutes?

Can the environmental covenant      Yes. Under § 10, the amendment or termination of       Not addressed.
or similar instrument be            the environmental covenant must be signed by:
amended or terminated by the            1. the agency;
consent of the parties?                 2. the current fee simple owner unless waived
                                           by the agency;
                                        3. each person who signed the covenant
                                           except in limited circumstances (e.g.

            ISSUE                                      UECA                                            STATE LAW
                                       inability to be found, waiver); and
                                    4. the holder, unless the above parties agree
                                       to remove and replace the holder.

                                 Also, if an owner of an interest in the real property
                                 exists, that interest is not affected by amendment
                                 or termination unless that owner consents or has
                                 waived the right to consent. § 10(b).

                                 A holder may not assign the holder’s interest
                                 without consent from the other parties unless
                                 otherwise provided in the environmental covenant,
                                 and the assignment of an environmental covenant
                                 to a new holder is an amendment to the covenant.
                                 § 10 (c), (d).
                                 A court may also fill the holder’s position. § 10(e).

How is an environmental          A party to the covenant, the agency, a person           Upon any violation of any condition or
covenant or similar instrument   granted power to enforce by the covenant, a person      restriction contained in this Easement and
enforced?                        whose interest in real property or whose collateral     Equitable Servitudes, DEQ may enforce this
                                 or liability may be affected by the violation, and      Easement and Equitable Servitudes as provided
                                 the unit of local government where the property is      in the prospective purchaser agreement or may
                                 located may bring a civil action for injunctive or      seek any other available legal or equitable
                                 other equitable relief. § 11(a).                        remedy to enforce this Easement and Equitable
                                 The agency retains its ability to enforce
                                 institutional controls under an environmental
                                 response project instituted under other law. §


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