CERCLA Section 107 Liable Parties (

							FEDERAL ENVIRONMENTAL
(CERCLA) LIABILITY




Mary C. Johnson
Associate Regional Counsel
EPA, Region 4
November 2007




CERCLA Section 107
Liable Parties (PRPs)
   Pursuant to Section 107(a) of CERCLA, 42 U.S.C. §
    9607(a), potentially responsible parties include:
   (1) current owners or operators of a facility;
   (2) past owners or operators who owned or
    operated the facility at the time hazardous
    substances were disposed at the facility;
   (3) persons who arranged for the disposal of
    hazardous substances (usually known as
    generators); and
   (4) persons who transported hazardous substances
    and selected the site for disposal.




                                                        1
How to Buy a Superfund Site
without becoming a Section 107
         owner,”
“current owner,” and thus liable ?
   The “Brownfields Amendments of 2002
    provide important liability limitations
    for landowners that qualify as a (an):

   1. bona fide prospective purchaser;
   2. contiguous property owner; or
   3. innocent landowner.




Small Business Liability Relief
and Brownfields Revitalization
Act (Brownfields Amendments)

   Enacted on January 11, 2002
               EPA’
    Established EPA’s Brownfields Grants
    Program
    – Provides funding to assess and clean up
      Brownfields sites
    – Provides funding to enhance state and tribal
      cleanup programs
   Clarified CERCLA liability provisions for
    certain landowners




                                                     2
Brownfields Amendments
Liability Provisions
   New liability protections for:
    - Bona fide prospective purchasers (BFPPs)
        CERCLA 107(r) and 101(40)
    - Contiguous property owners
        CERCLA 107(q)
   Revised provision for Innocent Landowner
    – CERCLA 107(b)(3) & 101(35)(A)(i) – amended
                               know”
      definition of “reason to know” (all appropriate
      inquiries) in CERCLA 101(35)(B)




Bona Fide Prospective
Purchaser (BFPP)
   CERCLA 107(r), the bona fide prospective
    purchaser (BFPP) provision provides a new
    landowner liability protection and limits
    EPA’
    EPA’s recourse for unrecovered response
    costs to a lien on the property for the
    increase in the fair market value attributable
       EPA’
    to EPA’s response action.
   To qualify as a BFPP, a person must meet
    the criteria set forth in CERCLA Section
    101(40).




                                                        3
COMMON ELEMENTS
   1. all appropriate inquiry
   2. no affiliation with a liable party
   3. compliance w/ land use restrictions and
    institutional controls
   4. taking reasonable steps with respect to
    hazardous substances on property
   5. cooperation, assistance, and access
   6. compliance with information requests and
    administrative subpoenas
   7. providing legally required notices
   8. buy property after January 11, 2002 (BFPP)




EPA Guidance on BFPP

   www.epa.gov/compliance/resources/p
    olicies/cleanup/superfund/common-
    elem-ref.pdf

   Contact Staff Attorney for Superfund
    Site regarding Region 4’s Prospective
    Purchaser Inquiry Process




                                                    4
Innocent Landowner
Defense
   Party must demonstrate that hazardous
    substance release was by a third party with
    whom he had no direct or indirect
    contractual relationship. CERCLA 107(b)(3)
                relationship”
    “contractual relationship” – defined in
    101(35)(A)(i)
     Includes virtually all land transfers unless
      (among other exceptions), property was
      acquired after disposal occurred and party can
      establish that he did not know or had no “reason
         know”
      to know” that hazardous substance was
      disposed of on, in, or at the facility




Innocent Landowner
Defense

              know”
    “Reason to know” – 101(35)(B)
    – Must demonstrate that, prior to
      purchasing property, he conducted AAI
      “into the previous ownership and uses of
      the facility in accordance with generally
      accepted good commercial and customary
                       practices”
      standards and practices”




                                                         5
Innocent Landowner
Defense
   Must also demonstrate compliance
    with additional CERCLA 107(b)(3)
    requirements upon and after
    purchase:
                     care”
    – exercise “due care” with respect to the
      hazardous substances
                        steps”
    – take “reasonable steps” and precautions
      against acts or omissions of third party




Contiguous Property
Owner Exemption
   Owners of contiguous property (and properties
                         situated”
    “otherwise similarly situated”) not considered to be
             operator,
    owner or operator, if:
    – property contaminated solely due to release from property
      owned by someone else
    – did not cause, contribute, or consent to release or
      threatened release
    – after conducting AAI prior to purchase, did not know or
      have reason to know that property was or could be
      contaminated by a release from the neighboring property
    – “protects parties that are essentially victims of pollution
                                 neighbor’ actions.”
      incidents caused by their neighbor’s actions.” S. Rep. No.
      107-2, at 10 (2001).




                                                                    6
ALL APPROPRIATE
INQUIRY (AAI)
   CERCLA Section 101(35)(B)
   Amended by Brownfields Amendments
   Applicability
    – Liability Protection
          BFPPs
          Contiguous Property Owners
          Innocent Landowners
    – Brownfields Assessment Grant Recipients
                                            EPA’
           Parties who receive grants under EPA’s Brownfields
           Grant program to assess and characterize properties
          Parties applying for Brownfields grants who must
           establish BFPP status




AAI-linked Liability
Protection
   Innocent Landowners, Contiguous Property
    Owners, and BFPPs all must conduct AAI
    prior to purchase
   If know, or have reason to know, that
    property is contaminated prior to purchase,
    cannot qualify as Innocent Landowners or
    Contiguous Property Owners
   BFPP can purchase property with knowledge
    of contamination and maintain protection
    from liability




                                                                 7
All Appropriate Inquiry
(AAI)

   Brownfields Amendments:
     – required EPA to develop regulations
       establishing standards and practices for
       how to conduct AAIs
     – list 10 criteria EPA required to include in
       regulations
     - November 1, 2006 New AAI Regulations
       Effective




Interim AAI Standard
   Properties purchased prior to May 31, 1997,
    court shall take into account in determining
    AAI:
    – Specialized knowledge of defendant
    – Commonly known information on property
    – Value of property if clean compared to purchase
      price
    – Obviousness of presence or likely presence of
      contamination
    – Ability of defendant to detect contamination




                                                        8
Interim AAI Standard

   Properties purchased after May 31, 1997:
    – the procedures of American Society for Testing
      and Materials (ASTM), including ASTM Standard
      E1527-97
   EPA Clarification of Interim Standard
    – Final Rule May 9, 2003 (68 FR 24888)
    – ASTM E1527-00 also satisfies interim standard
   Interim standard remains effective through
    November 1, 2006




Scope of AAI /
Contaminants of Concern

   for CERCLA liability protection
    – to identify releases and threatened releases of
      hazardous substances
   for Brownfields grants
                     site”
    – “brownfields site” includes properties
      contaminated with substances not included in
                               substances”
      definition of “hazardous substances”
    – includes petroleum and petroleum products,
      controlled substances, and pollutants and
      contaminants




                                                        9
Residential Property
exemption
   Statute provides exemption from completing
    full AAI only in instances where a non-
    governmental, non-commercial party buying
    residential property for residential use
    (CERCLA 101(40)(B)(iv))
   Site inspection and title search sufficient
   AAI required only if site inspection reveals
    reason to look further




AAI Final Rule
   40 CFR Part 312 – “Standards and Practices
                        Inquiry”
    for All Appropriate Inquiry”
   Effective date is November 1, 2006, one
    year after publication in Federal Register
   Until November 1, 2006, either the final
    regulation (or ASTM E 1527-05) or the
    interim standard (ASTM E1527-00 or E1527-
    97) can be used to satisfy AAI
   After November 1, 2006, parties must follow
    the provisions of the final rule or the ASTM
    E1527-05 standard.




                                                   10
Applicable AAI Standard
Purchase Date            Standard
before 5/31/97           five statutory factors

6/1/97 to 11/1/05       ASTM E1527-97

5/9/03 to 11/1/05       ASTM E1527-97 or 00

11/1/05 to 11/1/06      ASTM E1527-97, 00, 05 or
                        AAI Rule (40 CRF Part 312)

After 11/1/06           AAI Rule or ASTM E1527-05




When Must AAI be
performed?

   Must perform AAI prior to acquiring the property
   Must be conducted or updated within one year prior
    to date of acquisition
   Certain aspects must be conducted or updated w/in
    180 days prior to acquisition (interviews, records
    review, site inspection, lien search)
   Previously-conducted AAIs may be used as sources
    of information, even if more than a year old




                                                         11
Who can perform AAI?

   Person who supervises or oversees the
    conduct of AAI must meet the
    definition of Environmental
    Professional (EP)
   Person who does not qualify as an EP
    may assist conduct of AAI if under the
    supervision or responsible charge of
    an EP




Definition of Environmental
Professional
   Person who has:
    (1) Sufficient specific education, training,
      and experience to exercise professional
      judgment to develop opinions and
      conclusions regarding the presence or
      releases or threatened releases of
      hazardous substances; AND




                                                   12
Definition of Environmental
Professional
    (2a) holds a professional engineer or
    professional geologist license, or other state
    or federal government certification or
    environmental professional license and has
    3 years of relevant full-time experience; OR
    (2b) has a degree in science or engineering
    and 5 years of relevant full-time experience;
    OR
    (2c) has 10 years of relevant full-time
    experience.




Definition of Environmental
Professional
   Relevant Experience:
    – Participation in the performance of AAI
      investigations, environmental site
      assessments, or other site investigations
      that may include environmental analyses,
      investigations, and remediation which
      involve the understanding of surface and
      subsurface environmental conditions and
      the processes used




                                                     13
AAI Performance Factors

   Gather information required to meet
    standards that is:
     – publicly available
     – obtainable within reasonable time and cost
       constraints, and
     – can be practically reviewed
     – 312.20(f)(1)
   Review and evaluate thoroughness and
    reliability of information gathered
    (312.20(f)(2)




AAI Objectives

   AAI objective is to result in identification
    of conditions indicative of releases and
    threatened releases
    – of hazardous substances (312.20(e))
          CERCLA liability
    – Of hazardous substances, pollutants,
      contaminants, petroleum and petroleum
      products, and controlled
      scubstances(312.20(e)(2))
          Grant recipients




                                                    14
Interviews

   Current owners/occupants must be
    interviewed (312.23(a),(b))
   Past owners/occupants and others, if
    necessary to meet objectives and
    performance factors (312.23(c))
   Neighboring property owners, if
    property abandoned (at least one
    neighbor required) (312.23(d))




Review of Historical Sources
of Information
   Historical documents and records must
    be reviewed (312.24(a))
    – Records may include, but are not limited
      to: aerial photos, fire insurance maps,
      building department records, chain of
      title, land use records
   Review records covering a period of
                     property’
    time back to the property’s obvious
    first developed use (312.24(b))




                                                 15
Review of Government
Records
   Must review federal, state, and local
    government records (or databases
    containing government records) for subject
    and nearby properties
    – Subject property (312.26(b))
    – Nearby and adjoining properties with reported
      releases (312.26(c)(1))
    – Nearby and adjoining properties previously
      identified or regulated by government entity
      (312.26(c)(2))
   Must review tribal records if property is
    located on or near tribal-owned lands




Government Records
(continued)
   AAI regulation lists government records that
    should be reviewed (312.26(b) and (c)) and
    specifies the minimum search distance for
    each record (312.26(d))
    – Modification of the minimum search distance
      must be documented (312.26(d))
   Records can include CERCLIS, registries of
    institutional and engineering controls
    (limited to subject property), and leaking
    USTs




                                                      16
Visual Inspections

   On-site visual inspection of subject property
    required (312.27(a)(1))
    – Limited exemptions (312.27(c))
   Visual inspection of adjoining properties
    from nearest vantage point (312.27(a)(2))
   EPA strongly recommends that EP perform
    the visual inspection (312 Description of
    Rule)




Search for Cleanup Liens
   Search for recorded environmental cleanup
    liens filed or recorded under federal, state,
    tribal or local law (312.25(a))

   Property owner may provide lien search
    information to EP (312.25(b))

   EP not required to perform the lien search
    (312.21(b))




                                                    17
Retention of Previous AAI
Requirements (SARA)
   AAI rule still retains all AAI requirements
    from previous innocent landowner
    provisions (under SARA):
    – Relationship btwn purchase price vs. value of
      property, if not contaminated
    – Specialized knowledge
    – Commonly known and reasonable ascertainable
      information
    – Degree of obviousness and ability to detect
   Must consider all of these factors




Relationship between
Purchase Price and Clean
Value of Property
   Must consider whether the purchase
    price reflects the fair market value of
    the property, if not contaminated
    (312.29(a))
   If price does not reflect value, should
    consider whether differential is due to
    presence of contamination (312.29(b)
    and (c))




                                                      18
  Specialized Knowledge

     Purchasers and persons conducting
      AAI must take into account (312.28):
      – Their specialized knowledge of:
          Subject property
          Area surrounding property

          Conditions of adjoining properties; and

      – Any other experience relevant to the
        inquiry




Commonly Known or Reasonably
Ascertainable Information
     Must consider information that is
      commonly known and reasonably
      ascertainable within the local
      community (312.30(a))
     Information may be obtained from
      (312.30(c)):
      – Current owners or occupants
      – Local and state government officials
      – Other sources (e.g. newspapers, local
        libraries, historical societies)




                                                     19
 Degree of Obviousness and
 Ability to Detect
 Contamination

    Persons conducting AAI must take into account all
     information collected and consider:
     – The degree of obviousness of the presence of releases or
       threatened releases at subject property (312.31(a)), and
     – The ability to detect contamination by appropriate
       investigation (312.31(b))
    If necessary, should include an opinion regarding
     additional appropriate investigation, if any
     (312.31(b)).
     – No opinion needs to be provided if EP does not think that
       these factors warrant additional investigation




Delineation of Responsibility

     Activities done by EP or under the
      Supervision of EP
      – Interviews
      – Record Reviews
      – Visual inspection
      – Commonly known or reasonably
        ascertainable info
      – Degree of obviousness of presence of
        contamination




                                                                   20
Delineation of Responsibility
        Landowner responsible for “additional
         inquiries”
         inquiries”
         – Specialized knowledge or experience
         – Relationship of purchase price to FMV, if not
           contaminated
         – Commonly known or reasonably ascertainable
           info
         – Search for cleanup liens
        Landowner not required to provide
                     inquiry”
         “additional inquiry” info to EP
         – EP should assess the impact on ability to render
           opinion regarding site conditions
         – If impacts ability, EP should document as data
           gap




     Written Report
    Must include, at a minimum:
       EP’
     – EP’s opinion as to whether the inquiry has “identified
       conditions indicative of releases or threatened
       releases of hazardous substances on, at, in, or to the
                property.”
       subject property.” (312.21(c)(1))
     – Identification of data gaps (312.21(c)(2))
     – Qualifications of the EP (312.21(c)(3)

    Must be signed by the EP (312.21(d))

    Format, structure, length of the written report not
     specified in rule (ASTM 1527-05 does provide a
     recommended format)




                                                                21
Data Gaps

   EP must identify data gaps that affect
    his or her ability to identify conditions
    indicative of releases or threatened
    releases of hazardous substances on,
    at, in, or to the subject property
   EP must comment on significance of
    data gaps




Shelf Life of the Written
Report
   One year, with updates required after
    180 days for the following activities
    (must actually perform these activities
    during the 180 day period prior to
    purchase):
     – Interviews
     – Visual inspection of the subject property
     – Historical records review
     – Search for recorded environmental
       cleanup liens




                                                   22
Disclosure Obligations

   AAI rule does not include any new reporting
    or disclosure obligations
   Limited documentation requirements
    intended to enhance the inquiries by
    requiring EPs to record the results and
    conclusions regarding conditions indicative
    of releases
   Rule does not require that report be
    submitted to EPA or retained by landowner




Compliance with AAI

   EPA not necessarily involved in performance
    or review for completeness of AAI
    performed
   Written AAI report may allow person
    claiming CERCLA liability protection to offer
    documentation in support of claim that AAI
    conducted in compliance with CERCLA
   AAI rule does not affect admissibility of
    report as evidence




                                                    23
Continuing Obligations

   Compliance with land use restrictions and
    does not impede effectiveness of
    institutional controls
                         steps”
    Taking “reasonable steps” with respect to
    hazardous substances
   Provides full cooperation, assistance, and
    access
   Compliance with CERCLA requests and
    subpoenas for information
   Provides all legally required notices




Compliance with Land
Use Restrictions
   Compliance required even if restrictions not
    in place at time of purchase
   May require property owner to take steps to
    implement controls (record deed notice,
    agree to easement or covenant)
   If IC does not successfully implement a land
    use restriction relied on in connection with
    response action, landowner still required to
    comply with restriction




                                                   24
Cooperation, Assistance,
and Access
   To conduct response actions or natural
    resource restoration
   Includes cooperation and access necessary
    for the installation, integrity, operation, and
    maintenance of any complete or partial
    response action or natural resource
    restoration
   CERCLA 101(4)(E), 107(q)(1)(A)(iv),
    101(35)(A)




Compliance with Info
Requests

   BFPPs and contiguous property owners
   Timely, accurate, and complete
    responses
   Inconsequential response errors – EPA
    may in its discretion still consider party
    protected from liability if meet all other
    conditions




                                                      25
Provide Legally Required
Notices

   BFPPs and contiguous property owners
   May include notices required under federal,
    state, and local law
   Federal notice examples: CERCLA 103,
    RCRA 9002, EPCRA 304
   Party has burden of ascertaining applicable
    notice requirements
   EPA may require self-certification
   Ongoing obligation




“Reasonable Steps”

   Stop continuing releases,
   Prevent threatened future releases,
    and
   Prevent or limit human,
    environmental, or natural resource
    exposure to earlier hazardous
    substance releases




                                                  26
“Reasonable Steps”

   Same legal standard for the three
    landowner provisions, but obligations may
    differ
   BFPP may have greater reasonable steps
    obligations because BFPP can purchase with
    knowledge of contamination and
    opportunity to plan
   New contamination gives rise to full CERCLA
    liability




“Reasonable Steps”

   Site-specific, fact-based inquiry
         Care”
    “Due Care” CERCLA 107(b)(3)(a)
                                       care”
    Statutory language differs for “due care”
                       steps,”
    and “reasonable steps,” but existing due
    care case law may be good reference
   Courts addressing due care generally
    require landowner to take some positive or
    affirmative step(s) with respect to
    hazardous substances




                                                  27
“Reasonable Steps”

   Examples / General Guidance
    – Notification
    – Site Restrictions
    – Containing Releases or Threatened
      Releases
    – Remediation
    – Site Investigation
    – Performance of EPA Approved Remedy




“Reasonable Steps”

   Comfort/Status Letters Addressing
    Reasonable Steps
    – Site-specific, discretionary, upon request
    – typically limited to sites with significant
      EPA involvement
    – used to facility cleanup/ redevelopment of
      brownfields; when realistic probability of
      Superfund liability; no other mechanism
                   party’
      to address party’s concerns




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               DISCLAIMER

   This presentation is intended for
    informational purposes only and
    creates no substantive rights for any
    persons. It is not a regulation and
    does not impose any legal obligations.
    It is not intended as a substitute for
                               guidance(s)
    reading the statute or the guidance(s)
    itself.




EPA Contact Information
Mary C. Johnson
Associate Regional Counsel
EPA Region 4
404.562.9526
johnson.maryc@epa.gov

Karen Singer
Associate Regional Counsel
EPA Region 4
404.562.9540
singer.karen@epa.gov




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