Brownfields Bill Advances

Scott H. Reisch
Robert E. Witwer
Hogan & Hartson L.L.P.
Denver, Colorado

On April 25, 2001, on a bipartisan vote of 99-0, the United States Senate passed the Brownfields Revitalization and Environmental Restoration Act of 2001 (the "Brownfields Bill"). The purpose of the Brownfields Bill, which amends the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), is to promote the cleanup and reuse of brownfields and to provide financial assistance for brownfields revitalization.

Following Senate passage, the Brownfields Bill was referred to the U.S. House of Representatives and is currently pending in the House Subcommittee on Environment and Hazardous Materials and the House Subcommittee on Water Resources and Environment, where it is subject to modification. For that reason, the following discussion pertains only to the Senate version of the Brownfields Bill.

The Brownfields Bill has three key components: 1) increased funding for site evaluation and cleanup; 2) CERCLA liability reform; and 3) new limitations on EPA authority. Each of these components is aimed at accelerating the cleanup process on the estimated 400,000 - 500,000 brownfields sites in the United States.

Funding
The Brownfields Bill authorizes the appropriation of $200 million per year for each of the next five years for grants to state and local governmental agencies for various brownfields initiatives, including site characterization, assessment and remediation. An additional $50 million per year for each of the next five years is authorized for grants to states and Indian tribes for implementing voluntary cleanup programs that meet certain criteria.

CERCLA Liability Reform
Current law imposes strict, joint and several and retroactive liability on past and present owners and operators of contaminated sites. The Brownfields Bill provides liability protection for contiguous property owners, prospective purchasers and innocent landowners.

The Brownfields Bill provides a liability shield for persons whose property is contaminated by the migration of hazardous substances from a contiguous property. Liability protection for contiguous landowners only exists, however, insofar as they: 1) did not cause or contribute to the release of hazardous substances; 2) are not otherwise potentially liable, and are not affiliated with any person potentially liable, for response costs at a facility; 3) have taken reasonable steps to stop any continuing release and prevent any future release; 4) provide cooperation and access to authorized persons conducting response actions and natural resource restoration efforts; 5) comply with land use restrictions established or relied upon in connection with the response action; 6) comply with EPA information requests; (7) provide legally required notices with respect to the discovery or release of hazardous substances at the facility; and 8) at the time the property was acquired, "conducted all appropriate inquiry" and "did not know or have a reason to know" that the property was or could be contaminated by release from the other property.

Under the Brownfields Bill's "bona fide prospective purchasers" provision, a prospective owner qualifies for liability protection if they: 1) acquire the property after enactment of the Brownfields Bill; 2) can establish that disposal of hazardous substances occurred before they acquired the property; and 3) have met qualifications similar to those required of contiguous property owners, except that a prospective purchaser does not need to show that they did not know or have reason to know that the property was contaminated. Despite the bona fide purchaser exemption, however, the federal government may acquire a lien on the property if the federal government has expended unrecoverable funds cleaning up the property and cleanup results in a windfall increase in the property's value. The lien is limited to the amount of the increase in property value caused by the cleanup and continues until the government collects its unrecovered response costs.

Finally, the Brownfields Bill modifies the current "innocent landowner" defense by expanding the pre-conditions for claiming the defense (e.g., by requiring that the landowner provides cooperation and access in connection with any response action, complies with land use controls and does not impede institutional controls) and defining the term "all appropriate inquiry." Under the existing statute, a purchaser of contaminated property has a defense from liability if they can show that prior to purchasing the property, they conducted "all appropriate inquiry" and did not find the contamination. Under the Brownfields Bill, EPA will be required to issue regulations within 2 years of the bill's enactment, which define "all appropriate inquiry" to include: 1) the result of an inquiry by an environmental professional; 2) interviews with past and present owners, operators, and occupants of the facility; 3) reviews of historical sources, such as chain of title documents and aerial photos; 4) searches for recorded environmental cleanup liens; 5) reviews of government records; 6) visual inspection of the facility and adjoining properties; 7) specialized knowledge on the part of the purchaser; 8) the relationship of the purchase price to the value of the property if uncontaminated; 9) commonly known or reasonably ascertainable information about the property; and 10) the obviousness of the presence or likely presence of contamination at the property, and the ability to detect the contamination by appropriate investigation. These requirements are very similar to the current ASTM standard for Phase I environmental site assessments, and so would largely confirm the current understanding of the requirements for the innocent landowner defense. Indeed, the Brownfields Bill expressly provides that until EPA issues the regulations required by the bill, for transactions dated May 31, 1997 and later, compliance with the ASTM standard constitutes "all appropriate inquiry."

The Brownfields Bill also confirms the general understanding that a much more limited review is considered "appropriate" in the context of a residential transaction. Under the Brownfields Bill, only a title search and property inspection would be necessary to meet the "all appropriate inquiry" standard.

The Brownfields Bill departs from current interpretations of CERCLA with respect to transactions prior to May 31, 1997. Until EPA issues its regulations, courts are directed to consider only a subset of the ten factors listed above, including any specialized knowledge of the purchaser, the relationship of the purchase price to the value of the property if uncontaminated, commonly known information about the property, the obviousness of the presence or likely presence of contamination, and the ability of the defendant to detect the contamination. It remains to be seen whether this language will permit defendants covered by this provision to avoid liability even when they have failed to obtain an ASTM-quality Phase I.

Limitations on EPA Authority
Under the Brownfields Bill, at the request of a state, the President "generally shall" defer listing a site on the National Priorities List if the President determines that: 1) the state, or another party under agreement with or order from the state, is conducting a response action at the eligible site that will provide long-term protection for human health and the environment; or 2) the state is "actively pursuing an agreement to perform a response action" at the site. The deferral decision will be revisited after one year, at which time the President will make a determination on the progress of the response action. If "reasonable progress" has not been made, then the President may add the eligible response site to the National Priorities List.

Finally, the Brownfields Bill provides that the President may not take administrative or judicial action with respect to an eligible response site which is undergoing a state response action unless: 1) the state requests assistance in the performance of a response action; 2) the contamination has migrated or will migrate across a state line or onto federal property; 3) there is an "imminent and substantial endangerment to public health or welfare or the environment" and additional response actions are "likely to be necessary" to address, prevent, limit or mitigate the release or threatened release; or 4) after consultation with the state, the EPA determines that new information has been discovered such that further remediation is required to protect "public health or welfare or the environment." For a state program to qualify for EPA forbearance, however, it must contain several elements, including public participation requirements, a requirement that cleanup be conducted in accordance with federal law, and a mechanism by which "a person that is affected or may be affected by a release . . . may request the conduct of a site assessment."

Conclusion
While the Brownfields Bill is an improvement over current law in many ways, it does not provide the kind of far-reaching CERCLA reform that many have been awaiting. For example, nothing in the bill moves EPA towards the risk-based programs adopted by many states. Indeed, because state programs will not qualify for EPA forbearance unless they provide for cleanups in accordance with federal law, it might be argued that the current bill pushes state voluntary cleanup programs closer to the federal Superfund model. With several other brownfield bills currently making their way through the Senate and the House, affected parties can only hope that if Congress finally amends CERCLA, it will do so in a way that provides a real boost to brownfields cleanup and redevelopment.