New Brownfields Bill - Bullet Points for Bullet-proof Builders

John W. Traeger
Kathleen S. Northcutt

On January 11, 2002, President Bush signed into law the "Small Business Liability Relief and Brownfields Revitalization Act" (Act) which provides a roadmap for builders seeking to develop a contaminated property without buying enormous liabilities.

The Act amends CERCLA and fosters brownfields redevelopment. The Act features four main sections: (1) two new exemptions - the De Micromis Exemption and the Municipal Solid Waste Exemption; (2) brownfields revitalization funding; (3) brownfields liability clarifications for contiguous property owners, prospective property owners and innocent landowners; and, (4) new rules relating to State Response Programs. The following bullet points highlight the new provisions of the bill and indicate the new flexibility and funding available to developers building in areas previously deemed too "brown" to develop.

I. TWO NEW EXEMPTIONS

Existing EPA policies were codified in legislative form:

• DE MICROMIS EXEMPTION (applies to all persons, not just small businesses)
  
  • A person shall not be liable with respect to response costs at a facility on the National Priority List ("NPL")
    
  • If the material disposed of is less than 110 gallons of liquid materials or 200 pounds of solid materials; and,
    
  • All of the disposal, treatment or transport occurred before April 1, 2001.
• MUNICIPAL SOLID WASTE EXEMPTION
  
  • A person shall not be liable, with respect to response costs at a facility on the NPL,
    
  • For municipal solid waste disposed of (before April 1, 2001) at a facility if the person can demonstrate the person is
    
    • Residential
      
    • A small business entity (an entity that employed less than 100 hundred persons on average during the three taxable years preceding notice of potential liability)
      
    • A 501(c)(3) organization (that employed less than 100 persons on average in the taxable year preceding notice of potential liability)

Neither exemption will apply where:

• The waste contributed (or could contribute) significantly to the cost of the response action, or
  
• The person has failed to comply with an information request or administrative subpoena, or
  
• The person has impeded or is impeding the performance of a response action, or
  
• The person has been convicted of a criminal violation for the conduct to which the exemption would apply (De Micromis Exemption).

II. BROWNFIELDS REVITALIZATION FUNDING

The Act authorizes Congress to appropriate $200,000,000 to carry out the Act for fiscal years 2002 through 2006. $50,000,000 (25%) of this amount shall be used for site characterization, assessment, and remediation of facilities. The Act authorizes grants of up to $200,000 for brownfields site characterization and assessment (up to $350,000 if the Administrator issues a waiver) and up to $1,000,000 for brownfields remediation (additional grants for remediation possible any year after initial grant).

III. BROWNFIELDS LIABILITY CLARIFICATION

The Act clarifies the liability of contiguous property owners, prospective purchasers of brownfields sites, and addresses the innocent landowner defense.

• CONTIGUOUS PROPERTY OWNERS

A person that owns real property that is contiguous to, that is or may be contaminated by a release or threatened release of a hazardous substance from real property that is not owned by that person shall not be considered to be an owner or operator of a vessel or facility solely by reason of the contamination if the person:

• CAUSE - did not cause, contribute, or consent to the release.
  
• STOP AND PREVENT RELEASES - takes reasonable steps to stop any continuing release, prevent any future release, prevent human, environmental, or natural resource exposure to hazardous substances on or from property owned by that person.
  
• INSTITUTIONAL CONTROLS - complies with any existing land use restrictions and does not impede the effectiveness of any institutional control employed in connection with a response action.
  
• REQUESTS FOR INFORMATION - complies with Requests for Information (RFIs).
  
• NOTICES - provides legally required notices with respect to discovery or release of hazardous substance.
  
• APPROPRIATE INQUIRY - conducts all "appropriate inquiry" and possesses no knowledge or reason to know of possible contamination at the time the person acquired the property.

The Act provides that the EPA must promulgate regulations to provide standards and guidance on the definition of '"appropriate inquiry."

• BONA FIDE PROSPECTIVE PURCHASER

A person will be considered a bona fide prospective purchase if the person acquires ownership of a facility (after January 11, 2002) and establishes each of the following elements:

• NO DISPOSAL PRIOR TO ACQUISITION - all disposal of hazardous substances must be prior to acquisition.
• INQUIRIES - purchaser made all "appropriate inquiries" into previous ownership and uses of facility; in the case of property for residential use, a facility inspection and title search that reveal no basis for further investigation will suffice.
  
• NOTICES - the purchaser must provide all legally required notices with respect to the discovery or release of any hazardous substances at the facility.
  
• CARE - the purchaser must exercise appropriate care to stop any continuing release, prevent any threatened future release; prevent or limit human, environmental, or natural resource exposure to any previously released hazardous substance.
  
• COOPERATION, ASSISTANCE and ACCESS - purchaser must provide full cooperation to regulatory authorities.
  
• INSTITUTIONAL CONTROL - purchaser must comply with land use restrictions established or relied on in connection with response action and must not impede the effectiveness or integrity of any institutional control.
  
• REQUESTS and SUBPOENAS - purchaser must comply with RFIs and subpoenas.
  
• NO AFFILIATION - purchaser must have no affiliation with potentially liable parties.
  
• LIEN - if certain conditions are met and purchaser is not liable because they are deemed to be a bona fide prospective purchaser, the United States may obtain a lien on the facility or may, by agreement with the owner, obtain a lien on any other property or assurance of payment, for unrecovered response costs.
  
  • Conditions for Lien:
    
    • The EPA has implemented a response action for which there are unrecovered costs.
      
    • The response action increases the fair market value of the facility.
      
    • The lien does not exceed the increase in fair market value of the property that is attributable to the response action.

     

• INNOCENT LANDOWNER DEFENSE

The Act clarifies when one will qualify for the innocent landowner defense by requiring the US EPA to promulgate regulations defining "appropriate inquiries." Hopefully the regulations will further expand the standards set forth by the American Society of Testing and Materials (ASTM Standards). The Act provides criteria for the US EPA to include when promulgating such regulations. Many of these criteria are mentioned in the ASTM Standards. These include the following factors (some of these were previously included in CERCLA):

• Results of inquiry by environmental professional.
  
• Interviews with past and present owners, operators and occupants of the facility.
  
• Reviews of historical sources and governmental records.
  
• Searches for recorded environmental cleanup liens.
  
• Visual inspections of the property.
  
• Innocent landowner's specialized knowledge.
  
• Relationship of the purchase price to the value of the property.
  
• Easily ascertainable information about the property.
  
• Degree of obviousness of the presence or likely presence of contamination at the property.

IV. STATE RESPONSE PROGRAMS

• GRANTS TO STATES OR INDIAN TRIBES TO ESTABLISH OR ENHANCE RESPONSE PROGRAMS
  
• The State or Indian tribe program must include the following elements:
  
• Timely survey and inventory brownfields sites in the State.
  
  • Oversight and enforcement authorities or other mechanisms and resources.
    
  • Mechanisms and resources to provide meaningful opportunity for public participation.
    
  • Mechanisms for approval of a corrective action plan and a requirement for verification, certification or similar approval process from the State.
    
  • States must maintain and update public records of sites.
    
  • Congress is authorized to appropriate $50,000,000 to carry out this section of the Act.

   

• EPA ENFORCEMENT BAR

• The Act bars the EPA from using administrative or judicial enforcement in cases of a release subject to a state program. The exceptions to this enforcement bar include:
  
  • When the State requests assistance.
    
  • When the Administrator determines contamination has or will migrate across state lines.
    
  • After considering the response activities already taken, the Administrator determines a release or threatened release may present an imminent and substantial endangerment to public health, welfare or environment and additional response actions are likely to be necessary to address, prevent, limit, or mitigate the release or threatened release.
    
  • The Administrator determines that information was not known by State when cleanup was approved such that contamination or conditions present a threat requiring further remediation to protect public health, welfare, or environment.

Mr. Traeger is member of Gallop, Johnson and Neuman, L.C in St. Louis. He practices primarily in the Environmental and Toxic Tort practice area (jwtraeger@gjn.com). Ms. Northcutt is an associate at Gallop, Johnson and Neuman, L.C (ksnorthcutt@gjn.com).