President Bush recently signed the Small Business Liability Relief and Brownfields Revitalization Act. The Act amends the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to provide significant new protections from liability associated with the ownership of contaminated properties and limited relief from liability for small businesses and several other parties at federal Superfund sites.
Liability Relief and Clarification Facilitates Brownfields Redevelopment
Purchasers of Contaminated Property
The Act provides a new exclusion from CERCLA liability for a so-called bona fide prospective purchaser of contaminated property that acquires ownership of the property after the effective date of the Act. In order to qualify for this exclusion, the purchaser must establish that all disposal of hazardous substances at the site occurred before the purchase of the site, and that prior to the acquisition, the purchaser made an appropriate inquiry into the previous ownership and uses of the site. Since the bona fide prospective purchaser provisions are intended to encourage the acquisition and redevelopment of properties known to be contaminated, the purchaser does not have to show a lack of knowledge of the contamination at the time of acquisition.
The Act directs the U.S. Environmental Protection Agency (EPA) to promulgate regulations that establish what constitutes an appropriate inquiry, and it specifies several requirements to be included in the regulations. For residential property purchased by a non-governmental or non-commercial entity, the Act provides that the appropriate inquiry consists of a facility inspection and title search that reveal no basis for further investigation. For all other types of property, the Act establishes interim standards that apply until the EPA promulgates its regulations. For property purchased before May 31, 1997, the interim standards specify several factors to be taken into account in determining whether the purchaser carried out the requisite inquiry. For property purchased between May 31, 1997 and the date of the EPA’s regulations, the interim standards require compliance with the procedures of the American Society for Testing and Materials (ASTM), including the ASTM standard for Phase I Environmental Site Assessments. In addition, for all properties, the Act requires a bona fide prospective purchaser to meet several other requirements, including taking reasonable steps to prevent releases and exposure to hazardous substances and granting access to persons conducting response actions.
If the United States has conducted response actions that increase the fair market value of a site owned by a bona fide prospective purchaser and has not recovered its response costs, then it has a lien on the property. The amount of that lien cannot exceed the increase in fair market value of the property attributable to the response actions.
The Act also provides a new exclusion from CERCLA liability for an owner of property "contiguous to or otherwise similarly situated" with respect to contaminated property owned by another party. In order to qualify for this exclusion, the owner must establish that, at the time of acquisition, it conducted an appropriate inquiry, as described above, with respect to the property and did not know or have reason to know that the property was or could be contaminated by hazardous substances from property owned or operated by another party. In addition, the owner must meet several other standards, including taking reasonable steps to prevent releases and exposure to hazardous substances and granting access to persons conducting response actions.
The Act clarifies CERCLA’s innocent landowner defense and adds requirements to that defense. Such a party must establish, among other things, that it acquired the property after the disposal of the hazardous substances and did not know and had no reason to know of the hazardous substance disposal when it acquired the property. In order to establish the requisite lack of knowledge, the owner must have undertaken, at the time of acquisition, an appropriate inquiry into the previous ownership and uses of the property as described above. In addition, the Act requires the owner to meet several other standards, including taking reasonable steps to prevent releases and exposure to hazardous substances and granting access to persons conducting response actions.
Liability Exemptions at Federal Superfund Sites
As described below, the Act creates new exemptions from CERCLA liability at National Priorities List (NPL) sites. These are the contaminated sites determined by the EPA and the states that pose the greatest hazards to human health and the environment. The new exemptions do not apply where the EPA determines that the party’s hazardous substances contributed, or could contribute, significantly to the cost of response actions or natural resource restoration at the site.
De Micromis Parties
The Act creates a new exemption from CERCLA response cost liability for generators and transporters of hazardous substances at an NPL site the total amount of material containing hazardous substances for which such party is responsible was less than 110 gallons of liquid materials or less than 200 pounds of solid materials, and at least part of the disposal, treatment or transport of the hazardous substances at or to the site occurred before April 1, 2001. The EPA is authorized to issue regulations altering the threshold volumes.
Small Businesses, Residential Properties and Nonprofit Entities
The Act creates an exemption from CERCLA response cost liability for generators of municipal solid waste at an NPL site if such a party falls within one of the following categories: small business entity with not more than 100 full-time employees; an owner, operator or lessee of residential property from which the municipal solid waste was generated; or a nonprofit entity under Section 501(c)(3) of the Internal Revenue Code with not more than 100 employees at the location from which the municipal solid waste was generated. Municipal solid waste is defined as waste generated by a household or waste generated by a commercial, industrial or institutional entity that is essentially the same as household waste, is collected and disposed of as part of normal municipal solid waste collection services and contains the same relative quantity of hazardous substances as typical household waste.
Federal Enforcement Bar and Superfund Site Listing Deferral
The Act bars the federal government from taking enforcement action under certain provisions of CERCLA to require cleanup or to recover response costs with respect to a site where response actions are being conducted or have been completed under a state contaminated site response program, provided that the state maintains and updates a publicly available list of sites addressed under the program. There are several exceptions to this enforcement bar, including a situation where the contamination may present an imminent and substantial endangerment to public health or welfare or the environment.
In addition, the Act requires the federal government to defer listing a site on the NPL if the state, or another party under agreement with or order from the state, is conducting response actions under the state response program or the state is actively pursuing an agreement to perform response actions. There are several exceptions to this deferral requirement, including a situation where there has not been sufficient progress toward performance or completion of the response actions.
Brownfields Revitalization and Other Funding
The Act authorizes the appropriation of $200,000,000 during each fiscal year from 2002 through 2006 for grants to be used in inventorying, assessing and remediating brownfield sites and in capitalizing revolving loan funds for remediation of brownfield sites. Grants can be provided to various governmental entities for use by the entity, for grants to other such entities or nonprofit organizations or for loans to other such entities or to site owners, site developers or other persons. A grant for assessment or remediation of an individual brownfield site generally cannot exceed $200,000.
Under the Act, brownfield sites are properties where the presence or potential presence of a hazardous substance, pollutant or contaminant may complicate redevelopment or reuse of the property. Such sites also include certain sites contaminated by petroleum or petroleum products, sites contaminated by controlled substances and mine-scarred land. Brownfield sites under the Act generally do not include sites listed on the NPL, sites subject to any of certain enforcement actions or cleanup requirements under federal environmental statutes or U.S. government property.
The Act also authorizes the appropriation of $50,000,000 during each fiscal year from 2002 through 2006 for grants to states or Indian tribes to be used for certain activities related to their contaminated site response programs.