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Almost 25 years after its enactment, Superfund still strikes fear in the hearts of owners of industrial property. Superfund refers to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) passed by Congress in 1980 in response to the discovery of a series of now infamous toxic waste sites, including, most notably, the Love Canal site in upstate New York. The solution Congress hurriedly concocted to solve this politically charged problem was a statute that casts a wide net of liability over virtually all owners and operators of a site, including past owners that operated in a world without environmental laws and existing owners that, through no fault of their own, unwittingly found themselves to be titleholders of waste sites. Over the years, the wrath of Superfund has been spared on few parties-ensnaring banks, landlords and tenants in the process. The irony of Superfund is that, while the statute was designed to clean up contaminated waste sites, the statute’s harsh liability provisions have scared away many potential buyers of industrial sites-leaving a legacy of shuttered properties with no prospects for sale and, thus, no incentives for cleanup. Congress has attempted to ease the harshness of Superfund and resolve some of these unintended consequences. In the mid-1980s, Congress added an “innocent landowner” defense to the statute. The 1990s saw liability protections afforded to lenders to ensure financing was available to effect the sale of these industrial sites. The latest attempt by Congress to fix Superfund was the passage of the Small Business Liability Relief and Brownfields Revitalization Act of 2002 (known as the Brownfields Revitalization Act, H.R. 2869). While falling far short of achieving the far-reaching Superfund reforms many in Congress thought necessary, the Brownfields Revitalization Act nonetheless was signed into law with great fanfare and billed as another important step toward eliminating the barriers to effective redevelopment of industrial sites across the country. As the statute professes, the goal of the act is to promote the cleanup and reuse of brownfield sites. Brownfield sites contemplated for revitalization under the act include any property where environmental contamination may be serving as an impediment to “expansion, redevelopment, or reuse.” 42 U.S.C. 9601 (39) (A). The heart of the Superfund reforms offered by the act can be found in Title II’s expanded liability protections. Specifically, the Brownfields Revitalization Act adds new Superfund liability defenses for “bona fide prospective purchasers” of contaminated sites and “contiguous property owners” (as those terms are defined in the statute), while at the same time clarifying the bounds of Superfund’s existing innocent-landowner defense. The crown jewel of the Brownfields Revitalization Act’s liability defenses is the bona fide prospective purchaser defense. Prior to passage of the act, a buyer of contaminated property could escape Superfund liability as an innocent landowner only if, prior to acquiring title to property, the buyer conducted “all appropriate inquiry” into the past uses of the property and “had no reason to know” at the time of purchase that contamination existed at the site. 42 U.S.C. 9601 (35). Any knowledge of environmental contamination uncovered during preacquisition environmental due diligence would obviate the availability of the innocent-landowner defense. Necessary elements The bona fide prospective purchaser defense allows a buyer to acquire title to a site with full knowledge of contamination and still be exempt from Superfund liability. Of course, entitlement to this exemption comes with certain obligations. To earn the status of a Superfund liability-exempt bona fide prospective purchaser, a buyer of contaminated property must: First, have conducted “all appropriate inquiry”-a fairly exhaustive environmental investigation-into the past history and environmental condition of the property (42 U.S.C. 9601 (40) (B)). Second, exercise “appropriate care” by taking “reasonable steps” to stop continuing releases or to prevent future releases at a site (42 U.S.C. 9601 (40) D)). Third, cooperate with the Environmental Protection Agency (EPA) or other parties that might desire future access to perform cleanup work. Fourth, agree to comply with any future land-use restrictions that the EPA might impose in connection with any cleanups. Fifth, recognize that the property might be saddled with EPA “windfall liens,” allowing the EPA to recoup financial gains when the EPA’s cleanup increases the value of property. For contiguous property owners and innocent landowners, the Superfund liability exemptions offered under the act are limited to parties that acquire property, again after conducting “all appropriate inquiry,” but without knowledge of contamination. Notwithstanding the limits of these defenses, entitlement also comes with the obligation to comply with the “appropriate care” and other conditions imposed on bona fide prospective purchasers. While the Brownfields Revitalization Act has been on the books for more than a year, the extent to which the act has truly advanced its goal of promoting the cleanup, redevelopment and reuse of contaminated properties remains unclear. Provisions in the act such as “all appropriate inquiry,” “appropriate care,” “reasonable steps” and “windfall liens” shout EPA discretion, uncertainty and potentially expansive legal obligations that lead one to ponder whether buyers of contaminated sites might be signing on to endless cleanup obligations or, equally problematic, might be acquiring properties that, post-cleanup, are burdened with use restrictions that limit redevelopment prospects. To respond to some of these concerns, the EPA has been busy developing guidance documents and regulations defining the bounds of the act’s provisions. In March of this year, the EPA issued its Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowners Limitations on CERCLA Liability or “Common Elements” (available at www.epa.gov/brownfields/liab.htm), which is a guidance addressing the actions required of property owners to preserve the statutory defense. In April, the EPA convened a federal advisory committee to develop regulations to set standards for conducting the “all appropriate inquiry” investigation required of any party seeking the advantages of the act’s liability protections. The EPA also issued its Interim Enforcement Discretionary Policy Concerning “Windfall Liens” Under Section 107(r) of CERCLA in July, which describes the circumstances under which the EPA may seek to perfect windfall liens against a property. There is some progress The EPA has made diligent efforts at attempting to make sense of these new liability defenses. The Brownfields Revitalization Act, like Superfund itself, remains less than a modicum of clarity. Skeptics can point to certain provisions of the act and argue that, notwithstanding EPA assurances to the contrary, the Brownfields Revitalization Act expands, rather than lessens, the liability burdens imposed on property owners under Superfund. For example, while the bona fide prospective purchaser defense allows a party to buy property with knowledge of contamination and still be exempt from Superfund liability, this is not an entirely new concept. Prior to passage of the act, buyers of property could negotiate prospective purchaser agreements (PPAs) with the EPA to resolve liability issues when environmental contamination was uncovered at a site. PPAs were valuable to buyers of property as they typically set out the exact remediation obligations a buyer would need to perform to obtain a liability release from the EPA. The knock on PPAs were that they simply took too long to negotiate. The act does away with the requirement to procure a PPA to enjoy the benefits of the exemption. The act, however, also creates continuing cleanup and response obligations without the ability to negotiate the full extent of those obligations in an enforceable agreement with the EPA. Criticism has also been targeted at the act’s contiguous property owner exemption. The exemption for adjacent property owners only applies in the first instance if an owner acquires property with no knowledge of contamination. Adjacent landowners must also satisfy the “appropriate care” requirements of the act and agree to land-use restrictions on their property, even if imposed at some future date. These conditions arguably increase the burdens beyond the EPA’s existing guidance for adjacent property owners when their status as a liable party under Superfund is derived entirely from the migration of contaminants from an adjacent site. Consequently, these requirements may have a chilling effect on the acquisition of sites in the vicinity of unresolved major Superfund sites. Another concern emerging from the act is the extent of the preacquisition investigation that will be required in order to take advantage of any of these defenses. The “all appropriate inquiry” provision contained in the Brownfields Revitalization Act is a remnant of the original innocent-landowner defense added to Superfund in 1986. Since then, an industry standard has emerged for conducting these all appropriate inquiry investigations: the American Society for Testing and Materials (ASTM)’s Standard Practice for Environmental Site Assessment-Phase I Environmental Site Assessment Process (E-1527). The ASTM standard is well understood by all those involved in property transactions-from the environmental engineers performing the work and the developers devising the redevelopment plan to the lenders providing the financing for the transaction. While the work of the EPA’s “all appropriate inquiry” federal advisory committee is not yet complete (the rule must be finalized by January 2004), the likely direction the rule making is heading toward is a final rule that imposes additional investigation requirements beyond the existing ASTM standard in order to take advantage of the act’s liability protections. Quieting fears Much of the guidance issued to date by the EPA is directed at allaying the fears of developers of property and addressing some of the perceived barriers to redevelopment allegedly created under the act. Despite some of the criticism leveled by industry, the EPA’s common-elements guidance does contain a number of important pronouncements that should offer comfort to buyers of contaminated property. Obviously, the biggest concern for any prospective purchaser of industrial or contaminated property is the extent of any cleanup obligations the buyer will sign on to if proceeding with the deal. As a general proposition, the EPA affirmatively states in its common-elements guidance that “[i]n requiring reasonable steps from parties qualifying for landowner liability protections, EPA believes Congress did not intend to create, as a general matter, the same types of response obligations that exist for a CERCLA liable party (e.g., removal of contaminated soil, extraction and treatment of contaminated groundwater).” (See “Common Elements,” supra, at 9-10). The common-elements guidance attempts to provide additional assurances for prospective purchasers indicating that Superfund-type response actions will not be required except in “exceptional” or “unusual” circumstances. Id. at 10. While full-blown cleanups might not be required, the common-elements guidance makes clear as well that, if a property owner wants to enjoy the liability protections provided under the act, doing nothing to address identified environmental risks is not an option. At a minimum, the act’s “reasonable steps” requirement will likely obligate a property owner to conduct an investigation to assess the extent of the hazards present at a site. The guidance also suggests that any immediate hazards-the presence of leaking drums, for example-might need to be abated by the site owner. Certainly, the EPA would expect the site owner to comply with any land-use controls or maintain any monitoring or containment systems installed at the site to control the spread or migration of contamination. It is too early to tell whether the Brownfields Revitalization Act will live up to its name and truly revitalize the cleanup and redevelopment of brownfield sites. Certainly, the elements of effective reform are embedded in the act’s essential requirements. How some of these provisions are ultimately interpreted over time by the EPA will determine the success and effectiveness of the legislation. Not a free pass For those who expected the Brownfields Revitalization Act to provide a free pass on Superfund liability, it certainly does not do that. In fact, buyers of property must proceed cautiously through the preacquisition due diligence process to ensure they are laying the foundation for entitlement to the act’s liability defenses. Given the direction of the EPA’s “all appropriate inquiry” federal advisory committee, it is likely that more, not less, up-front investigation will be necessary to satisfy the act’s site-assessment requirements. Additionally, the bona fide prospective purchaser that acquires property with preacquisition knowledge of contamination would be well advised to attempt to obtain clarity from the EPA on the bounds of the cleanup work the EPA might require to satisfy the buyer’s “appropriate care” obligations. Toward this end, the EPA has indicated a willingness in certain circumstances to provide “comfort letters” to buyers of contaminated property to confirm at least the initial scope of some of these obligations. These steps, along with continued diligence in assessing compliance with the act, will ensure that parties gain the full relief offered by the act. John Watson is a partner at Chicago’s Gardner Carton & Douglas and is the head of the firm’s environmental law group. Watson is a member of the Environmental Protection Agency’s All Appropriate Inquiry federal advisory committee.

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