Congress Enacts Law to Revitalize Brownfields
By: SUSAN D. STEINWALL
President Bush signed the Small Business Liability Relief and Brownfields Revitalization Act into law on January 11, 2002, thus amending the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). To some, the new law is the most significant change to the Superfund Law since 1986.
There are three major components of the new law. First, the new law provides Superfund relief to small businesses that disposed of "de micromis" (i.e., small) amounts of hazardous substances or mixed municipal solid waste. Previously, even the smallest amount of hazardous substances that a business might have tossed into the dumpster was sufficient to hold that business liable for a landfill clean-up under federal law. Secondly, the new law provides funding for assessing and cleaning up brownfields and petroleum contaminated sites. These grants are available only to units of government.
For real estate developers, the third major component of the new law is perhaps the most significant: the Brownfields Revitalization and Environmental Restoration Act. The new law is designed to encourage development of brownfields. The law defines "Brownfield Sites" as real property whose redevelopment or reuse may be complicated by the presence or potential presence of a hazardous substances, pollutants, or contaminants. Brownfield Sites include sites contaminated by petroleum or petroleum products in certain cases. Excluded from the definition of Brownfield Sites are federal Superfund Sites; sites that are the subject of a planned or ongoing removal action under CERCLA; or sites that have been contaminated by PCBs and are subject to remediation under the Toxic Substance Control Act.
The new law enables the United States Environmental Protection Agency (EPA) to issue certain types of assurances, similar in some respects to the types of letters that have been available from the Minnesota Pollution Control Agency through its Voluntary Investigation and Clean-up Program (VIC). For example, CERCLA now allows the EPA to provide liability protection for owners whose property may be contaminated by a contiguous site.
The new law provides some liability protection to prospective purchasers of brownfield sites. A new section of CERCLA provides that "bona fide prospective purchasers" whose only potential liability is based solely on the purchaser's status as an owner or operator of a site will not be liable under CERCLA so long as the bona fide prospective purchaser cooperates with the site's clean-up. "Bona fide prospective purchasers" are persons who can demonstrate certain things, including that they undertook all appropriate inquiry into the previous ownership and uses of the facility following generally accepted commercial and customary standards and practices. The law directs the EPA to develop "standards and practices" regulating "all appropriate inquiry" by January 11, 2004. Until the EPA develops its own standards, the ASTM Standard for environmental due diligence would remain as the primary standard.
In cases where the federal government has incurred clean-up costs which have not been repaid, the United States will have a "windfall lien" on the facility to recover those costs. A "windfall lien" would exist in those cases where the clean-up increased the fair market value of the facility above the fair market value of the facility that existed before the clean-up began. The specter of "windfall liens" at properties where federal action has taken place could actually hamper redevelopment of a site, especially if an environmental lien would be prime to a mortgage. "Windfall liens" underscore the importance of good environmental due diligence and title examination before purchasing a brownfield site.
Finally, the new law buttresses state programs, such as Minnesota's VIC Program. The federal government will defer to state brownfields programs when the state has entered into a "Memorandum of Agreement" with the EPA and when the state program meets certain other requirements. Minnesota has entered into a Memorandum of Agreement with EPA Region V. Federal enforcement under CERCLA would be precluded except when: a state requests the enforcement; the contamination has migrated across a state line or onto federal property; or when the EPA determines that an "imminent and substantial endangerment" to the public health or welfare or the environment exists, after considering the response actions already taken at the site. The current threshold for EPA to take any action under CERCLA to recover response costs is whether there has been "a release or threatened release ... of a hazardous substance;" a much more permissive standard. Even though the new law reflects EPA's practice at brownfield sites addressed under state programs, the amendment makes it clear that landowners who remediate property under state programs need not worry about the feds trumping state supervision.