Property owners and prospective property owners should be aware that ASTM International recently published a Standard Guide for Identifying and Complying with Continuing Obligations, ASTM E 2790-11 (Guide). This Guide was developed by representatives of various industrial, lending, consulting, and governmental entities and offers a comprehensive approach to assist property owners (and other users such as tenants/operators, as may be appropriate) with maintaining important environmental liability protections. The Guide fills a critical gap by providing practical guidance to implement statutory environmental liability protections to promote the redevelopment of Brownfields and other under-utilized properties.
The Guide is intended to advise users on how to maintain certain liability protections after properly completing “all appropriate inquiries” or what is often called a “Phase I Environmental Site Assessment.” By obtaining a valid Phase I ESA prior to taking ownership of real property, the purchaser may become eligible for certain liability protections, including CERCLA’s innocent landowner defense (ILO), contiguous property owner (CPO) liability protection, and the bona fide prospective purchaser (BFPP) liability protection. These protections were largely added by Congress in its 2002 “Small Business Liability Relief and Brownfields Revitalization Act" (2002 Brownfields Amendments), and protect an qualified owner from being required to fund cleanup efforts for environmental impacts to the property that occurred prior to ownership. The Phase I aspect of environmental due diligence performed prior to obtaining title to property is a common practice prior to a real estate transaction and more often then not, required by a lending institution.
In creating the BFPP and CPO exemptions, and in amending the existing ILO defense, Congress created a series of elements required to qualify and maintain each respective liability protection See 42 U.S.C.§§ 9601(40) and 9607(r) (BFPP), 42 U.S.C. §§ 9601(35)(a)(iii) and 9601(35)(b)(i)(ii), (ILO), and 42 U.S.C. §9601(q) (CPO). Many of these requirements have been considered to be confusing and difficult to implement with certainty. For example, each of the liability protections require some variation of “reasonable steps” to stop continuing releases; prevent any future threatened releases, and prevent or limit human, environmental, or natural resource exposure to any previously released hazardous substance. The obligations for each liability protection varies slightly, and other obligations apply as appropriate, depending on which liability protection a person is seeking to qualify for and maintain.
The 2002 Amendments were designed to strike a balance between the competing public interests of requiring environmental cleanup and encouraging prospective owners to purchase and redevelop environmentally distressed properties including Brownfields. However, since the 2002 Brownfields Amendments, very little practical guidance was available on how to identify, perform and document “continuing obligations”. Without fully understanding how to perform continuing obligations, many purchasers avoided potentially contaminated properties, even when offered at a purchase price below market value.
The new ASTM Guide addresses the steps that owners must take after acquiring property to maintain eligibility for the environmental defense. The Guide generally outlines a suggested procedure to evaluate potential environmental impacts, identify the continuing obligations that may flow from these environmental impacts consistent with legal obligations, and implement such continuing obligations. The Guide presents a four-step approach to evaluate subject properties and to identify and comply with continuing obligations under CERCLA. In addition, the Guide proposes some options to help document efforts to meet the elements of the liability protections, at the user’s option.
The first step involves a detailed review of the Phase I Environmental Site Assessment or All Appropriate Inquiry report for the property, and any other actual knowledge of the presence of hazardous substances at the property. Where a user has actual knowledge of environmental impacts, or where there is reason to know of potential environmental impacts at the property, Step 2 focuses attention on these environmental impacts. The Step 2 analysis also suggests a detailed review of available information relating to any cleanup activities that may have occurred in the past. Such information will inform the user what continuing obligations to implement, if any.
Where environmental impacts are confirmed, Step 3 suggests methods to identify and implement “initial” continuing obligations, which are those steps taken to meet the statutory elements of the liability protection. For example, initial continuing obligations might include removing leaking drums from a property, or installing an engineered barrier. Property-specific circumstances will determine the type and number of initial continuing obligations that may be appropriate.
Step 4 suggests methods to identify and implement “ongoing” continuing obligations, which are those actions taken either continuously or intermittently from time to time to maintain compliance with the statutory elements. Such requirements may include inspecting the property to evaluate compliance with land use restrictions, or evaluating the land use to ensure that changes in property use do not result in unacceptable risks of exposure to hazardous substances.
For more information about ASTM E2790, we invite you to attend our free webinar on October 18, 2011.
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