Landowner liability protections (LLPs) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) include the innocent landowner, contiguous property owner, and bona fide prospective purchaser (BFPP) LLPs. Three common elements must be met in order for a property owner to assert that one of these LLPs applies. The property owner must 1) not be affiliated with a potentially responsible party, 2) timely conduct all appropriate inquiry (AAI) on the property, and 3) satisfy continuing obligations.
EPA regulations and ASTM Standard E1527 have been around for several years to assist prospective property purchasers with completing AAI prior to acquisition of a facility. But to date, useful continuing obligations guidance or case law has been scarce. Recently, ASTM Standard E2790 was released to provide property owners (and potential property owners) with guidance in determining whether continuing obligations apply, and if so, what those obligations may entail.
Under CERCLA, continuing obligations include, among other things, taking “reasonable steps” to stop a continuing release; preventing any future threatened release; and preventing or limiting any human, environmental or natural resource exposure to any previously released hazardous substance. Complying with land use restrictions and not impeding the effectiveness of any institutional controls are also required.
The general statutory requirements hardly provide a definitive guideline to assure a prospective purchaser or landowner that they are taking appropriate steps to maintain the desired liability protection under CERCLA. The ASTM Standard E2790 provides a useful roadmap to assist those wishing to take advantage of CERCLA LLPs.
The standard provides a four-step approach in defining continuing obligations. The first step is determining whether continuing obligations actually apply and involves a review of the Phase I environmental site assessment. The second step is a review and evaluation of environmental conditions. In undertaking this step, the standard suggests a host of potential information sources to review to obtain information on the property conditions, and it outlines various steps to take in evaluating the scope of any releases, exposure pathways and activity and use limitations (AULs).
The results of step two inform steps three (identify and perform initial continuing obligations) and four (identify and perform long-term continuing obligations). Initial continuing obligations may apply to a BFPP shortly after acquiring the subject property and may include, for example, limiting site access or emptying a leaking container. Long-term obligations resemble operation and maintenance requirements and could include site inspections or monitoring and repair of an engineered cap. These are several examples provided by ASTM E2790. The standard also suggests issuing a Finding of No Continuing Obligations or preparing and maintaining a Continuing Obligations Plan.
While the new ASTM standard does provide buyers and owners of contaminated property, and the lenders who fund the transaction, some guidance as to items such as what constitutes “reasonable steps,” it begs the question whether to maintain a limited liability defense a party must now comply with this standard. In other words, is this the standard that an agency or court will rely upon to assert or find that a party does not qualify for a LLP (i.e., based on failure to meet its continuing obligations)? This is of particular interest since some of the examples and suggestions in the new ASTM standard appear to impose obligations that go beyond what a property owner might otherwise anticipate as being necessary in order to maintain its LLP (e.g., addressing future exposures, contaminant migration and documentation).
No matter what the answer, unique circumstances will be encountered in every transaction and at any given property and, as the standard itself emphasizes, the need to use an experienced environmental counsel and consultant to evaluate and understand CERCLA’s liability protections is critical. Buyers must remember that the requirements to qualify for liability protection under CERCLA do not end at closing, but are “continuing obligations.”