Small Business Liability Relief and Brownfields Revitalization Act

01/30/2002

On January 11, 2002, President Bush signed the “Small Business Liability Relief and Brownfields Revitalization Act” (the “Act”).  As its name suggests, the Act provides relief to small businesses and funding for Brownfields (“real property, the expansion, re-development, or re-use of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant”).  It also significantly amends certain liability-related provisions of the Comprehensive Environmental Response Compensation Liability Act (“CERCLA”) or Superfund.
 
Under the Act, two classes of potentially responsible parties (“PRPs”) are newly exempted from liability for National Priority List (“NPL”) sites: (1) arrangers and transporters of de micromis amounts of materials, if the amounts of the materials they disposed of are under prescribed quantities, and (2) specified arrangers, i.e., residential property owners or operators, small businesses, and tax exempt institutions, who generated municipal solid waste.   These exemptions are conditional; among other things, all or part of the disposal, treatment, or transport of the wastes must have occurred before April 1, 2001.
 
For small businesses, the Act provides another benefit.  It amends CERCLA to allow parties who are unable or of limited ability to pay response costs, to expeditiously settle for small amounts.  It also authorizes them to use alternative payment methods. 

The Act creates a new exemption from Superfund liability – applicable to a person who owns real property that is contiguous to and that is or may be contaminated by a release or threatened release of a hazardous substance from real property not owned by that person, provided certain conditions are met.  The Act generally exempts owners of property whose groundwater is contaminated from offsite sources from having to conduct groundwater investigations or to install groundwater remediation systems.  For these types of exempted PRPs, the Administrator is authorized to issue an assurance of no enforcement action and to grant contribution protection.
 
The Act also clarifies the innocent land owner exemption.  Among other things, it includes easements and leases as well as deeds as examples of the type of contractual relationship that may trigger the need for the innocent land owner defense.  It requires a person seeking protection under this exemption: to fully cooperate with the response action and natural resource restoration; to comply with land use restrictions; and to not impede the integrity of institutional controls.  It also expands upon the “all appropriate inquiry” standard by explaining that the defendant must carry out all appropriate inquiry into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices and take reasonable steps to stop any continuing release, prevent any threatened future release, or prevent or limit any human, environmental, or natural resource exposure to any released hazardous substances.  The Act  requires the EPA Administrator, within two years of enactment, to promulgate regulations taking into account prescribed factors.
 
With respect to property purchased before May 31, 1997, the Act specifies a subset of the prescribed factors that courts are required to take into account in determining whether “all appropriate inquiry” has been carried out.  With respect to property purchased after that date, until the Administrator promulgates regulations, the ASTM 1997 standards for environmental site assessments satisfy the requirements for all appropriate inquiry.  For a residential property, a facility inspection and title search that reveal no basis for further investigation generally are adequate.
 
But both the innocent land owner defense and the new contiguous land owner defense are unavailable if the person performs the investigation and determines that contamination is present. To address that circumstance, EPA would enter into prospective purchaser agreements, on a case-by-case basis, pursuant to which the agency would release the purchaser from liability in exchange for monetary and other consideration.  The Act institutionalizes this practice by exempting so-called bona fide prospective purchasers from liability.
 
The term “bona fide prospective purchaser” is defined as a person (or a tenant of a person) that acquires ownership of a facility and that can show certain elements by a preponderance of the evidence.  These elements include : (1) that disposal occurred prior to acquisition; (2) that  the person made all appropriate inquiry into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices; (3) that the person provided all legally required notices; (4) that the person is exercising appropriate care with respect to the hazardous substances; (5) that  the person is fully cooperating with the persons authorized to conduct response or natural resource restoration actions; (6) that the person is complying with land use restrictions and is not impeding any institutional controls; and (7) that the person is responding to information requests; and (6) that the person not be potentially liable and not be affiliated with the party responsible for the contamination.
 
If there are unrecovered federal response costs at a site, the United States may impose a lien on the site, or negotiate some other assurance of payment with the site owner, for the unrecovered response costs.  The amount of the lien, however, may not exceed the increase in fair market value of the site attributable to the response action, as of the time of sale.
 
The Act provides relief to small businesses and revitalizes Brownfields.  It also significantly amends certain of the liability provisions of CERCLA.  Among other things, it affords a defense to prospective purchasers who, upon all appropriate inquiry, discover contamination, by institutionalizing the benefits of a prospective purchaser agreement, thereby encouraging Brownfields development.
 
For further information, please contact Jeff Civins or Bane Phillippi or any of the Firm’s environmental lawyers with whom your routinely work.

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