New EPA Guidance on Tenant Liability under Superfund

01/25/2013

On December 5, 2012, EPA issued revised enforcement guidance to assist agency personnel in exercising enforcement discretion regarding the treatment of tenants under Superfund’s bona fide prospective purchaser (BFPP) defense. (See here.) The revised guidance supersedes guidance the agency had issued on January 14, 2009 and expands some of the protections.

As background, under Superfund, it is possible for a tenant's status and activities to give rise to "owner or operator" liability - for the costs of investigating and remediating a contaminated site and for natural resource damages. The guidance does not flesh out the contours of tenant liability as an owner or operator, but instead assumes that tenant liability exists and explains how the BFPP defense under section 107(r) of Superfund might then be available.

To take advantage of the BFPP defense, a potentially responsible party (PRP), such as an owner or operator of contaminated property, must satisfy three statutory prerequisites. Specifically, it must show: (1) it conducted all appropriate inquiry or AAI, e.g., by having conducted a phase I; (2) it has no affiliation with a PRP; and (3) it satisfies certain so-called continuing obligations, including, among other things, complying with applicable regulatory requirements and not impeding remedial actions.

In brief, the revised guidance does four things:

(1) It confirms that tenants may receive protection as a BFPP derivatively from their landlord, that is, if the landlord conducted AAI, provided that all disposal occurred prior to acquisition and the tenant satisfies continuing obligations. In that case, if the landlord qualifies for the defense, then so too does the tenant.

(2) It expands EPA's use of enforcement discretion for a tenant who relied upon the landlord for the BFPP defense to include situations in which the landlord loses the BFPP defense, provided the tenant meets the prerequisites of the BFPP defense other than having performed AAI.

(3) It clarifies that a lease will not disqualify a tenant from the BFPP defense for failure to have satisfied the "no affiliation" prerequisite.

(4) It confirms EPA will use its enforcement discretion for a tenant who independently meets the BFPP prerequisites, including having performed AAI prior to execution of the lease.

The new guidance notes the obvious: all bets are off if the tenant itself engages in an activity that independently creates liability, e.g., by creating or exacerbating contamination. It also notes that, except as otherwise provided, the tenant itself must satisfy the BFPP prerequisites.

As the guidance states, the BFPP defense is available only for property acquisitions after January 11, 2002. And one of the prerequisites is that the disposal of hazardous substances at the facility have occurred prior to execution of the lease.

The agency explains that it generally will not be involved proactively in making determinations as to the availability of the BFPP defense in connection with any particular transaction, e.g., by issuing a comfort letter, though there may be limited circumstances where it might.

Please feel free to contact us if you have any questions regarding these matters.

Jeff Civins
512.867.8477
jeff.civins@haynesboone.com

Mary Mendoza
512.867.8418
mary.mendoza@haynesboone.com

Carie G. McKinney
512.867.8438
carie.mckinney@haynesboone.com

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