Key Development: The Environmental Protection Agency outlines how it intends to exercise its enforcement discretion for parties who would otherwise qualify for liability protection defenses under the superfund law.
Potential Impact: EPA personnel will have more clarity in using their discretion to decide who may quality for bona fide prospective purchaser and contiguous property owner liability defenses.
By Pat Ware
The Environmental Protection Agency has outlined how it intends to exercise its enforcement discretion for parties who would otherwise qualify for liability protection defenses under the superfund law in a memorandum from the agency's Office of Enforcement and Compliance Assurance.
The memo is to assist EPA personnel in exercising their enforcement discretion—on a site-specific basis—for parties who meet all requirements as bona fide prospective purchasers or contiguous property owners except for being “affiliated with any other person that is potentially liable” for contamination at a facility.
The Sept. 21 memo, Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA's Bona Fide Prospective Purchaser and Contiguous Property Owner Liability Protections, was sent to EPA regional counsel and superfund national policy managers.
The Brownfields Amendments of 2002 to the Comprehensive Environmental Response, Compensation, and Liability Act provide bona fide prospective purchasers and contiguous property owners protection from liability under CERCLA as long as they meet certain statutory requirements.
One criterion that parties who seek either of the defenses must meet is that they cannot be “affiliated with” another party who is potentially liable under CERCLA at a facility.
Before analyzing whether there is a prohibited affiliation, EPA personnel should consider four preliminary issues, the memo said.
EPA also said certain types of affiliations between the purchaser of the property or owner and other entities do not disqualify the purchase or owners from protective status under CERCLA.
For bona fide prospective purchasers, CERCLA provides an exception that allows contractual, corporate, or financial relationships that are “created by the instruments by which title to the facility is both conveyed or financed.”
CERCLA also includes an exemption providing that “a contractual, corporate, or financial relationship that is created … by a contract for the sale of goods or services” is not an affiliation that denies protection under the bona fide prospective purchaser or contiguous property owner defenses, the memo said.
“The affiliation language in the [bona fide prospective purchaser] and [contiguous property owner] provisions is broad and could potentially encompass many, if not all, familial relationships, and many corporate or other relationships, thus having the potential consequence of reducing the number of entities that qualify for these liability protections,” the memo said.
EPA said it has decided not to treat the following as disqualifying affiliations:
“I think it's a great start, but it probably doesn't go as far as some of us would like,” Timothy Haley, an attorney with Barnes & Thornburg told BNA Oct. 12.
The guidance is helpful because it addresses nonaffiliation, an area of CERCLA's liability protection that has not been studied in much detail, said Haley, who represents brownfields developers and landowners.
If it does not go far enough, it is because it does not substantively address the Ashley II case, Haley said.
Ashley II refers to a 2010 ruling by the U.S. District Court for the District of South Carolina finding that the Ashley LLC, which wanted to redevelop a superfund site, did not meet several of the bona fide prospective purchaser requirements, including nonaffilation, to establish liability protection under CERCLA (Ashley II of Charleston LLC v. PCS Nitrogen, 746 F. Supp. 2d 692 (D.S.C. 2010);.
“The problem in Ashley II is that the indemnity releases signed were fairly typical for brownfields developers,” Haley said.
“The concern is what has to change in the future to preserve these liability protections,” Haley said. “We'll have to wait and see what happens with Ashley II.”
The memorandum,Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA's Bona Fide Prospective Purchaser and Contiguous Property Owner Liability Protections, is available at http://www.epa.gov/compliance/resources/policies/cleanup/superfund/affiliation-bfpp-cpo.pdf.