Tim Haley\'s E2790 Presentation

Timothy A. Haley Barnes & Thornburg LLP 11 S. Meridian Street Indianapolis, Indiana 46204 (317) 231-6493 Atlanta – Chicago – Delaware – Indiana – Los Angeles – Michigan – Minneapolis – Ohio – Washington D.C. ASTM’S New E2790 Continuing Obligations Standard What It Means For You

ASTM’s E2790 Standard
1. Scope
1.1 . . . . this guide’s primary purpose is to provide information and guidance about procedures that, if completed, would help users to satisfy continuing obligations applicable to the innocent landowner , the contiguous property owner (CPO), and the bona fide prospective purchaser (BFPP) protections from CERCLA liability (hereinafter, collectively referred to as the “ Landowner Liability Protections ,” or “ LLPs ”) (see Legal Appendix X1.1 to X1.3 for an outline of CERCLA’s liability and defense provisions).

ASTM’s E2790 Standard
A Need for the Guide: Legal and Factual Background
Nuts and Bolts: How It Works
Legal Issues: Emerging Issues to Understand
Example Scenarios

A Need for the Guide Source: http://topnews.ae/content/22971-closed-toxic-dump-spells-trouble-residents

A Need for the Guide – CERCLA
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
CERCLA’s unintended impact on development
Possible acceleration of “Brownfields” and associated social, environmental, and economic issues

A Need for the Guide – 2002 Brownfields Amendments
2002 Brownfields Amendments
The addition of 2 liability defenses, (BFPP, and CPO) defense
Amendment of the innocent landowner defense (ILO)
Congressional attempt to balance potentially competing goals of promoting clean up and promoting redevelopment.

A Need for the Guide – Liability Protections
Basic Elements to Three Liability Defenses:
All appropriate inquiries [Phase I ESA]
Continuing obligations [ASTM 2790]
No affiliation with PRP
Key distinctions:
ILO performed AAI and had no reason to know of contamination
CPO performed AAI and had no reason to know of contamination, contamination migrated on-site
BFPP performed AAI and knows of contamination at the time of purchase

The “Continuing Obligations”
No “disposal” after property ownership
Provide all legally required notices with respect to the discovery or release of any hazardous substances
Take reasonable steps to:
(a) stop any continuing release
(b) prevent any future threatened release; and
(c) prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance
Cooperate and allow access to those authorized to conduct response actions at the property
Comply with land use restrictions established or relied on in connection with the response action
Do not impede the effectiveness or integrity of any institutional control

What does it all mean?
2003 EPA “Common Elements” Guidance
2010 Ashley II 746 F. Supp. 2d 692 (D.S.C. 2010) (amended at 2011 U.S. Dist. LEXIS 57441, May 27, 2011)
2010 3000 E. Imperial v. Robertshaw Controls Co., 2010 U.S. Dist. LEXIS 138661 (C.D. Cal. Dec. 29, 2010)
2011 ASTM 2790-11

Why this Standard Guide Matters
ASTM E 2790 matters for
the buyer : Preservation of liability protections increases degree of certainty related to particular property
the seller : Ability to preserve liability protections may increase property value and/or increases ability to sell.
the lender : Preservation of liability protections may preserve property value, and/or increase ability to sell.
“ First Generation” Document
Though important, the standard is not required.
CERCLA liability protections are voluntary.
Process variations may be appropriate; other methodology may work as well.

Overarching Themes of ASTM 2790
BFPPs, ILOs, and CPOs generally need not undertake the same actions required of CERCLA PRPs
Provide guidance on an evaluation procedure that is roughly chronological
Procedure is flexible and guidance is intended to apply to all types of properties
May necessarily require reliance on professional judgment and collaborative efforts between purchaser, consultant, and counsel.
Many, if not all, decisions must be made on a property-specific basis .

Nuts And Bolts
Four Step Procedure
Suggestions for documentation
Evaluation can be performed by anyone

Nuts And Bolts – Step 1
Step 1: Do Continuing Obligations Apply?
Phase I ESA is the starting point
Other information known by the User
CAVEAT: Subsequent knowledge or subsequent change of material condition at the property may change conclusions. Practical Consideration : Is the Phase I reliable?

Nuts and Bolts – Step 2
Step 2: Review and Evaluate Environmental Conditions.
Examples of Options:
Phase I
Agency reports
Investigation/Phase II
Land Records
Specialized knowledge
Practical Consideration : How much information is “enough”?

Step 3: Initial Continuing Obligations
Generally, initial continuing obligations are actions taken to address exposure risks, or to comply with LURs/ICs
Examples:
Emptying leaking container
Evaluating secondary containment
Limit site access
Notifications to prevent foreseeable exposure risks
Evaluation of compliance with ICs and/or LURs

Nuts and Bolts – Step 3 (cont’d)
Practical Considerations :
Are any COs required?
If so, what are the alternatives?
What does the user want to do with the land?
Do you want or need to preserve a record of decision making?
How quickly can/must this process occur?

Step 4: Ongoing Continuing Obligations
O & M – type requirements
Examples:
Property inspections
Corrective maintenance
Monitoring property or
government records
Practical Considerations : Who will be implementing COs “on the ground” and how will they be trained? What oversight should/will be provided? How often should COs be evaluated?

Nuts and Bolts - Documentation
Documentation not required
Some documentation suggestions:
Finding of No Continuing Obligations
Continuing Obligations Plan (COP)
O&M/Inspection Reports
Practical Considerations : How much documentation is appropriate? What does the user want? Privilege concerns?

That’s Great. What do I do? ASTM E 2790 X.3

That’s Great. What do I do?
Property-specific decisions
Collaborative efforts with
purchaser
Compliments of Mike Sowinski, Terradex

That’s Great. What do I do? ASTM E 2790 X.4

Due Diligence & Continuing Obligations
Continuing Obligation Guide and its relationship with other environmental due diligence tools:
Phase I Standard Practice;
Phase II Standard Practice;
VES Standard Guide;
Environmental Compliance Audits;
State and local requirements

Legal Issues: Reasonable Steps
ISSUE: What are “reasonable steps?”
Due care case law operates as a “reference point” and provides general “guide posts” to defining what is reasonable.
Willful Blindness
Prudent Actions
2002 Brownfields Amendments legislative history offers some guidance
EPA “Common Elements” guidance indicates “due care” case law could be important

Legal Issues: Reconciling Ashley & Robertshaw
Court decisions addressing “reasonable steps”
Ashley II
Ashley II not a BFPP because (1) did not demonstrate by preponderance of evidence that no disposal occurred after ownership; (2) did not demonstrate that reasonable steps were taken because some contamination left exposed; and (3) was affiliated with a PRP.
Revised order emphasizes the failure to meet “affiliation” requirement and de-emphasizes other two findings.
Robertshaw
3000 E. Imperial LLC is a BFPP because it took “reasonable steps” to stop any continuing release and prevent future threatened releases. Plaintiff qualified as BFPP under state law and engaged in voluntary cleanup under California DTSC oversight, sampling the USTs and ultimately removing them.
Both cases are trial opinions, and may be ongoing and/or potentially subject to appeal.
Can we reconcile these holdings?

Legal Issues: Disposal and Passive Migration
ISSUE: What constitutes “disposal?”
Some development activities have been found to constitute “disposal”
Grading, excavating, land preparation: Honeywell , 542 F. Supp. 2d 1188 (E.D. Cal. 2008)
Grading, filling: Ashley II (revised 2011)
Is passive migration “disposal”?

Legal Issues: Disposal and Passive Migration
ISSUE: Is passive migration “a continuing release” or a “previously released hazardous substance”?
Reasonable steps to “ stop continuing releases”
Reasonable steps to “ prevent or limit human, environmental, or natural resource exposure to any previously released hazardous substance.”

Legal Issues: “Land Use Restrictions”
ISSUE: What are “Land Use Restrictions”?
A BFPP must be “in compliance with any land use restrictions established or relied on in connection with the response action…” 42 U.S.C. § 9101(40)(F)(i)
Are affirmative obligations contained in restrictive covenants land use “restrictions”?
Are NFA letters land use restrictions?

Other Legal Issues
What constitutes improper affiliation?
Common Elements
Ashley II
September 21, 2011 EPA Guidance
All Appropriate Inquiries
Non-CERCLA Environmental issues
State and Local Continuing Obligations Requirements

Example Scenarios

Scenario A Dry cleaner with on-site release. Step 2: Enough Information? Step 3: Options/Alternatives? Step 4: Reevaluation issues?

Scenario B Former Machine Shop, with on-site groundwater well. Step 1 : Continuing Obligations? Step 2/3 : Site investigation & well abandonment. No Further Continuing Obligations

Scenario C Multi-tenant mixed use building, subject to AUL. Step 2: LUR/IC information Step 3: Any Continuing Obligations? Step 4: Evaluations?

Scenario D Existing office building. AAI shows no RECs and no data gaps. Step 1: Continuing Obligations?

Scenario E NPL Site. Step 2: Enough information? Step 3: Remedy complete? Step 4: Minimum 5 year review

Subsequent Migration of Groundwater Plume Compliments of Mike Sowinski, Terradex

Commercial Redevelopment Compliments of Mike Sowinski, Terradex

To Preserve Liability Protections…
If worried about CERCLA liability: Property purchasers, owners and tenant/operators should consult an experienced environmental consultant and legal counsel to evaluate and understand the liability protections and possible continuing obligations.
Some legal issues are unsettled and may change.
Privilege concerns?
Each property is different and may have unique circumstances that require unique analysis.

For additional information or if you have additional questions, please feel free to contact:
Timothy A. Haley
11 S. Meridian Street
Indianapolis, Indiana 46204
(317) 231-6493 (o)
(317) 753-0554 (m)
[email_address]
Atlanta – Chicago – Delaware – Indiana – Los Angeles – Michigan – Minneapolis – Ohio – Washington D.C.

Tim Haley\'s E2790 Presentation

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Tim Haley\’s E2790 Presentation — Presentation Transcript