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CERCLA Liability Protection Associated with the Development of Brownfields

Often located in urban and suburban areas, “brownfields” are industrial and commercial properties that are abandoned or underutilized because of actual or perceived environmental contamination subject to costly statutory liability. Historic manufacturing operations are generally responsible for the contamination of these dormant sites. To encourage redevelopment of these sites, the Small Business Liability Relief and Brownfields Revitalization Act (the Brownfields Act) was passed to limit some of the liabilities associated with owning or operating a brownfield site.

Environmental Liability of Brownfields Under CERCLA

Traditionally, brownfields have been underutilized due to their associated environmental liability. For example, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), landowners or operators of property found to be contaminated or threatened with the release of a hazardous substance may be held strictly liable (i.e., liable regardless of fault) for any costs incurred in response to the problem.

Consequences of CERCLA Liability

The redevelopment of brownfields has been hindered by the threat of potential liability. Because an owner of contaminated land can be liable for expensive cleanup costs under CERCLA and similar state laws, developers and purchasers have avoided brownfield sites. Instead, developers seek out pristine open space and farmland (“greenfields”) on which to build. As a consequence, relatively clean brownfield properties remain idle even though they generally already contain the infrastructure (e.g., utilities, roads) necessary for development. Ultimately, such legal obstacles may contribute to urban sprawl.
Limiting CERCLA Liability – The Brownfields Act

In order to promote the redevelopment of brownfields, President Bush passed the Brownfields Act on January 11, 2002. The Brownfields Act represents the first substantial set of amendments to CERCLA in years. The amendments revise CERCLA’s liability scheme and are intended to reduce various legal impediments to brownfield redevelopment. The Brownfields Act alters and explains CERCLA liability in the following ways:

  • Clarifies and limits CERCLA liability for three classes of landowners: innocent landowners, contiguous property owners and bona fide prospective purchasers

  • Provides liability protection for certain small volume contributors and contributors of municipal solid waste

  • Exempts homeowners from liability
Among other provisions, the Brownfields Act also grants federal funding to states with voluntary site cleanup programs, expands the U.S. Environmental Protection Agency’s (EPA) Brownfields Program, and enhances roles for state and tribal response programs.

Landowners Seeking CERCLA Liability Protection

The Brownfields Amendments to CERCLA provide liability protections to landowners who qualify as innocent landowners (ILOs), contiguous property owners (CPOs) or bona fide prospective purchasers (BFPPs). In general, an “ILO” must take the property with no knowledge or reason to know of a hazardous substance or threatened release of such substance on the property. A “CPO” owns property next to a contaminated site and is thus excluded from CERCLA’s definition of “owner” of land. Like ILOs, CPOs must also take their contiguous land without knowledge or reason to know of a hazardous substance or threatened release of such substance. In contrast, a “BFPP” may have knowledge of the actual or threat of contamination, but the EPA’s recourse is limited to placing a lien on the property for an amount equal to the increase in fair market value attributable to the EPA’s cleanup.

Final Rule on “All Appropriate Inquiries”

All landowners qualifying under the Brownfields Act to seek protection from CERCLA liability must also demonstrate that they made “all appropriate inquiries” into identifying releases and threatened releases of hazardous substances on the property before acquiring it. The EPA has defined the term “all appropriate inquiries” as “the process of evaluating a property’s environmental conditions and assessing potential liability for any contamination.” Effective November 1, 2006, the final rule establishes specific regulatory requirements for conducting all appropriate inquires to identify the release and threatened release of hazardous substances on property subject to CERCLA liability.

What “All Appropriate Inquiries” Should Reveal

The final rule requires prospective landowners to retain environmental experts to conduct the following inquiries:

  • interviews with past and present owners, operators and occupants;
  • reviews of historical sources of information;
  • reviews of federal, state, tribal and local government records;
  • visual inspections of the facility and adjoining properties;
  • commonly known or reasonably ascertainable information; and
  • degree of obviousness of the presence or likely presence of contamination at the property and the ability to detect the contamination.

The final rule defines an environmental professional as someone who possesses sufficient specific education, training, and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases on, at, in, or to a property, sufficient to meet the objectives and performance factors of the rule, and has: (1) a state or tribal issued certification or license and three years of relevant full-time work experience; or (2) a Baccalaureate degree or higher in science or engineering and five years of relevant full-time work experience; or (3) ten years of relevant full-time work experience.

Additional inquiries that must be conducted by or for the prospective landowner or grantee include:

  • searches for environmental cleanup liens;
  • assessments of any specialized knowledge or experience of the prospective landowner (or grantee);
  • an assessment of the relationship of the purchase price to the fair market value of the property, if the property was not contaminated; and
  • commonly known or reasonably ascertainable information.
When Must All Appropriate Inquiries Be Conducted?

All appropriate inquiries must be conducted or updated within one year of the date of acquisition of a property. If all appropriate inquiries are conducted more than 180 days prior to the acquisition date, certain aspects of the inquiries must be updated.

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