all appropriate inquiry the new rules sara beth watson steptoe & johnson llp washington, d.c....

All Appropriate InquiryThe New Rules

SARA BETH WATSONSteptoe & Johnson LLP

Washington, D.C.American Bar Association Teleconference

Wednesday, November 16, 200512:00 pm -1:30 pm EST

[email protected](202) 429-6460

Brownfield Amendments

The Small Business Liability Relief and the Brownfields Revitalization Act of 2002 (Brownfield Amendments)

• Potential for federal CERCLA liability relief• Hurdles to qualify for the relief before the

acquisition of the property• Long-term commitments to maintain the relief • State law liability issues must be considered

separately

How Does One Meet the Qualifying Criteria?

A. “All Appropriate Inquiry” Criteria

B. Full Cooperation

C. Compliance with Land Use Restrictions and Institutional Controls

D. Did Not Cause, Contribute or Consent to a Release/Disposal Occurred Prior to Acquisition

E. Compliance with All Requests for Information

F. All Legally Required Notices

G. No Affiliation with a Potential Liable Party

H. Reasonable Steps

42 U.S.C. § 9601(35)(B)(iii)

Evaluation of compliance preformed on a “careful, fact-specific analysis”

Statutory Criteria for compliance:

1. Innocent purchasers

2. Contiguous property owners

3. Bona fide prospective purchasers

To whom is AAI applicable?

All Appropriate Inquiry is applicable to 3 categories of property owners:

* provided that the property owner meets the statutory criteria, which will be analyzed on a fact-specific basis

4. Certain Brownfield grant recipients

To whom is AAI applicable?

All Appropriate Inquiry is applicable to relief from CERCLA liability for the 3 categories of property owners i.e. limited to CERCLA hazardous substances definition

Need to consider other liability schemes for non-CERCLA substances such as petroleum

Grant recipients have a broader range of substances under AAI

Statutory Criteria For Compliance – All Appropriate Inquiry

Statute requires EPA to promulgate regulations and consider

several factors in developing the regulations• Results of the inquiry of an environmental professional• Interview with past and present owners, operators and

occupant regarding the potential for contamination• Review of historical sources• Searches for recorded environmental clean-up liens• Reviews of federal, state and local records• Visual inspections for the facility and adjoining properties• Relationship of the purchase price to the value of the property

if not contaminated• Commonly known or reasonably ascertainable information

about the property• The degree of obviousness of the presence or likely presence

of contamination and the ability to detect contamination by appropriate investigation

All Appropriate Inquiry Regulations

• EPA instituted a negotiated rulemaking to develop All Appropriate Inquiry regulations.

• The Federal Advisory Committee represented a variety of interests• The negotiating committee included representatives from

commercial real estate, mortgage bankers, engineers and geologists, Tribes, state and local government, environmental groups, conservation groups and environmental justice groups

• SEER served as a resource• Insurance interests served as a resource

• Consensus draft in November 2003• Proposed Regulations published August 26, 2004 69 Fed.

Reg. 52,542• Final Rule published November 1, 2005 70 Fed. Reg. 66,070 • Effective date of regulations is November 1, 2006.


The inquiry is time sensitive AAI must be conducted prior to the acquisition of

the property (date on which person acquires title to

the subject property)

AAI must be conducted within one year before the

acquisition (earlier information can be used in the

report)

Certain elements must be current within 180 days

prior to acquisition

Time components may impact other aspects of the

deal

Performance based; not a checklist


Results of the inquiry of an environmental professional (EP)

What is an environmental professional?

EP must identify data gaps, identify sources used to

address gaps and comment on significance of the

data gaps on the ability to identify conditions

Results must be documented in a written report

which must include an opinion as to whether

conditions are indicative of a release and signed by

EP


The inquiry of the EP must include Interviews with past and present owners, operators, and

occupants regarding the potential for contamination

Must interview current owner and occupant, if multiple

occupants must include major occupants and those likely

to use, store or handle hazardous material

To extent necessary to achieve objectives include current

and past managers, past owners, and current and former

employees

Special rules for “abandoned properties”


Review of historical sources

As far back in history as the subject

property had structures or was first used for

residential, agricultural, commercial,

industrial or government purposes

EP can use judgment as to how far back in

time EP needs to go to meet objectives

Reviews of federal, state and local records Specific search distances provided in

regulations.

EP may modify if written justification in the

report

Includes tribal records in some circumstances


Visual inspections for the facility and adjoining properties Physical limitations on the inspection such as weather must be

documented

Must have on-site inspection of subject property except in

unusual circumstances

Visual inspection of adjoining property from subject property line

or other vantage point

The degree of obviousness of the presence or likely presence of contamination and the ability to detect contamination by appropriate investigation


Information that can developed by others Specialized knowledge or experience on the part of the

defendant

Relationship of the Purchase Price to the value of the property if

not contaminated (need not share with EP)

Searched for recorded environmental clean up liens

Commonly known or reasonably ascertainable information about

the property

Documentation of information developed by

others is critical to liability relief defense


Important Points to Remember Regarding All Appropriate Inquiry

1. Is AAI relevant to my site?

2. Specified time frames i.e. the All Appropriate Inquiry must be

completed before ownership is acquired Inquiries have a shelf life Ongoing obligations after acquisition required

by the amendments


Important Points to Remember Regarding All Appropriate Inquiry

3. State law programs may be relevant and have different criteria

4. Site specific issues

5. Constraints of the deal


all appropriate inquiry the new rules sara beth watson steptoe & johnson llp washington, d.c....

Documents