The Brownfields Amendments: New Opportunities, New Challenges-part I

• Publication year: 2002
• Pages: 99
• Citation: Vol. 31 No. 6 Pg. 99

31 Colo.Law. 99 Colorado Lawyer 2002.

2002, June, Pg. 99. The Brownfields Amendments: New Opportunities, New Challenges-Part I

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99

Vol. 31, No. 6, Pg. 99

The Colorado Lawyer
June 2002
Vol. 31, No. 6 [Page 99]

Specialty Law Columns
Natural Resource and Environmental Notes
The Brownfields Amendments: New Opportunities, New Challenges - Part I
by Scott H. Reisch

This column is sponsored by the CBA Environmental Law, Water Law, and Mineral Law Sections. The Sections publish articles of interest on local and international topics

Column Editors

Maki Iatridis of Vranesh and Raisch LLP, Boulder (Environmental) - (303) 443-6151; Michael F. Browning of Porzak, Browning & Johnson LLP, Boulder (Water) - (303) 443-6800; Gus Michaels, Boulder (Mineral) - (303) 442-3688

About The Author

This month's article was written by Scott Reisch, a partner in the Environmental Practice Group of Hogan & Hartson LLP's Denver office - (303) 899-7355.

This two-part article describes important new amendments to the Comprehensive Environmental Response, Compensation, and Liability Act. The amendments alter the defenses to landowner and "generator" liability and make other changes intended to promote the cleanup and redevelopment of contaminated properties known as "brownfields."

In December 2001, after years of debate and delay, Congress unanimously passed the Small Business Liability Relief and Brownfields Revitalization Act1 ("Amendments") as an amendment to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA").2 The Amendments attempt to address two distinct problems that arise from CERCLA's draconian liability scheme. First, CERCLA has impeded the cleanup and reuse of contaminated properties known as "brownfields," and thereby contributed to development of "greenfields" (pristine undeveloped land) and urban sprawl. Second, CERCLA has had a devastating impact on many small businesses.

The Amendments address these problems through a combination of brownfields funding, liability reforms, and limitations on federal authority to require cleanups where a viable state program is already taking the lead. Although the Amendments' liability reforms are narrower and more complicated than one would hope, the additional funding and limitations on federal authority will likely further buttress Colorado's highly successful Voluntary Cleanup Program.3 Ultimately, it may thereby achieve the brownfields revitalization that Congress has promised.

This article describes changes to CERCLA that will impact real estate transactions involving contaminated property, as well as new defenses available to small businesses caught in
CERCLA's liability net. Part II of this article will describe the financial incentives Congress authorized in order to promote brownfields redevelopment.

Background

CERCLA imposes liability for "response costs" incurred in cleaning up contaminated property on four classes of "potentially responsible parties" ("PRPs"): (1) the current owner and operator of the contaminated property; (2) the owner and operator of the contaminated property at the time "hazardous substances" were disposed of at the property ("prior owner/ operator"); (3) any person who "arranged for" the disposal or treatment of hazardous substances ("generator") at a property that is now contaminated; and (4) any person who transported hazardous substances to the contaminated property for treatment or disposal and selected the property as the destination.4

Landowner liability has made developers reluctant to acquire and redevelop contaminated property for fear that they will acquire perpetual, joint and several cleanup liability. Generator liability has resulted in thousands of small businesses being ensnared in litigation despite the fact that their wastes contained low concentrations of hazardous substances.

Congress previously attempted to mitigate the harshness of CERCLA's liability regime by establishing the "third party" and "innocent landowner" defenses for landowners and by giving the U.S. Environmental Protection Agency ("EPA") authority to enter into expedited settlements with certain "de minimis landowners" and "de minimis generators" who contributed a small fraction of the waste at a site. Under the "third party defense," which dates back to CERCLA's enactment, an owner of contaminated property is not liable under CERCLA if it can prove three elements:

1. The contamination arises solely from the acts or omissions of a third party with whom the owner does not have a "contractual relationship."

2. The owner exercised "due care" with respect to the hazardous substances concerned.

3. The owner took "precautions" against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions.5

In 1986, realizing that the "no contractual relationship" requirement left purchasers of contaminated property exposed to the full brunt of CERCLA liability, Congress amended the statute by adding a definition of "contractual relationship" that has become known as the "innocent landowner" defense. Under the defense, in addition to meeting conditions 2 and 3 above, a purchaser of contaminated property can avoid CERCLA liability if it can show that, prior to its purchase, any "disposal" of hazardous substances ceased and the purchaser conducted "all appropriate inquiry" and did not have any reason to believe that the property was contaminated.6

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Owner/Operator
Liability Reforms

The Amendments change CERCLA owner/operator liability in several important areas. They revise the innocent landowner defense, establish a...