How the CERCLA Notification Requirements Facilitate the Creation of Brownfields and What EPA Can Do to Address this Problem

Author:Larry Schnapf
Position:Principal of Schnapf Law Offices in New York City where he focuses on environmental issues associated with business, financial, and real estate transactions as well as brownfield development projects
Three decades after t he passage of the Co mprehensive
Environm ental Response, Compensatio n, an d Liab il-
ity Act (“CERCLA”),1 this country is still adding to its
inventory of contamin ated sites. Many of these con taminated
properties have been transferred or sold a number of times since
CERCLA was passed, yet regul ators have not been notified of
the envi ronmental conditions uncovered during due diligence.
Regulators and community officials often only learn about con-
tamination after the owner has filed for bankruptcy or abandoned
the property—leaving the taxpayers to pay for the cleanups.
This article argu es that the CERCLA reporting obligations
and similar state laws contribute to creating and delaying reme-
diation of brownfi elds, and proposes administrative solutions
that EPA could adopt to acceler ate the pace of cleanups and
allow the publ ic to access information a bout the potential risks
posed by sites in their communities.
CERCLA was enacted to add ress the problems associated
with improper disposal of hazar dous subst ances. The statute
imposes strict and joint liability on four categories of potentially
responsible parties (“PRPs”) and provides the federal govern-
ment with sweeping authority. To establish liability under CER-
CLA, a plaintiff must show that there has been:
• a release2
• of a hazardous substance3
• from a facility4
• that has resulted in the response costs that were incurred
consistent with the National Oil and Hazardous Substances
Pollution Contingency Plan (“NCP”).5
government cercla reSponSe authority
Under section 104 of CERCLA, EPA has broad inves-
tigatory powers to inspect sit es where there may be a release
or threatened release, to obtain information about the materials
at t he site, to determine the nat ure of the release, to evaluat e
the abil ity of the facility’s owner to pay for a clea nup, and to
copy records or documents.6 Under CERCLA section 105, EPA
is authorize d to compile a list of s ites that it believes pose the
greatest danger.7 These sites are placed on the National Priorities
List (“NPL”), a lso known as the Superfund List, which is pub-
lished as App endix B to the NCP.8 There are three ways that a
site may be listed on the NPL. The principal method is by inves-
tigating and evaluating the dange r posed b y the rel ease using
the Hazardo us Ranking System (“HRS”), which is attached to
the NCP as Appendix A.9 Sites that do not score high enough
on the HRS may also be placed on the NPL if a state where the
site is located designates that site as the top priority site in that
state, presenti ng the greatest da nger to the public health or the
environment.10 Finally, a site may be added to the NPL if: 1) the
Agency for Toxic Substances and Disease Registry (“ATSDR”)
issues a “public health advisory” rec ommending that individu-
als be isolated from the release of hazardous substances; 2) the
EPA determines that the release poses a significant threat to the
public; and 3) that a remedial action will be more cost effective
than removal action.11
When EPA first learns that a release of hazardous sub-
stances may have occurred at a facilit y, the release and the
facility may be record ed in the CERCLA Information System
(“CERCLIS”), a database that EPA has developed to inventory
and manage sites where re leases of hazardous su bstances are
known to have occurred.12 However, adding a site to CERCLIS
does not represent a finding of liability for a particular party or
a determina tion that a response action is necessary.13 An NPL
listing is not, by itself, a determination of CERCLA liability nor
does it require site owners or operators to undertake response
actions. Moreover, the EPA may undertake a removal action and
pursue enforcement actions against PRPs even when the site is
not on the NPL. However, Superfund-financed remedial actions
may not be undertaken unless the site is on the NPL.14 Private
parties may pursue cost recovery and contribution actions even
for non-NPL sites.
To determine if a site should be placed on the NPL using the
HRS, EPA will first take the site through a two-stage site assess-
ment. The first step is a preliminary assessment (“PA”) which
consists o f an office review of the existing information on the
site and possibly a visual observation of the site. The second step
is a site investigation (“SI”), where m ore detailed inform ation
is collected, including soil and groundwater sampling.15 Nearly
half of th e CERCLIS sites that are ev aluated a re elimi nated
how the cercla notiFication requirementS
Facilitate the creation oF brownFielDS anD
what epa can Do to aDDreSS thiS problem
by Larry Schnapf*
* Lawrence Schn apf is the principal of Schnapf Law O ffices in New York City
where he focuses on environme ntal issues associated with business, financial,
and real estate transactions as well as brownfield development projects. He has
over 25 years of national environmental law experience with international law
firms and as in-house counsel. He is also an adjunct professor at New York Law
School w here he teaches “Environm ental Issues in Transacti ons” and is the
author of “Managing Environmental Liability” publishe d by Juris Publishing.
He is also the chair of the Environment, Energy, and Resources Committee of
the ABA’s Business Law Section. He can be reached at
FALL 2010 20
from further consideration after the PA. If the EPA determines
that a si te does not require further investigation, a “No Further
Respons e Ac tion Planned” (“NFRAP” ) de signation will be
placed in CERCLIS for that site which means that no additional
actions will be taken by the federal government under CERCLA
unless additional information becomes available which suggests
more investigatory steps are warranted at the site.16 It is impor-
tant to understand that NFRAP designation does not necessarily
mean a hazard does not exist but simply that EPA does not plan
to take any action based on the available information. A NFRAP
determination does not preclude a state from initiating enforce-
ment action u nder its own environmental laws. Indeed, a small
percentage of NFA sites do eventually become active CERCLIS
sites aft er EPA notifies states of an NFRAP decisio n. If a site
receives a HRS score of 28.5 or more, EPA will place the site
on the NPL using the process required under the Administrative
Procedures Act for promulgating regulations. The NPL must be
revised annually. The procedure that EPA usually follows is that
it will first propose placing a group of sites on the NPL. This
notice of proposed inclusion on the NPL will be published in the
Federal Register. Then, after a public comment period, EPA will
issue a final rule in the Federal Register formally adding sites to
the NPL. Listing of a sit e on the NPL may be challenged only
in the Court of Appeals for the District of Columbia. Petitions
challenging the listing of a site must be filed within ninety days
of the final notice to list the site on the NPL.
Many states are incr easingly reluctant to add contam i-
nated sites to the NPL due to their concerns that listed sites may
become stigmatized and scare away developers. In response to
this conc ern, Congress a uthorized EPA und er the Small Busi-
ness Liability Relief and Brownfields Revitalization Act (“2002
CERCLA Amend ments”) to make a d etermination to defer
final listing of an “eligible response site” on the NP L if a state
requests the deferral under certain circumstances.17
The federal government is authorized to perform cleanups
known as response actions18 and then may seek to recover its costs
against PRPs.19 The federal government may also seek injunctive
relief by ordering PRPs to perform response actions for hazardous
substance releases that pose “imminent and substantial endanger-
ment” to human health or the environment.20 Private parties and
states that incur response costs may also seek to recover those
costs either in cost recovery actions21 or contribution actions.22
cercla liable partieS anD liability DeFenSeS
The four categories of PRPs are: 1) past and current owners of
facilities and vessels (i.e., tanks, equipment, etc.);23 2) past and cur-
rent operators of facilities and vessels;24 3) generators of hazardous
substances;25 and 4) transporters of hazardous substances.26
A party may avoid CERCLA liability by asserting one of the
CERCLA affirmative defenses such as the third party defense,27
the i nnocent landowner (“ILO”),28 bona fide prospective pur-
chaser ( “BFPP”),29 and contiguous property owner (“CPO”)30
defenses. To asser t the third party defense, a defendant must
establish that:
• the release was caused solely by a third party;
• the third party was not an employee or agent of the defen-
dant, or the acts or omissions of the third party did not occur
in connection with a direct or indirect “contractual relation-
ship” with the defendant;
• the defendant exercised due care with respect to the hazard-
ous substances; and
• the defendant took preca utions against forese eable acts or
omissions of the third party.31
CERCLA does not indicate what ty pes of actions wo uld
constitute the exercise of “due care” that would satisfy the third
party defense. The legi slative his tory indica tes that a p erson
must demonstrate that its actions were consistent with those that
a “reasonable and prudent person would have taken in light of
all r elevant facts and circumsta nces.”32 The due care require-
ment has been i nterpreted to in clude “t hose ste ps nece ssary
to protec t the public from a healt h or environmental threat.”33
Because a person ’s a ctions will be evaluated based on the
“relevant facts and circumstances,” the due care anal ysis is a
fact-intensive inquiry and will be evalu ated on a case-by-case
basis.34 In one such case, a shopping center was able to dem-
onstrate that it exercised due care because it took steps such a s
maintaining water filters, sampling drinking water, instructing
tenants to avoid discharging into the septic system, inserting use
restrictions into leases, and conducting periodic inspections .35
In contra st, parties who did not tak e any affirmative measures
have be en held to have failed to satisfy their due care obliga-
tions.36 Some courts have e ven held that a party who doe s not
inquire about past environmental practices failed to exercise the
requisite due care necessary to assert the defense, on the grounds
that Congress intended CERCLA to provide incentives for pri-
vate parties to investigate potential sources of contamination and
initiate remediation efforts.37 As part of this line of cases, some
courts have held that CERCLA “does not s anction willfu l or
negligent blindness.”38
The I LO liability exemption exclude s from th e definition
of “contractual relationship ” a person who, at the time they
acquired the facility, did not know and had no reason to know
that any past or current release or threatened release of a hazard-
ous substance at the facility.39 To establish that it did not know
or had no reason to know of the contamination, a defendant must
demonstrate that it took “ appropriate inquiry int o the previous
ownership and uses of the property consistent wit h good com-
mercial or customary practice i n an eff ort to m inimize liabil-
ity.”40 Since the innocent purchaser defense is technically a part
of the third party defense, a landowner would still have to sat-
isfy the due care and pr ecautionary elements of the third party
defense.41 In addition, t he landowner must demonstrate that it
exercised appropriate care by taking reasonable st eps to stop
any continuing releases, prevent threatened future releases, and
prevent or limit any human, environmental, or natural resource
exposure to previously released hazardous substances.42
The BFPP liabil ity protecti on applies to pu rchasers (an d
tenants) that acquired ownership or possession of property after
January 11, 2002.43 A person may knowingly acquire contami-
nated property under the BFPP defense if the party conducts an
“all appropriate inquiry” prior to acquisition and complies with
certain post -closing “continui ng o bligations,” inclu ding the
exercise of appropriate care with respect to a previously released
hazardous substance.44
Owners or operator s of prope rties impacted by off-site
releases may be able to as sert the CPO if they can e stablish
that t hey conducted an all appropriate inquiry when they first
acquired the property and still did not know or have reason to
know that it was or could be contaminated. In addition, the own-
ers of affected p roperty seeking to invoke the CPO must also
demonstr ate co mpliance with their “continuing obligati ons”
after taking title to the affected property, incl uding taking rea-
sonable steps to stop continuin g rele ases, preventing future
threatened release and otherwise preventing or limiting exposure
to a hazardous substance released on or from property owned by
that person.45
Under EPA’s 2003 “Common Elements Guidance,”46 the
agency indicated that the “due care” case law of the CERCLA
third party defense provides a reference point for evaluating the
“reasonab le steps” and appropriate care requirement s.47 The
guidance go es on to s tate that when courts have exam ined the
due care requirement in the context of the pre-existing innocent
landowner defens e, they have generall y concluded that a land-
owner should ta ke some positive or affirmativ e step(s) when
confronted w ith hazardous substances on its propert y.48 Based
on the similarity of the concepts, the kinds of actions that owners
and operators of properties must take to satisfy the “reasonable
steps/appropriate care” obligations of the ILO, BFPP, and CPO
liability protections will probably be similar to t hose required
under the “due care” obligation of the third party defense.
Sectio n 103(a) of CE RCLA provides that any pers on
in charge of a v essel or facility shall im mediately no tify the
National Response Center as soon as the person has knowledge
of a release of hazardous substances that exceeds the reportable
quantities (“RQ”) promulgated by EPA.49 The primary purpose
of the notification obligation is to inform the federal government
of potentially serious releases of hazardous substances so that it
can determin e if a respon se is necessary and evaluate the ade-
quacy of any cleanup action implemented by others.50
When EPA first developed its RQs, the agency decided to
use a 24-hour period for determining if a reportable release had
occurred.51 The statute did not mandate this approach. Instead,
EPA adopted the 24-hour RQ because this approach was used
for section 311 of the Clean Water Act52 and the agency as well
as the regulated community had experience with this framework.
This framework made sense in the early 1980s, when improper
management of hazardous waste was rampant. However, man-
agement pr actices have improve d significantly sinc e then, and
the principa l concern now is not new d ischarges but the threat
posed by the thousands of sites that have historical contamina -
tion from past practices. Yet, because the notification obligation
is lin ked to the RQs, the presence of historical co ntamination
exceeding applicabl e standards may not be reportable. Owners
and sellers of historically contaminated property often take the
position that they have no obligation to disclose the contamina-
tion because they do not know if the contamination was a result
of a release that exceeded the RQ or simply the result of de mini-
mis leaking ov er an extended period. Mor eover, becaus e the
reporting obligation is limited to a “person in charge,” potential
purchasers of property have no obligation to report contamina-
tion discovered during due diligence. In essence, EPA has cr e-
ated a “don’t look, don’t tell” policy that encourages parties not
to rep ort historical contamination. However, without accurate
information about the existence or extent of contamination, reg-
ulators cannot effectively administer their remedial programs or
protect communities from unacceptable risks.
The problem with the structure of the rel ease re porting
requirements is no t limited to the CERCLA pr ogram. Nearly
all states have adopted their own CERCLA-like programs and
the overwhelming majority of cleanups in this country are per-
formed u nder state remed ial programs. No t surprisingly, most
states ha ve followed the CERCLA RQ approach for r eporting
Remedial programs are built upon self-reporting, but mar-
ket f orces discourage parties fr om volunteering adverse env i-
ronmental information. As rational economic actors , property
owners are loa the to generate information about environmental
conditions much less share that information with other parties,
since they are uncertain what the sampling will reveal and how
it may im pact asset values. Moreover, if the buyer walks away
from the transaction, the owner will not only lose a sale, bu t
also face an accelerated clean up obligation without the benefit
of the sale’s proceeds to fund the cleanup. Finally, owners ar e
concerned that tort liability could arise from disclosure.
Mainstream eco nomic theory assumes that all participants
have equal access to materially imp ortant informa tion. How-
ever, becau se contamination is usually not easily discoverable
and i nformation about contamination is costly to obtain, con-
taminated properties o perate in a distorted market. Oft en, the
seller poss esses superior or private knowledge about the envi-
ronmental conditions.
Some academics and government regulators have expressed
the view that reporting obligations are not a problem because a
buyer can always require a seller to dis close or cleanup a site.
However, this view ignores the practical market reality that buy-
ers often do not have the leverage to extract such concessions,
and may not realize that they need such information or that they
may even want to know. In the absence of a regulatory driver,
sellers often employ “no look” contracts that contractually pro-
hibit the buyer from further investigating or disclosing contami-
nation. Since the buyer will only be compelled to remediate the
site if the regulator beco mes aware of the contamination, the
buyer has little incentive to voluntarily clean up the site. In the
meantime, the unknown contamination can mig rate from a site
and expose the community to unknown risks.
The c onventional narrat ive has been that it was concerns
over CERC LA liability that le d t o the creation of brow n-
fields because purchasers and lenders were c oncerned about
FALL 2010 22
remediation costs. However, the reality is far more complex and
intertwined with the economic dislocations and globalization
over the past three decades. The primary reason for the creation
of brownfields was that property owners were allowed to aban-
don sites without first being required to remediate them.53 If the
CERCLA r eporting obligations required historic al contamina-
tion to b e disclosed, many of these viable companies that relo-
cated their operations would have been forced to remediate the
facilities at that time. It is im possible to say how much of the
$14 billion in brownfield funding th at EPA has awarded in the
past fi fteen years would have been necessary if the CERCLA
reporting obligations applied to historical contamination, though
we do know that many contaminated sites were abandoned in the
past two decades —well after the passage of CERCLA. Indeed,
it appears that EPA d oes not track or maintain inform ation on
whether brow nfield funding is being used for sites with viable
responsible parties. By not pursuing responsible parties for t he
costs of the as sessment and cleanup grants, EPA has actually
created a moral hazard by incentivizing companies to continue
to abandon their old and contaminated facilities.54
The HRS scoring system is heavily weighted towards con-
taminated groundwater that is used for drinking water purposes.
Groundwater in urban areas is often impacted from former com-
mercial uses and long-forg otten underground storage tanks.
Because urban groundwater is typical ly not used f or potable
purposes, regulators have usually allowed responsible parties to
leave contaminated water at a site, as long as institutional co n-
trols are recorded to prevent the groundwater from being used.55
Indeed, ma ny local government s have enacted ordinances that
prohibit the use of groundwater to help reduce the cleanup costs
and encourage reuse of contaminated properties.
Because of the RQ a pproach for release notification, the
discovery of contamina ted groundwater in urban areas i s fre-
quently not reported to regulatory agencies. As a result, there
are scores of what are known as “rogue plumes” in urban areas
that environmental lawyers may be aware of from due diligence,
but have not been reported to regulators or do not appear on any
databases of known relea ses. If the drinking water pathway is
the only pathway for exposur e to these unkn own plumes, then
the existence of these plumes would not pose a signific ant risk
to human h ealth. However, during the past decade, federal and
state regulato rs have learned t hat residual contaminants in soil
and groundw ater can act as source for contaminated vapors to
migrate into building structures.56 Scientists and regulators now
realize that the behavior of cont aminated vapors in the subsur-
face, which is known as “vapor intrusion,”57 is far more complex
than previously understood and the potential for vapors migrat-
ing into buildings may be far greater than previously assumed.
As a r esult, these u nreported groundwater plumes might be
causing the a ccumulation of unaccepta ble levels of contami-
nated vapors in occupied buildings.
Moreove r, because the concent rations of contami nated
vapors that ca n trigger remedial obligations are extremely low,
unacceptable levels of vapors may be present in a building from
releases that do not exceed reportable quantities.58 To combat
the risk posed by “rogue plumes,” N ew York adopted legisla-
tion that requires responsible parties to notify adjacent property
owners if vapor intrusion sampling detects concentrations above
acceptable thresholds .59 The owners, in tu rn, are required to
share the results with their tenants.60
During the past fifteen years, EPA and states have increas-
ingly relied on their brownfield and voluntary cleanup pro-
grams to remediate contamina ted si tes. T hese p rograms are
essentially a market-based approach to remediation, whe re the
market dec ides which sites have sufficient value to remedi ate.
While these state programs have enco uraged the remediation
of c ontaminated sites , they a re not robust enough to substan -
tially whittle down the nation’s inventory of such sites. Stud-
ies have estimated that there are between one q uarter and one
million contaminated sites in the country.61 Many of these sites
and the risks they pose are unknown. Yet, according to a study
by the Northeast-Midwest Institute, approximately six to seven
thousand sites were cleaned annually prior to 2 006.62 Even at
the height of the real estate bubble from 2007 to 2008, the pace
may have increased to ten thousand remediated sit es annually.
Clearly, if we co ntinue to re ly primarily on the cu rrent incre-
mental market-base d approa ch in addressing these sites, the
inventory of contaminated legacy sites will not be cleaned up for
another generation.
Given the sharp decline in the real estate market, commu-
nities sh ould not have to wait y ears for conditio ns to improve
before their sites are cle aned up. One way to accel erate th e
pace of cleanups is to impose a mandatory obligation on prop-
erty o wners to i nvestigate suspected releases a nd disclose the
existence of contamination that exce eds unrestri cted cleanu p
standard s. Beca use c ontamination can impact human health
and publ ic resources, i nformation about contamination should
be regulated as a public good that should not be hidden behind
archaic notions of caveat emptor. EPA could implement this
recommen dation by a dopting one or mo re of the followi ng
administrative reforms.
reviSe reportable quantity to eliminate the
24-hour perioD
EPA could c lose the historic contamination loophole by
eliminating the 24-hour period from its section 103(a) reporting
obligations. Instead, contamination would have to be disclosed
if it excee ds applic able soil or groundwater standards. Once
this information is in the public domain, decisions can be made
about who is responsible for cleanup. Many current landowners
or prospective purchasers who discover historical contamination
would be able to assert a liability defense. In deed, disclosure
could be the quid pro quo for the liability relief.
The CERCLA legi slative histo ry indicated that EPA has
broad authority to revise the reporting requirements if underre-
porting was occurring.63 Because delays in reporting could exac-
erbate an already serious condition, Congres s said EPA should
err on the side of protecting human health and the environment
when administering this authority.64
The current RQ reporting framework has contributed to the
proliferation of so-calle d “self-directed” or “at-ris k” cleanups
where parties pe rform cleanups without any regu latory over-
sight.65 Developers an d property owners concern ed about the
costs and time delays associated with regulatory oversight often
simply reme diate contamination that is uncovered during con-
struction activities, and use their own environmental consultants
or in-house staff to determine when the spill has been adequately
remediated.66 Frequently, these clean-ups do not involve sam-
pling soil or groundwater to determine the true extent of the con-
tamination, but simply removing the visibly con taminated soil
and then covering it with a new building found ation or park-
ing lot.67 In doing so, the developer or owner is betting that the
understaffed regulatory agency will not learn about the contami-
nation and if it does, the development will have been completed
and the regulator will not take any action. Without regulatory
oversight, the re can be no assurance that the cleanup was ade-
quately performed and that the site do es not pose unacceptable
risks to human health.
Some might argue that enhanced disclosure will discour-
age redevelopment of contaminated properties, thereby pushing
development to undeveloped land, or “greenfields.” However,
many states and local go vernments have counter ed this poten-
tial t hreat by ad opting “smart growth” initiative s that mak e it
increasingly difficult to build on undeveloped sites.68
Others migh t al so a ssert that mandatory repor ting will
stigmatiz e prop erties. This rationale has often been used to
discourage purchasers fr om reporting or investigatin g histori-
cal contamination. While the contamination goes unreported, it
might a lso migrate a nd later bec ome an NPL site because the
contaminatio n was not add ressed earli er. However, there are
plenty of opportunist ic investors who are willing to purchase
contaminated sites th at their proprietary mo dels tell them are
undervalued. Indeed, empirical information from the New York
Brownfield Cleanup P rogram indicate s that cleanup costs are
only one to five percent of the potential redevelopment value—
with most of the sites around one percent.69 Ofte n, the re me-
diation costs are simply a “delta” over the construction costs.70
In addition, several states have established reporting obligations
that do not use the RQ approach and many states impose affirma-
tive obligations on owners or operators of un derground storage
tanks to investigate suspected releases.71 There is no evidence
that these disclosure schemes have disrupted the real estate mar-
kets in those states.72
The structure of the CERCLA reporting obligations allows
many sellers of corporate property to keep the presence of con-
taminatio n secret. In the absence of a regulator y driver , the
owner-seller can then contractually prohibit the buyer from dis-
closing the con tamination unl ess an overburdened regulatory
agency somehow stumbles acro ss the contamination. Indeed,
transactional documents often contain a so-ca lled “No Look”
or “No Hunt” clau se that prev ents the bu yer from co nducting
further investigatio ns on the property if the purchaser wants to
maintain contractual protections obtained from the seller.73 In
fact, it is not uncommon f or environmental lawyers to spend a
significant amount of time negotiating and drafting what an d
how contamination information should be disclosed.
The excuses for maintaining the current “hide the ball” trick
do not stand up under any analysis. Mandatory disclosure would
level the p laying field among known contaminated sites and
unknown contaminated sites, while eliminating the moral hazard
created by the current approach. Currently, property owners who
disclose historical contam ination because of corporate aspira-
tional goals are at a disadvantage since the sites with unreported
contamination and therefore thought to be clean, are compara-
tively overvalued. Furthermore, if the buyer walks away from a
disclosed property, the seller is still obligated to clean up the site
under either CERCLA or a state brownfield program. Once the
contamination is disclosed, the risk posed by the contamination
can b e assessed and sellers will be forced to either remediat e
sites or convey the property at discount to encourage a buyer
willing to remediate the sites as part of a redeve lopment plan.
One wa y or the other, the site will be remediated without the
need to spend public funds.
Mandatory disc losure could also encourage buyers to per-
form more thorough due diligence actions since the information
will be available at a more cost-effective price and the informa-
tion could be used to gain an advantage during the negotiations.
Furtherm ore, greater disclosure will facilita te le nding since
uncertainty over environmental risks will be reduced.
The federal Emergency Planning and Community Right
to Know Act (“EPCRA”) and California’s Proposition 65 law
serve as examples of the environmental benefits that inure for
the pu blic when gr eater disclosure is required. When EPCRA
was e nacted in 1986, commentators warned t hat the i nforma-
tion would result in a wave of litigation. Not only did t he dra-
matic increase in toxic tort lawsuits never materialize, but also
the disclosures motivated facilities to substantially reduce their
emissions.74 Likewise, Proposition 65 has been credited with
causing companies to significantly lower the content of danger-
ous chemicals in their products.75
Recognizing the mischief that the current R Q framework
allows, a number of states have recently begun to move away
from the RQ approach.76 For example, the Maryland Depart-
ment of Environment (“MDE”) has proposed new r eporting
obligations that are targeted to the discovery of “historical con-
tamination.”77 Under this proposed rule, any res ponsible party
in posse ssion of samplin g data or other environmental assess-
ment that indicates the presen ce of a re lease of a hazardous
substance into t he environment above an applica ble standard
must immediately report the info rmation to the MDE.78 T he
proposed rule emphasizes that the reporti ng obligation is trig-
gered even if the responsible part y cannot link the information
to any known rele ase or disch arge.79 In addition, Connecticut
has proposed amendments to its reporting obligations that would
impose notification obligations for past releases based on a num-
ber of factors including proximity to sensitive receptors, as well
as the nature of the material released and the threat it poses.80
FALL 2010 24
Washington state enacted legislation that extended its residential
disclosure requirements to commercial properties.81
To fur ther encourage property owners to disclose histori-
cal contamination, EPA could adopt an amnesty program for
property owners who voluntarily disclose contamination within
one year of the reforms, much like what EPA has done with its
audit po licy.82 Property owners who v oluntarily disclose their
sites would be treated as Bo na Fide Prospec tive Pu rchasers
(“BFPP”), provided they did not cause the co ntamination and
would only be responsible for complying with appropriate care/
continuing obligations, and the sites do not pose an imminent
and substan tial endangerment t o human health or the environ -
ment. Owners could take actions such as installing vapor intru-
sion mitigation systems to cut off human exposures, and remove
floating products or gro ssly contaminated soils that se rve as a
source of groundwater contamination.
clariFy guiDance on reporting obligationS unDer
Section 103(c) contains a notification requirement that is a
separate and distinct reporting obligation.83 This section required
that owners or operators notify EPA by June 9, 1981 of the exis-
tence and location of facilities where hazardous waste had been
stored, tr eated, or disposed of prior to December 1980 , unless
the facility obtained interim status und er the Resource Conser-
vation and Recovery Act (“RCRA”).84 Persons who knowingly
failed to comply with this notification obligation were precluded
from asserting any of the affirmative defenses contained in sec-
tion 107 of CERCLA.85
EPA’s 1981 guidanc e indicated the repor ting obligation s
applied to inactive facilities that did not previously file a notice
under RCRA section 3010 and that frequent spills or leakage
over a period of years could create de facto disposal facil ities
that would be subject to the 103(c) notification requirement.86
EPA subsequently issued three interpretative documents indi-
cating that the reporting obligation under 103(c) was not a single
time obligation but was a “lasting” obligation when an owner or
operator discovered pre-1981 disposal.87 The only reported deci-
sion involving 103(c) appears to be City of Toledo v. Beazer Mate-
rials & Services, Inc.88 As part of its claim under the citizen suit
provision CERCLA section 310, the plaintiff asserted the defen-
dant (former owner) failed to comply with section 103(c).89 In dis-
missing this count, the court ruled that section 103(c) imposed a
one-time reporting obligation that had expired on June 9, 1981.90
Since the violation was a wholly past violation, the plaintiff could
not maintain an action under section 310.91
The court did not add ress whether the reporting requ ire-
ment could apply to landowner s, purchasers, or operators who
discover th e existence of pre-1981 hazardous waste after Jun e
9, 1981. Moreover, since 103(c) imposes an affirmative duty on
owners and operators to examine reasonab ly available records,
failure to review rea sonably available records that could have
shown or prevented a release of hazardous substances might be
construed to be a failure to exercise due care or appropriate care
necessary to assert the landowner liability protections.92
EPA should reaffirm its earlier guidance that section 103(c)
imposes a c ontinuous reporting obligation on owners or opera-
tors o f facilities but allow such parties a one-year amnesty to
disclose such historical hazardous waste activity without incur-
ring any penalties so long as they are not active polluters.
iSSue guiDance on Section 111(g)
Section 111(g) require d EPA to promulgate regula tions
requiring owners or operators of facilities where there has been
a release of hazardous substances to provide notice to p ersons
potentially injured parties by such releases of a hazardous sub-
stance.93 Until the regulations were is sued, owners or opera-
tors of a facility or vessel were required to “provide reasonable
notice to potential injured parties by publication in local newspa-
pers serving the affected area” of a hazardous substances release
from that facility or vessel.94 In the preamble to its 103(a) regu-
lations, EPA stated that the 111(g) notification was independent
from the reporting requirements of section 103(a).95
EPA has never proposed or promulgated any r egulations
under section 111(g). Just as EPA is correcting its omission to
issue financial assurance regulations under section 108,96 EPA
should promulgate regulation s under 111(g) if it declin es to
revise the 103(a) RQs.
reviSe all appropriate inquireS to require
Sampling oF releaSeS
In 1986, Congress added the ILO defense, which was actu-
ally a subset of the third party defense.97 The ILO provides that a
person would not be considered to be in a “contractual relation-
ship” (one of the four elements of the third party defense) if the
owner performed an “appropriate inquiry” into the past uses of
the property and as a result of that inquiry did not know or have
any reason to know of releases of hazardous substances.98 Courts
were instructed to consider the following factors in evaluating if
the o wner satisfied the ILO: 1) any specialized kn owledge or
expertise of the defendant, owner; 2) if the purchase price indi-
cated awareness of the presence of a risk of contamination, com-
monly known, or reasonable information about the property; 3)
the obvi ousness of the presence of contamination at the prop-
erty; and 4) the ability to detect such contamination by appropri-
ate inspection.99 The case law interpreting what might be called
“little all appropriate inquiries” ( “aai”) has not been uniform,
but a preponderance of cases have held that a party must at least
perform some sampling to qualify as an ILO.100
When CERCLA was amen ded in 2002, Congress added
the BFPP and CPO defenses and modified the ILO (collectively
the “ Landowner Liability Protections” or “LLPs”).101 As part
of these amendments, Congress added five criteria to t he “aai”
factors and instructed EPA to promulgate a rule based on those
ten fa ctors,102 which was called the All Appropriate Inquiries
(“AAI”) rule.
When EPA promulgated its AAI rule, the agency said a pur-
chaser did not have to conduct sampling but simply had to iden-
tify if there were any releases to comply with AAI.103 Thus, if a
purchaser learned of a release during its investigation but did not
disclose or remediate the release, it would still be considered to
have performed an all appropriate inquiry. EPA felt that sampling
should be related to compliance with the post-closing continuing
obligations.104 However, EPA did acknowledge that sampling
might be appropriate in some cases, such as to plug data gaps.105
EPA also suggested that a court could conclude that sampling
should have been conducted, depending on the obviousness of the
contamination and the ability to detect the contamination.106
EPA should revise the language of AA I to incorporate an
affirmative obligation to sample suspected releases identified in
phase one investigation. If a phase two inv estigation identifies
contamination above cleanup standards, the inf ormation would
then have to be disclosed. If an owner wants to qualify for one of
the LLPs, the quid pro quo should be disclosure of the results of
due diligence so that regulators can decide if and how to address
the contamination. To motivate owners to disclose the informa-
tion, EPA should borrow from its audit policy and only require
owners to comply with continuing obligations if they were not
an active polluter. Thus, even if the deal fell through, the owner
would be rewarded for disclosing the due diligence results.
Some have suggest ed that such mand atory sampling and
disclosure would frustrate the purposes of the 2002 CERCLA
Amendments to encourage redevelopment of brownfields. How-
ever, Congress actually added to the obl igations of landowners
when it modified “aai” and created the continuing obligations.107
Moreover, when enacting CERCLA, Congress deliberately cast
a wide liability net to protect human health and the environment.
In pro mulgating AAI, EPA appeared to have lost sight of the
principal g oal of CERCLA. It seems to have focused mor e on
protecting property owners and not enough on protecting local
communities by providing them with timely information about
conditions identified in phase one and phase two reports.
Objective data on how well AAI is facilitating cleanups is
scarce. Unfortunately, EPA does not track the number of clean-
ups performed under state brownfield programs but only clean-
ups completed by EPA Brownfields grantees. Thus, we only
have anecdotal accounts that are generally used to support unex-
amined assumptions about the impact of disclosure on transac-
tions. We know from industry sources that the average number
of phase one reports during the past seventeen years ranged from
200,000 to 250,000 annually. However, we do not know how
many of those reports identified releases, how many such reports
proceeded to phase two reports, and how many of those t hen
proceeded to cleanups. Such data could help EPA eval uate the
effectiveness of its brownfield program and AAI.
require StateS to aDopt the new reporting
obligationS to qualiFy aS a “State reSponSe
program” unDer Section 129
Unlike othe r environmental laws, CERCLA does not pro-
vide for the de legation of CERCL A a uthority to states .108
Indeed, state brownfiel d prog rams pr oliferated in the 1 990s
largely in response to the perceived liability concerns posed by
CERCLA. Even with these state initiatives, brownfield develop-
ers and their lenders remained concerned that EPA might deter-
mine that a site c leanup performed u nder a state program was
inadequate. This fear of federal enforcement is probably more
theoretical t han real since brownfield sites are not as seriously
contaminated as NPL sites and are therefore usually not on the
federal enforcement radar screen.
To address this concern, the 2002 CERCLA Amendment s
added a new section 128 to CERCLA that bars EPA from bring-
ing enforcement actions under CERCLA when a cleanup is
performed at an “eligible respon se site” and the state response
program meets the minimum stan dards established in this sec-
tion.109 An “eligible response site” under se ction 128 includes
sites that fall within the definition of a brownfield site and those
sites tha t EPA determines are eligible for brownfield financial
assistance on a case-by-case basis.110 Sites specifically excluded
from this definition are NPL sites, as well as sites where EPA
has conducted or is conductin g a pre liminary assessme nt and
site ins pection and deter mines, after con sulting with the state,
that the preliminary score of the site makes it eligible for inclu-
sion on the NPL.111 Howeve r, if EPA determines not t o take
any further action, the property may be classified as an eligible
response site.112 In addition, a site that pose a threat to a “sole-
source drinking water aquifer or a sensitive ecosystem” may not
be considered an “eligible response site.”113
Congress did not impose any extensive standards for state
response programs in orde r for the federal enforcement bar to
apply at eligible response sites. The only state program require-
ment is that a state maintains an inventory of sites where response
actions ha ve been completed in the p revious year and that are
planned in the upc oming ye ar.114 Specifi cally, th e invento ry
must be upda ted at least annually an d be made available to the
public.115 Each site must be identified by name and location.116
The inventory must also indicate if a site will be remediated for
unrestricted use or if institutional controls will be us ed.117 The
specific land use controls that will be used must also be identi-
fied in the inventory.118
Consist ent with the general movement tow ards greater
transparency, EPA should require states to adopt the proposed
notification reforms discussed in this arti cle. In addition, states
interested in qualifying for a “state response program” that is eli-
gible for th e federal enforcement deferral under CERCLA sec-
tion 128 should be required to establish and maintain centralized
databases of sampling results unde r their cleanup prog rams,119
and provide the information to the public.120 Signifi cant finan-
cial resources and time are expe nded dupl icating phase tw o
investigations at sites that have been investigated in past transac-
tions. If there was a centralized database, local governments and
private purchasers seeking to redevelop sites would not have to
waste money repeating investigative work.
Some consulta nts h ave e xpressed concern that creating
databases could expose the m to liability. It is unclear how a
repository would pose any different liability than reports now
made available to the public for remedy selection by responsible
parties or parties parti cipating in vol untary cleanup programs.
In any event, the concern could be easily addressed by r equir-
ing persons seeki ng access to the database to acknowled ge a
disclaimer that the repository was for informational purposes
FALL 2010 26
without any warranty of accuracy. By acknowledging the dis-
claimer persons would also waive any claim of reliance upon the
information. Indeed, consultants already inse rt such disclaimer
language in their reports.
clariFy continuing obligationS
EPA’s 2003 Common Elements memorandum was not par-
ticularly helpful on what constituted reasonable steps/appropri-
ate care, although it did suggest that landowners that qualify for
the LLPs must take “some positive or affirmative steps” about
releases of hazardous substances.121 EPA should therefore issue
additional guidance elaborating on the kinds of actions that would
be considered in compliance with the continuing obligations. In
particular, EPA should reiterate the language in the preamble to
AAI that sampling is a critical component of exercising appropri-
ate care.122 After all, it is hard to exercise care about contamina-
tion if one does not know of its existence. In addition, EPA should
indicate that source removal (e.g., removal of leaking tanks and
impacted soil) and other measures to eliminate potential expo-
sures (e.g., installation of sub-slab depressurization systems to
eliminate vapor intrusion) should be considered to fall within the
scope of the continuing obligations.
The practice of environmental law for transactions involv-
ing contaminated properties has devolved to t he point where
lawyers are facilitating a moral hazard. If the nation is going to
finally move beyond this legacy of contaminated sites, we need
to raise the level of what is considered customary due diligence
and disclosure. It is time to reject antiquated notions that aro se
from our agra rian heritage and encourage practices that lead to
greater transparency reflecting the twenty-first century society’s
values in promoting public well-being.
Mandatory reporting of historical contamination is the best
long-term, sustainable approach to remediating these legacy sites
and reintroducing the m into mainstream commer ce. We need
to swi ng the pend ulum back f rom reliance on a mark et-based
approach to clean ups towards a system with more enforcement
mechanisms, which provide the public with meaningful oppor-
tunities to discover contaminat ion ear ly and shape remedial
decisions in their communities.
Justice Brandeis once wrote that “sunlight is said to be the
best of d isinfectants; electric light the mos t efficien t police-
man.”123 A recent New York Times article on contaminated meat
illustrates the potential power of improved disclosure.124 In cov-
ering shoddy oversight by the U.S. Department of Agriculture,
the article revealed that slaughterhouses had adopted their own
version of “no loo k” contracts that prohibited their customers
from sampling the meat for E. coli, at the risk of being cut off
from further supplies.125 Once the existence of these a gree-
ments was disclosed, several large food chains discontinued this
Contract ual pr ohibitions on sampling, whether they are
imposed by slaughterhouses or sellers of contaminated property,
should be void as a matter of public policy and simply have no
place in the 21st century since they allow withholding of infor-
mation that impacts th e public’s health and welfare. So ciety
prohibits landlords from renting substandard properties, manu-
facturers from making defective product s, and new housing
from voiding implied warranties. Similarly, EPA should lift cur-
rent provisi ons that prevent sampling of potentia l and existing
property contamination as a matter of public policy.
We can list a “parade of horribles” why these suggestions
may not work, but it is clear that the current system is not work-
ing. We need to try some new a nd creative approaches. The
existing CERCLA reporting system is broken. Who would have
ever dreamed that thirty years after the passage of CERCLA we
would still be discovering sites contaminated decades ago? If we
do not change the system, our grandchildren will be discovering
sites contaminated by our grandfathers.
Endnotes: How the CERCLA Notification Requirements Facilitate the
Creation of Brownfields and What EPA Can Do To Address
this Problem
1 Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. §§ 9601-9675 (2006).
2 § 9601(22). CERCLA broadly defines a release to include any conceivable
contact of a hazardous substance with the environment. There is no minimum
amount to qualify as a release. A “threatened release” is even more broadly
defined and includes abandonment of drums, improper storage of materials,
lack of experience of a facility owner in handling hazardous substances, the
mere presence of contaminated dust on the floor of a warehouse that could be
carried outside on the clothes or shoes of workers, and the absorption of hazard-
ous substances into a concrete floor.
3 § 9601(14). CERCLA hazardous substances are those that EPA has specifi-
cally designated as such under § 311 of the Clean Water Act, a toxic pollut-
ant under § 307(a) of the Clean Water Act, any RCRA Hazardous Waste or
hazardous air pollutants under § 112 of the Clean Air Act and any imminently
hazardous chemical which the EPA has taken action on under § 7 of the Toxic
Substances Control Act (“TSCA”). The definition of hazardous substances
contains the so-called “petroleum exclusion” that excludes petroleum or any
fractions (e.g. gasoline) thereof. Thus, property owners may not use CERCLA
to recover the cleanup costs associated with the cleanup of releases at gas sta-
tions even where the gasoline may contain lead or other hazardous substances.
In its guidance interpreting the scope of the petroleum exclusion, EPA said that
if the petroleum has been contaminated with hazardous substances that are not
normally added during the refining process such as used oil that is mixed with
solvents or PCBs, the petroleum exclusion no longer applies.
4 § 9601(9). A CERCLA “facility” includes any building, structure site, land
area, pipe, equipment, pit, lagoon, storage container, motor vehicle, railcar, or
aircraft where hazardous substances have been “deposited, stored, disposed of,
or placed” or area where hazardous substances have “come to be located.”
5 40 C.F.R. § 300 (2010). The NCP contains procedures that must be followed
in responding to oil spills and releases of hazardous substances.
Endnotes: How the CERCLA Notification Requirements
Facilitate the Creation of Brownfields continued on page 63