CHAPTER 1 FEDERAL ENVIRONMENTAL LAWS AFFECTING REAL ESTATE TRANSACTIONS

• Jurisdiction: United States

Environmental Considerations in Natural Resource and Real Property Transactions
(Nov 1988)
CHAPTER 1
FEDERAL ENVIRONMENTAL LAWS AFFECTING REAL ESTATE TRANSACTIONS
David P. Kimball, III
Evans, Kitchel & Jenckes, P.C.
Phoenix, Arizona

Introduction: Two Major Areas of Concern in the Transactional Setting

A. What liabilities will I assume if I take ownership or assume operation?

B. Is the facility in compliance with applicable environmental laws, so that it can continue to operate without unacceptable delay, expense, or penalties?

I. Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), as Amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA").

A. Background.

1. CERCLA authorizes EPA to remove or remedy a "release" or threatened release of a "hazardous substance" (CERCLA § 104).

a. "Release": any spilling, leaking, dumping, or "disposing" into the "environment" (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any hazardous substance or pollutant or contaminant) (CERCLA § 101(22)).

i. "disposal": same meaning as provided in RCRA § 1004, which is the "placing" of any solid or hazardous waste into or on any land or water so that such solid or hazardous waste or any constituent thereof may enter the environment (CERCLA § 101(29), RCRA § 1004(3)). The term has been judicially construed to include the "migration" or "leaching" of wastes from their initial location. See United States v. Conservation Chemical Co., 619 F. Supp. 162, 200, 253- 54 (W.D. Mo. 1985).

ii. "hazardous substance": any substance designated pursuant to Sections 307(a) and 311(b)(2)(A) of the federal Clean Water Act, Section 112 of the federal

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Clean Air Act, Section 3001 of the federal Resource Conservation and Recovery Act, Section 7 of the federal Toxic Substances Control Act, or Section 102 of CERCLA (CERCLA § 101(14)). The substances designated pursuant to these provisions are identified in 40 C.F.R. § 302.4.

b. No minimum concentrations: CERCLA does not require any particular concentration level for the finding of a "hazardous substance." Thus, any traceable amount of a "hazardous substance" is sufficient for the finding of a "release." See Eagle-Picher Industries v. EPA, 759 F.2d 922, 927- 31 (D.C. Cir. 1985)

2. In addition to responding to a "release" or threatened release with its own "removal" or "remedial" action, EPA may seek a judicial injunctive or issue an administrative abatement order if the "release" poses an imminent and substantial endangerment to the public health or welfare or the environment (CERCLA § 106).

B. Liability.

1. Persons deemed responsible for a "release" or threatened release are liable for the costs of removal or remedial actions and up to $50,000,000 in natural resource damages (CERCLA § 107(a)).

2. Persons deemed responsible for a "release" include:

a. Current Owner or Operator: "the owner or operator of a...facility," which is defined as any person who owns or operates "any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located" (CERCLA §§ 101(9), 107(a)(1)). The term "owner or operator" does not include "a person, who, without participating in the management of a...facility, holds indicia of ownership primarily to protect his security interest in the...facility" (CERCLA § 101(20)(A)). Current owners or operators include:

i. Managing stockholders: New York v. Shore Realty Corp., 759 F.2d 1032 (2nd Cir. 1985); United States v. Carolawn Co., 14 Envtl. L. Rep. 10699 (D.S.C. 1984).

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ii. Managing parent corporations: Idaho v. Bunker Hill Co., 635 F. Supp. 665 (D. Idaho 1986); Colorado v. Idarado Mining Co., 18 Envtl. L. Rep. 20578 (D. Colo. 1987); Vermont v. Staco, Inc., 684 F. Supp. 822, 831- 32 (D. Vt. 1988). But see In re Alleged PCB Pollution of Acushnet River v. New Bedford Harbor, 675 F. Supp. 22 (D. Mass. 1987).

iii. Corporate officers: United States v. Conservation Chemical Co., 614 F. Supp. 162, 190 (W.D. Mo. 1985); New York v. Shore Realty Corp., 759 F.2d 1032, 1052- 53 (2d Cir. 1985); United States v. Bliss, 667 F. Supp. 1298 (E.D. Mo. 1987).

iv. Foreclosing lenders: United States v. Maryland Bank & Trust Co., 632 F. Supp. 573, 578- 80 (D. Md. 1986). But see United States v. Mirabile, 15 Envtl. L. Rep. 20994 (E.D. Pa. 1985).

v. Non-disposing current land owners: United States v. Tyson, 12 Chem. Waste Lit. Rep. 872 (E.D. Pa. August 22, 1986) ("The current owner of a facility is within Section 107(a)(1) even if it never operated the facility as a hazardous waste dumpsite and even if no hazardous wastes were dumped at the facility during the period of its ownership"); United States v. Stringfellow, 661 F. Supp. 1053, 1063 (C.D. Cal. 1987) (Section 107(a) "does not require that the present owner contribute to the release, but merely that he is the present owner of the facility where there has been a release or threat of release of a hazardous substance").

vi. Lessors: United States v. Argent Corp., 14 Envtl. L. Rep. 20616 (D.N.M. 1984) ("mere ownership" as lessor is sufficient for Section 107(a) liability).

b. Owner or operator at time of disposal: "any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of" (CERCLA § 107(a)(2)). The same persons held responsible under CERCLA § 107(a)(1) may be held responsible under CERCLA § 107(a)(2) if they "owned or operated" at the time of disposal. For example:

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i. Managing stockholders, corporate officers: United States v. Conservation Chemical Co., 628 F. Supp. 391, 416, 420 (W.D. Mo. 1985).

ii. Lessees: United States v. SCRDI, Civ. No. 80-1274-6 (D.S.C. August 24, 1984); United States v. Northernaire Plating Co., 670 F. Supp. 742, 747 (W.D. Mich. 1987).

iii. Unknowing owners in the chain-of-title: every owner of property between the initial disposer and current owner may be held responsible for a "release" so long as a "disposal" (i.e., a migration or leaching) of a "hazardous substance" can be found to have occurred during the term of ownership. See, e.g., United States v. Conservation Chemical Co., 619 F. Supp. 162, 253- 54 (W.D. Mo. 1985).

c. Arrangers for disposal: "any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or operated by such person, by any other party or entity...." (CERCLA § 107(a)(3)).

i. Off-site generators: United States v. Conservation Chemical Co., 619 F. Supp. 162, 233- 34 (W.D. Mo. 1985) (mere arrangement for off-site disposal); Jones v. Inmont Corp., 584 F. Supp. 1425, 1428- 29 (S.D. Ohio 1984).

ii. Managing shareholder, corporate officer: United States v. Mottolo, Civ. No. 83-547-D (D.N.H. May 5, 1987).

iii. Non-owner of hazardous substances: United States v. NEPACCO, 810 F.2d 726, 742- 44 (8th Cir. 1986) (plant supervisor who had "actual 'control'" over generator company's hazardous substances "possessed" such substances for purposes of CERCLA § 107(a)(3)); "We believe requiring proof of personal ownership or actual physical possession of hazardous substances as a precondition for liability under...section 107(a)(3)...would be inconsistent with the broad remedial purposes of CERCLA").

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iv. Broker of hazardous substances: United States v. Bliss, 667 F. Supp. 1298, 1306- 07 (E.D. Mo. 1987) (broker between chemical manufacturer and disposal company may be held liable under CERCLA § 107(a)(3); because "control" is the critical factor in determining liability, "a party need not have actual ownership or possession of the waste to fall within the scope of that section").

v. But not a seller of contaminated real property: Jersey City Redevelopment Authority v. PPG Industries, 655 F. Supp. 1257 (D.N.J. 1987) (sale of real property containing contaminated soil which is subsequently removed from the site by purchaser does not give rise to liability of seller under CERCLA § 107(a)(3). Under Section 107(a)(3), the "responsible party must affirmatively act to dispose of

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