CHAPTER 8 WHAT EVERY LANDMAN SHOULD KNOW ABOUT ENVIRONMENTAL LAW AND WHY

• Jurisdiction: United States

Land and Permitting
(Jan 1994)
CHAPTER 8
WHAT EVERY LANDMAN SHOULD KNOW ABOUT ENVIRONMENTAL LAW AND WHY
Zach C. Miller and Kevin P. Stichter
Davis, Graham & Stubbs
Denver, Colorado

TABLE OF CONTENTS

SYNOPSIS

I. INTRODUCTION

II. CERCLA/SUPERFUND

A. BACKGROUND AND OVERVIEW

B. TRIGGERING CERCLA: RELEASE OF HAZARDOUS SUBSTANCES

C. CERCLA COVERAGE OF MINING WASTES

D. CERCLA PETROLEUM EXCLUSION

E. LIABLE PARTIES UNDER CERCLA

1. Four Classes of Liable Parties

2. Interests and Activities Leading to Owner/Operator Liability

F. CERCLA LIABILITY: "STRICT" AND "JOINT AND SEVERAL"

G. LIABILITY FOR CLEANUP COSTS AND DAMAGES

1. Administrative Cleanup Orders

2. Federal Cost Recovery and Natural Resource Damages

3. Private Party Cost Recovery

4. Superfund Liens

H. DEFENSES TO LIABILITY

I. INDEMNIFICATION

J. CERCLA CLEANUP PROCESS

K. CERCLA REPORTING REQUIREMENTS

L. EMERGING ROLE OF PUBLIC LAND AGENCIES

M. STATE "MINI-SUPERFUNDS"

N. AVOIDING CERCLA LIABILITY

III. RESOURCE CONSERVATION AND RECOVERY ACT

A. BACKGROUND AND OVERVIEW

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B. HAZARDOUS WASTES REGULATED UNDER RCRA

C. RCRA OIL AND GAS EXEMPTION

D. RCRA MINING WASTE EXCLUSION

E. RCRA REQUIREMENTS FOR HAZARDOUS WASTE GENERATORS

F. RCRA ENFORCEMENT

G. RCRA CORRECTIVE ACTIONS

H. UNDERGROUND STORAGE TANKS

1. Scope of Coverage

2. UST Requirements, Corrective Actions, and Enforcement

I. EVALUATING POTENTIAL RCRA LIABILITY

IV. CLEAN WATER ACT

A. BACKGROUND AND OVERVIEW

1. National Pollutant Discharge Elimination System ("NPDES") Permit Program

2. Section 404 "Dredged and Fill" Permit Program

3. Oil Spill Prevention and Cleanup Program

4. Stormwater Quality Program

5. Publicly Owned Treatment Works ("POTW") Program

6. Non-Point Source Runoff Control Program

B. NPDES PERMIT PROGRAM

1. Regulated Waters and Discharges

2. NPDES Effluent Limitations

3. NPDES Monitoring and Reporting Requirements

4. Transfer of NPDES Permits

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C. SECTION 404 WETLANDS PROGRAM

1. Scope of Regulated Wetlands

2. Regulated and Exempt Activities

3. Land Clearing and Excavation Activities

4. Section 404 Permits and the Permitting Process

5. EPA's Section 404(b)(1) Guidelines

6. 1990 EPA-Corps "Mitigation" MOA on Implementing the 404(b)(1) Guidelines and "Sequencing"

7. Wrestling with Section 404: A Practical Approach

D. OIL SPILL REPORTING AND CLEANUP

1. Reporting Obligations

2. Oil Spill Cleanup Liability and Prevention Plans

E. CWA PENALTIES AND LIABILITIES

V. CLEAN AIR ACT

A. BACKGROUND AND OVERVIEW

B. CAA PERMIT REQUIREMENTS

1. "Major stationary sources"

2. "Regulated sources of hazardous air pollutants"

3. Sources subject to the acid rain requirements of Title IV of the 1990 Amendments

4. Sources regulated by New Source Performance Standards

5. Other sources designated by EPA

C. HAZARDOUS AIR POLLUTANTS

D. NATIONAL STANDARDS AND NEW SOURCE REVIEW

1. CAA Nonattainment Program

2. PSD Program

3. Regulation of Fugitive Dust Emissions

E. VISIBILITY PROTECTION ON FEDERAL LANDS

F. CAA PENALTIES AND LIABILITIES

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VI. RELATIONSHIP TO STATE LAWS

VII. OTHER FEDERAL ENVIRONMENTAL LAWS

1. National Environmental Policy Act

2. Endangered Species Act

3. Oil Pollution Act of 1990

4. Safe Drinking Water Act

5. Toxic Substances Control Act

6. National Historic Preservation Act

7. Migratory Bird Treaty Act

8. Emergency Planning and Community Right-to-Know Act

9. Federal Land Policy and Management Act

10. BLM "Onshore [Oil and Gas] Orders"

VIII. STEPS TO AVOID ENVIRONMENTAL PROBLEMS

A. PRELIMINARY ENVIRONMENTAL AUDITS

B. CAUTION IN STRUCTURING TRANSACTION

C. DOCUMENT CONDITION OF PROPERTY

D. INSURANCE

E. DON'T ALWAYS BE SCARED OFF

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I. INTRODUCTION

Not long ago, to be an effective landman or land manager primarily required good negotiating skills and a solid knowledge of conveyancing, title standards, and the key principles of property, mineral and public land law. Environmental regulation was a somewhat arcane area of law that rarely affected or was relevant to a landman's line of work.

Explosive developments in environmental law over the last two decades have vastly changed that situation. Today it is essential for every landman and land manager to have a basic understanding of the key provisions of various environmental laws in order to avoid or minimize potential major environmental liabilities, costs, delays, or restrictions. A number of these environmental liabilities and requirements automatically accrue upon mere acquisition of title or by conducting minimal operations on the ground and not only can cause a prospect to become unprofitable but also can sometimes greatly exceed the total value of the acquired property. In addition, the presence of certain environmental conditions, such as wetlands or endangered species, can completely frustrate the purpose of a proposed project. As a result, it often is critical for a landman or land manager to identify and address key environmental issues as early as possible in a transaction or project.

This paper outlines the purpose and certain key aspects of four major federal environmental laws that can have a critical impact on mineral and other natural resource projects and properties:

(i) CERCLA (aka "Superfund"), which addresses the cleanup of facilities where hazardous substances have been released;

(ii) RCRA, which regulates the handling, storage, disposal and cleanup of hazardous wastes;

(iii) the Clean Water Act, which regulates discharges of pollutants into waters of the U.S.; and

(iv) the Clean Air Act, which regulates emissions of pollutants into the atmosphere.

The general role and relationship of these key federal laws to parallel State laws, and of the U.S. Environmental Protection Agency ("EPA") to comparable State agencies, is also

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discussed in Section VI. Additional, often applicable environmental laws of which landmen should be aware are also listed and briefly described in Section VII below. Finally, Section VIII outlines several measures that a landman or land manager can take to identify and avoid or minimize problems under these environmental programs.

This introduction and overview is not a detailed description or analysis of the entirety of these programs but rather is intended to assist persons involved in land transactions and management to be able to identify issues and circumstances when these programs and requirements may be applicable and take appropriate steps to deal with them.

II. CERCLA/SUPERFUND

A. BACKGROUND AND OVERVIEW

Of all the federal environmental laws enacted since the early 1970s, no statute has had a greater impact on real property and mineral transactions than the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA" or "Superfund"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. §§ 9601 -9675. All landmen and land managers should be familiar with CERCLA's basic provisions and broad liability scheme before buying, selling, leasing, or conducting any operations on lands that might be affected in any way by a hazardous substance.

Largely in reaction to the Love Canal disaster, CERCLA was enacted in 1980 in response to a growing recognition that the United States was littered with numerous abandoned or otherwise unregulated hazardous waste sites. In enacting CERCLA, Congress concluded that only a sweeping scheme of liability would prompt the cleanup of these unaddressed sites. Further expanding the reach of CERCLA, the courts have applied CERCLA's liability and cost-recovery provisions extremely broadly. As a result, the enormous breadth and cost of CERCLA liability create many problems for persons interested in acquiring property rights; it is often difficult to assess whether CERCLA liability may attach under a particular transaction or activity.

The potential costs and scope of liability under CERCLA are staggering. The magnitude of exposure arises from the astronomical expenses associated with investigating and remediating hazardous waste sites. The average cost of merely investigating and planning CERCLA remedial actions has been estimated at approximately $1,100,000 per site. The average Superfund site cleanup costs around $26,000,000.¹

CERCLA's primary purposes are: (1) to provide the government with authority to respond to the release or threatened release of hazardous substances into the environment;

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(2) to establish a broad scheme for imposing liability on four classes of persons, commonly known as "potentially responsible parties" or "PRPs"; and (3) to create a fund, known as the Hazardous Substance Response Trust Fund or "Superfund," to finance the cleanup of hazardous substance releases. The United States Environmental Protection Agency ("EPA") is the primary government agency charged with implementing CERCLA.

In a nutshell, CERCLA provides that, at any facility where there has been a release (or threatened release) of any broadly defined hazardous substance, one or more PRPs can be required either to clean up the contaminated site or to pay for the cleanup costs incurred by someone else. In practice, CERCLA's tentacles reach into virtually every type of property transaction and operations.

B. TRIGGERING CERCLA: RELEASE OF HAZARDOUS SUBSTANCES

The CERCLA process is triggered by a release (or threatened release) of a hazardous substance from a facility into the environment. The key terms "hazardous substance," "release" and "facility" are defined extremely broadly in CERCLA. The definition of "facility" includes, among other things, any structure, equipment, pipe, ditch, pit, or motor vehicle.² Moreover, the definition of "release" encompasses the movement or migration, in virtually any manner, of a hazardous substance from a facility into the...