tim haley\'s e2790 presentation

$: Tim Haley\'s E2790 Presentation$
© 2011 Barnes & Thornburg LLP. All Rights Reserved.

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Timothy A. HaleyBarnes & Thornburg LLP

11 S. Meridian StreetIndianapolis, Indiana 46204

(317) 231-6493

Atlanta – Chicago – Delaware – Indiana – Los Angeles – Michigan – Minneapolis – Ohio – Washington D.C.

ASTM’S New E2790 Continuing Obligations Standard

What It Means For You

© 2011 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.

ASTM’s E2790 Standard

1. Scope1.1 . . . . this guide’s primary purpose is to provide information and

guidance about procedures that, if completed, would help users to satisfy continuing obligations applicable to the innocent landowner, the contiguous property owner (CPO), and the bona fide prospective purchaser (BFPP) protections from CERCLA liability (hereinafter, collectively referred to as the “Landowner Liability Protections,” or “LLPs”) (see Legal Appendix X1.1 to X1.3 for an outline of CERCLA’s liability and defense provisions).


ASTM’s E2790 Standard

• A Need for the Guide: Legal and Factual Background

• Nuts and Bolts: How It Works• Legal Issues: Emerging Issues to

Understand• Example Scenarios


A Need for the Guide

Source: http://topnews.ae/content/22971-closed-toxic-dump-spells-trouble-residents


A Need for the Guide – CERCLA

• Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

• CERCLA’s unintended impact on development

• Possible acceleration of “Brownfields” and associated social, environmental, and economic issues


A Need for the Guide – 2002 Brownfields Amendments

• 2002 Brownfields Amendments– The addition of 2 liability defenses, (BFPP,

and CPO) defense– Amendment of the innocent landowner

defense (ILO)

• Congressional attempt to balance potentially competing goals of promoting clean up and promoting redevelopment.


A Need for the Guide – Liability Protections

• Basic Elements to Three Liability Defenses:– All appropriate inquiries [Phase I ESA]– Continuing obligations [ASTM 2790]– No affiliation with PRP

• Key distinctions: – ILO performed AAI and had no reason to know of

contamination– CPO performed AAI and had no reason to know of

contamination, contamination migrated on-site– BFPP performed AAI and knows of contamination

at the time of purchase


The “Continuing Obligations”

• No “disposal” after property ownership• Provide all legally required notices with respect to the discovery

or release of any hazardous substances• Take reasonable steps to:

– (a) stop any continuing release– (b) prevent any future threatened release; and– (c) prevent or limit any human, environmental, or natural resource

exposure to any previously released hazardous substance• Cooperate and allow access to those authorized to conduct

response actions at the property• Comply with land use restrictions established or relied on in

connection with the response action• Do not impede the effectiveness or integrity of any institutional

control


What does it all mean?

• 2003 EPA “Common Elements” Guidance• 2010 Ashley II 746 F. Supp. 2d 692 (D.S.C. 2010)

(amended at 2011 U.S. Dist. LEXIS 57441, May 27, 2011)• 2010 3000 E. Imperial v. Robertshaw Controls Co.,

2010 U.S. Dist. LEXIS 138661 (C.D. Cal. Dec. 29, 2010)

• 2011 ASTM 2790-11


Why this Standard Guide Matters

• ASTM E 2790 matters for – the buyer: Preservation of liability protections increases

degree of certainty related to particular property– the seller: Ability to preserve liability protections may

increase property value and/or increases ability to sell.– the lender: Preservation of liability protections may preserve

property value, and/or increase ability to sell.

• “First Generation” Document• Though important, the standard is not required.

– CERCLA liability protections are voluntary.– Process variations may be appropriate; other methodology

may work as well.


Overarching Themes of ASTM 2790

• BFPPs, ILOs, and CPOs generally need not undertake the same actions required of CERCLA PRPs

• Provide guidance on an evaluation procedure that is roughly chronological

• Procedure is flexible and guidance is intended to apply to all types of properties

• May necessarily require reliance on professional judgment and collaborative efforts between purchaser, consultant, and counsel.

Many, if not all, decisions must be made on a property-specific basis.


Nuts And Bolts

• Four Step Procedure

• Suggestions for documentation

• Evaluation can be performed by anyone


Nuts And Bolts – Step 1

• Step 1: Do Continuing Obligations Apply?– Phase I ESA is the starting point– Other information known by the User

CAVEAT: Subsequent knowledge or subsequent change of material condit ion at the property may change conclusions.

Practical Consideration:

Is the Phase I reliable?


Nuts and Bolts – Step 2

• Step 2: Review and Evaluate Environmental Conditions.

• Examples of Options: – Phase I– Agency reports– Investigation/Phase II– Land Records– Specialized knowledge

Practical Consideration:

How much information is “enough”?



• Step 3: Initial Continuing Obligations• Generally, initial continuing obligations are

actions taken to address exposure risks, or to comply with LURs/ICs

• Examples: – Emptying leaking container– Evaluating secondary containment– Limit site access– Notifications to prevent foreseeable exposure risks– Evaluation of compliance with ICs and/or LURs


Nuts and Bolts – Step 3 (cont’d)

Practical Considerations: • Are any COs required?• If so, what are the

alternatives?• What does the user want to

do with the land?• Do you want or need to

preserve a record of decision making?

• How quickly can/must this process occur?



• Step 4: Ongoing Continuing Obligations• O & M – type requirements• Examples:

– Property inspections– Corrective maintenance– Monitoring property or

government records

Practical Considerations:

Who will be implementing COs “on the ground” and how will they be trained?

What oversight should/will be provided?

How often should COs be evaluated?


Nuts and Bolts - Documentation

• Documentation not required• Some documentation suggestions:

– Finding of No Continuing Obligations– Continuing Obligations Plan (COP)– O&M/Inspection Reports

Practical Considerations:

How much documentation is appropriate?

What does the user want?

Privilege concerns?


That’s Great. What do I do?

ASTM E 2790 X.3



• Property-specific decisions

• Collaborative efforts with purchaser

Compliments of Mike Sowinski, Terradex



ASTM E 2790 X.4


Due Diligence & Continuing Obligations

• Continuing Obligation Guide and its relationship with other environmental due diligence tools: – Phase I Standard Practice; – Phase II Standard Practice; – VES Standard Guide;– Environmental Compliance Audits;– State and local requirements


Legal Issues: Reasonable Steps

ISSUE: What are “reasonable steps?”• Due care case law operates as a “reference

point” and provides general “guide posts” to defining what is reasonable.– Willful Blindness– Prudent Actions

• 2002 Brownfields Amendments legislative history offers some guidance

• EPA “Common Elements” guidance indicates “due care” case law could be important


Legal Issues: Reconciling Ashley & Robertshaw

• Court decisions addressing “reasonable steps” – Ashley II

Ashley II not a BFPP because (1) did not demonstrate by preponderance of evidence that no disposal occurred after ownership; (2) did not demonstrate that reasonable steps were taken because some contamination left exposed; and (3) was affiliated with a PRP. Revised order emphasizes the failure to meet “affiliation” requirement and de-emphasizes other two findings.

– Robertshaw 3000 E. Imperial LLC is a BFPP because it took “reasonable steps” to stop any continuing release and prevent future threatened releases. Plaintiff qualified as BFPP under state law and engaged in voluntary cleanup under California DTSC oversight, sampling the USTs and ultimately removing them.

– Both cases are trial opinions, and may be ongoing and/or potentially subject to appeal.

– Can we reconcile these holdings?


Legal Issues: Disposal and Passive Migration

ISSUE: What constitutes “disposal?”

• Some development activities have been found to constitute “disposal” – Grading, excavating, land

preparation: Honeywell, 542 F. Supp. 2d 1188 (E.D. Cal. 2008)

– Grading, filling: Ashley II (revised 2011)

• Is passive migration “disposal”?


Legal Issues: Disposal and Passive Migration

ISSUE: Is passive migration “a continuing release”

or a “previously released hazardous substance”? – Reasonable steps to “stop continuing releases” – Reasonable steps to “prevent or limit human,

environmental, or natural resource exposure to any previously released hazardous substance.”


Legal Issues: “Land Use Restrictions”

ISSUE: What are “Land Use Restrictions”?

A BFPP must be “in compliance with any land use restrictions established or relied on in connection with

the response action…” 42 U.S.C.§ 9101(40)(F)(i) – Are affirmative obligations contained in

restrictive covenants land use “restrictions”?– Are NFA letters land use restrictions?


Other Legal Issues

• What constitutes improper affiliation?– Common Elements– Ashley II– September 21, 2011 EPA Guidance

• All Appropriate Inquiries• Non-CERCLA Environmental issues• State and Local Continuing Obligations

Requirements


Example Scenarios


Scenario A

Dry cleaner with on-site release.

Step 2: Enough Information?

Step 3: Options/Alternatives?

Step 4: Reevaluation issues?


Scenario B

Former Machine Shop, with on-site groundwater well.

Step 1: Continuing Obligations?

Step 2/3: Site investigation & well abandonment.

No Further Continuing Obligations


Scenario C

Multi-tenant mixed use building, subject to AUL.

Step 2: LUR/IC information

Step 3: Any Continuing Obligations?

Step 4: Evaluations?


Scenario D

Existing office building.

AAI shows no RECs and no data gaps.

Step 1: Continuing Obligations?


Scenario E

NPL Site.

Step 2: Enough information?

Step 3: Remedy complete?

Step 4: Minimum 5 year review


Subsequent Migration of Groundwater Plume



Commercial Redevelopment



To Preserve Liability Protections…

If worried about CERCLA liability: Property purchasers, owners and tenant/operators should consult an experienced environmental consultant and legal counsel to evaluate and understand the liability protections and possible continuing obligations. – Some legal issues are unsettled and may change. – Privilege concerns?– Each property is different and may have unique

circumstances that require unique analysis.

© 2011 Barnes & Thornburg LLP. All Rights Reserved.

btlaw.com

For additional information or if you have additional questions, please feel free to contact:

Timothy A. Haley11 S. Meridian Street

Indianapolis, Indiana 46204(317) 231-6493 (o)(317) 753-0554 (m)

[email protected]

Atlanta – Chicago – Delaware – Indiana – Los Angeles – Michigan – Minneapolis – Ohio – Washington D.C.

tim haley\'s e2790 presentation

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haleybarnes thornburg

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legal appendix x1

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cercla liability

outline of cerclas liability